Endgame: The End of the Debt SuperCycle and How It Changes Everything by
Greece isn’t the only country drowning in debt. The Debt Supercycle—when the easily managed, decades-long growth of debt results in a massive sovereign debt and credit crisis—is affecting developed countries around the world, including the United States. For these countries, there are only two options, and neither is good—restructure the debt or reduce it through austerity measures. Endgame details the Debt Supercycle and the sovereign debt crisis, and shows that, while there are no good choices, the worst choice would be to ignore the deleveraging resulting from the credit crisis. The book:
Reveals why the world economy is in for an extended period of sluggish growth, high unemployment, and volatile markets punctuated by persistent recessions
Reviews global markets, trends in population, government policies, and currencies
Around the world, countries are faced with difficult choices. Endgame provides a framework for making those choices.
From the Back Cover
Praise for “Endgame”
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“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”
About the Author
JOHN MAULDIN is a renowned financial expert, a multiple New York Times best-selling author, and a pioneering online commentator. His weekly e-newsletter, Thoughts From The Frontline, was one of the first publications to provide investors with free, unbiased information and guidance. Today, it is one of the most widely distributed investment newsletters in the world, translated into Chinese, Spanish and Italian. He is regularly seen on TV and in national print media. President of Millennium Wave Investments, he is the father of seven children (five adopted) and lives in Dallas, Texas.
JONATHAN TEPPER is the founder and Chief Editor of Variant Perception, a macroeconomic research group catering to hedge funds and high-net-worth individuals.
Q&A with Authors John Mauldin and Jonathan Tepper
What is the debt supercycle?
Over a period of about sixty years, debt levels grew faster than incomes. This increase in debt became particularly pronounced in the 1980s, 90s and finally went parabolic after the Federal Reserve lowered interest rates to 1% after the Nasdaq crash. The increase in debt was not just a US phenomenon. As interest rates fell structurally in the fall in inflation from 1982 onwards, people took on more debt because it became more manageable. However, by 2008 the burden of debt became too much to bear and the debt supercycle came to an end. People started deleveraging and banks started collapsing due to low levels of capital and large losses from loans people couldn’t pay back.
How does the sovereign debt crisis play into this?
The rapid contraction in debt levels due to default and deleveraging lead to a fall in economic activity as people started saving and cutting spending. Governments immediately stepped in and backed bank debt with explicit guarantees. Governments also started borrowing and spending to transfer money to the private sector, for example via unemployment insurance. So in a very real sense, private borrowing was replaced with public borrowing. A debt was added to more debt. Rather than free itself of debt, the system now has more debt. The sovereign debt crisis is the recognition that most of this debt will not be paid back, and governments are making promises to pay debt and other obligations, for example, general spending and pensions, that they simply lack the ability to fulfill.
The end of the debt supercycle and the beginning of the sovereign debt crisis present problems and challenges for investors and governments. Governments will need to either 1) inflate, 2) default or 3) devalue, which is similar to inflate. That is the way governments have historically dealt with too much debt. Some countries will experience deflation and others inflation, depending on what choices governments make. Currently, governments have only bad and worse choices. Let’s hope they can choose wisely.
What do you predict for the next ten years?
Central banks globally have shown a predisposition to print money to solve problems. We foresee rising inflation in many parts of the world, reductions in real income as people lose purchasing power due to higher food and fuel prices and more macroeconomic volatility. Some countries that do not control their own money supply or are running pegs may experience deflation as they are forced to deliver and cannot increase the money supply to counteract the weight of deleveraging.
You cite the events in Greece as an example of a country continuing to run massive deficits. Is there an example of a country making a better choice?
The UK is making some of the right steps to control spending, but even the UK could be more draconian. In nominal and real terms, government spending in aggregate will not be cut in the UK. Also, Iceland has made positive steps by defaulting on its debt effectively. The default is a good way to cure too much debt.