I have been reading and talking with Simon Hunt for a long time. He is a very thoughtful Brit who spends a lot of time in China and thinks about copper and commodities and cycles. He has enough seasoning to have seen a few cycles himself. This piece summarizes rather well the view that he has expressed for some time. And while I am generally skeptical of relying too much on cycles for specifics (they work until they don't), I think Simon has some very powerful conclusions. From his summary:
"The world is in a balance sheet depression which will make a second and perhaps more dangerous credit crisis almost inevitable. That should break out next year or in 2013.
"The three global pillars of the world economy, the USA, Europe and China, each have their own problems, but their impact is global because of the feedback loops from the financial sector to the economy.
"The USA has a debt and deficit profile which is unsustainable; the Euro Zone has to decide whether it can forge a fully fiscal union or whether the costs are too great, in which event membership will be restructured; and China is trying to put its economy on a more sustainable growth path at a time of leadership change.
"Debt and demographics will be the determining forces to global growth. Markets will no longer countenance indecision and pushing debt problems under the table by lending more funds to indebted governments. Politicians want to postpone what they know is inevitable: debts must be repaid."
This is a very interesting Outside the Box and one I suggest you put some thought into, as to how its conclusions may affect you.
I write this from Dr. Mike Roizen's office in Cleveland, where I will be at the Wellness Clinic tomorrow to do a general physical and to find out specifically what is wrong with my right arm. Nothing life-threatening here, as I told my daughters last night. Just life-annoying.
I get back to Dallas in time to go shopping for Thanksgiving dinner and start the cooking. Some things just have to be done overnight. I love this week! 40-plus people coming to dinner. And I hope you have a great holiday as well. And if you are not in the US and don't celebrate Thanksgiving, then make up an excuse and get your family and friends together and have a great meal, emphasis on together. We should do things like this more often!
Your enjoying life more and more (even with the damn arm) analyst,
John Mauldin, Editor
Outside the Box
Simon Hunt Strategic Services
Economic and Copper Advisory Services
November/December Economic Report
"Four years into the crisis it is surely time to accept that the underlying problem is one of solvency not liquidity – solvency of banks and solvency of countries. Of course, the provision of additional liquidity support to countries and institutions in trouble can buy valuable time. But that time will prove valuable only if it is used to tackle the…