
Endgame: The End of the Debt SuperCycle and How It Changes Everything

Like many other small European countries, it borrowed money very cheaply from abroad and paid very high interest rates on foreign deposits. Icelanders could borrow Japanese yen for close to 0 percent, and they paid foreign investors very high rates. For instance, Kaupthing Bank’s (an Icelandic bank) Isle of Man subsidiary offered 7.15 percent on on
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As an aside, both your humble authors are believers in owning gold, and in some countries and currencies, owning more than a small insurance portfolio is well recommended. For us, gold is not so much an inflation hedge as a currency hedge.
John Mauldin • Endgame: The End of the Debt SuperCycle and How It Changes Everything
At some stage, you run out of suckers to buy government debt. What is certain is we will only see more efforts at financial oppression, but we will see increasing attempts to monetize deficits and reduce the future value of liabilities through inflation. It will not be pretty.
John Mauldin • Endgame: The End of the Debt SuperCycle and How It Changes Everything
The title for the chapter on Japan is “A Bug in Search of a Windshield.” While the currency of the Land of the Rising Sun is very strong as we write, there are real structural reasons, as well as political ones, that lead us to predict that the yen will begin to weaken. At first, it will be gradual. But without real reform in government expenditure
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This squares solidly with the work done by Rogoff and Reinhart, showing that when the debt of a country reaches about 100 percent of GDP, there is a reduction in potential GDP growth of about 1 percent. As we wrote earlier, government debt and spending do not increase productivity. That takes private investment. And if government debt crowds out pr
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That being said, at the bottom of the next U.S. recession, we think emerging market countries could see their economies and stock markets finally decouple from the United States, and at that point, they could become the trade of the decade. We suggest that investors use the time to find specific stocks and not just country ETFs, or find someone who
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If we go into a downturn, we hope central banks will be wise enough not to monetize government debt in any fiscal crisis. Sadly, they probably will.
John Mauldin • Endgame: The End of the Debt SuperCycle and How It Changes Everything
Now, there are bullish voices telling us that things are headed back to normal. Mainstream forecasts for GDP growth this year (2010) are quite robust, north of 4 percent for the year, based on evidence from past recoveries. However, the underlying fundamentals of a banking crisis are far different from those of a typical business-cycle recession, a
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The Fed could enforce these interest-rate ceilings by committing to make unlimited purchases of securities up to two years from maturity at prices consistent with the targeted yields. If this program were successful, not only would yields on medium-term Treasury securities fall, but (because of links operating through expectations of future interes
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