Home » Posts tagged 'maudlin economics'
Tag Archives: maudlin economics
Almost All Countries In Europe Have Border Issues
Almost All Countries In Europe Have Border Issues
For centuries, Europe has fought wars over borders. In the 19th century and the first half of the 20th century, Europe’s borders shifted wildly. As empires fragmented, new nations arose and wars were waged.
After 1945 and the beginning of the Cold War, a new principle emerged on the Continent. The borders that existed at the end of World War II were deemed sacrosanct—not to be changed.
Europeans knew that border disputes had been one of the reasons of the two world wars and that even raising the legitimacy of post-war borders risked igniting passions that led to violence.
Similarly, untouchable were the existing spheres of influence on the Continent. There was the East and the West, and neither would mess with the other.
Thus, when the Soviets crushed independence movements in Hungary and Czechoslovakia, the United States refrained from any military action (not that there were many options). When Yugoslavia chose a pro-Western neutrality over membership in the Warsaw Pact, the Soviets didn’t intervene.
But in the early 1990s, everything changed.
Border Issues Arise, Again
In 1991–1992, two things happened.
First came the fall of the Soviet Union; then came the signing of the Maastricht Treaty and the creation of the European Union. Border issues began to drive events again.
The border of the Soviet Union collapsed, and a multitude of countries popped up to reclaim their past. There were many questions about borders that were mumbled about.
But for Eastern European countries, other problems took precedence: establishing national sovereignty, finding their place in a Europe that they longed to join, and building a new life for their people. They let the border issue drop—for the most part.
…click on the above link to read the rest of the article…
Pension Storm Warning
Pension Storm Warning
This time is different are the four most dangerous words any economist or money manager can utter. We learn new things and invent new technologies. Players come and go. But in the big picture, this time is usually not fundamentally different, because fallible humans are still in charge. (Ken Rogoff and Carmen Reinhart wrote an important book called This Time Is Different on the 260-odd times that governments have defaulted on their debts; and on each occasion, up until the moment of collapse, investors kept telling themselves “This time is different.” It never was.)
Nevertheless, I uttered those four words in last week’s letter. I stand by them, too. In the next 20 years, we’re going to see changes that humanity has never seen before, and in some cases never even imagined, and we’re going to have to change. I truly believe this. We have unleashed economic and technological forces we can observe but not entirely control.
I will defend this bold claim at greater length in my forthcoming book, The Age of Transformation.
Today we will zero in on one of those forces, which last week I called “the bubble in government promises,” which I think is arguably the biggest bubble in human history. Elected officials at all levels have promised workers they will receive pension benefits without taking the hard steps necessary to deliver on those promises. This situation will end badly and hurt many people. Unfortunately, massive snafus like this rarely hurt the politicians who made those overly optimistic promises, often years ago.
Earlier this year I called the pension mess “The Crisis We Can’t Muddle Through.” Reflecting since then, I think I was too optimistic. Simply waiting for the floodwaters to drop down to muddle-through depth won’t be enough. We face an entire new ocean, deeper and wider than we can ever cross unaided.
…click on the above link to read the rest of the article…
The Next Recession May Be A Complete Reset Of All Asset Valuations
The Next Recession May Be A Complete Reset Of All Asset Valuations
Sometime this year, world public and private plus unfunded pensions will surpass $300 trillion. That is not even counting the $100 trillion in US government unfunded liabilities. Oops.
These obligations cannot be paid. A time is coming when the market and voters will realize this.
Will voters decide to tax “the rich” more? Will they increase their VAT rates and further slow growth? Will they reduce benefits? No matter what they decide, hard choices will bring political turmoil.
And that, of course, will mean market turmoil.
The Great Reset Will Cause a Horrible Global Recession
We are coming to a period I call “the Great Reset.” As it hits, we will have to deal, one way or another, with the largest twin bubbles in the history of the world. One of those bubbles is global debt, especially government debt. The other is the even larger bubble of government promises. The other is the even larger bubble of government promises.
History shows it is more than likely that the US will have a recession in the next few years. When it does come, it will likely blow the US government deficit up to $2 trillion a year.
Obama took eight years to run up a $10 trillion debt after the 2008 recession. It might take just five years after the next recession to run up the next $10 trillion.
Here is a chart my staff at Mauldin Economics created in late 2016 using Congressional Budget Office data. It shows what will happen in the next recession if revenues drop by the same percentage as they did in the last recession (without even counting likely higher expenditures this time).
…click on the above link to read the rest of the article…
Mark Yusko: I’m Telling You Right Now, the US Is Going to Have a Massive Crash
Mark Yusko: I’m Telling You Right Now, the US Is Going to Have a Massive Crash
“I’m telling you right now, the US is going to have a crash and it will be massive,” asserted Mark Yusko at Mauldin Economics’ Strategic Investment Conference.
In his keynote speech, Mark Yusko, CIO of Morgan Creek Capital Management, outlined where he sees the biggest opportunities and risks for investors are today.
Demographics Are Destiny
Mark began with the big story of the SIC 2017—demographics.
He believes that efforts to generate growth through fiscal stimulus and tax cuts will prove futile because the working-age population in the US is declining. As such, consumption—which makes up 70% of the US—will continue to fall.
Mark thinks instead of taking off, the US economy is on the cusp of a recession.
Headed for Recession
Mark points to key indicators such as credit growth and tax revenues, which are declining, as proof a recession is around the corner.
Source: St. Louis Fed
“Every time a President leaves the White House after two terms, there is a recession within the first year of the new administration. I believe this time will be no different.”
So, what does this mean for investors?
Sell US Stocks
Since 2012, the earnings of S&P 500 companies have gone nowhere, yet the market is up 70%. This rise has all been multiple expansions. As such, US equities are one of the most expensive class of assets in the world today.
With the S&P 500 trading at record highs, top investment management firm GMO projects returns will be negative over the next seven years.
Source: GMO
With US markets fully priced, Mark says his firm is deploying their capital elsewhere.
European Banks Are a Buy
Despite all the hype around US financials due to “Trumponomics,” Mark points out that European financials have vastly outperformed their US counterparts since the beginning of the year.
…click on the above link to read the rest of the article…
