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    Thoughts from the Frontline

    Forecast 2013: Unsustainability and Transition

    January 14, 2013

    Choose your language

    “There are decades when nothing happens and there are weeks when decades happen.” – Vladimir Ilyich Lenin

    "People only accept change when they are faced with necessity, and only recognize necessity when a crisis is upon them." – Jean Monnet

    "If something cannot go on forever, it will stop." –Herbert Stein

    As we begin a new year, we again indulge ourselves in the annual (if somewhat futile) rite of forecasting the year ahead. This year I want to look out a little further than just one year in order to think about the changes that are soon going to be forced on the developed world. We are all going to have to make a very agile adaptation to a new economic environment (and it is one that I will welcome). The transition will offer both crisis and loss for those mired in the current system, which must evolve or perish, and opportunity for those who can see the necessity for change and take advantage of the evolution.

    This is my most-read letter of the year, by the way, and if you’re not yet a subscriber you can join my “one million best friends” and receive both Thoughts from the Frontline and my other weekly letter, Outside the Box, as well as Grant Williams’ rollicking Things That Make You Go Hmmm…, all for free, by simply entering your email address on my site: http://www.mauldineconomics.com/go/bwbsl/MEC

    Unsustainability and Transition

    Think back to 2001. It was the opening of a new millennium. While that was auspicious enough, several events then ensued that shaped the future for decades to come. China was admitted to the World Trade Organization, leading to a revolution in its production and global trade. The euro was launched with much fanfare – and a minor chorus of criticism.  We are now in a midst of a…

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    friday@rockisland.com

    Jan. 15, 2013, 3:10 a.m.

    Bravo, John.  !Una carta interesantisima!

    Russell Joplin

    Jan. 15, 2013, 2:15 a.m.

    John,


    Please discuss the possibility, benefits and drawbacks of a federal balanced budget amendment.

    dnpt@ukr.net

    Jan. 15, 2013, 1:12 a.m.

    The world has changed and continues to change. Everything is connected. In different countries and groups of countries, their problems, but none of them solve their problems on their own, independently of the others. Solutions require global systemic problems. The current production system is almost exhausted its potential. The only serious reserve formation remained organically unified whole production system to replace the mechanical sum of national production. It is this problem is solved by this stage of the global crisis. The world economy is in the early stage of transition to a new system of production ( http://crisismir.com/analiticheskie-materialy/ekonomika/13-mirovoj-ekonomicheskij-krizis-prichiny-i-posledstviya-quo-vadis.html ). For such a transition would require decades. Transition does not have to wait for stability. There is a desire stability, but there is no way.

    Gordon Davis Jr

    Jan. 14, 2013, 10:52 p.m.

    Debt monetization and the resulting currency debasement appears to be the path the world has chosen. Krugman and those of his ilk have, for now, won the argument with the governments of the “developed world”.  The simple reason is that it is the easiest, most politically palatable short term solution to debt and deficits. Clearly, the Obama administration has bought in. There is no chance of enacting substantive spending cuts any time soon.  One can make the case that in the absence of trillion dollar deficit spending the recession of 2008 would still be with us. It seems to me that the US government and the Fed are “all in” for a policy of debt monetization for the next four years. John, I agree with you on just about all things economic, but I fear that the uber Keynesians will, baring economic collapse, convince the voting public that their course is the correct one. You may be very early once again with your predictions.

    bryankaufman@mac.com

    Jan. 14, 2013, 10:02 p.m.

    John,

    I rarely write in response to blog articles. I find it uniformly fruitless to try to convert others opinions in that setting. And although I occasionally disagree with the positions you take, they are virtually always entertaining. So the arrival of your most recent article “Forecast 2013: Unsustainability and Transition” in my mailbox was greatly anticipated.

    As usual, I was not disappointed with the caliber of the writing; nor with the clarity of thought. There was however a recurring dissonance encountered with specific terminology. In particular your use of the word sustainability.

    The general usage of the term sustainability has become so hackneyed by the global warming and agenda 21 communities, that large sectors of the blogosphere are now abandoning the use of the term. And in my opinion, rightly so.

    The term which more accurately corresponds to what you describe is resilient, rather than sustainable. Resilient communities are forming all over the planet.

    Resilience, is what is commonly sacrificed on the altar of efficiency.

    The absence of resilience in public-sector planning is what differentiates brittle top-down economies from true free-market economies.

    Resilience is not part of any mandate; nor can it be.

    I went back and reprinted your article, replacing every use of the word sustainable with resilient; and it not only made perfect sense, it made better sense.

    You yourself say that the meaning of sustainability is frequently misinterpreted. You are 100% correct, but you will never change the mind of the uninitiated. This renders the word sustainable, unusable with any precision.

    Resilience on the other hand, has been adopted in order to describe the type of sustainability which you are describing.

    My purpose in sharing this with you, is twofold. 1st is that I wish to help in your ongoing endeavor to improve the clarity of thought of your readers (which I personally always appreciate). And 2nd, to endorse to you the concept of resilience in its superiority over the more rigid and dogmatic concept of sustainability.

    If you have prior thoughts on this, hearing those would be appreciated as well.

    Thanks again for all of the great work.

    Bryan Kaufman

    tjp.bayley@gmail.com

    Jan. 14, 2013, 9:42 p.m.

    Regarding the godzilla redux, in Disaster A monetizing debt will bring massive inflation whereas in Disaster B cutting spending will bring deflationary depression. So why do you consider the two to be mutually exclusive? The obvious solution is to do both.

    Furthermore, most nations depend on bank lending for the creation of the money supply. In other words without debt there would be literally no money, other than what is physically printed as bank notes. So how are we supposed to achieve sustainable growth and stable prices without a steady increase in debt (either government or private)? Is this something that Mauldin Economics gives much thought to?

    Cliff Anger

    Jan. 14, 2013, 6:15 p.m.

    We hear endlessly about the fact that most countries are up to their ears in debt; so where are the creditors?  Surely who they are and how they look at things is important.  How about looking at the other side of this equation?

    david@msf1.com

    Jan. 14, 2013, 3:45 p.m.

    Another prolog quote to add…
    “We can ignore reality, but we cannot ignore the consequences of ignoring reality.” ~ Ayn Rand

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