Book SummaryAftermath, by James Rickards

1-Page Summary1-Page Book Summary of Aftermath

A scrutiny of how the national debt and fiscal shortfall of the United States have developed and their current condition.

The debt levels of the United States have been on a consistent rise, nearing a pivotal point.

The passage offers an insight into the escalating national debt within the United States and elucidates why the current economic conditions are unsustainable. Rickards argues that the United States is at a pivotal point as a result of accumulating debt over many years. The current economic strategies have rendered the traditionally successful U.S. government debt management untenable.

Throughout history, the United States has experienced periods where it accumulates more debt during conflicts and reduces it in times of tranquility.

For much of its history, the U.S. adhered to a pattern of accumulating debt during wars and then reducing it during peacetime. The administrations of James Madison and Thomas Jefferson are prime examples of this approach. During his term, Jefferson managed to diminish the country's monetary commitments, yet the economic load almost doubled under Madison's administration, largely due to the war that broke out in 1812. From the 19th century through the early 20th century, the United States experienced a recurring cycle of debt accumulation followed by reduction, with significant debt buildups during the Civil War and World War I. After World War II, the nation's debt began to decrease in proportion to its gross domestic product, aided by economic growth, a surplus of government income over expenditures, and the implementation of prudent financial strategies during the administrations from Truman through Johnson. Upon assuming the presidency, Ronald Reagan inherited a national debt that constituted a mere 32.5% of the GDP, the lowest ratio since the time of the Great Depression.

In recent years, the financial obligations of the United States have escalated, with an increase in debt and expanding budget deficits, compounded by decreased tax income, growing mandatory spending on social welfare, and the ongoing costs associated with military engagements.

Starting with the Reagan era in the 1980s, the United States shifted away from its customary approach of lowering its national debt, embarking on a period marked by consistent spending that surpassed its income. Upon taking office, Reagan inherited a manageable ratio of debt to GDP, yet he expanded the nation's debt to enhance military strength amidst the Cold War and concurrently enacted substantial tax cuts. Rickards emphasizes that while Reagan's tactical use of debt revitalized the economy and aided in Cold War victories, it also deliberately set a financial trap that left subsequent administrations grappling with considerable debts and fiscal shortfalls. Under the administrations of Bush 41 and Clinton, the debt-to-GDP ratio declined as a result of increased taxation and reduced expenditure; however, the fiscal policies adopted by Bush 43 and Obama reversed these advancements. Under the administration of George W. Bush, the 43rd President of the United States, the country's national debt soared, largely due to the expenses associated with the War...

Aftermath Summary The current financial system is laden with a multitude of vulnerabilities and potential hazards.

The intricate and widespread nature of the financial system, along with its multifaceted interconnections, has exposed inherent vulnerabilities.

This section delves into the importance of features that are commonly found in intricate financial systems. Rickards argues that the financial system has grown more intricate and voluminous, increasing the risk of a systemic failure.

Economic trading environments also exhibit characteristics of complex systems, such as the development of new properties, scaling effects that are not proportional, and a propensity for extreme behaviors to manifest concurrently.

Rickards applies principles from Geoffrey West's field of physics to shed light on the intricate and ever-evolving nature of economic trading systems. The unforeseen results, like sudden and unexplainable market plunges, originate from the combined behaviors of separate components within these networks. These systems exhibit growth patterns that are not directly proportional to input; instead, they undergo periods of swift intensification succeeded by sudden declines. Investors often display collective behavior, rapidly selling off their assets during moments of fear or...

Aftermath Summary Approaches to maintaining financial stability despite looming disruptions.

Investors are advised to diversify their holdings beyond just publicly traded assets to include those that might retain a value higher than their intrinsic value.

In this part, Rickards outlines particular tactics that individual investors might utilize to safeguard their assets against impending economic turbulence. He advises spreading investments across traditional asset classes, maintaining access to cash reserves, incorporating valuable metals, and exploring a variety of investment opportunities. The portfolio serves as a safeguard for the investor, cushioning the impact of fluctuating prices, particularly during periods when economic growth is limited and the country's debt is significant in comparison to its gross domestic product.

Avoid investing in lesser-known exchange-traded products and notes, as they may face liquidity challenges during periods of market turmoil.

Rickards recommends that readers avoid specific financial instruments, particularly funds that are actively traded and notes that can be exchanged, which are notorious for their restricted liquidity, especially those structured to amplify returns or operate inversely to current market trends. He...