Thoughts from the Frontline

Unintended Consequences

By John Mauldin

March 25, 2011

Choose your language

Loose Monetary Policies and Emerging Markets
Bubbles in Emerging Markets
Difficult Choices
Snowbird, New York, Portland, and La Jolla

The central banks of the developed world are printing money and are engaged in a very-low-interest-rate regime. What does that mean for emerging markets? It is more than just a dilemma, it is a tri-lemma – they have problems not just coming and going but also sitting still! I am in Zurich tonight after a long day, with a 4:30 AM wake-up call to get back home, but deadlines are deadlines. So, to make this one easier on me as well as hopefully instructive for you, you will get chapter 15 of my new book, Endgame, in which coauthor Jonathan Tepper and I speculate about the future of emerging markets in general and investments in them in particular. We once again are on the New York Times best-seller list this week, by the way (thanks to many of you).

The reviews keep coming in. I have never met Anthony Harrington, but he is clearly a keen and astute analyst, since he has called this book a must-read. Seriously, he homes in on one aspect that I think is critical; and that is the issue of trade deficits and fiscal deficits and how they affect each other. You can read his work at http://www.qfinance.com/blogs/anthony-harrington/2011/03/23/mauldins-end-game-teaches-politicians-the-basics-but-are-they-listening-austerity-measures.

And this week, if you have not yet bought your copy, let me commend you to my friends at Laissez Faire Books. I have been buying books from them for nearly 30 years. They are the best source for Austrian economics and libertarian books, along with the usual offering of investment books current in the market. They have matched the Amazon price for Endgame; but if you are interested, move around their website and pick up a few other things along with my book. http://www.lfb.org/product_info.php?products_id=1014&PromoCode=L401M301

And now, let’s look at emerging markets.

Loose Monetary Policies and Emerging Markets

So far we have focused on the United States and other mature, developed economies that have far too much debt. With Japan, the United States, the United Kingdom, and Switzerland at close to zero percent interest rates, it seemed like a good idea to stimulate the economy. However, emerging markets that maintain pegged currencies or that shadow the dollar are essentially reduced to importing excessively loose monetary policies.…

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Comments

andre therien

April 1, 2011, 10:10 p.m.

Get some rest John, you look like sh.it, there are no medals at the end. America is depressing us all, will common sense prevail ? I’m hedging my bets, never been so confused. Good luck all.

Ellen Kronick

March 27, 2011, 5:02 a.m.

Recent reports (for example http://www.sbs.com.au/dateline/story/watch/id/601007/n/China-s-Ghost-Cities) indicate that much of China’s “growth” is actually just construction for the sake of construction.  At some point that particular music is going to have to stop.  What happens then, and how does this fit with your above thesis?

Ed Pence

March 26, 2011, 4:47 p.m.

Will the La Jolla conference be recorded or broadcast? If so how do you subscribe.

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