The Great Crash Ahead by Harry S Dent, Jr With Rodney Johnson – Book Review

Synopsis of Content: Harry Dent has been confounding the “experts” for twenty years by predicting economic and financial trends and markets based largely on demographic data and economic cycles.

This is his fifth book in a series that has predicted economic trends. If Harry Dent is right yet again everyone should be reading this book! Dent’s thesis is relatively simple enough: he submits that demographic trends drive economic cycles that have been predictable for several centuries and that these cycles drive the economy regardless of much else that is going on.

This fifth book traces that giant “baby boom” generation – 92 million people in the US born between 1946 and 1964 who have had the greatest impact on our economy and society in the past half century. He explains how this large demographic changes demand for goods and services as they pass through different phases from the explosion of school construction in the 1960s to educate them to through the strong economy of the 1990s and early 2000s when they were at the peak of their consumptive period.

The Great Crash Ahead now predicts an economic depression from 2008-2018 or longer due to the aging of this demographic and its reduced demand for goods and services. Combined with misguided government and financial policies this cycle built a giant “bubble” for real estate and credit during the first decade of the 21st century. This period from 2001-2007 was seen as a good time with easy credit and easy access to home ownership.

All bubbles in the economy are self-correcting. Dent describes how the correction in this credit and housing bubble combined with the steady reduction in spending by the largest group of Americans is working to create the worst financial depression since the 1930s. He weaves through this the over extension of credit both to the government and the private sector and how it cannot be quickly repaired. This then inevitably leads to failures of the financial markets and significant price deflation for the next decade. Dent does not limit himself to the US. He explains how similar bubbles and demographic trends led to the depressed Japanese economy for the past 20 years and will lead to similar problems in Europe and China.

Dent bases much of this on an 80 year cycle of boom and bust that his research shows has repeated itself many times over the past several hundred years. Now 80 years after the great depression we are again in the “winter” of this cycle which will last ten to fifteen years before a new spring will lead to a slow recovery in the 2020s.

It is difficult to ignore Dent’s theory. In the late 1980s he predicted the demise of the Japanese economy when most economists and pundits were bullish on Japan. Likewise in the 1990s when many were predicting difficult times for the US economy Dent was predicting the boom of the 1990s and early 2000s. The book traces the failure of government to correct this cycle because it simply cannot do so. It examines the huge private and government debt which must be paid off or written down to restore the economy. His macro predictions have been spot on so far, making it foolish to ignore what he says now. If he is wrong it will be the first time in his three decades of predictions and if he is right we are in for some tough times.

At the end of the book Dent gives advice for how we can use this information to protect assets, invest wisely in this “new” world. He teaches how to forget the way of doing things that we learned over the past half century and learn how to adapt to a new economy.

To be sure Dent has his critics. A quick Google of his name and books shows a number of highly critical articles arguing that Dent assumes too much, that his analysis while technically impressive overlooks other factors that will influence the economy beyond his demographic predictions and some who offer complex Elliott wave analysis suggesting that Dent has it wrong.

At the same time he has some impressive supporters. David Bach, John Thomas, Kim and Charles Githler, and a long list of others endorse his book. I cannot say for sure whether Dent is right or the critics are – but if he is right, he bears consideration. Again, while some of the details of his predictions may not have always panned out perfectly one cannot overlook or dismiss the general accuracy of his predictions to date.

Usefulness: It must be noted that any predictions of future economic trends and behaviors are inherently fraught with risk. However if Dent’s predictions in this book are as accurate as his past analysis this will prove very useful to anyone saving for retirement, investing, running a business or choosing a career.

Readability/Writing Quality: Dent writes clearly and well. The book is full of rather complex economic and demographic analysis. It is not an easy book to read but well worth the effort to understand.

Notes on Author: Harry Dent is an author and head of the HS Dent Financial Advisor Network. He publishes a regular financial newsletter. He is author of The Great Boom Ahead, The Roaring 2000s Investor, The Next Great Bubble Boom and The Great Depression Ahead.

Three Great Ideas You Can Use:

1. The economy is driven primarily by demographic trends which in turn drive economic cycles. External activities including wars, natural disasters and government actions have a minimal effect on these trends. Understanding these cycles and trends is critical to plan for the future and protect investments.

2. In the later part of the first decade of this century we have entered a winter phase of a very large 80 year demographic and economic cycle. Nothing the government does will change this. This winter cycle will lead to large debt restructuring, market corrections and deflation. The period between 2008-2018 will look much like 1930-1940.

3. Understanding this mega trend and its inevitable consequences is essential to investing wisely over the next decade to protect current assets and exploit the winter economy.

Publication Information: The Great Crash Ahead by Harry S. Dent, Jr. with Rodney Johnson Copyright 2011 by H.S. Dent Publishing Published by Free Press, a division of Simon and Schuster