Thoughts from the Frontline

A Random Walk Through the Data Minefields

By John Mauldin

March 24, 2012

Choose your language

Sweden, the Socialist Mecca
What the US Needs Is a Good Swedish Socialist
“Europe Short of Magic Wands”
What Will Be the US Unemployment Rate Prior to the Election?
Baby Needs a New Pair of Shoes

"I speak the truth not so much as I would, but as much as I dare:

and I dare a little more as I grow older."

- Michel de Montaigne (influential writer of the French Renaissance)

This Friday finds me sleeping later than I planned … in the lounge at the airport in Stockholm, on my way to Paris. To the great applause of readers all over the world this may be the shortest letter in 12 years. I will write here and on the plane and quit when I land so I can be with friends this evening. No time for exhaustive research, so we will march through random topics that caught my attention this week until it is time to hit the send button. In no particular order, let's jump in.

Sweden, the Socialist Mecca

I was brought to Stockholm to speak for Swedbank. They arranged for me to meet a wide variety of local people, as well as to have dinner with readers. I talked with a number of people who were in positions of authority during the Swedish credit and debt crisis of the early 1990s. And a crisis it was. The currency was under attack, as the fundamentals were negative. This…

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Darren Climans

March 26, 2012, 10:27 a.m.

Amazing to me that the TFTF and subsequent discussion thus far has not addressed the core difference between Sweden and the United States - TAXATION. Swedish Corporate and Personal tax rates are both significantly higher than the U.S. and the largest European countries. Sweden also has a 25% VAT, and a 59% Fuel tax that brings the average price for a gallon of gasoline in Sweden close to $8.

The key to creating and maintaining competitive advantage in our global economy is for a government to have the resolve and the capital resources to invest in modernization. Central to this is to support long-term investment in an infrastructure (people and networks) that encourages innovation and create sustainable growth.

The acknowledgement that government, not business, has the responsibility to secure the safety, stability, and economic well being of its citizens is self-evident in Sweden. The way forward for the U.S. is to escape “the classic problem of generals always fighting the last war” and detatch from the archaic belief that higher corporate profits on their own are a collective cure-all. Until such notions are no longer perjoratively labelled as ‘Socialist’, U.S. wealth and global influence will continue to spiral downwards.

Thore Johnsen

March 25, 2012, 2:37 p.m.

Your Swedish hosts claim about the government’s handling of the early 1990 banking crisis:
“We did it much differently and it proved to be the right way. If a bank wanted government help, the government said ‘Sure. No Problem. Just give us all your private equity.’ Shareholders were wiped out in exchange for government help.”
In fact, the government provided a 100 % guarantee for the debt of the major banks (SEB & Handelsbanken), providing a fantasttic wealth transfer to the private investor. The public takeover and the bad-bank model was only used for the “basket cases”, which had already lost their equity (Gota and Nordbanken).

Gerald Ferguson

March 24, 2012, 7:14 p.m.

The continuing rise in the use of robots in manufacturing poses areal problem for near future unemployment. Japan makes increasing use of robots to compensate for their low birthrate and resistance to immigrants, resulting in fewer workers supporting more elderly. Germany is in a fairly similar position. Only our immigrant population is raising enough children to provide a good supply of future workers. Of course their inferior education is a worry.

David Dukes

March 24, 2012, 6:46 p.m.

I take issue with you on one sentence otherwise, I think I understand if not totally agree with your observations.  You said, “Or if you took a job for a short time working on your neighborâ??s lawn. To my mind, a job, even if temporary and for very low pay, is a job is a job, for statistical purposes.”

So he makes 40 bucks per week mowing his neighbor’s lawn?  Big deal.  Now maybe if he was making 100 per week on an annual basis that would be different.  But lawns don’t need mowing in winter.  I think your mind needs to reconsider that statement.  So you are trying to skew the statistics in your favor with a piddling example.

Barry Pither

March 24, 2012, 1:31 p.m.

The Swedes are unafraid of adopting ideas without the baggage of ideology. For all the American chatter about a so called bureaucratic tax ridden “Socialist Paradise” there has been an effective and immensely popular school voucher system for the past 2 decades. It is relatively easy for a community to establish a private school with government money.

Prior to changing the pension system they were not adverse at sending a multiparty delegation to visit Jose Piñera , the architect of Chile’s private pension system while Labor minister under dictator Pinochet.

And the modern philosophical inspiration for both?
Look up Milton Friedman.

As for the word ‘Socialist” and while the primary agenda for most post war European Social Democrats - and to an extent accepted by Conservative parties - was to nationalize the “commanding heights” of the economy, the Swedish Social Democratic party only nationalized a small utility company during the 44 years of uninterrupted power between 1932 and 1976.

It was the following government - a non socialist Bloc - which took over failing shipyards and steelworks in the late seventies .

Michael Wheeler

March 24, 2012, 12:32 a.m.

Two thoughts about the US jobs picture. One, can they still get a true picture of the unemployment rate by phoning people because a lot of people will have either given up their land lines and switched to a smartphone or having lost their job will have given up the phone anyway to save money. Also, with the BLS coming out month after month with the unemployment rate dropping, how does that square with the fact that the amount of taxes collected has been stagnant to falling! If people were finding jobs shouldn’t they be paying taxes and therefor the total amount collected should be rising.

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