.Books: Endgame: The End of the Debt Supercycle and How It Changed Everything

The Beginning Of The End Game

John Mauldin

 ........overnments gone wild with ever-increasing taxes and spending, and especially governments that take on too much debt. When governments decide to spend today more than they can collect in taxes; when they borrow ever-greater amounts to live a national lifestyle that is beyond their means, obliging our children to pay in the future for our spending today to maintain that lifestyle; we know that there will eventually be a day of reckoning

That day comes when the debt is growing faster than the economy. The final Bang! moment happens when the total interest on the debt overwhelms the nominal growth of the economy.

When that happens, whether to a family, a company, or a nation, either spending must be slashed or taxes raised (which will hurt overall growth), or there will be a default. There comes a moment when investors start to worry more about the return of their capital than the return on their capital. Rates begin to creep upward and the process turns into an ever-tightening spiral of rising taxes and falling spending (which we currently call austerity), which hampers the growth of the nation and makes it ever more difficult to escape the debt trap.

In the course of human experience we have watched this process unfold literally hundreds of times, yet we never seem to learn.

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