Thoughts from the Frontline

The Unsustainable Meets the Irresistible

By John Mauldin

January 22, 2011

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State and Local Spending
QE Policy Meets the Tea Party
A Bug in Search of a Windshield
Miami, Vegas, Thailand, and Some Needed Help

This week’s letter is a result of two lengthy conversations I had today, which have me in a reflective mode. Plus, I finished the last, final edits of my book, all of which is causing me to mull over the unsustainability of the US fiscal situation. There is a true Endgame here, and it may happen before we are ready.

The first conversation was with Kyle Bass, Richard Howard, and Peter Mauthe, over lunch (more on Peter, who has come to work with me, below). Kyle is the head of Hayman Advisors, a very successful macro hedge fund based here in Dallas. Then I recorded a Conversation with David Rosenberg and Lacy Hunt, which is one of the best we have ever done. Subscribers will be very happy. The new Conversation with George Friedman is now online, too. You can learn more about Conversations with John Mauldin at www.johnmauldin.com/conversations/ . And please comment on this and future letters in the readers’ forums of my new website. Now, to this week’s letter. My goal is to make this one a little shorter than normal. We’ll see how I do.

The Unsustainable Meets the Irresistible

Kyle, Lacy, and David are typically pushed into the bearish category, but (not surprisingly to me) their forecast for the next few quarters is rather strong. None of us would be surprised by a high-3% number for GDP this quarter, and 4% is not out of the question. And we all see GDP tailing off as the year winds down. Inventory builds begin to slow, and in 2012 the…

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Larry Brown

Jan. 22, 2011, 8:27 p.m.

When it comes to the Federal budget.  Consider:

Amount of deficit = $1.4 Trillion.

Amount to trim =  $1.4 Trillion.

Trimming tool: =  Chainsaw (or NO votes in the House).

What to trim =  Exeutive Departments.

Where to start =  Department of Education.

Followed by = other unconstitutional departments.

Read the book:  “The Deliberate Dumbing Down of America”  (Download from:  http://www.deliberatedumbingdown.com/MomsPDFs/DDDoA.sml.pdf)

Bill Bonner quipped that they should first abolish all government agencies that begin with a letter.  And then the rest.

Dean Vanderbilt

Jan. 22, 2011, 7:41 p.m.

John - You are of course correct that dealing with Entiltlements is essential to get our debt under control. 

In order to make that politically possible, it is essential that some grass roots “political” organizations be formed and force our elected leaders to listen and understand.  I have joined one such group (No Labels) which may or may not have some success.

Do you have ideas about how some more of those efforts can be formed and grow?

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