How an Economy Grows and Why It Crashes

The book is written in a simple, straightforward language that makes it easy for anyone to understand it. Make no mistake though, there is nothing basic about it. If it were so our politicians would not be making the mistakes they are making. I am a Brazilian who is concerned with the direction we have taken in my country. While we are far from reaching the US critical condition, if nothing changes here we will get there. We got similar stimulus packs, government is pushing for consumption, interest rates are falling, indebtedness is rising etc. just like discribed for the USA. The book uses a story his father used to tell his kids during long car trips (adapted for current events) which basically explains very well what is wealth, where it comes from, the vital importance of entrepreneurship, production, savings, the currency and banking systems and investments based on this cycle. The book shows that Americans think they're getting a free ride, but that there is no such a thing. He advocates the importance of gold backing and how easy and dangerous the money printing machine has become. It reads smoothly and is fun. I turned page after page wanting to get to the end. I felt wiser and better prepared after reading it. Peter has a way of getting to some people's nerves, but once you get his point you understand why he acts like that. We have no time and no one but this gentleman seems to have the head attached to the neck when it comes to modern economics. The book is complete on its own but you will want to read more from him. I now just got the Real Crash... Read them in this order. Congratulations Peter. Keep up the good work. You're helping the whole world, believe me.

I accidentally came across Peter Schiff's ideas a few years ago. He was on TV with some other economists and he was the only person to state his assumptions clearly and defend his statements with facts and logic. I looked him up and found his 2006 presentation to a Mortgage Bankers association. This fascinated me. At the height of the housing boom, he described precisely how and why the economy was about to crash. As it turns, and as Peter admits himself, he does not have any super powers and he is not the smartest guy in the room. (Although I personally think he actually is the smartest guy in room.) He had different teachers. He studied Economics as developed by the Austrian School. And as I looked around, low and behold, a lot of people were able to see exactly what was happening and be able to explain the reasons why. Nearly all of the people who understood what was happening had studied the Austrian School of economics. They are better off for it. Unfortunately, the Austrian perspective, with a few exceptions, is not something you can find easily; largely because it does not lend itself to sound bites. You have to read books or listen to lectures. Luckily both of these sources are plentiful. I read a few of the Austrian authors, including "Human Action" by Ludwig von Mises and "The Road to Serfdom" by Hayek. These books, especially "Human Action", are written as academic texts, meaning you can't just relax and read. You have to focus and study and look up definitions and make outlines. It takes a lot of time. It should be standard college text for all majors, but not many people would have time after college to make a study of it. I mention this because "How and Economy Grows and Why it Crashes" is a non-fiction allegory that is fun to read and does not take up the time required to read academic books about economics. It is written in plain language and provides the reader with a general and useful understanding about how the economy works. Understanding economics can help you understand why certain government policies are destructive and why other policies are beneficial. It can also help a person make sound choices for career path, for investing savings and for running a business. Thank you Mr. Schiff, for your relentless energy, your clear mind, and your powerful work. The world is better off because of you.

Not only does this book explain the material very well, being both easy to read and easy to understand, it contains ideas that I've not previously seen expressed that help make understanding the big picture even more clear. Schiff does this by making two very cogent points: 1) The distinction between microeconomics and macroeconomics is bogus. Macroeconomics is what lets economists such as Keynes pretend that wealth-destroying policies create wealth. 2) Deflation is not bad, but rather a necessary adjustment to economic realities. Deflation is unpleasant, but it is a result, not a cause, of an economy in recession. Schiff does a very good job at explaining what wealth is. Wealth is not equivalent to economic activity, nor does economic activity create wealth. Rather, the creation of wealth results in economic activity. This helped me reach a better clarity of understanding, namely that the mistake of "macroeconomics" or "Keynesianism" is to confuse the metrics of economic productivity with economic productivity itself. Economic activity is a valid metric of wealth creation, but only up to a point: it isn't valid to add to that number via inducing activities that don't create wealth, and then treat the higher number as a healthier economy. It's like confusing the number on a thermometer with the actual temperature (of the outdoors, of the room, of a patient's body). Thus the policies advocated by Keynesianism are often no more than like the strategy of a child pretending to be sick: he holds the thermometer next to the lightbulb while his mom is out of the room. His temperature isn't really 106, he just wants the benefits that he imagines would result from a temperature reading of 106 (namely staying home from school for a day). Keynesian policies move money around, and the metrics (taking the temperature) measure money moving around. It is easy to (temporarily) convince everyone that the economy is strong by moving money around, but eventually the truth that no wealth has been created is communicated to everyone, causing a bust ... at which point the Keynesians insist on more policies that move money around. The housing crisis is a good case in point. The government adopted several policies for various political reasons that made it very easy to move money around, turning housing into a commodity rather than an asset. As long as housing was an asset, it was real wealth, and its value would always go up. The moment it became a commodity, the values fluctuated wildly. Now the Keynesians want to jump start the housing market by pumping money into it (moving money around), ignoring the fact that there is now a surplus of housing that will take several years to clear up. All the pump priming will never erase the facts that no wealth is being created. Why do so many people subscribe to Keynesianism, if it is so obviously problematic? The issue is that it is not "obviously wrong" at all because the assumptions of the theory "prove" themselves via confirmation bias. Economic "stimulus" moves money around, and economic growth is measured by how much money moves around, thus the metric for economic growth hides the fact that wealth isn't created. This is where my analogy of the child pretending to be sick fails: the child knows the number is a lie. Keynesians have inadvertently fooled themselves into believing that the number is true.

Economics explained in simple and funny way. Despite being a sad story of how the economy was built and destroyed, the autor makes us laugh every time.

Es un libro muy ameno y fácil de leer. De una manera muy simpática se describen los retos de una economía, desde el principio, hasta el colapso. Recomendable

This book is simply mind-blowing, though some of the details could have been better developed or revised. It reminds me of a Peter Lynch quote talking about one successful investor who didn’t have any formal business school experience: “The secret of his success is that he never went to business school. Imagine all the lessons he never had to unlearn.” I certainly have a rough idea that all the complicated models taught in textbooks are not challenged enough. However, it is upon reading this little book that I started to realize how much my reasoning was limited by all of these “demand-driven growth” baloney. Good and audacious work 👍

What Peter Schiff has told in this book, is something I used to think deeply about as a child. It is regarding the basics on how the economy governs. I remember in my youth thinking how some nations become wealthy and others poor, what determines wealth, where do business' get their money from (or where does the first person get his money from) etc. These were basic questions that I used to ponder over as a child, and as I got older, I learnt new stuff (e.g. macroeconomics) but my questions as a child remained unanswered. That was until I finished reading this book. Essentially, Peter Schiff tells a story, initially in it's primitive stages which gets complexed as you read further. It starts with 3 characters Able, Baker and Charlie who, in the beginning, have no other time except catching one fish a day, eating it, resting and sleeping. It states that through sacrifice and innovation, their standard of living increases (e.g. building a net that can catch two fishes). Thereafter, the story becomes complex with the introduction of banks, paper money, foreign nations etc but nevertheless, remains an extremely exciting read and understandable. If there is one thing I have realised is that all this wealth (i.e. the wealth of nations) comes about by lowering the cost of food (in this case the fish i.e. being able to catch more than one fish a day). I have realised that this is key to the success of standard of living (i.e. this is what creates the factories, the manufacturing industry, the tourism etc). This statement seems quite simple, yet something that is not first thought of given the complex economical system that we live in. Whilst I don't think the book states that clearly within the text, it gave me a sense of satisfaction that if I learnt just this from the book it would have been sufficient and a worthwhile read. I'm happily to say, that fortunately it touches on many more topics. Nevertheless, the wonderful tale presented by Peter Schiff captivates the reader to keep reading more. You can quite comfortably read this book within a few days even if you set aside a couple of hours at the end of a busy working day.