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BookmarkToday John Mauldin warned King World News that a nightmare will trigger a cascading effect and then the unthinkable will happen.
John Mauldin.HS.King World NewsToday John Mauldin issued a dire warning that a financial nightmare will lead to the unthinkable.
John Mauldin: “If I had gone to people four years ago and said, ‘40 percent of the world’s sovereign bonds would be at negative rates (even 40 percent of corporate bonds now in Europe are coming out at negative rates), central banks would expand their balance sheets $10 trillion, and that the world would somewhat look normal, with all of the geopolitical risks that we have with ISIS, etc,’ people would have said, ‘John, what are you thinking?’ And yet all of those unthinkable things have come about…
John Mauldin continues: “The world has been turned upside down, and we now have to think the unthinkable. And it used to be that thinking the unthinkable was dangerous to your portfolio. Now you have to look at it and say, ‘Thinking the unthinkable is the only way to be defensive.’
When The Weak Link Will Breaks There Will Be A Cascading Effect
And so I look at the chain of risks that are around the world — Europe, China, Japan, the emerging market total debt, the U.S. potentially going into a recession, and there’s a weak link somewhere and I just don’t know which one of them is the weak link. But when one of them breaks I think you are going to see a cascading effect. And what you will see as we start thinking about the unthinkable, is central banks reacting.
Skyrocketing U.S. Debt That Leads To The Unthinkable
If the U.S. goes into recession, the deficit immediately goes to $1.5 trillion and you are looking at total U.S. debt of $30 trillion within 5 years. That’s an unthinkable number.
The problem is there’s too much debt in the world and it’s growing. It’s becoming a massive inhibiter of growth. Could the central banks of the world recognize that and say, “OK, let’s all hold hands and monetize our debts together?’ That’s very possible. It’s unthinkable but we have to think those things. Then you start thinking, ‘OK, in light of the unthinkable, how do I position my portfolio?’
King World News
June 8, 2016
