The Endgame Headwinds
By John Mauldin
April 29, 2011
1304128968
I
have written repeatedly about the Endgame in the weekly letter, as well as in a
New York Times best-seller on the same topic. By Endgame I mean the period of
time in which many of the developed economies of the world will either
willingly deleverage or be forced to do so. This age of deleveraging will
produce a fundamentally different economic environment, which the McKinsey
study referenced below suggests will last anywhere from 4-6 years. Now, whether
this deleveraging is orderly, as now appears to be the case in Britain, or more
resembles what I have long predicted will be a violent default in Greece, it
will create a profoundly different economic world from the one we have lived in
for 60 years. This makes sense, in that the prior world was defined by ever-increasing
amounts of leverage. Outright reductions in leverage or even a significant
slowing of the rate of growth is a whole new ballgame, economically speaking.
In all this I have explained the
various options facing the developed world, but I have refrained from putting
forth my own estimates as to what will actually happen and what the environment
surrounding that outcome will be. That is about to change. I have been giving
this a great deal of thought and research. While my conclusions will be
somewhat controversial (I know, surprise, surprise), with enough to offend
almost everyone on some point, I hope that I can muster enough clarity to help
you think through your own personal views and how you will respond to what I
think will be yet another crisis on the not-too-distant horizon. Whether that
is Crisis Lite or Crisis Depression is up to us and the politicians we elect. I
argue that we need to choose most wisely, because we are at a crossroads that
is as critical as any since 1940.
As I start this letter, I am on
a flight to San Diego, where I will co-host my 8th annual Strategic
Investment Conference. As usual, I will be the last speaker on Saturday. This
letter will be the beginning of that speech, and we will conclude (hopefully)
next week. What I hope to do here is summarize the main points, add some new
ones, and then move on to how I think the Endgame will play out. These next two
e-letters will be among the more critical ones of the last few years. Feel free
to forward, and if you are reading this letter you can join my one million
closest friends and sign up for my free weekly letter at www.johnmauldin.com. (This letter may
print longer than usual, as it will have a significant number of graphs.)
But before we jump in, many of
you know that I am a serial entrepreneur. I look for business opportunities for
inclusion in “the Mauldin companies.” My “hobby,” if you will, is looking at
cutting-edge biotechnology. You have been asking for details and an update on
one I mentioned last year. We partnered with a very serious biotech research
firm, International Stem Cell Corporation, whose scientists discovered a
patent-pending formula that rejuvenates skin. We continue to partner with them
to help augment this breakthrough and, most importantly, to help fund their
therapeutic research to find cures for very serious diseases. You can learn
more at www.lifelineskincare.com/antiagingbreakthrough.
Now, let’s get into the letter.
Before
we can get to how I think the Endgame of the debt supercycle plays out in the
US, we need to quickly survey the current environment, and revisit (at least
for long-time readers) a few basic economic themes that I will call the “headwinds”
of economic growth. So many leaders in so many countries think that with the
right policies they can grow (export) their way out of the problem. As I have
written, not everyone can grow their way out of a crisis at...
Comments
Steve Klap
April 29, 2011, 5:53 p.m.
So what do you propose be done to deal with the health care issue in a humane and realistic fashion? Canadians pay half of what Americans pay for similar services yet have a civilized and humane system. Millions of Americans cannot afford to get sick yet there is the continual call for government to exit. Has the private sector done health delivery more efficiently than government? Your claim here is simply not accurate. The private health industry(and the financial services industry) in the U.S. are bankrupting the country and both need to be regulated.