Mauldin’s reference to a global debt Jubilee dates back to the Bible and freeing all those enslaved by debts. Countries around the globe formed Jubilee 2000 in the early 1990s, with the goal of absolving a significant portion of debt around the world. Mauldin’s thinking is in concert with all the thinkers who see debt absolution as the only way out of currency quagmires and, in our case, the erosion of the middle class in America.
“I think sometime in the next 20 years, we [will[ have to get radical,” said Mauldin. He said that we need to restructure tax and regulatory issues to work toward this “global debt Jubilee.” He addeid that central banks are going "to walk off the monetization cliff together.” .
“I have been putting money with currency traders for almost 30 years, and it’s a tough market,” said Mauldin. Surprisingly, Mauldin admitted, “I’m the guy that put my mortgage on Japanese Yen options.” The Japanese yen has proven so volatile – basically having a lost century like the stock market’s 2000-2010 lost decade – that Mauldin has taken to buying 10-year currency options.
Europe Or Asia Could Cause The Next U.S. Recession
“I look to exogenous shocks from either Europe or China to trigger problems in the United States,” said Mauldin. Europe must figure out what to do with it’s immigration issues and its “massive, massive debt issues.” Mauldin said, “The only way for the European Union to stay together is to mutualize their debt.”
Resurrecting the 2008 TARP-fueled media term, Mauldin recalled the effect of “Japan zombie businesses’ and ‘zombie banks’” inciting the global debt bubble.
Mauldin sees the deflating of the global debt bubble as triggering a day of reckoning, characterized by “the bursting of the bubble of government promises.” Right now, the government promises us entitlement programs, and eventually something’s got to give with this house of cards it has built."
Bailouts won't be politically or economically feasible. “You cannot get $200 trillion out of the American unprotected class, and that’s going to upset the unprotected class even more,” said Mauldin.
Lisa A. Ditkowsky, CFP, is the president of Pllush Capital Management Inc. and can be reached at (847) 859-2530.