Sustainable Wealth: Achieve Financial Security in a Volatile World of Debt and Consumption

274 Pages·2009·2.21 MB·English

by  Axel Merk

CON TINUED FROM FRON T FL A P $29.95 USA / $35.95 CAN
PRAISE FOR
In Part II, you’ll discover how to apply these lessons
to your personal fi nances. Merk highlights that S U S T A I N A B L E W E A L T H
everyone should be challenging the conventional
wisdom. He then illustrates how to save, spend, T
he world has endured an economic crisis of
and invest in a volatile world, providing clear,
epic proportions—the biggest since the Great
straightforward advice should you and/or the
Depression. Trillions of dollars in accumulated
economy be faced with a crisis. MERK
“Finally an easy-to-read but very comprehensive study on investments in a world where wealth lost, gone forever. That crisis reminded
us once again how quickly economic crises can
sadly common sense is no longer so common—and short-term profi t ‘temptations’
Filled with in-depth insights and practical advice,
strike and how bad they can be.
Sustainable Wealth: overwhelm the discipline of building sustainable wealth.”
(cid:127) Reveals why “staying the course” when —Marc Faber, Editor, Gloom, Boom & Doom Report You’re a wealth builder. You work hard, and you
governments or markets change the rules may
want to have something to show for it some day.
be hazardous to your wealth “Maybe had Congress gotten this book before this fi nancial crisis, we wouldn’t be in this S You want to send your kids to college, to plan a
(cid:127) Coaches you on how to recognize major
comfortable retirement, to sleep comfortably at
crisis. But alas, we are, and alas, there’s hope. Axel Merk not only shows Washington the
economic trends before they happen U
night, and to achieve fi nancial peace of mind. You
(cid:127) Offers a plan to spend, save, and invest wisely way out, but more importantly, the rest of us too. Not with a lecture, but a plan, and a damn
want to use debt prudently, if at all, and have the
S
in the face of an uncertain world, build a good plan, without the bull and without the jargon. It’s why I love this guy. He really means S U S T A I N A B L E
ability to do what you want—fi nancially—come
fi nancial legacy, and achieve peace of mind it when he says he’s looking out for the rest of us guys. In Sustainable Wealth, he proves it.” T hell or high water.
—Neil Cavuto, Sr. Vice President and Anchor, Fox News Channel
A
As you read Sustainable Wealth, you’ll quickly be
and Fox Business Network What should you do to ensure that the next fi nancial
able to understand—and adapt to—today’s erratic
I calamity stays clear of your backyard? That’s where
and rapidly changing markets. Financial peace of N W E A L T H Axel Merk’s Sustainable Wealth comes in.
“The right fi nancial decisions are always essential, but become particularly important in
mind. That’s what this book is all about.
today’s turbulent times. Preparation and knowledge are required to protect you and your A Over the course of his successful fi nancial career,
AXEL MERK is the President and Chief Investment family, and this book provides everything you need to develop a sound plan for the future.” author and fund manager Axel Merk has led the
Offi cer of Merk Investments LLC, an SEC registered B
—James Turk, founder and Chairman, GoldMoney.com way in identifying major economic trends before
investment advisory fi rm that manages mutual
L they occur. Most importantly, he has been a guiding
funds specializing in currencies. He has published
light for investors and individual wealth builders
“It’s hard to accumulate wealth without making many costly mistakes along the way. That
articles describing complex economic phenomena E
to navigate economic crises like the recent global
in understandable terms and is a frequent expert has never been more true given the enormous fi nancial risks we see today. This book may
recession. Now, with this timely new book, Merk

presenter and moderator at conferences. Merk is help you avoid them.”
puts your fi nancial decisions in a global context,
W
a sought-after voice in fi nancial news, known for —Bill Fleckenstein, Fleckenstein Capital ACHIEVE FINANCIAL SECURITY IN showing you how “big picture” factors can infl uence
his understandable advice and uncanny ability to
your fi nancial well-being.
predict market movements. He is a regular guest E
“Axel Merk’s Sustainable Wealth is a storehouse of historical and current investment A VOLATILE WORLD
on CNBC and Fox News, and is frequently quoted
information—clearly written and packed with valuable information. I recommend this A Part I of Sustainable Wealth helps you understand
in Barron’s, the Wall Street Journal, Bloomberg
the dynamics that drive this world and how they
News, USA Today, and the Financial Times. book without reservation.” L OF DEBT AND CONSUMPTION may affect your fi nances. Here, Merk skillfully
—Richard Russell, Publisher, Dow Theory Letters
Learn more and subscribe to the free eNewsletter and T discusses the world we live in, by highlighting the
Sustainable Wealth blog at www.sustainablewealth.org temptations of our society: the temptations of credit,
JACKET IMAGE: © JUPITER IMAGES H A X E L M E R K consumption, policy change, and complacency.
Rather than be left scratching your head about the
meaning of the last Fed decision, you’ll learn how
P R E S I D E N T , M E R K I N V E S T M E N T S the world really works and what it really means for
you and your wealth.
F O R E W O R D B Y W I L L I A M P O O L E
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O V E R A L L M A T T E F I N I S H
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Sustainable Wealth
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Sustainable Wealth
ACHIEVE FINANCIAL SECURITY
IN A VOLATILE WORLD OF DEBT AND
CONSUMPTION
Axel Merk
Foreword by
William Poole
John Wiley & Sons, Inc.
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Copyright © 2010 by Axel Merk. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
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Library of Congress Cataloging-in-Publication Data:
Merk, Axel.
Sustainable wealth : achieve financial security in a volatile world of debt and
consumption / Axel Merk.
p. cm.
Includes index.
ISBN 978-0-470-49658-9 (cloth)
1. Finance, Personal—United States. 2. Financial security—United
States. I. Title.
HG179.M4318 2010
332.024--dc22
2009023151
Printed in the United States of America
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To my children:
Felix, Helena, Katarina, and Lina
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Contents
Foreword xi
Preface xiii
Introduction 1
Achieving Excellence as a Financial Pilot 2
What Is Sustainable Wealth? 4
A Volatile World of Debt, Consumption, and
Temptation 6
Unintended Consequences 8
The Flight You’re About to Embark On . . . 9
Part I A World of Temptations 13
Chapter 1 The Temptation of Credit 15
The Relationship Between Credit and Debt 17
Credit as Money 20
The Power (and Un-Power) of Central Banks 23
Sizing the Debt Problem 25
A Crisis in Confidence 27
Credit Crisis Consequences 28
A Bond Market Bubble? 31
Credit as a Threat to Sustainable Wealth 32
Credit as Fuel for Other Temptations 33
Using Credit Wisely 34
vii
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viii Contents
Chapter 2 The Temptation of Consumption 37
The Consumption Paradigm 39
The Cost of a Consumption Economy 45
Long-Term Consequences 53
Unwinding the Consumption Bubble 54
What This All Means for You 56
Chapter 3 The Temptation of Policy Change 59
The Boom/Bust Cycle: Can You Fool
Mother Nature? 60
Goldilocks Intended 65
Above and Beyond: The Fed Ventures
Into Fiscal Policy 69
More Bad Medicine for Boom/Bust Cycles 73
Regulation and Taxes: Consistency is the
Best Policy 76
Long-Term Policy Consequences 79
Policy, Complacency, and Sustainable Wealth 82
Chapter 4 The Temptation of Complacency 83
Big Hat, No Cattle 84
Complacency’s Counterparty—Risk 88
The Complacency of Business Legacy 93
Trust Must Be Earned Every Day 95
Live Free or Die 98
Part II Achieving Sustainable Wealth 101
Chapter 5 Challenging Conventional Wisdom 103
Recognize Your Responsibility 104
Should You Use an Adviser? 107
The Proactivity of Sustainable Wealth 110
Low-Probability, High-Risk Events 117
Adaptive Investing, Rather Than Staying
the Course 118
The Sustainable Wealth Lifestyle 123
Chapter 6 Saving and Spending in a Volatile World 125
The Sustainable Wealth Grid 126
Become a Scenario Planner 129
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