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John Mauldin - The Real End Game, We’re Coming To The End
On the heels of China and Brazil nearly doubling the IMF’s lending capacity to $456 billion, and with renewed fears of Europe becoming a systemic risk to the global financial system, today King World News interviewed John Mauldin, President of Millennium Wave Securities. Mauldin told KWN, “What we’re seeing is the real end game” and “it is coming to an end.” Here is what Mauldin had to say about the crisis in Europe: “Everything changed and nothing changed. Greece isn’t solving its problems. It’s fundamental problem is its trade imbalance. They can sit and posture all they want to, but until they solve that problem, nothing is going to happen.”
John Mauldin continues:
“So they are going to have another period of frustrating non-recovery and continued recession. Then the voters will get upset and probably elect a new group of people to get frustrated with, until they finally leave the euro.
Spain has lost access to the bond market. They can’t fund themselves. So Europe, through some mechanism, will tap the central bank because that’s the only place where there’s any real money in the size that is needed for Spain.
Whether they make the ESM a bank, whether they declare the ESFS available to fund and guarantee other money on a leveraged basis -- All of the things I just suggested are against the rules, and they (European central planners) don’t care....
Continue reading the John Mauldin interview below...
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“They’ve got a crisis and politicians will do whatever they need to do to get through the crisis.
The reality is they’ve got a massive trade imbalance in Europe. The Southern countries want the Germans to finance it. The Germans want a fiscal Union with control over the budgets. I don’t know how it’s going to turn out, they don’t either, but it is coming to an end.
What we’re seeing is the real end game. We’re coming to the end of government’s ability to borrow money to fund current spending that’s beyond the growth of their economy.
I actually find that massively bullish because that government funding misallocates capital. So governments are going to have to live within their means. Not just in European countries, not just in Britain, not just in Japan which has its own problems that will be coming to us next year, not just in France which will be the headline in 2 years, but also in the US.
It’s going to end in the next 2 or 3 years, Europe first, then Japan, then the US. Hopefully we (the US) don’t end by becoming Spain and hitting the wall and losing access to the market, without the central bank massively funding ourselves and watching interest rates rise.
Hopefully we do it proactively. We learn the lessons of Europe and Japan. But if we don’t, then okay, that’s fine, we know what the rules are. It’s the developed nations of the world, we’re watching them come to the end of the Debt Supercycle. It’s deflationary. That debt is going to have to be destroyed. It’s happened a couple of hundred times in history.
Debt has been renegotiated, it’s been printed, defaulted upon, restructured. There are all sorts of ‘re’ words we talk about, but it’s default by another name. It’s what happens if you as an individual have more debt and you have more than you can possibly pay, you have to restructure something or file bankruptcy.
That’s where Western governments are. They’ve run out of the ability to borrow money to finance their current consumption. This is a good thing that it’s coming to an end. I don’t see this as negative in the longer-term. It’s still going to be a bumpy ride for the markets. It’s certainly going to be (an interesting) ride for the business as usual crowd.”
Mauldin also cautioned investors: “You can structure things so that you are protected from whatever stupid things that the government is going to do. You don’t have to stay on the tracks when the train is coming at you, you get off the tracks.”
John Mauldin discussed the crisis in Europe, the US, and around the world. He also tells investors how to position themselves and what to expect going forward. The extraordinary KWN interview with John Mauldin is available now and you can listen to it by CLICKING HERE.
© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
The interviews with Egon von Greyerz and Gerald Celente are available now. Also, be sure to listen to this week’s line-up of other KWN interviews which include John Embry, Bill Fleckenstein, MEP Nigel Farage, Michael Pento, Dr. Stephen Leeb, Don Coxe ($538 billion BMO), Art Cashin ($612 billion UBS) and Rob Arnott (oversees $100 billion) by CLICKING HERE.
Eric King
© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast,
rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
June 19, 2012
