Note: This may be my single least favorite commentary I have ever read from my friend John Mauldin. It is filled with logical errors, poor assumptions and factual misinformation. I normally would not publish it, but I decided to molest it with annotations.

What the hell is in the drinking water in Texas? First W, then Rick Perry, now this.



The Answer We Don’t Want to Know
By John Mauldin
February 11, 2012


What Is a President to Do?
Thinking About President Gore
Clinton on the Dole
And Then There Was 2012
The Fed Has a Printing Press
The Strategic Investment Conference in Carlsbad, California, May 2-4
Washington DC, Kansas City, and Europe

2012 will be the 11th time in my short life that I will be able to participate in the choosing of a president of the United States. While it may just be me, it seems like each and every election is cast as the most important election of our time and a defining moment for the American Experiment. The future of the Republic was being weighed in the balance, and only the proper outcome (which would of course be the election of the candidate you supported) would assure its survival. This week we will continue our meditations on the economic choices that confront the world, this time focusing on the US.

We will start with a thought experiment, in which I invite you to think about alternate histories. Just how important are presidents (or leaders in general) to the success or failure of the economy? And then how critical is the coming election this fall? We will assault a few of our most cherished beliefs, both from the left and from the right. If I do not offend you in the first few pages, I invite you to keep reading; I will get to you somewhere.

(Warning: I risk upsetting more people than usual, as this letter is centered on the politics of economics. I will do my dead level best to be even-handed, but there is just no pleasing everyone. So better to write what I think and at least have one person happy. Which is pretty much what I do every week, anyway.)

As I continuously argue, the most important issue facing the US is dealing with its deficit, just as that is the defining issue in much of Europe and will soon be in Japan. [BR: This is a s political, not economic or Fiscal assumption. While we need to deal with the deficit, it is not nearly the issue made out by the far Right — the US has had bigger deficits, i.e., WW2, and resolved them] The longer we put off the decision, the more difficult the task and the more serious the economic impact. Without action, Italy all too soon becomes another Greece, but with real impact. They realize that and are making the efforts. But would it not have been easier for Italy with about 40% less debt-to-GDP? Perhaps not politically, at that time when they should have been working on it, but in hindsight I bet the politicians now wish they had done more. It seems we accept change only in the face of necessity and see the necessity only in a time of crisis (as one Italian more or less put it, long ago).

So we discuss politics, because the looming debt crisis (and its solution) is at its very core a political creation and must have a political solution. And once the bond market decides to provide its own solution by demanding much higher interest rates, it is too late. That’s game over, and a prolonged recession if not a depression will ensue.

But before we go any farther, and quickly, if you are an accredited investor (or professional investment advisor or broker) in the US, let me invite you to a live discussion/webinar with myself and Tony Fenner-Letto of Winton Capital Management this next Tuesday, February 14, 2012 at 10:00 a.m. Pacific / 1:00 p.m. Eastern. This presentation will be hosted by my partners at Altegris Investments. Winton Capital Management is the largest and arguably the best-known managed futures firm on the planet. We will discuss their strategy for dealing with today’s market environment. I will also share my current thoughts on the global economy and its outlook. Hopefully we can talk about something besides Greece (are you tired of Greece yet?).

You can get an invitation to the webinar by calling your Altegris representative at 800-828-5225. If you have not yet opened a relationship with them, I will have them call you if you register at The Mauldin Circle. A replay will be available to registrants unable to attend. I apologize for limiting this discussion to accredited investors, but we must follow the rules and regulations. I am working on doing a webinar in the near future that will not be restricted. Stay tuned. (In this regard I am president and a registered representative of Millennium Wave Securities, LLC, member FINRA.)

One further note. At the end of the letter, I will give you information and a link to be able to register for my Strategic Investment Conference, May 2-4. I expect it will sell out, as always, so I would suggest making your reservation promptly.

Now, we start today’s letter in South Africa, as I wonder which continent I will finish it on. In order to be able to hit the send button while on layover in London, we’d better jump in.

What Is a President to Do?

I have long maintained that presidents take too much credit for good economic times and get altogether too much blame for bad ones. That is not to suggest that they can’t make a difference by promoting certain policies over others. Clearly they can. But I think we might find, if we think about what might have been if the “other guy” had been elected, that outcomes would often have been not very different. In fact, it is often not until after a president is gone that we see the results of his policies. Let’s start with recent history and work backwards.

Let me preface this by pointing out that we are dealing with just the economic outcomes of the election of a particular president. I readily admit that other areas, such as Supreme Court nominees, regulations, social policy, and foreign policy would, perhaps, change a great deal. These developments are important, and perhaps more important than mere economic outcomes; but for this letter, let’s just focus on the economic aspects of a particular election.

Thinking About President Gore

In what seems like an eternity, but was only a short time ago, we were learning more about “hanging chads” on punched election ballots in Florida than any of us ever wanted to know. The world marveled as the denizens of the last Superpower fought tooth and nail over whether a ballot counted according to whether the holes were punched correctly. The difference between President Bush and a potential President Gore was in the end just a small number of votes in just one state. It was the closest of elections, with the results literally hanging by a chad. So, it is not at all far-fetched to imagine what would have happened if Al Gore had won the election. How much of an economic difference would there have been? I would suggest, not all that much. [BR: We don’t know, but this reeks of excuse making for one of our worst Presidents]

The market had already begun to collapse by the time Bush was inaugurated in January ’01. Could Gore have prevented a recession? The answer is no, because the weakness had already set in. There would still have been 9/11. [BR: Unsupported counter-factual conclusion — we have insufficient information to conclude that Gore (or anyone else) would have ignored the same warning that Bush so fatefully failed to heed] That had been planned since Clinton’s presidency, when Gore was vice-president. [BR: Oddly implies some blame on Gore as Veep] An Al Gore as president would hardly have deterred bin Laden from his plans.

And the economic aftermath of the event would have been roughly the same. Greenspan and the Fed would have kept lowering rates and kept them low for too long, no matter who resided in the White House. Would Gore have nominated an old-school monetarist as Fed Chair? [BR: Perhaps, we don’t know. Someone should ask him, or review his speeches for the 1999-2003 period] Hardly likely. Almost the entire establishment, both Right and Left, the latter of which Gore was a leading figure, were Keynesian to their core. And Greenspan (or Bernanke, or whoever) was not going to allow deflation on his watch, not without a fight, with his main weapon being low rates and easy money.

The regulations that fostered the housing bubble and the subprime crisis were already in place. [BR: I think John means radical deregulations that allowed private bankkers to abdicate lending standards and engage in reckless specualtion] Both parties were in thrall to Fannie Mae and Freddie Mac. [BR: However, disproven as a cause of the crisis, and now a wingnut talking point] Greed was already running rampant on Wall Street. Did I somehow miss loud, insistent calls for a tighter home-lending regulatory environment from the partisan leadership on either side of the aisle? No, there weren’t any. [BR: Ed Gramlich at the Fed and others demanded it — they were shouted down]

Would consumers have borrowed less on their homes? Was anyone complaining (except those buying?) that housing values were climbing too fast? Indeed, my neighbors in Texas were lamenting our lack of participation in the seemingly nationwide skyrocketing of housing prices. [BR: Yes, some of us were]

Would we have avoided a subprime crisis leading to a credit crisis under Al Gore? [BR: Wrong question — would a President Gore have effected policy that made it worse? Would he have appointed Harvey “Shred-all-documents-before-subpoena-arrives” Pitt as SEC chairman? Federal preempted of predatory lending laws?] Did the Democrats protest the laws, passed by a Republican Congress, that allowed a few investment banks to massively increase their leverage? [BR: It was a rule exemption passed by the SEC, not congress] Or did they also take the lobby money and vote for the legislation?

The repeal of Glass-Steagall? That happened in 1998 under Clinton, with the full support, yea, the insistent urging, of the Republican leadership. [BR: Actually, it was GOP sponsored legislation passed by a veto proof majority] (Shepherded by a certain Texas senator, who also called Alan Greenspan the “Greatest Central Banker in History.” I still fondly recall Senator Gramm, an economics professor in his prior life, who I think all in all was a very good senator, if just a tad overenthusiastic about Greenspan. [BR: A terribly misguided Senator who not only sponsored the repeal of Glass Steagall but also introduced the Commodity Futures Modernizaton Act of 2000, which exempted all derivatives from any Federal or State oversight or regulations] (Side note: The conference I just spoke at here in South Africa voted overwhelmingly that the devil’s actual surname was Greenspan, from a rather dubious list of choices. Ah, how we fall from Grace. But back to our historical meanderings.)

Yes, we would not have had the Bush tax cuts, which some mathematically challenged individuals think are responsible for the whole deficit crisis. [BR: A little more than half] The tax revenues that were supposedly lost due to the cuts? Tax revenues were actually up just a few years later. [BR: Irrelevant to lost revenue due tot ax cut analysis, as it was driven by population growth and inflation — hence, a rather misleading statement here] To argue that the Bush tax cuts did not have a stimulative effect on the economy flies in the face of all credible nonpartisan research, which shows tax cuts do indeed provide a positive stimulus effect; so the recovery would have been even weaker without them. [BR: Yes, a trillion dollars combined with ultra low rates stimulated the economy — but at a cost of blowing out the deficit]

But under Gore we would likely not have had the Bush spending increases (which is what he should be blamed for), as the Republican Congress would likely have continued policies started under Gingrich, which opposed spending wanted by a Democrat president and which resulted in the running of a surplus. It was only when Republicans could get credit for spending increases that they wasted the surplus. But my bet is that (sadly) they would have still figured a way to use up that surplus, post-2000. [BR: Again, we do not know that, to assume so reveals the excuse making for W that makes this column so disappointing]

Would a Gore presidency have reacted any differently to the credit crisis, in ways that mattered? There was initial bipartisan consensus (at least of a majority, although with some noted disagreements) of the need for a stimulus, although later there was serious disagreement as to what that stimulus should be.

Would Gore have launched a war in Afghanistan? To think he would not have is to ignore who Al Gore was. He was (and I assume still is) a very hard-nosed foreign policy and defense hawk, when he was in the Senate and as vice-president. Would he have gone into Iraq? Probably not, but when all the world’s intelligence agencies (even the French!) believed Saddam Hussein had weapons of mass destruction and was close to a nuclear weapon, who can say? [BR: I cannot think of any other serious Presidential candidate of the past 20 years who would have gone into Iraq after 9/11 ]

(I should note that they all believed that because they had tapped Saddam’s communication lines. His top scientists told him they were close, because they were afraid for their lives to tell him they were not. So even Hussein believed he was close to a nuclear device. It was all a colossal failure of the intelligence professionals – even those in Iraq! Without such “evidence,” Hussein might still be in power today. If it was not so profoundly sad, with such a tragic loss of lives, the irony would be just too delicious.) [BR: Nonsense — As I wrote in March 2003, the intelligence was clear that there were no WMD — VP Cheney’s set up an alt-intelligence unit, because the pros refused to peddle the nonsense he asked for]

So, there would have been less accumulated debt, but not all that much in the grand scheme of things. [BR: It would have been less than half] The increase in debt under Bush just brought forward a few years the end of the Debt Supercycle. Instead of the necessity of dealing with the deficit in 2013, we might have gotten to 2016. But the math of the entitlement programs makes the Day Of Reckoning a future certainty. However, that is not the point.

The point is that the main economic events would have happened under either president. [BR: The key questions: Would a President Gore have responded as poorly as President Bush did? Would we have had a TARP? And a trillion giveaway to the banks?] Would there have been a difference in marginal tax rates? [BR: We simply do not know] Yes, but I do not think tax rates were the cause of the debt crisis, or the subprime crisis. Would Republicans have avoided the temptation to spend under a President Gore? Not if Hastert and DeLay were still in charge of the House, at least if they continued to espouse the same policies. Less deregulation? But the subprime problem was not caused by deregulation. [BR: Hmmm, this Kool-Aid is delicious!]

The economy would have been basically the same under either president, though a case could be made that there would have been less accumulated government debt. Differences? Sure, I can think of many, but not major ones. [BR: Wow, excuse making for the disaster that was the George W. Bush Presidency on an awesome scale, leading to an epic fail].


BR: You get the idea. This is an exercise in rationalization that suggests terrible decision-making isn’t so bad, because others would have made similarly bad decisions in the office of the President. It suggests judgement doesn’t matter when you are the leader of the free world. I disagree, and believe Bush was the “Costanza President. (If everything I say and think is wrong, than the OPPOSITE must be right.)

Here is the rest of John’s musing, unmolested by my annotations.


Clinton on the Dole

Now let’s go back to 1996. What if Dole had won? (Remember Bob Dole?) We would be talking about the Dole surpluses, as he would have taken the credit for them. Seriously, can you imagine President Dole giving credit to former President Clinton for the surpluses that had accrued by 1998? Hardly. We were at the end of the bull market and a roaring technology boom. Would Long Term Capital and the 1998 Asian crisis have happened under Dole? I certainly think so. The resident of the White House had no control over those events, and in any event was hardly likely to try and burst a technology and stock-market bubble. What politician runs against higher stock prices?

Let’s push the clock back to 1992. What if Perot had kept his charts to himself? George Bush Senior wins rather handily. What would have changed? The economy was already on the mend when Clinton took office. The technology boom and the resulting bull market would have happened under any president. Deficits would have continued to grow.

Perhaps the defining moment of the decade was not a presidential election but Newt Gingrich becoming Speaker of the House, with a new cadre of troops that actually wanted to cut spending and rein in government. At least until Gingrich was gone and they were in Congress for another decade.

It was precisely the partnership between Gingrich and Clinton that laid the foundation for the surplus. Would that have happened with a Bush I? Hard to really say, but Gingrich was a true believer in smaller government back then, and was regarded as something of an oddity by much of the Republican establishment. He was just as much a firebrand back then as he is today, without some of the problems. In an odd way, if we want to revisit the differences in individuals and their importance to the economy, our economic future depended back then as much or more on Gingrich than the president. With a Republican President Bush, would he have had the same results? Could he have helped engineer surpluses? Would he even have become Speaker? Hard to say.

Without the reprieve of the surpluses we had for a few years, we would have been much closer to the end of the Debt Supercycle than we are today. Who knew we would be nostalgic for the economy fostered by the cooperation of Clinton and Gingrich?

If Bush I had lost in 1988? I can’t think of anything that would have changed in the next four years. The recession was due. Dukakis would have raised taxes, just as Bush did.

Reagan and Carter? There you could argue that Reagan made a difference. But even then, Carter appointed Volcker, and the die was cast under his watch. Volcker started his war against inflation under Carter, not under Reagan. Reagan benefitted that it was early in his presidency that we had the double-dip recession. Did Reagan’s tax reforms help spur growth? Yes, there is little doubt about that. Note that Reagan did not ask Volcker to stay on. Back then, Volcker was not very popular.

But Reagan also had the good fortune to start his presidency at the beginning of a bull market and a technology revolution. Stock market valuations were at historic lows, not because of Reagan but because of Volcker and the double-dip recession he caused. Reagan certainly helped the business climate by lowering taxes on small businesses and reducing the regulatory burden.

I would argue that the main effect of a Reagan presidency was felt after he left. It was his stamp on the economy, whether you liked it or not, that set the tone for the next 20 years.

And Then There Was 2012

So, is the upcoming election a truly defining moment? Will this election change our economic future all that much? Or are things going to more or less unfold the same (in terms of the economy), whether Obama is re-elected or we have a Republican (whoever that may be)?

To get a sense of the answer, we have to go back four years, to a rather heated primary battle between Hillary Clinton and Barack Obama. Republicans were enjoying the spectacle of the two of them beating each other up, questioning each other’s fitness to lead, debating the merits of their experience and their visions of the future. Let’s really alter history and assume Hilary Clinton had won, as most everyone at the beginning of 2012 thought would happen. She goes on to beat McCain and then has to deal with the aftermath of the debt crisis, which would have been in full bloom as she entered office.

What would have been different? Bill Clinton always said they were a team, so let’s assume for a second that she would have been similar to him with her policies. There is certainly nothing in her role as Secretary of State to suggest anything else. Bill Clinton was center-left, not as hard-left as Obama. He was a pragmatist who could tack to the center when it was the thing to do. But he also had his hand in every bit of policy decision. He wanted details on everything. To think Hillary would have not been deeply involved in whatever stimulus there was, and it would not have been similar in size, would not be consistent. The stimulus would have been less of a candy store for Democratic Congressman and more focused. Republicans would still have been deeply critical. Aren’t we always, of a Democratic President, and vice versa? But I imagine there would have been more infrastructure and targeted spending. Both Clintons are policy wonks, to their credit. You might not like their policies, but they do know the detailed ins and outs of what they do, and why. They were at home in DC and they knew the players. President Hillary Clinton would have hit the ground running on a targeted stimulus, and it would have been her stamp and not Nancy Pelosi’s on the bill. But the economic results would have been pretty much the same for the first three years.

The economy would still have been down 8 million jobs. Tax revenues would have fallen in any event. Would the stimulus have been less under McCain? Yes, but it would have still been massive. Hillary would finally have gotten her health-care project, but it would have been different in its scope and reach, I think. And just like Bill, she would have found a way to get bipartisan support. While Obama talked about a new post-partisan era, the last time the parties actually worked together was under a Clinton.

And there would more than likely have been a Republican takeover of the House in 2010, as mid-term elections often do change things up (as in 1994).

So, one way or the other, we would arrive at 2011 and the crisis over raising the debt ceiling.

During that crisis I had the privilege of being at a three-hour-long private dinner with the Speaker of the House, John Boehner. There were about 12 of us at the table. My book Endgame was just out, and I was invited to be the agent provocateur for the evening. I made a short (for me) presentation of the problems confronting the country, particularly the deficit crisis – not much different from what I write here, just maybe a tad more colorful and pointed. There were also a couple of members of the House Republican leadership present, and I wanted to make a few very serious points, as these were the people who would be tasked with coming up with some solutions. I don’t get many chances like that.

About halfway through the dinner, and afer some very sobering and frank conversation, I light-heartedly remarked that, “It’s too bad you had to deal with Harry Reid over the debt ceiling” (as nothing was getting done at the time).

Boehner turned and looked at me and said with some passion, “Harry? [rising voice] Harry? Hell, Harry ain’t the problem. If it was just me and Harry we could sit down tomorrow and get it done.”

The problem, at least from Boehner’s point of view, was they could not get an agreement with Obama. (It would be interesting to get Reid’s version. Note: I will be in DC next Thursday. Just saying.) And later, when they did reach an agreement on a rather modest beginning to a real deficit-reduction package, I am told that when Boehner called to say he had the votes lined up on the deal he thought they had agreed to, at no small expense to his political capital, Obama decided he wanted another $400 billion in taxes. Which was a non-starter. And thus the gridlock.

My bet, in my alternative world history, is that Hillary Clinton would have gotten that deal done. And more. Because the math of not dealing with the deficit is apparent to most of the politicians I have talked to in DC, whether Republican or Democrat. They have different ways to solve the problem, but they know it has to get done. The economic health of the Republic is truly at risk.

But that is not where we are. We do not have a Hillary Clinton as president. There is a very clear divide in Washington DC on the path forward. Whether you blame it on Obama or Republican recalcitrance, the problem is not being dealt with.

This election is ultimately about dealing (or not dealing) with the deficit, and putting the country on a path to a sustainable budget deficit, one that is less than the growth rate of the country. As I have argued elsewhere, and will argue in future letters, that is the paramount issue. Not dealing with the deficit runs the very real risk of the bond market treating us just as it is treating Italy and any other country that gets to the point where its debt is unsustainable. Not this year or the next for the US, but almost certainly before 2016. And once the bond market loses faith in a country, it takes a massive restructuring to restore that confidence. And we can see how that is playing out in Europe.

The next president must have the ability to get a consensus. Let me shock a few of my fellow Republicans and say that I think the deficit is such a deadly disease that it would be better for the country for the Democrats to be in power and forced to deal with the situation than to do nothing. I would not like their solution, and I think it would be harmful, but not as harmful as a second Depression, brought on by not dealing with the deficits and entitlement problems.

As a businessman, I would rather pay higher taxes on profits than to have no profits at all. Just tell me the rules and I will figure out how to adjust. A Depression 2 would mean 20% unemployment (at least) and a real lost decade, with the Boomer generation trying to figure out how to deal with no money and no jobs and being old.

And the choices we would be forced to make? The spending cuts would be far deeper than anyone can now imagine, and the taxes needed far greater. Think what happens when any country has hit that debt limit. Greece is not having fun. And either Italy is going to be unhappy with the longer-term recession it will have, or Germany is going to be unhappy with the ECB backing Italian debt at below-market rates for a long time, which means printing money and a much lower euro. Actually, I think both must happen if the euro is to remain a viable currency. That’s just what happens when you don’t deal with deficits before they become a problem. If Italy is to remain in the euro, there must be a back-door bailout by the ECB, accompanied by Italian austerity (is that an oxymoron?). And don’t forget Spain.

The Fed Has a Printing Press

What would the Fed do in such an event? Does it succumb to the worst fears of the Austrian economic crowd and monetize the debt in an effort to fight deflation and depression? Or does it trash the dollar and make gold bugs happy? Or does it find its inner Bundesbank (Austrian) core and eschew the easier way out?

This is a question to which we do not want the answer. Whether it’s yes or no, the answer is a disaster. Just choose the form of disaster you prefer. To the unemployed, retirees, and the young, it will make little difference. Ask our grandparents (or my father and mother), who lived through the Depression.

And doing nothing will mean that we find the answer to that question. The very answer we want to never know in real life. It makes for interesting speculation now, but living through it will be hell.

Both Obama and whoever the Republican nominee is owe the American people an answer today as to what they will do if given the chance. To blame Congress for doing nothing is not a solution. A generic answer of cutting spending will not do. Allowing the Bush tax cuts to expire gets us less than 20% of the way there. The “rich” do not make enough money, even if you take 60%. We would still be down a half a trillion or more, probably much more, as income vanishes as taxes rise. Funny thing about that: people respond to higher taxes by making less.

What cuts will you actually make if you are Obama? And do not suggest that it can be done by getting rid of waste. Everyone promises to do that, and it doesn’t happen. Not that we shouldn’t try. There is just not all that much there, and certainly not enough to close the gap. Blaming a “do-nothing” Congress is also not enough. What do you want them to do? Not bits and pieces, but what is the whole game plan for dealing with the deficit?

If you are Republican, what programs and spending will you cut? What actual reforms of entitlements will you ask for? And if that’s not enough, what taxes will you raise? On whom? Or will you be willing to stop giving tax deductions for mortgage interest, charities, and (literally) 3000 other tax “incentives.” Actually, if no deductions were allowed for the so-called tax expenditures (or targeted deductions), the budget would come into balance. Those tax deductions are over $1 trillion a year. Of course, everyone thinks their favorite tax deduction is vital to the future of the Republic, and losing them will make a lot of people upset.

Who will the candidates be willing to upset? The country does not need vague policies and ideas, we need specifics. A real budget proposal, with details, just like a family or business in crisis would create. We don’t need someone to tell us what they think we want to hear, but what they will actually do to deal with the most pressing issue of our time.

Will you consider radical tax reform? A VAT instead of an income tax, or reduced income taxes and no Social Security or Medicare tax, if that is the deal on the table? What is your opinion on various types of taxes? A flat tax? At what rate?

Then run on that plan, or set of choices. Make it clear beyond the vague platitudes of politics as usual. This election is that important. Take it to the voters and get a mandate. It is time for a national conversation on debt and the deficit. It will be no secret what I prefer, as I will be writing on that theme in the coming weeks. But it is more important that we come to a consensus than that it be done in any particular way. I will admit to believing it would be better if we do it with less government and the most reasonable tax burden we can settle on. But creating a path to a sound, controllable budget is the important thing, the primary objective. It will not be easy to forge a consensus from our very diverse views, but we must if we want to give our children any hope of a better world than the one we have now.

Actually, that is what is needed throughout the “developed” world. We are running out of easy solutions. In many places there are not solutions, just ugly choices and pain. In the US, we must look around and realize that time is running out. We do have time, but we need to use it wisely.

The Strategic Investment Conference in Carlsbad, California, May 2-4

As I said at the beginning of the letter, we are now ready to take reservations for the 9th Annual Strategic Investment Conference, May 2-4, which this year will be in Carlsbad, California for the first time, at a venue that will allow us to take a few more attendees but still keep that intimate feeling. I host the conference, along with my partner Jon Sundt and his team at Altegris Investments.

Each year I wonder how we could make the conference any better, but I think we have done it. I must say that I do not think any conference anywhere has the quality speaking line-up that we do. It is the finest collection of top-notch raconteurs posing as economists assembled anywhere. Each speaker is a headliner in their own right, wherever they go. We have nothing but the best each year.

Look at this line-up: Dr. Woody Brock, Mohamed El-Erian, Marc Faber, Niall Ferguson, Jeff Gundlach, David Harding, Dr. Lacy Hunt, Paul McCulley, David McWilliams (from Ireland), David Rosenberg, Jon Sundt, and your humble analyst. Plus the surprise guests. Seriously, where else can you find all that talent under one roof? I design the conference each year to be the one that I would want to attend. And Sundt and team run as smooth and enjoyable a conference as you will find anywhere. You can learn more and register by going to http://meetings.StrategicInvestmentConference.

I should note that the best feature of the conference is the attendees themselves. You will make new friends and meet old ones. And the speakers are very accessible. The price goes up considerably on March 15, so register early. We always sell out, and I get calls asking to get in at the last minute, and have no way to help. Don’t procrastinate. Register now.

Washington DC, Kansas City, and Europe

I am finishing this letter in London, at the Admirals Club, and will soon hop a plane back to Dallas, hoping to catch some shuteye and magically adjust to Texas time en route. I stayed up and wrote, coming from Cape Town, in the hope that this will be a better way to adjust to the time change.

Next Wednesday I go to Washington DC for some quick meetings and then back home the next evening. I will be in Kansas City on Tuesday Feb 21, speaking along with my other US partner, Steve Blumenthal, at the Roth Companies (affiliated with RDA Financial) client conference. If you are in the area and interested in attending, please email Or you can call CMG at 610-989-9090. (There is limited seating.)

I am then home for a few weeks, working on my next book. I will go to Stockholm on March 20 and then to Geneva for a day for some quick meetings; and then I will weekend in Paris to attend the Global Interdependence Center’s conference on central banking, which starts Monday the 26th. That promises to be a very lively and vigorously debated theme; and a lot of good friends will be there, so there will be a nice spirit of bonhomie for springtime in Paris. I don’t go to many conferences as a participant, but this one is the topic du jour. Think about joining me:

Let me say thanks to the wonderful people at Rand Merchant Bank in Cape Town. What hosts, and I must admit to having one of the finest meals I have had anywhere in the world at the Greenhouse Restaurant. And such wonderful dinner companions, with their very savvy senior economist, Rudolph Gouws, and CEO Alan Pullinger making me feel like I was at home. It was a special night and one I will remember.

It really is time to hit the send button, as they are calling my flight. Have a great week, and tell your political friends it is time to step up.

Your wondering what time zone I’m in analyst,

John Mauldin

Category: Really, really bad calls, Think Tank

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

50 Responses to “The Answer We Don’t Want to Know”

  1. eclane says:

    Though a bit left-leaning myself, I very much appreciate Mauldin’s writings. But not this one. You called it right BR. He’s should not only be wondering what time zone he’s in, but what world on this one.

  2. Nuggz says:

    There is a reason that in Texas 30 percent of the population believes that Jesus walked with dinosaurs.

    What’s more disturbing is that when asked the question, a full 30 percent DID NOT know how to answer.

    People become part of their environment. I would say that after reading this piece, he is fully steeped.

  3. MayorQuimby says:


    You are *completely* wrong right at comment number one:

    “This is a s political, not economic or Fiscal assumption. While we need to deal with the deficit, it is not nearly the issue made out by the far Right — the US has had bigger deficits, i.e., WW2, and resolved them”

    Do we really have to go there. The post ww2 era saw us as the only intact manufacturing base for the planet when the entire west needed to rebuild. And our underfunded liabilities were very low. The situation today is DRASTICALLY different and we have NO MEANS to undergo such a MONSTROUS and prolonged growth spurt.

    Secondly, how big is the Feds balance sheet today? How big was it then? T’nuff said.

    Look…no one on this blog believes in our ability to innovate and kick ass more than I but the math says we are bankrupt and will default. Piling on more debts will only accelerat that outcome.

    It’s your blog and many will defend you and blow smoke up your ass but you are completely wrong on the deficit issue.

    And it isn’t hard to understand….a deficit is spending money we dont have. Period. Debts are now over 100 percent of GDP and the next recession will push us halfway over the cliff. At that point we will need 40 percent cuts in all entitlements or it is game over.

    Or…we can QE and lie and print and impoverish every single American below an income of $100k.

    THAT will work well for sure!!!

  4. MayorQuimby says:

    Short version…each deficit spurt REQUIRES an inflation rate that is positive to finance it.

    This is basic math.,lid your obligations are growing, then to revenues must grow as well so the scam is to get more money flowing NO MATTER WHAT.

    WE MUST STOP IMMEDIATELY for the next step is to push us into collapse. If gvmt tries to step in the next time the markets tank, it will HAVE to QE MANY trillions to keep inflation going forward. I’m talking $3t to $4t which will essentially precipitate a complete loss of confidence in the entire scam.

    DEFICITS ARE OUT NUMBER ONE PROBLEM. PERIOD. You are all destroying yourselves and the fact that you cannot see this is ASTOUNDING.

  5. I freely admit that I was a fiercer critic of W than BHO, as evidenced by the Costanza presidency remark. I have been critical of Obama, but not nearly as much

  6. econimonium says:

    As usual MayorQuimby is showing signs of early onset Alzheimer’s in thinking that the deficit is the number one problem. It isn’t. JOBS are the number one problem because, you know, healthier companies pay more taxes, hire more people, who pay more taxes, who buy more things, leading to healthier companies….round we go. Until you have a decent level of employment, austerity only makes you Greece or Great Britain now. But this is another example of people letting their political bias run their economic thought instead of figures, math, and what’s derived from them. Last time I checked, most of my Excel sheets don’t ask if I’m a liberal or conservative before running the functions or graphing something. But perhaps these people have a different release than I do.

    Maudlin makes me turn different shades of purple when I read him, as I’ve commented here several times. I find nothing helpful or even remotely intellectual about anything he says, and I await the day he blows up so the world can be spared from his drivel.

  7. Moss says:

    The deficit is a political football. Mauldin is simply lining the field for the next big game, the 2012 election. We know what sideline he will be on. Obama will try to preempt talk about the deficit by adapting some supply side policy which every red blooded apostle will have to support.

  8. MayorQuimby says:

    Eco- THAT is the Koolaid.

    I will explain how this works so you cannot get this wrong:

    1. Every time people spend money, the gvmt takes a cut. You spend $10 at the store and .gov takes $.83. But not only that – they ALSO tax the store owner on his profits. So they take say another $1 there. Then they tax the wholesaler who sells to the storeowner – another $1. Then when the store owner spends money – they do it all over again! Eventually – the money is taxed.

    2. Once you grasp this basic fact – it is obvious how inflation finances deficits. As our liabilities grow – it is MANDATORY that the $10 you spend goes UP UP UP UP UP UP forever and ever and ever. Why? Because they NEED that $.83 to become $.93 then $1.03 etc. With me? Good.

    3. How is this accomplished? Inflation. And IT IS RIGHT HERE that you ALL (yup – Barry too) get the whole thing WRONG. Inflation simply means more money OR credit chasing fewer widgets. But if inflation is created via CREDIT INJECTIONS it runs out and bursts quickly. Think of it like weight on a camel – there is only so many price increases that can be supported by the consumer. You reach a point at which a certain straw breaks his back and it is game over.

    Simpler version – money that is created the old fashioned way – by loaning against full collateral and labor is SUSTAINABLE and when credit aggregates MATCH GDP ie collateral – you WILL GET 0% inflation over time which allows workers to GET AHEAD by savings and SAVINGS for the basis of new loans at interest!

    THAT is how it is SUPPOSED TO WORK.


    How? The Fed injects POTENTIAL MONEY into the economy. SOMEONE has to turn that POTENTIAL CREDIT into an EXPENDITURE. For the Fed to CREATE inflation – it HAS to hand that money to SOMEONE – the banks to bid up futures, consumers to pay down debt etc.

    But THOSE price increases DESTROY the ability for people to CREATE MONEY the PROPER WAY because you are artificially pushing prices up against them!!!

    Which is why oil at $150 collapsed housing and it is why each bubble will keep bursting.

    We have COVERED OVER this scam with lower and lower rates.


    We have been through this for almost THIRTY YEAR and you guys are still believing in faery tales!!!

  9. Nuggz says:

    Oh and furthermore.

    Fist W then Rick Perry…. I don’t know…Rick looks more like a “receiver” to me.

    Just sayin’

  10. Conan says:

    The blame game and revision history has it’s “learned” proponents on both sides, Democrat & Republican, Liberal and Conservative. Here is the bottom line, since the year 2000 our economy has not grown, ZIP, Zero, Nada. Since 2000 the US government has grown in every way. Social Spending, Defense Spending, number of emplyees, salaries and benefits paid, etc, etc, etc………

    So if you want to be factual our Governement should be no bigger than what the economy has grown, period. Barry just as you say you can’t get sober by drinking more whisky. We can not grow the economy by making government disproportionately bigger!!

    These gyrations by both sides to tax and spend. Be it raise taxes and spend on one side, or cut taxes and spend on the other, makes no diffeence. This will go on until it doesn’t. By choice or by the heavy hand of the market, one day we will have to live within our means and one day there will have to be a relationship between earning (GDP, etc) and what we can spend ( US Gov budget and Liabilities)

    Argue all you want for either side, it makes no differences, both sides will drive us to ruin!!!

  11. wally says:

    It is pretty important in our culture today to recognize that almost every profession is made of two kinds of people: pros and entertainers. Politics is a good example: clearly there are people today, some even running for President, whose sole ambition is to perform to the applause of a crowd.
    I’ve always seen Maudlin as an entertainer – a would-be Will Rogers, perhaps… but definitely somebody who fancies himself a writer. I’d contrast that to perhaps a Warren Buffet who, though he is entertaining and is a good writer, is an investing pro.

  12. JoseOle says:

    To be fair, Krugman is another one who can’t keep his personal politics out of his economic analysis. I say this despite the fact that his economic analysis has been pretty much dead on. Sadly, we can expect the blurring of partisanship and economic analysis to intensify as the election approaches.

  13. wally says:

    An aside, but I always get a chuckle out of Quimby. With each post in the stream the use of CAPS increases as he works himself up. I hope his blood pressure is under control and his heart can take the strain.

  14. Conan says:

    So we as Americans have to decide in the bottom line, how much is personal resposibility and what is the Governmet to take care of? How much are we going to pay to defend the world? do the math, add up the bill and tax everybody, all income groups, enough to pay for the bill. It can be progressive, fine, but everyone has skin in the game and if you want to play, you have to pay. But remember, first we have to decide what it is that we are willing to pay for!!!

    As stated earlier we can get to this by being proactive or wait for the heavy hand of the market to take us there anyway. This screwing around and kicking the can down the road can go on for years and decades, it already has and it may take more years and decades of polarizations and getting nothing done to get to the finish of this.

    But it will finish. This time is not different, and when the bottom fails out it will be quick and painful.

  15. jd351 says:

    This is almost comical at best. Mauldin has to much time on his hands. I stopped reading after deficit paragraph. Utter BullShit.

  16. MayorQuimby says:

    Wally- usually my blood pressure is pretty low and in real life I’m actually quite relaxed and laugh a lot but today was a bad day for me. Glad you were entertained (everything I wrote is unfortunately spot on though)!

  17. MayorQuimby says:

    Jd…mauldin is correct and you and Barry are completely wrong. Read my (high blood pressure lol) posts above. Everything is explained.

  18. Ted says:

    Loved your decision about publishing John’s latest comments with your own editorial notes. Curious what he thought of it… Regardless, great approach from (at least this) reader’s perspective.


  19. theexpertisin says:

    Both BR and Mauldin present interesting anecdotes. BR has the effective counterpunch in action.


    Could it be that both President Bush and President Obama are both colossal failures, for a different roster of reasons?

    I don’t see anyone stumbling towards the Presidency in 2012 who can significantly improve upon these two. I hope this changes in some remarkable way come summer.

  20. Futuredome says:

    Maudlin wants a plutocratic dictatorship. Nothing more or less. He is no different than the players on the field. Just his buddies come from a different angle. Sorta like how Koch’s Jack Welch and JPM had no problem playing footsie in the mid 20th century.

    People like Conan(the economy hasn’t grown, uh right) and Quimby represent the failure of America and their hatred for its survival.

  21. DeDude says:


    Yes the Mayor is off his meds again. As always very CONVINCED but not convincing at all. Now if he could substitute the CAPS with some supporting evidence for his postulates we might have a real DEBATE.


    “We can not grow the economy by making government disproportionately bigger”

    Why not? Government spending is just personal spending via an intermediary of elected officials. From an economic point of view it is still spending, and should be no more or less effective at increasing economic activity than direct personal spending. Let look at a few examples.

    A person spends $100 on useless little Chinese produced toys, or he is taxed $100 and the government use that money to hire an American worker to clean up some trash from a public park. What is most effective at creating growth here in US?

    A person spends $25K on an unsuccessful lawsuit of a food supplier that poisoned him with spoiled food, or that person is taxed $25K and government use that money to hire an inspector who ensures that the food suppliers do not sell spoiled food. What is most effective at creating growth her in the US?

    Government taxing and spending is simply your purchase of “services”, and from an economic point no different from services that you purchase from private service providers. You may recent it more because the purchase is forced upon you (like certain insurance purchases from the private sector). Given that more or our products are produced outside of this country there is actually a good argument for the idea that your spending on government services are better for the economy than your purchase of products.

  22. eclane says:

    Conan, what was that about the economy not growing since 2000? Check out:

    While you’re at it, check out which I believe BR has already shared with all of us.

  23. donna says:

    Have you even read Al Gore’s report as VP on air travel and airport security? Many of the measures taken since 9/11 are directly from that report’s recommendations. Certainly Gore was aware of the threat and would have taken it VERY seriously.

  24. KC says:

    I used to be a big Mauldin fan. His quality took a cliff dive right as he started promoting his book. While I used to never go a week without reading his weekly comment, now I can’t bring myself to more than skim the table of contents.

  25. Conan says:

    Furtherdome – you mistake facts with hatred. I agree somewhat with theexpertisin. Both W and the big O are failures for different reasons. We are not going to be able to jaw bone ourselves out of this fix, hard non politically correct solutions will either be found or fourced on us.

    The big difference that I have notice in the more than a quarter of a century I have been working as an Engineer is, before you were supposed to be hard charging, results driven action counts type of behavior. Now generally speaking everyone has to be a winner, we all have to be politically correct and one’s philosofical outlook and apperance is more import that the bottom line results.

    So even being more to the point I travel all over the world, the Far East, Latin America especilly. You don’t see this there. There is no welfare, capitalism is more of away of life in the 3rd world than in Europe, Japan or my own good old USA.

    So when we start doing and stop bickering America will be great again. Most of what we complain about we either did to ourselves or bent over and let them do it to us. The world is a cruel placer and winners are not there because the were lax, undisciplined and couldn’t get the troops organized toward a common goal.

    I will end by saying again, either we fix it ourselves, because following either side will lead to collapse. I’ll let our own lost decade from 2000 till now speak for itself. None of what we are doing is working on a big enough scale to make a positive change. It’s all bailing wire, duct tape and supper glue. Don’t worry be happy the Grand Kids will fix it!

    Sorry if this isn’t what you wanted to hear.

  26. dougc says:

    The political season is warming ,by November the amount and sillines of historical revisions will be epic.

  27. I also like John Mauldin but he can be sloppy with his facts, and he cites a lot of facts!

    For example, see my comments at the bottom of this article of his from last year on Greece (John did kindly acknowledge some of his errors):

  28. scharfy says:

    Mauldin and George Washington are two immediate must-not-read sections of this otherwise excellent blog.

    Mauldin wanders and waxes and philosophizes and tries to sell books, and George Washington creates nutjob theories with way too many links.

    Overall they are poor content which detracts from the quality of the blog.

    Are they paying for distribution?

  29. Molesworth says:

    summed up beautifully with:
    “Your wondering what time zone I’m in analyst,

    John Mauldin”

    * *
    Twilight zone?

  30. MayorQuimby says:


    And as usual you cannot debate anything I wrote and resort to insults and skulking away…’tactics’ which equate to an admission that you are unable to refute anything I wrote.

    I double dog dare ya!

    The only person on meds here is you and they will run out about the same time the fed’s lies and scams will.

  31. MayorQuimby says:


    Look t this stroke of genius:

    “Government taxing and spending is simply your purchase of “services”, and from an economic point no different from services that you purchase from private service providers. You may recent it more because the purchase is forced upon you (like certain insurance purchases from the private sector). Given that more or our products are produced outside of this country there is actually a good argument for the idea that your spending on government services are better for the economy than your purchase of products.”

    What nonsense!

    By this logic, gvmt can increase taxes all the way to 100 percent and simply jump in and substitute for your homelessness.

    Dude….you have yet to successfully make sense despite hundreds of posts. I wish there was a record of all the mmt fiat fed printing weak dollar nonsense you have written.

  32. TomO says:

    This clown is hopelessly out of his depth. The fact that clueless fantasists like him can be paid so well to manage other people’s money is frightening. I have heard more coherent reasoning during Bong Night at UC Santa Cruz.

    Although his entire premise reeks of alcohol and anti-depressants, let’s take a baby step down his road. Does any sane individual think a putative President Gore would have invaded Iraq? I can understand his guilt in supporting perhaps the worst President in the last hundred years, but this comes across as an attempt to justify his mistake by assuming any other person elected President would be just as ill-advised and lacking in mature judgment as W?

  33. boveri says:

    Worth reading for BRs comments, clarifications, corrections and insights.

  34. DeL–

    you come out with..”…that person is taxed $25K and government use that money to hire an inspector who ensures that the food suppliers do not sell spoiled food. What is most effective at creating growth her in the US?…”

    try some of..

    “…Consider the food industry, particularly its sometimes malign influence on nutrition and health. Obesity rates are soaring around the entire world, though, among large countries, the problem is perhaps most severe in the United States. According to the US Centres for Disease Control and Prevention, roughly one-third of US adults are obese (indicated by a body mass index above 30). Even more shockingly, more than one in six children and adolescents are obese, a rate that has tripled since 1980. (Full disclosure: my spouse produces a television and web show, called, aimed at combating childhood obesity.)

    Of course, the problems of the food industry have been vigorously highlighted by experts on nutrition and health, including Michael Pollan and David Katz, and certainly by many economists as well. And there are numerous other examples, across a wide variety of goods and services, where one could find similar issues. Here, though, I want to focus on the food industry’s link to broader problems with contemporary capitalism (which has certainly facilitated the worldwide obesity explosion), and on why the US political system has devoted remarkably little attention to the issue (though First Lady Michelle Obama has made important efforts to raise awareness).

    Obesity affects life expectancy in numerous ways, ranging from cardiovascular disease to some types of cancer. Moreover, obesity – certainly in its morbid manifestations – can affect quality of life. The costs are borne not only by the individual, but also by society – directly, through the healthcare system, and indirectly, through lost productivity, for example, and higher transport costs (more jet fuel, larger seats, etc).

    But the obesity epidemic hardly looks like a growth killer. Highly processed corn-based food products, with lots of chemical additives, are well known to be a major driver of weight gain, but, from a conventional growth-accounting perspective, they are great stuff. Big agriculture gets paid for growing the corn (often subsidised by the government), and the food processors get paid for adding tonnes of chemicals to create a habit-forming – and thus irresistible – product. Along the way, scientists get paid for finding just the right mix of salt, sugar and chemicals to make the latest instant food maximally addictive; advertisers get paid for peddling it; and, in the end, the healthcare industry makes a fortune treating the disease that inevitably results.

    Coronary capitalism is fantastic for the stock market, which includes companies in all of these industries. Highly processed food is also good for jobs, including high-end employment in research, advertising and healthcare….”

  35. bonzo says:

    I’ve always wondered why you give Mauldin space on this blog. Basically, he just spouts the usual Fox News talking points recast in his own distinctive style. (Not a particularly good style either, says your “leaving a reply, logged in as bonzo, commentator”). The more you read him for information, as opposed to entertainment or contrary indicator value, the stupider you become. As for the human behind the write, what a mess that is. Someday Mauldin’s going to go overboard on plastic surgery and hair transplants and other beauty treatments and turn himself into a freak (he’s getting close already).

  36. end game says:

    So glad someone called out John Mauldin. I stopped reading him when I realized he was off the deep end politically, which of course ruins the objectivity of his economic analysis and thus the usefulness of his calls about the financial markets.

  37. Francois says:

    Mayor QUimby:
    “The situation today is DRASTICALLY different and we have NO MEANS to undergo such a MONSTROUS and prolonged growth spurt.”

    Total and utter bullshit! Get some growth areas Dora! Right here on the floor’a! And how about you Fama? You wanna?

    1) Alt energies, contrary to what officialdumb and the corporatocrat MSM spew every day about a non-issue like Solyndra, are booming the hell out! Check investments, jobs gained, net job gained etc. etc. It is one of the most solid sectors of the world economy right now. The reason is as old as mankind: there’s ca$hola to be made baby!

    2) Don’t look too closely, but medicine is about to undergo the mother of all transformations. As it stands now, the system sucks to no end; too many entrenched interests are trying to suck the money out of everyone else. This won’t last for long. (3 other years max.) The convergence of proteomics, nanotech, bioinformatics will not only yield new treatments, but will scientifically validate old ways of doing things, such as yoga, meditation tai chi, just to name these.

    3) I got a 5 trillion dollars deal for ya! It oughta run for a decade. Wanna talk? Spell INFRASTRUCTURE. Don’t care if it not shovel ready. Neither do I care bout the conservatard naysayers who claim with a straight face (despite what the real experts say) that the US still has a top notch infrastructure (well! Compared to Zimbabwe, sure!) The investments ought to be done, period.

    I could go on but the point is clear. Look for growth areas and you shall find them.

  38. Francois says:

    Thanks for the annotations BR. Much needed reality-based call outs.

  39. Francois,

    with..”…2) Don’t look too closely, but medicine is about to undergo the mother of all transformations. As it stands now, the system sucks to no end; too many entrenched interests are trying to suck the money out of everyone else. This won’t last for long. (3 other years max.) The convergence of proteomics, nanotech, bioinformatics will not only yield new treatments, but will scientifically validate old ways of doing things, such as yoga, meditation tai chi, just to name these…”

    see some of..

    for starters..

    maybe, if we can get some actual ‘Vote Counts’ (ref. )

    We’d be able to, actually, employ some of these Technologies that would, both, drive down Costs, and improve Outcomes..

    most of what People go ‘to the Doctor’ for.. could be handled by a Girl Scout with an apped-out (sp-)iPhone..

  40. DeDude says:


    Aha, the good old “you-can’t-disprove-this-lunatic-right-out-of-my-dumb-ass-postulate-so-it-must-be-true”. Do you think this is Fox new debate? Give us some substance and facts rather than postulates and then you may be taken serious.

  41. Dima says:


    Thank you for your comments. I am a resident of Fort Worth (think Dallas for those of you who are geographically challenged) and often drive by Mauldin’s offices in Arlington. I have often wondered why Mauldin’s commentaries continue to show up on your blog when they often contain multiple errors in reasoning and logic. We don’t read or pay attention to Mauldin here as there are many local sources that do “proofread” their economic commentaries before they hit “publish”. But hey – just as with everything else AND everywhere else – guess it helps to be a “FOB”. No offense intended Barry as that is the way of the world.

  42. cthwaites says:

    I’m glad to see Mauldin called out. I don’t care much for his views or his faux humility, Uriah Heep like sign offs.

    But his facts are sometimes dead wrong (like his “averaging” of the FOMC forecasts or last weeks mining/manufacturing jobs) which weakens his arguments. What’s the line: entitled to yr opinion but not to yr own facts?

  43. DeDude says:


    I have no doubt that there are food problems that a government inspector will not solve, just as there are other food problems that can be solved by better controls in the supply chain. That is a whole other discussion and not the issue I was addressing.

    I was using a couple of examples to point out that this desperate attempt to designate government spending as “destructive” and private sector spending as “good” for the economy doesn’t hold up to even a simple economic evaluation. The GDP formula does not handle the two types of spending differently so the only argument for a particular type of spending being “better” for the economy would be to evaluate multiplier effects. If you compare a private sector purchase of a Japanese electronics product made somewhere in Asia it has a very low multiplier (much lower than most government spending). Government spending is no different from any other spending on services, except that you purchase it via taxes that you are forced to pay. Some government spending has big positive multipliers and some don’t. So the issue of economic impact of government spending vs. private sector spending is an ideology driven false paradigm. Within each sector you have spending that is “destructive” and spending that is “good” for the economy.

    I have no doubt that most people prefer to have their own personal choice of what to spend their income on, rather than having government taxes taken from their income and used on “collective” spending, decided by the collectively elected government. But just admit that, and don’t to try to concoct some moronic woodoo-economic explanation that collective spending is inherently or by its nature “bad” for the economy. The dishonesty does not get any better by putting up straw men suggesting that others are arguing in favor of government being 100% of the economy (which nobody has suggested for the past 4 decades).

  44. DeD,

    be careful with..”…If you compare a private sector purchase of a Japanese electronics product made somewhere in Asia it has a very low multiplier (much lower than most government spending)…”

    feel free to page-through some of..

    “…Devices: Smart Phones, Cell Phones, Data Only Devices, Tables…”

    the GSA buys ‘all kinds’ of “Imported” ‘Goods’…

    to say nothing of instances like..

  45. NoWonder says:

    Al Gore’s 2002 speech to the Council On Foreign Relations:

    Excerpt: “And there is a clear case that one of these governments in particular represents a virulent threat in a class by itself: Iraq. As far as I am concerned, a final reckoning with that government should be on the table. To my way of thinking, the real question is not the principle of the thing, but of making sure that this time we will finish the matter on our terms.”

    Fox News ain’t the only echo chamber in town…


    BR: There is an enormous difference between criticizing a country — that costs nothing — and invaded that country and occupying it for a decade (cost = trllions).

  46. rickw says:

    It’s your blog so say what you like.

    As an exercise in “what if?”, I think the single most interesting remark was that Hillary would have had her name on some legislation instead of Pelosi. Beyond that, if you think that Gore would have done things differently given the tech bust and then 9/11 you are speculating as well.

    I’ll give you Graham, but Rubin was in there somewhere as I remember reading that one of the reasons we offed Glass-Steagall was that the Brits and everyone else would get the fees if we didn’t.

    where did the concept of “the prudent banker” go? Everyone was just chasing fees.

  47. DeDude says:


    Exactly my point. The government as well as the private sector has a wide variety of activities some with very high multipliers and some with very low multipliers. So it is complete nonsense to discuss economic impact of spending in either of those two sectors without specifying what the spending is used on.

  48. garsar says:

    This is John Mouldin’s worst piece ever. There are too many inaccuracies to even list. The prejudices are numerous as well. Just read Barry’s comments on the first few paragraphs. I subscribe to John and had spotted the same things. As for the end point that we should know what politicians stand for/will do, is naive at best. When special interests, through their money, can easily buy Congress and the President, there is no way what’s best for the country will ever figure in the equation. Go back a day or two on Big Picture and watch the Bill Moyers/Bruce Bartlet interview. Bartlet is a conservative economist with brains. It’s more important, insightful and honest than anything in this piece of nonsense.
    As always, thanks Barry for the BIG PICTURE

  49. Jaycephus says:

    MayorQuimby owns this blog.

    BR really doesn’t know what he’s talking about. I found this place looking for criticisms of Mauldin’s article, but the particular criticisms BR makes are mind-bogglingly ignorant. MayorQuibmy, do you have a blog? I’d spend some time there.

    Another couple of points regarding JUST BR’s first comment, where he goes off the rails and crashes in a hideous explosion of dumbth: At the end of WWII, in addition to MayorQuimby’s points, the US also did not have the anti-hiring regulatory frame-work we now have. Businesses were not afraid of hiring anyone for the fear of being sued. They did not have the liabilities or the cost-burden, including the costs arising from regulations, per hire that they have now. Additionally, we now have a built-in two year delay between someone losing their job, and their honest desire to find a job for anything less than ~$44K per year, and even at that price-point, they are extremely picky. The recent uptick in jobs is certainly due more to the 99-week unemployment benefits running out and workers HAVING to take jobs at lower price-points than to an improving economy offering high enough wages to pull unemployed workers away from the teat at which they’ve been suckling. When you actually have manufacturing business in the US locking their front-office doors on Fridays because they know they are going to receive a rush of “job-applicants” just looking for a signature to prove that they are still looking for a job, while having no intention of taking a job for a ‘mere’ $40K/year, then you should know you have a serious problem.

    Simultaneously, US businesses are now suffering under the highest corporate tax rate of any nation in the world, now that Japan has just lowered their corporate tax rate. For any US corporation, it makes more and more sense to locate manufacturing outside of the US to escape this punishment. This is another big difference between the 50′s and now. And for those that claim that US business do get to write off some taxes, just look at the average EFFECTIVE tax rate, meaning the average tax that US business actually do pay after these deductions or write-offs. The US is STILL at the very top of the list, with only a few small countries that essentially have a ~35% rate and zero loop-holes coming in higher than the US.

    And all this is BEFORE the full brunt of the taxes and damaging regulations of Obamacare hits the economy, to say nothing of the additional taxes and ending of business-expenditure write-offs that our ‘worst-president-EVAR’ wants to enact. (I think of Obama as George Bush III. He’s basically doubled-down on every stupid thing Bush ever did. I don’t know why progressives think he’s even as good as Carter. He makes Carter look like a genius, and actually makes W look smart. Sure, BO reads a teleprompter better. Good thing he always has one.)

    Finally, even if we START growing our way out of this extremely deep hole (thank you Obama and Democrats for making it twice as deep), it will take a very long time. (It will be absolutely impossible without enacting a plan that cuts growth as much as Paul Ryan’s plan, which BTW, only guts growth in spending, not actual spending.) In that 30-year process, even if we begin it, what happens if rates that the US govt pay to borrow money go back to just 6 or 7%? The long-term average is over 8%. What happens if we have a period at 8 to 10%? What if we need a Volker-like spike to rescue our currency?? It will be a catastrophe at 8%. The impact on the deficit will be immediate, since courtesy of a Democrat, we are now on the equivalent of an adjustable rate mortgage. (T-Bills instead of 30-yr bonds) This is another problem that simply didn’t exist during the 50′s.

    Your analysis of of Mauldin’s article is shockingly deceptive, since you have to know these facts, or you would have no business writing an economic blog in the first place.