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This Time Will Be Different

John Mauldin profile picture
John Mauldin


  • Global debt could easily reach $500 trillion in a few years, and yet everyone acts like that is normal and can continue.
  • Just like subprime mortgage debt triggered the last recession, corporate debt will trigger the next one, which will be different.
  • The next recovery will be even slower than the last one, which will bring up political tensions and give rise to the far left.
  • For this reason, in the next decade, politics will be more important to markets than ever before.

For almost 40 years, we’ve lived in an era of low rates and easy money. It let governments and businesses worldwide run up piles of debt.

Global debt could easily reach $500 trillion in a few years. And yet everyone acts like that is normal and can continue.

Just like subprime mortgage debt triggered the last recession, corporate debt will trigger the next one. This will start a liquidity crisis and create havoc in all sorts of “unrelated” markets.

Investors will learn once again that all asset classes globally are correlated in a crisis. There will be few places to hide.

But then, as all recessions do, this recession will end. And recovery will begin, because that is what happens after recessions.

Except it will be different this time.

The Rise of the Far Left

Recovery from the Great Recession was the slowest on record. The next recovery will be even slower.

Debt is future consumption brought forward. We are now enjoying consumption and growth that won’t happen in the future.

Debt is a drag on future growth. And the amount of debt the world now has will be a monster drag on future growth.

Recessions always bring higher unemployment, on top of technology-driven job losses. This will worsen the current political tensions.

Humans want scapegoats. Many will blame markets and capitalism, when we have neither free markets or true capitalism.

The progressive left’s siren song will begin to play everywhere. They’ll promise guaranteed basic income, free college, free everything, etc.

If you haven’t already heard of the economic insanity called Modern Monetary Theory or MMT, you will.

It says we don’t need to worry about government debt. We should simply monetize it. Create and spend whatever we need for the common good.

They produce fancy equations and rationales, but monetization

This article was written by

John Mauldin profile picture
I am a financial writer, publisher, and New York Times bestselling-author. Each week, nearly a million readers around the world receive my Thoughts From the Frontline free investment newsletter. My most recent book is Code Red: How to Protect Your Savings from the Coming Crisis. I appear regularly on CNBC and Bloomberg TV. I’m also Chairman of Mauldin Economics, a research group that provides monthly analysis and recommendations to thousands of readers around the world. I was previously CEO of the American Bureau of Economic Research. Today I am President of the investment advisory firm Millennium Wave Advisors, LLC. I am also president and registered principal of Millennium Wave Securities, LLC a FINRA and SIPC registered broker dealer. When I’m not traveling to speak at conferences and events, I live in Dallas, TX. I’m also the proud father of seven children.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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Comments (173)

perceptions_now profile picture
Good Luck, WE are going to need it!
When the robots and AI take your jobs, you'll be thankful or a guaranteed minimum income.
Good luck with that. You Hussman shiff and all the other clowns can sit out the next 15ish years of this secular bull. Just hope you don’t actually run people’s money.
I agree well said valunstr!
dalmond profile picture
So no one has mentioned gold or real assets. See: www.forbes.com/... The only way Germany solved the hyperinflation was to re-peg the mark to gold.

How will this happen? Simple, political enemies of the US (read: Russia and China) will simply peg some percent of their currencies to gold (or some PM standard, or whatever.) It needn't be a large percentage (5%? 10%?) but some percentage such that some amount of a type of money without counter-party claims will be needed to settle debts. Gold is the ONLY form of money with no counter-party claims and so the only thing that can truly extinguish debt.

If you're going to go ahead and argue that debt will be unservicable, the only way out is to monetize the debt. This hasn't happened, per se, as the problem has been dealt with via issuing more debt, but if Mr. Maudlin is serious in hes claims, there is only one option. Got gold?
hulubalang profile picture
Gold has always held its value over the long term and provided insurance against the foolish actions of profligate governments, a measure of security for the hard times that are surely coming.
Z-alpha Trading System profile picture
This Time Will Be Different: Nope, not for us, we follow the same rules on every trade.
GWP in Tulsa profile picture
Mauldin is right although timing of what he is predicting is are to forecast. One thing that is absolutely certain - - if the AOC crowd of lunatics ever get in power God help us all.
Steven Jon Kaplan profile picture
Thank you for this valuable and worthwhile essay. It contains many key lessons which too many people are ignoring to their peril.
In all of these comments I have yet to read one having to do with the concept of a living family wage. Ford understood that he couldn't sell his 'mass-produced' cars unless there were people with enough money to buy them. Very possibly he didn't do enough to make this possible but he understood the concept.
About all the recent tax cuts did was to provide money to companies so they they could buy back stock - which in turn has done much to create the illusion that companies are worth more - which has driven our stock market.
Is there any other person commenting who has seen his tax bill increase as a result of all these great tax cuts?
Should we care is we are totally messing-over our grand-children?
Sorry to introduce 'social commentary' but that seems to me to be an underlying element of this article.
lol. people, do your own due diligence. "there's simply not enough money to do everything they propose." that sentence is enough to say the OP does not understand MMT.
ckarabin profile picture
What I don't get is that debt is really the flip side of the savings coin. You borrow only what someone else has saved. If we have a problem of excessive debt, then do we also have a problem of excessive savings? Because if we somehow solved the debt problem tomorrow and everyone with a loan paid it back to the saver who provided the capital for it, the savers would be swimming in surplus cash with no place to put it but in a mattress! The return on their savings would fall to zero and a new problem would arise: i.e. no investment return, and then no reason to invest if that return were zero.

Someone help me out here! What am I missing!!!!???
it is a ponzi scheme... your banks printing money out of the thin air...
the creation of money this days is by loans. and destroying it by repaying. but since your nation can't repay its debt that means you printing money without reserves...
ckarabin profile picture
But aren't debt and savings still equal then? After all everything owed is also owned on the other side of the balance sheet
“Debt is future consumption brought forward. We are now enjoying consumption and growth that won’t happen in the future”

An individual can bring forward consumption by borrowing from someone else, who is deferring their consumption. But the idea that the whole planet can “bring forward consumption” does not make sense.

It’s like saying that planet earth is a net borrower. A specific country can be a net borrower) balanced out by a net exporter elsewhere) but it’s not possible for the whole planet to be a net borrower.

How is humanity borrowing resources from the future? From a time machine that spews our raw materials mined in 2030?

I don’t disagree that lots of debt outstanding is a bad thing - it leads people to believe they are more wealthy than they really are and to spend resources on frivolous things. Once people realize it was a mirage, everyone simultaneously tries to defer consumption and everyone suffers (recession).
not everyone suffer. the bankers that have some responsibility to the recession. doesn't suffer at all. see Alan Greenspan for example...
Nicholas Southwick Levis profile picture
free SHizz you say? No such thing as a free lunch... However, we can find ways to pay for things and ways to stop the outlandish fraud that is being perpetrated on the students and hospital patients, which is the real issue.
Mr. Mauldin, I agree with much with what you write, but on the issues of free education and free healthcare for all I have to disagree. If you believe in social upward mobility and equal opportunity for all you have to have free education for all and free healthcare until that person graduates from post-secondary schools. After all, for a proper capitalist system to work you need a healthy educated workforce and this, I am afraid costs money that everyone one should bear the cost.
wizer: Can you find professors that will work for free? Can you show me doctors and nurses, and related healthcare professionals that will work for "free."? Get back with us and let us know what you've learned.

Do you ask the same question about people in the military? What about firefighters or the police?
@valeurchat Nobody works for free. For education and healthcare, it has to come from taxes.
$62500 per person for everyone on the planet. Amortized @9% interest it is only about $500 month from every person for 30 years. Oh well. Hope the little tykes don't mind. My dog said it looks fine to him but just in case not burried another bone in the back yard. What's to worry about another exponential digit or two on a planet like this with everybody as friendly as they can be.
Curve Tech Investing profile picture
@Zapopan. Yeah, and that $500 per month from each person goes into other pockets. It doesn't disappear. Money makes the world go round.
Every system lasts until it is abused out of existence - doesn't matter whether it is capitalist or socialist or something else.

Even an ideal system, should it ever exist, could and would be distorted and wrecked by the shrewd, the greedy, the malevolent, and the downright mean and selfish elements of its society.

"Man's reach should exceed his grasp, else what is heaven for?"
A quote I cannot credit because I don't remember the author.
But it applies also to a would-be ideal society.

Still, we can do a great deal better than what we are doing, and one of those things is to get the government out of approved racketeering in many of our industries for the sake of taxes and political kick backs.

I fear the extreme left and the extreme right equally as they both can enslave and impoverish us if we let them. One is not worse than the other, they are equally flawed and dangerous.

The extreme right has held power in this country since the beginning, and that is why they fear the emergence of the extreme left so much, when what we need is something in the moderate middle that uses logic, reasoning, progress of every kind, and the best survival instincts and behavior combined with intelligent compassion.

What are our chances of getting this?

None, if we keep going the way we are going - guaranteed.
hulubalang profile picture
Socialism seems good on paper but never works in the real world exactly because of "the shrewd, the greedy, the malevolent, and the downright mean and selfish elements of its society." Very few people are altruistic.
S.A. is great because there are so many viewpoints expressed and completely diametrically opposed articles. I especially love reading the comments.
In regards to our current state of affairs, two points: 1) I always remember that there can be a disconnect between the stock market and the economy. For example, stocks sometimes rise during recessions.
and 2) stock market tops almost always end with euphoria, when everyone is talking about how great things are. Walls of worry articles are everywhere— so perhaps we may be years away from the major top.
I think I'm getting dumber by reading articles and comments.
ANG Traders profile picture

Is it possible that ignorance is contagious?
Facebook already patented your comment some years ago. I think you now owe them money for patent infringement.
Nicholas Southwick Levis profile picture
We need an IQ test for a lot of things, like Congress, Senate, SA articles, etc... Mauldin is likely Mensa level and I am too!
Richard S. Daskin CFA, CFP(R) profile picture
Trump and the GOP have already embarked on a spending binge in late 2017, except their method was cutting taxes for corporations and the wealthy. Any objections to that Mr. M?
Utter nonsense.
ruber-rant profile picture
Wait till inflation goes crazy and central banks have to tighten to prevent hyper inflation in the middle of a bad recession
You think hyper inflation will occur amidst a severe recession?
Is this what Seeking Alpha has become? What a joke.
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