Financial Armageddon: Protecting Your Future from Four Impending Catastrophes.

Park, Kwang Woo "Ken"

Financial Armageddon: Protecting Your Future from Four Impending Catastrophes, Michael J. Panzer. Kaplan Publishing, 2008.

Due to falling home prices and a wave of defaults on subprime mortgages, the financial crisis that began in August 2007 propagated deep fears over financial markets and the overall markets in the United States. In particular, the recent credit crisis and financial turmoil led to a severe lack of trust and confidence in the market. In this book, Michael Panzer attempts to offer an understanding of what led to the recent financial crisis, how to prepare for what's ahead, and how to manage our personal finances and investments in chaotic circumstances.

In the first four chapters, Panzner describes four potential threats to our recent financial system: 1) private and public debt problems due to asset bubbles in real estate, 2) inefficient private retirement systems in addition to the plausible insolvency problem in the Social Security system, 3) vulnerability of the financial system due to the government backed deposit insurance program, 4) misuse of credit derivatives by hedge funds and financial investment banks. In these chapters, he gives us a look at what potentially could be the future of this country as a result of outlandish spending, reckless regulation, faulty speculative markets and Credit Default Swaps.

In the next four chapters, the author identifies four widespread risks in the US financial system: 1) economic malaise 2) systemic economic crisis 3) potential depression 4) hyperinflation. He points out economic malaise such as rising mortgage payments, skyrocketing credit-card balances and sharply rising default problems due to the prevalent credit-driven bubbles in the real estate market. The author's fundamental point in a systematic crisis is a domino-like collapse of firms, lenders and investors. He argues that "complexity, unfamiliarity, uncertainty, misplaced complacency, newfound prudence will trigger broadly reactive response--the kind that has fostered numerous panics, bank runs, and market crashes through the years." In addition, the very large monetary expansion, in addition to increasingly widespread loss of faith in government policies, will spur significant capital flight.

For the most part, the author's arguments are based upon highly leveraged finance based economy. In the following four chapters, he eventually describes complete and utter chaos in the streets due to an economic collapse, plunging markets, widespread business failures, geopolitical explosions, and social upheaval. He points out that "the United States will soon suffer the fallout of the live-for-today orgy of borrowing and extravagance that has already foisted an untenable economic and financial burden on future generations." This book provides several directions on how to survive during a financial meltdown in the last four chapters. Panzner contends the importance of financial planning, tactical investment strategy and building solid human relationships as plausible solutions. He argues that individuals should make an effort in constructing solid financial, economic, and social relationships. At the same time, he states the importance of the establishment of personal support network consisting of family and friends during a time of economic collapse and deteriorating safety nets. In many cases, human network is more important than just having money. In regard to the implementation of the proposed solutions, he calls for judicious intelligence-gathering with the help of the Internet. Finally, Panzner suggests that the best way to plan ahead under the coming economic disaster is to assume that things will turn out badly. He concludes by saying that those who wish to survive the financial Armageddon will have little choice but to adjust to a world far removed from days gone by.

Even if all the scenarios that Michael Panzner lays out in his book do not apply perfectly to our current economy, the US economy has experienced the deepest and longest recession since the Great Depression and financial markets have been still struggling to return to a normal operation since the latest turmoil. In particular, the housing sector has been extraordinarily weak for a substantial amount of time. A number of author's predictions regarding the U.S. economy indeed came true during the recent crisis. In this sense, Panzner's book gives us several informative implications of the vulnerable characteristics of the modern economic structure.

Kwang Woo (Ken) Park

Associate Professor of Economics

Minnesota State University, Mankato

Mankato, Minnesota