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

The point of no return for countries is when interest rates are rising faster than their growth rates. At that stage, there is no hope of stabilizing the deficit. This is the situation many countries in the developed world now find themselves in.

It is our contention that long before we ever get to that point (say 2020), the bond market will revolt, interest rates will rise, and the results will be very unpleasant. And that’s for the United States. As we will see later in the book, without some serious intervention, that unpleasant ending could happen to a host of countries in the developed

We think we can take it as a given that there is another recession in front of the United States and/or Europe at some point. That is the natural order of things. But it would be better to have that inevitable recession as far into the future as possible, and preferably with a little inflationary cushion and some room for active policy responses. A

While it is unlikely that the United States, Japan, or any other country will soon enter hyperinflation, the situation could change in the future if any of the central banks were to lose their independence or continue to coordinate their actions with their treasuries.

If you believe in deflation, U.S. Treasuries offer great value. Unsurprisingly, the biggest proponents of deflation are David Rosenberg and Lacy Hunt. Both work at firms that manage a lot of money in bond funds.

But you know the fact is that when you run these big debts, the problem is not with your children or your grandchildren, it’s in your lifetime. If you get to really high debt levels, you don’t make it. The market eventually gets concerned.

To counter this problem, the authors are setting up a special forum for readers of Endgame, which can be found by going to www.johnmauldin.com/endgame.

Interestingly, the only country in the world that currently fits the bill for hyperinflation is the United Kingdom, where 100 percent of the budget deficit was monetized by the central bank. Unsurprisingly, ever since, inflation in the United Kingdom has consistently overshot the Bank of England’s own forecasts. Apparently, they don’t see a connect

Do we think the Fed will abandon its responsibility to control inflation and resort to total monetization of U.S. debt? No. But in the attempt to get mild inflation, it is possible the controlled fire they hope to kindle could get out of control, forcing them to act to take back the excess reserves and bring about a recession, as did Volcker. Let’s