Authored by John Mauldin via MauldinEconomics.com,
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).
Source: Mauldin Economics
And you can add the $1.3 trillion deficit in this chart to the more than $500 billion in off-budget debt—and add a higher interest rate expense as interest rates rise.
The catalyst could be a European recession that spills over into the US. Or it might be one triggered by US monetary and fiscal mistakes. Or a funding crisis in China, or an emerging-market meltdown.
Whatever the cause, the next recession will be just as global as the last one. And there will be more buildup of debt and more political and economic chaos.
It May Be a Complete Reset
The Great Reset will also bring an increase in volatility. And the correlation among asset classes will once again approach 1.0, as it did during 2008–2009.
If I’m right about the growing debt burden, the recovery from the next recession may be even slower than the last recovery has been. That is unless the recession is so deep that we have a complete reset of all asset valuations.
I don’t believe politicians and central banks will allow that. They will print and try to hold on as long as possible, thwarting any normal recovery, until markets force their hands.
But then, I can think of at least three or four ways that politicians and central bankers could react during the Great Reset. Each of the four ways will bring a different type of volatility and effect on valuations.
Flexibility will be critical to successful investing in the future.
I think the answer lies in diversifying among noncorrelated trading strategies that can invest in any asset class.
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The sky is falling, the sky is falling. They have been predicting this shit for the last 10 years.
Things will keep going, when all of it is devalued, TPTB will step in and buy it back for 10 cents on the dollar. The stock holders will take it up the ass – but who cares?
The most likely result is hyperinflation; the government will then print to support the FSA until the store shelves are empty; then government thugs will take any food citizens have and give it to the FSA; then the FSA will eat all the unarmed citizens.
To everyone who’s been looking forward to this event as long (and with as much enthusiasm) as I have, I’ve come to my own conclusion on the matter I’d like to share:
I think it’ll be about 30 years before the long awaited for event takes place.
Every 40 years, give or take, the system resets. Over the past 100 years it happened under FDR with gold confiscation and revaluation in 1933, again under Nixon in the 1971 as the USD became fiat, and in 2008 as (in my opinion) credit became the official currency of the world. If history is any guide, I expect the next crisis to hit in the mid-2040s.
Even Jesus’ warning (32 AD) about the destruction of Jerusalem (70 AD) happened in the same amount of time as the changes in the USA.
I DO think this is the final warning for the nation (and the Western World), but Generation Snowflake will likely be holding the reigns of power during the great and final meltdown.
This guy is on crack if he thinks tax receipts are going to surge from 3.3 trillion to a whopping 5 trillion from 2022 to 2025. $5 trillion! From what? By 2025, 1/4 of current jobs might be completely gone! Replaced by what? Kiosks dont pay no taxes. Smartphones, streaming, and various gigs dont generate remarkable tax revenue. I see spending being $5 trillion in 2025, but I can easily see tax receipts being half of that, with $4 trillion being on the bullish high side.
Complete reset…….got it (for the bizzillionth time). How many more of these articles can we endure?
The next recovery may be slower than the last……do ya think?
Lost tax revenue from a recession may cause deficits…….Really? Get outta here……Well, no shit.
Mauldin you’re fukkin brilliant, brilliant I tell ya.
The apparatus of destruction and it’s levers are tightly controlled… the reset will only be pulled when the bastards of wall street and all of brokers of greed have sucked every last benefit from the labor of the masses. When we beg and crawl on our hands and knees to be marked with our own individual UPC to receive our meal allotment… then it will reset but then none of us will care for the hidden slavery of today will finally be overt.
The sky is already falling!
Just take along a note pad with you to the grocery store. Record the prices of 30% of the products you buy as staples weekly. Be sure and record the “net weight” of the product.
Do it again next week.
Two months later, you will find you are getting less product for the same or a higher price.
We are being raped by the Federal Government week after week, month after month and “hidden” inflation (smaller amounts for the same price) which is inflation by another name.
We are slowly being reduced into penury, day by day and it’s hard to recognize unless you document it yourself. Do this for products, services, whatever you have to buy or services you purchase and you will see what I mean.
We are being made into paupers in slow motion because 99% of the sheeple don’t understand, notice or know how to combat it.
A fresh Muck’s Minute is on the way about it.