Endgame E-Book

John Mauldin

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 455

Veröffentlichungsjahr: 2013

Beschreibung

Praise for Endgame "This is an extremely powerful, sobering, well-written and highly accessible book. It will demonstrate to you why there are no painless solutions to the mounting debt problems around the world--something that too many people are yet to realize. It will take you on a well-documented journey through the debt supercycle, making stops around the world and at critical junctures. And it is a must-read for anyone wishing to understand the global debt dynamics and ways to protect against its bad consequences." --Mohamed A. El-Erian, CEO, PIMCO, and author of When Markets Collide "No one has thought more creatively about the economy. Mauldin's weekly newsletter is a must-read, and his book is even more important if you want to understand a rapidly changing world." --Newt Gingrich, Former Speaker of the House of Representatives "Successful investors explore all possibilities. You should read this book so you can succeed in case the Endgame is our future." --Jim Rogers, author of A Gift to My Children "I read everything John Mauldin writes. He travels the world and shares his financial stories like a good friend sharing a drink. Mauldin is that rarity--a skeptical optimist--who calls 'em straight and rewards his clients and fans." --Rich Karlgaard, Publisher and Columnist, Forbes magazine "There's clearly something important going on in the world economy. Something big. Something powerful and dangerous. But something as yet undefined and uncertain. We are all feeling our way around in the dark, trying to figure out what it is. John Mauldin must have night vision glasses. He does an excellent job of seeing the obstacles. You should read this book before you knock over a lamp and stumble over the furniture." --William Bonner, President and CEO, Agora Inc., and author of Dice Have No Memory and Empire of Debt "Endgame is not only a highly readable and informative account of the causes of the recent global economic and financial meltdown, but it also provides investors with a concrete investment strategy from which they can benefit while this final act in financial history is being played out." --Marc Faber, Managing Director, Marc Faber, Ltd., and Editor, Gloom, Boom & Doom Report

Leseprobe

Contents

Preface

Acknowledgments

Introduction : Endgame

Part One : The End of the Debt Supercycle

Chapter 1 : The Beginning of the End

How Did the Debt Supercycle Come About?

Private Deleveraging and Public Leveraging Up

Chapter 2 : Why Greece Matters

What Does Greece Mean to Me, Dad?

Chapter 3 : Let’s Look at the Rules

Six Impossible Things

Delta Force

Killing the Goose

But It’s More Than the Deficit

Not Everyone Can Run a Surplus

Pity the Greeks

The Competitive Currency Devaluation Raceway

Final Thoughts . . .

Chapter 4 : The Burden of Lower Growth and More Frequent Recessions

Three Structural Changes

Lower Growth, Fewer Jobs, Bigger Deficits, Lower Returns

Chapter 5 : This Time Is Different

A Crisis of Confidence

It’s the Deleveraging, Stupid!

Some Parting Words from Rogoff and Reinhart

Chapter 6 : The Future of Public Debt: An Unsustainable Path

A Bit of Background

Drastic Measures

The Future Public Debt Trajectory

Debt Projections

The Challenge for Central Banks

Bang, Indeed!

The Center Cannot Hold

Who Takes the Loss?

Chapter 7 : The Elements of Deflation

The Supertrend Puzzle

The Elements of Deflation: What Deflation Looks Like

The Velocity of Money

A Slowdown in Velocity

The Roadmap Ahead: Bernanke’s Helicopter Speech

There Are No Good Choices

Chapter 8 : Inflation and Hyperinflation

A Dose of Inflation

The Characteristics of Hyperinflations

The Dangers of Inflation

The Problems of Inflation

Hyperinflation in the United States?

Part Two : A World Tour: Who Will Face Endgame First?

Chapter 9 : The United States

Yes, We’re Screwed

Congress: Blind, Ignorant, and Indifferent

What Does It All Mean?

The Kindness of Strangers

Endgame for the United States

The Present Contains All Possible Futures

Some Policy Suggestions

Chapter 10 : The European Periphery

The Euro: A Suboptimal Currency Union

Some Countries Recover; Others Don’t

Chapter 11 : Eastern European Problems

Hungary: Damned If They Do, Damned If They Don’t

The Baltics: How to Destroy Your Economy and Keep Your Peg

Chapter 12 : Japan

The Mother of All Bubbles

Japanese Government: Spending Money Like There Is No Tomorrow

Japan’s Endgame

Chapter 13 : The United Kingdom

The United Kingdom Economy: Not as Safe as Houses

Northern Rock: A Modern Bank Run

The United Kingdom’s Endgame: Higher Inflation Ahead

Chapter 14 : Australia

The Lucky Country

A House of Cards

Chapter 15 : Unintended Consequences

Bubbles in Emerging Markets

Difficult Choices

Conclusion: Investing and Profiting from Endgame

Epilogue: Some Final Thoughts

Notes

About the Authors

Index

Additional Praise for Endgame

“There’s clearly something important going on in the world economy. Something big. Something powerful and dangerous. But something as yet undefined and uncertain. We are all feeling our way around in the dark, trying to figure out what it is. John Mauldin must have night-vision glasses. He does an excellent job of seeing the obstacles. You should read this book before you knock over a lamp and stumble over the furniture.”

—William Bonner, President and CEO of Agora Inc.; author of Dice Have No Memory and Empire of Debt

“Endgame not only is a highly readable and informative account of the causes of the recent global economic and financial meltdown, but it also provides investors with a concrete investment strategy from which they can benefit while this final act in financial history is being played out.”

—Marc Faber, Managing Director, Marc Faber, Ltd.; Editor, Gloom Boom & Doom Report

“I think the book is brilliant. It is well written, crystal clear, and hits the spot. My favorite chapters are the ones on fingers of instability (which I think everyone in finance should read and reread each year lest they forget), and the one on Eastern Europe as both a leading indicator for what’s in store and a potential land mine that could yet do for the euro what Credit Anstaldt did for the gold standard. But it’s a tough call. Lots of very good stuff in here.”

—Dylan Grice, Global Strategy Team, Societe Generale

Copyright © 2011 by John Mauldin and Jonathan Tepper. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, [phone], fax [phone], or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, [phone], fax [phone], or online at www.wiley.com/go/permission.

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Library of Congress Cataloging-in-Publication Data:

Mauldin, John.

Endgame : the end of the debt supercycle and how it changes everything / John Mauldin and Jonathan Tepper.

p. cm.

Includes index.

ISBN 978-1-118-00457-9 (hardback); ISBN 978-1-118-05806-0 (ebk.);

ISBN 978-1-118-05807-7 (ebk.); ISBN 978-1-118-05808-4 (ebk.)

1. Debt. 2. Debts, Public. 3. Debts, External. 4. Recessions. 5. Business cycles. I. Tepper, Jonathan, 1976– II. Title.

HG3701.M345 2011

336.3'4—dc

222010051231

This book is dedicated to Peter Bernstein.

Peter Bernstein 1919–2009

Amazing author, devoted husband, loving father

Mentor to generations of investment professionals

A man whose wisdom was always welcome

And who saw The Endgame clearly before everyone

You are missed, my friend, now more than ever when your wisdom is most sorely needed.

In order to improve your game, you must study the endgame before everything else, for whereas the endings can be studied and mastered by themselves, the middle game and the opening must be studied in relation to the endgame.

Jose Raul Capablanca, Cuban chess player who was world chess champion from 1921 to 1927 and one of the greatest players of all time

Preface

It is said that the present is pregnant with the future.

Voltaire

Prediction is very difficult, especially about the future.

Niels Bohr

Endgame is a book about the future of the global economy. When we started writing the book in 2010, we were afraid that by the time it arrived in bookstores many of the things we had predicted or warned about would have already happened. Both of your authors had written extensively about the issues and predicted outcomes we discussed in Endgame.

The buildup of debt that caused the financial crisis was still weighing many countries down, and central bankers and governments were responding with unprecedented stimulus. Some countries, such as Greece, were on the verge of defaulting, even though the markets (and European politicians!) were in total denial. We must admit that for us it wasn’t rocket science to make the predictions we did, it was simple arithmetic: Greece didn’t have enough income to handle its expenses.

As luck would have it, we were able to get Endgame out before Greece defaulted and the worst of the European crisis came to pass. For other countries, like Japan, we were able to warn about the extraordinary measures the Bank of Japan would end up taking. We didn’t get everything right, but we were able to provide a very useful roadmap for readers. Endgame was timely, and we’re pleased to see that it still reads well and offers a good look at the future.

Parts of Endgame are timeless and are intended to provide a fundamental way of viewing the world. In the first part of the book, we looked at the Debt Supercycle and how a very long period of debt buildup in the US, UK, Japan, and Europe would lead to lower growth and a debt-deflationary dynamic. The events of the past few years have borne out that insight. While developed economies appear to be “in recovery,” it is the most anemic recovery of the past 60 years. Welcome to the New Normal.

Each country faces different challenges and paths ahead. For most countries, the choices are stark—between bad options and worse ones. Some sadly face a choice between Disaster A and Disaster B. They merely get to choose which path to take in the lead-up to the destruction of their economies, exactly as we wrote about Greece. The worst-off countries of the developed world are still confronted with staggering debt and ageing populations. They are caught in a tug of war between deflation from too much debt and potential inflation from unconventional central bank monetary policies – quantitative easing (QE), large-scale asset purchase programs (LSAPs), and currency devaluations. Other countries, particularly in emerging markets, have lower debt levels and higher population growth, but they are facing the spillover of loose money policies from their developed neighbors. They must deal with the fickle tides of capital flows from the developed world, as money pours in and out. As a result, they have gone from being darlings of the investment world to pariahs.

We anticipated that we would see the US Federal Reserve, the Bank of Japan, the European Central Bank, and the Bank of England take the world in the direction of extraordinarily loose monetary policies. The events of the past few years have only confirmed our view that central bankers would err on the side of doing too much rather than too little. In the manner of Hollywood blockbusters, we’ve seen QE1 followed by QE2 and now, seemingly, “QE Infinity.”

Endgame was particularly accurate in describing the deflationary dynamics in Europe. The euro is very much like the gold standard; and, as Greece and the rest of the Eurozone periphery have discovered, the burdens of economic adjustment have fallen on the weaker members. We were extremely pessimistic about Europe, but as it turns out, our views now have an almost optimistic ring to them. Who would have guessed that Greek and Spanish unemployment levels would rise above 25% and that almost 60% of Greek and Spanish youths would be unemployed? Reality is almost always more interesting than fiction.

Many of the countries we wrote about have experienced the troubles we foresaw. When we wrote Endgame, we warned about Australia’s housing bubble; and we are now seeing the Australian dollar fall and the housing market slowly deflate. The chapter on Australia is particularly worth reading in light of that country’s weakening domestic economy, the slowdown of exports to China, and the bursting of the housing bubble. The story is still playing itself out.

The chapter on Japan as “a bug in search of a windshield” was perhaps the most farsighted. We did not say anything that other watchful people had not said, but we did emphasize how unsustainable Japan’s situation was. Time has only proved us right. The Tohoku earthquake and the Fukushima disaster were the not-so-small final grain of sand that caused the sand pile to collapse. The Bank of Japan (BoJ) has embarked on the largest, most adventurous policy of quantitative easing the world has seen. The BoJ makes the Fed and the Bank of England look like sissies. Japan’s ageing population, Godzilla-size government debt, and dismal public finances guarantee that we’ll see the yen weaken considerably as the central bank prints money hand over fist to finance government spending.

We did not get everything right, but we did best we could with our cloudy crystal ball. It is a pleasure for us to reread the book after the passage of several years. We must admit, given the volume of writing we have each done, that we can’t say the same about everything we have published. So far, Endgame has stood the test of time. We hope that you will enjoy it, as well, and find it instructive.

As we were finishing Endgame, we already suspected our next book would have to be on currency wars and unconventional monetary policy. We thought we would be able write it at our leisure during 2014 and that it would come out late that year. But then the Japanese launched the first missile in what we think is the beginning of a full-blown currency war that will dominate the latter half of the decade. We started madly writing this summer. Much like Endgame, we wrote Code Red to provide a roadmap to what will happen now that Japan has gone nuclear and unleashed the boldest, most forceful devaluation the world has seen since the 1970s. We have yet to see the full effects of Japan’s monetary policies.

We hope you like Endgame. If you do, we would recommend that you also find Code Red. We can only hope that Code Red reads as well a few years from now as Endgame does today.

John Mauldin and Jonathan TepperOctober, 2013

Acknowledgments

We would like to thank our many reviewers and readers. We have had a lot of feedback from reviewers, which has really helped. Martin Barnes of Bank Credit Analyst was particularly vicious, but he really made us do a lot more homework and think through some of our points. Andrew Wynn, Dylan Grice, and Albert Edwards provided very valuable critiques and insight. Lacy Hunt was particularly helpful in his suggestions and criticisms of our deflation and hyperinflation chapters. Simon White at Variant Perception was invaluable in helping draft some of the chapters on the United Kingdom, Eastern Europe, and Australia, and he helped produce most of the charts in the book. Debra Englander and Kelly O’Connor at John Wiley & Sons helped shepherd this book from its original idea to publication. Claus Vistesen and Edward Hugh offered valuable critiques, saw many of the crises before they happened, and have provided valuable insights into demographics.

INTRODUCTION

Endgame

People only accept change in necessity and see necessity only in crisis.

—Jean Monnet

Every child learns about the Great Depression in school, but economists, historians, and commentators have not agreed on what we will call the turbulent economic period we are currently living in. Some do call it a depression. Others call it the Great Recession. And some refer to it as the Great Financial Crisis. The Great Financial Crisis is particularly apt, because crises force us to make difficult choices. And one thing that everyone can agree on is that this new era of turbulence will impose difficult choices on governments and voters around the world.

I (John)1 am somewhat of an expert on bad choices—not only my own, but I have had the joys of seven teenage children. As our family grew, we limited the choices our kids could make, but as they grew into teenagers, they were given more leeway. Not all of their choices were good. How many times did Dad say, “What were you thinking?” and get a mute reply or a mumbled “I don’t know.”

Yet how else do you teach them that bad choices have bad consequences? You can lecture, you can be a role model, but in the end you have to let them make their own choices. And a lot of them make a lot of bad choices. After having raised six, with one more teenage son at home, I have come to the conclusion that you just breathe a sigh of relief if they grow up and have avoided fatal, life-altering choices. I am lucky. So far. Knock on a lot of wood.

I have watched good kids from good families make bad choices, and kids with no seeming chance make good choices. But one thing I have observed: Very few teenagers make the hard choice without some outside encouragement or help in understanding the known consequences, from some source. They nearly always opt for the choice that involves the most fun and/or the least immediate pain and then learn later that they now have to make yet another choice as a consequence of the original one. And thus they grow up. So quickly.

But it’s not just teenagers. I am completely capable of making very bad choices as I approach the beginning of my seventh decade of human experiences and observations. In fact, I have made some rather distressing choices over time. Even in areas where I think I have some expertise, I can make appallingly bad choices. Or maybe particularly in those areas, because I have delusions of actually knowing something. In my experience, it takes an expert with a powerful computer to truly foul things up.