Silent Archimedes

Book Review: Crash Proof

Posted by silentarchimedes on July 10, 2008

Book Review: Crash Proof

How to Profit from the Coming Economic Collapse

Author: Peter Schiff with John Downes

After seeing the striking similarities between Stephen Leeb’s The Coming Economic Collapse: How you can thrive when oil costs $200 a barrel and Jim Rogers’ Hot Commodities: How anyone can invest in the world’s best market, I decided to read one more book on this topic to verify the similarities. The first two books, in simple terms, describes the American economy as teetering on a precarious cliff due to horrible economic policies that have stripped it of its purchasing power and flexibility from a mountain of debt. With the growth of China and the East, prices of raw materials such as oil and metals are skyrocketing. This will only hurt the American economy as our current standard of living requires huge amounts of oil and imports. However, we are required to use our future earnings to continue this consumptive economy.

In all likelihood, this book will basically say the same things as the other two books. However, it will be interesting to see how it is presented and if a more convincing argument is used.

THE AUTHOR: PETER D. SCHIFF

Peter Schiff doesn’t have as much clout as a Jim Rogers, but nonetheless is well-known in the business world. He has the nickname “Dr. Doom” because of his extremely bearish views on the U.S. economy and the U.S. dollar. He is currently the president of Euro Pacific Capital Inc., a brokerage firm that specializes in international investments. Schiff became the economic advisor to Ron Paul in his presidential campaign because of Paul’s commitment to constitutional values to stimulate savings and production.

THE REVIEW

As expected, the book’s general cause and effect of why we are in this economic state are the same as other recent books on economic gloom. That is not to say this book is unoriginal, as some people have mentioned in the Amazon reviews. Since this is the third book on the topic I’ve read recently, I might be inclined to label it unoriginal, but that’s being unfair. I could easily have read this book first. Additionally, I am not reading these books for originality. As mentioned, having three experts (and I’m sure lots more because of the books out there) write books on the same dour predictions due to the same causes, should make one take action. I am also interested in reading about the suggestions of each of them; whether they are the same or different.

That being said, this book definitely has its own unique style of conveying its arguments. The first three chapters are very fun to read. This historical perspective on how our country went from producers to consumers, how the government massages economic data to its own benefit, and how the dollar has declined is written with simplicity, logic and a wry humor. Schiff is the master of analogies and simple stories to demonstrate how stupid some of the economic actions are in this country. If you are not an expert at economics these chapters will clear up some confusion you have about debt, economic indicators, and the state we are in. The stories using Farmer Chin and Farmer Smith to explain how China is buying our wealth makes it easy to understand.

On our consumptive behavior, he equates it “to a philandering playboy who inherits a huge fortune and then proceeds to squander it. during the dissipation period, he lives a good life, and by all appearances he seems prosperous. but his prosperity is a function of the hard work of his ancestors rather than his own. once the fortune is gone, so too will be the gracious lifestyle that it helped support.”

In the second chapter, sections are divided by “comforting distortions” and “disturbing realities” to differentiate what the government wants the public to perceive about the well-being of the economy and what the actual reality is.

I’m not sure why, but Schiff goes away from his fun use of analogies and stories. It becomes a little more technical and dry in the chapters where he explains inflation, stock market chaos, real estate, and debt. It’s unfortunate, because the first three chapters rank as one of the best I’ve read. Experts will probably reverse my views with these two sections, but as a pseudo-beginning contrarian, the first three chapters cleared many things up for me.

His last three chapters are reserved for what you should do to protect yourself against the upcoming crisis. Nothing too crazy here, although Schiff is more on the conservative side than a Rogers or Leeb. Investing in gold is still the common theme in all three of them. The other two are less commonly suggested but still make sense. His advice is general and not so in depth.

This book is pretty much in line with other books I have read about the upcoming economic crisis. They help confirm the dire situation we are in. However, there are some negatives about this book that leave it open for criticism. Although this book has lots of charts and graphs, the source of them are all from the same website, prudentbear.com. By using only one source, and that source being well known as always being bearish (their phrase is “The One Stop Shop for the Bear Case”), it leaves an atmosphere of bias. He should have used more sources, especially those coming from the government and neutral sources. Additionally, every few pages in the book, he reminds the reader that he will later give advice on how to protect yourself from the crisis. We know that! Almost everyone reading this book reads it for the advice given. You don’t have to keep reminding us. Finally, during his last three chapters, there is a constant stream of subtle to not-so-subtle pressure to sign up with his investment group, Euro Pacific Capital, Inc. Talking about it once is enough. If we believe in what the book is preaching, we will naturally consider the author’s company when we do invest.

VERDICT

This book is not for experts or those that are already truly in the know about the economic situation of this country. Just from the title, it’s apparent he is trying to capture readers unaware of the situation. If you are still trying to understand the problems, this book is easy and fun to read. The first three chapters definitely stand out; not just in this book but in other books I’ve read. In terms of advice, the Roger’s book Hot Commodities ranks first (although all of them are in commodities). In terms of specific advice, Leeb’s book The Coming Economic Collapse gives more only because he is allowed to legally. Since Schiff is an investment advisor for a specific company he cannot give specific stock advice. Without the first three chapters, I would rate this book lower, but with it, it’s a good book to read overall.

Rating: 8 out of 10 bears

Advertisements

3 Responses to “Book Review: Crash Proof”

  1. Nice writing. You are on my RSS reader now so I can read more from you down the road.

    Allen Taylor

  2. Tim Ramsey said

    I recently came accross your blog and have been reading along. I thought I would leave my first comment. I dont know what to say except that I have enjoyed reading. Nice blog.

    Tim Ramsey

  3. Thanks for the review, I guess I don’t need to pick this one up. My main question is that we need a good road path to get out of this mess. We all are aware of how and why we got here – but how do we get out and how do we create a sustainable future? That is what I’m looking for right now.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

 
%d bloggers like this: