Steps to Prosper in this Debt and Financial Crisis

Harry S. Dent | Wednesday, December 19, 2012 >>


I arrived back from a trip to South Korea recently and I must tell you:

That place is an economic miracle much like Japan 22 years earlier.

In just three decades, it went from being an emerging country to a developed country with a standard of living approaching ours. It achieved this by moving into many high-end industries like steel and cars, appliances and computers.

The reason they’re not quite as rich as us is that it doesn’t dominate the even higher-end industries like software, financial services and health care.

But just like us, on the road to riches, South Korea had a bubble and financial crisis. Theirs occurred in the late 1990s…

Back then, their Chaebol, or top government-connected families, were leveraging their industrial growth in major new industries. They borrowed cheap, short-term money from Japan and then invested and leveraged that in long-term investments in Korean industries.

That is always a bad move. No matter what country you are, or what decade or century you’re in, history shows that excessive greed and leverage always end badly.

For South Korea, that bubble ended in late 1997. For us, it burst starting in late 2007. And now the Fed-created bubble of 2009 to 2012 is likely to burst again in 2013.

Yet, we’ll do it again… and again… because most people are greedy little bastards. Even the very hard-working and industrious South Koreans and the Japanese before them.

Maybe greed has been built into our survival mechanisms over thousands of years or something. There clearly is a bias towards optimism and positive thinking that likely served our survival over our history and evolution. Who knows? But most people certainly want to be wealthier. Given a strong growth trend, some political advantages and low interest rates, even very smart people will speculate like “nutless monkeys.” They try to make such a fundamental growth trend even better than we deserve. Everyone wants to retire early and live happily ever after and speculation always seems more attractive than hard work and responsible savings strategies.

Yes, we are simply prone to cheating to get ahead.

In the 1820s and 1830s, the U.S. government gave away land for next-to-nothing in the west and everyday people speculated on that. In the 1920s, everyone used low-cost money to speculate in stocks. In the 1990s, people and companies speculated on the bubble in tech stocks with many hoping to retire as an E-trader. People speculated increasingly on real estate well into the 2000s. Now more people are speculating in gold and silver, bonds and junk bonds.

The outcome each time has been painful. This will not change on the next go around.

Every such debt and speculation bubble in history has been followed by a depression, deflation and a long period of austerity… all of which is necessary to rebalance.

Know this: everything moves in cycles and our greedy human nature exaggerates such cycles until they burst. And when they burst, you’re either a victim writhing in agony or you’re a survivor prospering.

I know you want to be that survivor… and we’ll continue to help you every step of the way so you can prosper in this once-in-a-lifetime debt and financial crisis.

Harry

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Categories: Economy

About Author

Rodney Johnson works closely with Harry Dent to study how people spend their money as they go through predictable stages of life, how that spending drives our economy and how you can use this information to invest successfully in any market. Rodney began his career in financial services on Wall Street in the 1980s with Thomson McKinnon and then Prudential Securities. He started working on projects with Harry in the mid-1990s. He’s a regular guest on several radio programs such as America’s Wealth Management, Savvy Investor Radio, and has been featured on CNBC, Fox News and Fox Business’s “America’s Nightly Scorecard, where he discusses economic trends ranging from the price of oil to the direction of the U.S. economy. He holds degrees from Georgetown University and Southern Methodist University.