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Endgame: The End of the Debt Supercycle and How It Changes Everything (Mauldin and Tepper)

Many, many charts illustrating the impending descent of the sky.


Endgame: The End of the Debt Supercycle and How It Changes Everything

John Wiley & Sons, 2011, 318 pages



"We all know we have seen the end of an era, and now we have courtside seats to watch the Endgame unfold. We are watching the end of Act I: The Debt Supercycle. Now we will get to see how Act II: The Endgame plays out."—John Mauldin & Jonathan Tepper (Chapter 1)

Hundreds of books have been written about the financial crisis that engulfed the world after Lehman Brothers went bankrupt. But what if the bigger financial crisis is ahead of us, not behind us? As John Mauldin and Jonathan Tepper deftly illustrate in this controversial audio book, the crisis was more than a half-century in the making. The Great Financial Crisis, however, was merely Act I. Act II has now begun.

The massive household deleveraging and historic shift of private debt onto government balance sheets now underway all over the world represents the end of a 60-year global Debt Supercycle. We have now entered the Endgame, a time when bankruptcies and defaults (disguised as "restructuring") will not be of households and companies but of governments. The stakes are now higher. The coming crises will offer policymakers few good choices and many bad ones. It will require extraordinary clarity and courage from leaders, courage that so far is largely completely lacking. Yet, despite the authors' dark forecast, the message in Endgame is not all gloom and doom. The book lays out positive steps governments can take to weather the worst of the stormy days ahead, minimize the inevitable pain and discomfort most of us can expect to experience, and chart a bold new course to sustained economic growth and prosperity. It also offers investors an abundance of useful analysis and expert advice on how to protect their assets during the worst of it and prosper from the many new opportunities that will emerge globally as they present themselves.

In Part 2, the authors take listeners on a country-by-country tour—including the United States, UK, European countries, and Japan—clearly explaining the problems each country faces, as well as the good and bad policy options open to each, and the investment pitfalls and opportunities likely to be found in each national economy.

Whether you call it the Great Recession, the Great Financial Crisis, or the Global Debt Crisis, what we are experiencing is unlike anything seen in 80 years. Now is not the time to succumb to panic and superstition. It is a time for courage and intelligent decision making informed by the brand of rational analysis and wisdom you'll find in Endgame.




You know those pain charts in doctors' offices to help patients describe how bad it hurts?

Pain chart

Endgame describes how things are going to play out for a number of countries (including the U.S.) given the current global economic climate. Nearly every country in the industrialized world has unsustainable debt that is only getting worse, which means the future is going to painful for everybody. Each country has choices it can make to make the pain manageable, but some countries have more options than others. For the U.S., depending on what our economic overlords decide, the range of available options looks something like this:

This is going to hurt

Whereas if you're Greece, your choices are more like this:

A lot.

And don't bet on the "least pain" option.

So, the publisher's summary says that "the message in Endgame is not all gloom and doom," and John Mauldin and Jonathan Tepper wax on a bit about how after the world economy hits the "system reset" button, medical technology and other things will make the 2020s awesome.

The thing you have to realize is, they are mostly talking to rich people. For the rich, the kind of economic upheaval they describe in Endgame means maybe a modest adjustment in your retirement plans. For the not-so-rich, "Endgame" is likely to mean a significant increase in homelessness and truly dire poverty the likes of which affluent industrial nations tend to think of as something we left behind in the 1930s.

If you want to really understand national debt, GDP, trade deficits and surpluses, interest rates, and why all that shit matters, then Endgame is a decent primer. Anyone who's taken a macroeconomics class or two will probably find a lot of it redundant, but the authors say that their goal was to write a book that "even a politician can understand," and it's pretty clear that they are actually addressing politicians whom they hope might be reading it.

Their viewpoint is definitely further to the right than, say, Paul Krugman, but for the most part, this manifests itself only in their recommendations for cutting taxes and a general approval of "austerity measures" — which is economic-speak for cutting social spending, or what we refer to obliquely in the U.S. as "entitlement programs." The authors are not in that class of people for whom being told "Oops, sorry, no more Social Security for you, and that pension you counted on all your life is gone, OUR BAD!" is a real concern.

That said, mostly they stick to sobering mathematical facts. These facts paint an ugly picture for most of the world, uglier for some countries than others. It's not an entirely US-centric book; they describe the economic situation in the Eurozone, including the great big problem child that is Greece and the soon-to-be-problem children Spain, Portugal, and Italy, as well as Australia and Japan ("A bug in search of a windshield").

(Sorry Canadians. Mauldin and Tepper didn't think you were important enough to mention. Maybe they consider you to be economically the 51st state.)

Endgame is full of charts and graphs and tables, but their thesis is basically this: we are at the end of a "supercycle" of unsustainable debt accumulation that will bring about major economic upheavals. They're quite fond of chaos theory, and go into some detail about how it relates to economic crises. Basically, even when everyone can look at the balance sheets and knows that things are screwed up and sooner or later there will be a piper to pay, no one knows exactly when it will happen or what the triggering event will be. A single small bank failure can be the event that kicks off an international recession. So for example, Japan's economy has been absolutely screwed for decades, and it's only getting more screwed as their population ages. Everyone "knows" that sooner or later, Japan is going to meet that windshield. And yet, Japan is still a first world industrial nation; they've got hardship and unemployment and increasing economic woes, but it's just "normal" bad, not "widespread homelessness" bad. According to the author's chaos theory of economic crises, sooner or later, barring an economic miracle, Japan is going to hit "widespread homelessness" bad, but that could kick off next week, or Japan might continue on as it is now for another ten years.

That being the case, the U.S. is an even bigger ship. We could face a Great(er) Depression starting next month, or things might not get really, really bad until it's time for our children to deal with it.

Besides not really dealing with the social consequences of all this upheaval (the real suffering will happen to the little people, after all), the authors seem to be of the opinion that after the dust settles, the world will continue on its merry way in a better and saner environment. They completely neglect to consider the possibility that this level of economic upheaval might involve a lot of violence, failed governments, wars, and general badness that is beyond the scope of any economic institution to "adjust." The end of the debt supercycle may not be armageddon, but it's probably not going to be just a bunch of sad homeowners who can't sell their houses.

However, I did find this to be an informative if slightly, understatedly scary book. It's really not a panic-mongering book meant to scare you into hiding gold coins in your mattress, but if you want to have some understanding of what all that shit coming out of Washington (or London, or Brussels, or Beijing) means, then it's a good starting point.

Endgame was written in 2010. Already, we can start looking at how well the authors' predictions about 2011/2012 would measure up. In another year or two, it will be of largely historical interest, since either they'll have been proven correct at least in their near-term predictions, or they'll be about as relevant as all the cranks insisting that none of this matters because Peak Oil!



Verdict: Endgame is only for people interested in crunchy macroeconomics full of graphs and tables, but it's not overwhelmingly technical, and if you want to know how your country's economy got so screwed up and just how much more screwed it could get, it's a good starting point. The authors are mildly opinionated, but their biases are not so great as to distort their credibility, so you can probably read it and extract useful insights regardless of your politics. If you're looking for a book that will give you advice on what to do about the various levels of worst-case scenarios the authors describe, though, Endgame doesn't have much in the way of useful advice for the 99%.




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