Thoughts from the Frontline

An Irish Haircut

By John Mauldin

October 8, 2011

Choose your language

Two Insights from Ireland
The Irish Chamber of Commerce
An Irish Haircut
New York, South Africa, Back to Ireland ... and Pushups

Just as only four short years ago it was All Subprime, All the Time, and then it was the Credit Crisis, now it is Europe. (When) will Greece default and which banks will implode as a result? Is there another banking crisis in our future? I just came back from a whirlwind four-country visit to Europe, and I will try to offer a few insights. This week we start with Ireland, move to the problem of Europe at large and, if we're not out of space (and your patience!), we'll visit some last-minute data points. There is a lot to cover, so let's jump right in.

Two Insights from Ireland

This was my first visit to Ireland, but it won't be my last. In an odd way, I felt more at home than I do in some US cities. And the views! I was charmed enough to agree to go back next month to speak at one of the most unusual economic "festivals" I have ever been to, when the last thing I want to do is get on…

Discuss This

7 comments

We welcome your comments. Please comply with our Community Rules.

Comments

Alan Harris

Oct. 11, 2011, 5:30 a.m.

The problem is that each euro country is being run by their own nationals who cannot be objective for fear of being unelected. Merkle is right….the only way to sort this is to unite. This leaves only two choices: 30 yrs of austerity leading to social revolutions, 100% hair cuts and piecemeal EU exits/expulsions, or the United euro states of europe where fiscal policy/responsibility is brought to the centre, a euro bond is issued to re gain control of the debt/% and local politicians are left to scrap about local trivial issues.
The EU will split into those wishing to sacrifice self determination and those that will return to the original EFTA (European Free Trade Association) concept. Youre either in or youre on your own.

Alan Harris

Gary Hess

Oct. 9, 2011, 2:31 p.m.

Wisconsin did not go crazy over the size of the cuts.  They went nuts over the unilateral elimination of negotiating rights improperly characterized as a cost savings measure.

Dave McKay

Oct. 9, 2011, 9:45 a.m.

Margaret Thatcher famously said…“Eventually, socialists run out of spending other people’s money.””  That time has now come.

Georgios Tzenichristos

Oct. 9, 2011, 8:34 a.m.

Always a pleasure to read your articles, John. Clarity and straight talking!

Andrew Hickey

Oct. 9, 2011, 2:14 a.m.

It’s clear that the “sophisticated European banks” will have to take a significant haircut
of 50-80%. Anything less is not manageable or realistic. They can moan about Moral Hazard
but Ireland can certainly question the prudence of these geniuses who lent such vast quantities
without adequate collateral. I seem to remember my father a rural bank manager in Ireland
visiting the farms of his clients to count their livestock prior to loan approval. Bank nationalisation
will have to occur in Germany , France and England with major change of management. The sad part is the losses that the superannuation funds will have to sustain. PAIN Oh PAIN!

Howard Goldson

Oct. 8, 2011, 3:04 p.m.

I can’t be the only one who sees the “end game” as “Bretton Woods 3”.

William Krause

Oct. 8, 2011, 1:20 p.m.

John, there you go again… being complicit in marketing the neo-liberal story about welfare queens gaming the system and thereby implying that all our current problems are due to government mis-management of fiscal policy.  I love this insight of yours… “Think French politicians will try and get their unions and public workers to take a 15% pay cut? The French will not be civilized and stoical, like the Irish. They will take to the streets.”  And well they should don’t you think?  What actually got us into this mess?  De-regulation of the financial industry and regressive tax codes which stripped away the revenue base whilst enabling Warren Buffet to pay less tax than his secretary and 13 major US Corps to tax the government last year.  Suppressed wages over the last 35 yrs has meant that households had to take on enormous amounts of debt in order to live above their heads.  This was aided and abetted by the housing bubble which de-regulation enabled.  So all of that is coming crashing down which is sapping away consumer demand.  Austerity measures - basically asking the average punter to pay for the green and excess of the financial industry - only sap more demand from the economy.  You dismiss government created jobs as only a temporary measure.  Really?  Why does this have to be so?  Why not set up a government bank to finance a wide sweeping job creation program aimed at rebuilding existing infrastructure and building from scratch a new industrial sector for alternative energy.  Why can’t we put teachers back in schools?  Why can’t we spend to fund basic research at the levels that are necessary to regain our reputation as innovative leaders?  Job creation leads to increased consumer demand which will kick start the private sector and in turn increase tax collections and thereby decrease the budget deficit.  The only way out of this huge debt crisis is to grow our way out of it.  This can’t be done when the private sector is de-leveraging AND the government sector is told to cut back.  It’s a recipe for certain disaster.  Time to let go of all the neo-liberal dogma and put common sense back into our policy making.

But in the end I read your stuff John because I know that your opinion represents the prevailing opinion of policy makers and as such I have to pay heed to what will actually take place rather than what should be done to fix the mess. 

Always with respect,
Bill

© 2013 Mauldin Economics. All Rights Reserved.

Thoughts from the Frontline is a free weekly economic e-letter by best-selling author and renowned financial expert, John Mauldin. You can learn more and get your free subscription by visiting www.MauldinEconomics.com.

Please write to subscribers@mauldineconomics.com to inform us of any reproductions, including when and where copy will be reproduced. You must keep the letter intact, from introduction to disclaimers. If you would like to quote brief portions only, please reference www.MauldinEconomics.com.

To subscribe to John Mauldin's e-letter, please click here: http://www.mauldineconomics.com/subscribe

To change your email address, please click here: http://www.mauldineconomics.com/change-address

Thoughts From the Frontline and MauldinEconomics.com is not an offering for any investment. It represents only the opinions of John Mauldin and those that he interviews. Any views expressed are provided for information purposes only and should not be construed in any way as an offer, an endorsement, or inducement to invest and is not in any way a testimony of, or associated with, Mauldin's other firms. John Mauldin is the Chairman of Mauldin Economics, LLC. He also is the President and registered representative of Millennium Wave Advisors, LLC (MWA) which is an investment advisory firm registered with multiple states, President and registered representative of Millennium Wave Securities, LLC, (MWS) member FINRA and SIPC, through which securities may be offered. MWS is also a Commodity Pool Operator (CPO) and a Commodity Trading Advisor (CTA) registered with the CFTC, as well as an Introducing Broker (IB) and NFA Member. Millennium Wave Investments is a dba of MWA LLC and MWS LLC. This message may contain information that is confidential or privileged and is intended only for the individual or entity named above and does not constitute an offer for or advice about any alternative investment product. Such advice can only be made when accompanied by a prospectus or similar offering document. Past performance is not indicative of future performance. Please make sure to review important disclosures at the end of each article. Mauldin companies may have a marketing relationship with products and services mentioned in this letter for a fee.

Note: Joining The Mauldin Circle is not an offering for any investment. It represents only the opinions of John Mauldin and Millennium Wave Investments. It is intended solely for investors who have registered with Millennium Wave Investments and its partners at www.MauldinCircle.com (formerly AccreditedInvestor.ws) or directly related websites. The Mauldin Circle may send out material that is provided on a confidential basis, and subscribers to the Mauldin Circle are not to send this letter to anyone other than their professional investment counselors. Investors should discuss any investment with their personal investment counsel. John Mauldin is the President of Millennium Wave Advisors, LLC (MWA), which is an investment advisory firm registered with multiple states. John Mauldin is a registered representative of Millennium Wave Securities, LLC, (MWS), an FINRA registered broker-dealer. MWS is also a Commodity Pool Operator (CPO) and a Commodity Trading Advisor (CTA) registered with the CFTC, as well as an Introducing Broker (IB). Millennium Wave Investments is a dba of MWA LLC and MWS LLC. Millennium Wave Investments cooperates in the consulting on and marketing of private and non-private investment offerings with other independent firms such as Altegris Investments; Capital Management Group; Absolute Return Partners, LLP; Fynn Capital; Nicola Wealth Management; and Plexus Asset Management. Investment offerings recommended by Mauldin may pay a portion of their fees to these independent firms, who will share 1/3 of those fees with MWS and thus with Mauldin. Any views expressed herein are provided for information purposes only and should not be construed in any way as an offer, an endorsement, or inducement to invest with any CTA, fund, or program mentioned here or elsewhere. Before seeking any advisor's services or making an investment in a fund, investors must read and examine thoroughly the respective disclosure document or offering memorandum. Since these firms and Mauldin receive fees from the funds they recommend/market, they only recommend/market products with which they have been able to negotiate fee arrangements.

PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN MANAGED FUNDS. WHEN CONSIDERING ALTERNATIVE INVESTMENTS, INCLUDING HEDGE FUNDS, YOU SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS: OFTEN ENGAGE IN LEVERAGING AND OTHER SPECULATIVE INVESTMENT PRACTICES THAT MAY INCREASE THE RISK OF INVESTMENT LOSS, CAN BE ILLIQUID, ARE NOT REQUIRED TO PROVIDE PERIODIC PRICING OR VALUATION INFORMATION TO INVESTORS, MAY INVOLVE COMPLEX TAX STRUCTURES AND DELAYS IN DISTRIBUTING IMPORTANT TAX INFORMATION, ARE NOT SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER. Alternative investment performance can be volatile. An investor could lose all or a substantial amount of his or her investment. Often, alternative investment fund and account managers have total trading authority over their funds or accounts; the use of a single advisor applying generally similar trading programs could mean lack of diversification and, consequently, higher risk. There is often no secondary market for an investor's interest in alternative investments, and none is expected to develop. You are advised to discuss with your financial advisers your investment options and whether any investment is suitable for your specific needs prior to making any investments.

All material presented herein is believed to be reliable but we cannot attest to its accuracy. Opinions expressed in these reports may change without prior notice. John Mauldin and/or the staffs may or may not have investments in any funds cited above as well as economic interest. John Mauldin can be reached at 800-829-7273.