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John Mauldin's Outside the Box

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  • Hoisington Quarterly Review and Outlook

    The relationship between high total public debt and interest rates is controversial (to some); and in today’s Outside the Box Van Hoisington and Dr. Lacy Hunt of Hoisington Investment Management tackle the subject head-on, in their “Quarterly Review and Outlook” for Q2 2012. They bring important new evidence to the debate, citing three academic studies (including an April 2012 paper coauthored by Rogoff and Reinhart) and an historical retrospective that focuses on the debt-disequilibrium panic years of 1873 and 1929 in the US and 1989 in Japan. In their view, the onus of responsibility for the “Panic of 2008” falls on the sometimes-slumping shoulders of the Federal Reserve, for making money and credit too easily available, and then “[failing] to use regulatory powers to check the unsound lending and the concomitant buildup of non-productive debt.”

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  • Flirtin’ with Disaster

    This week I offer a main course, a veritable piece de resistance, for Outside the Box readers, from my friend Rich Yamarone. Rich is Chief Economist for Bloomberg and one really sharp talent. He helps write Bloomberg Brief: Economics, a daily notebook that comes out every business morning with an all-encompassing view of what's happening and will happen.

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  • The Pain in Spain

    I want to emphasize that I do not think Spain is hopeless. Rather, it has a narrow set of limited options that will require a great deal of austerity and economic pain on the part of Spain and significant help from the rest of Europe, combined with the forbearance and patience of the bond market or massive buying of Spanish bonds by the ECB for an extended period of time. I think it will need to be the latter, as the bond market is on the brink of breaking down on Spanish debt, failing a realistic path to economic balance and growth. The way ahead is most difficult and treacherous. It appears to me that at the end of the day only ECB participation can buy Spain the time it needs. If they give Spain the time, it can get through. But the pain will then be spread to the valuation of the euro and thus the entire eurozone.

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  • Egypt's Next Crisis: The Economy

    Mubarak resigned, journalists packed their gear, and CNN went back to talking about obesity statistics - but Egypt's troubles are far from over. After weeks of protests (leading to strikes and, understandably, no tourists), the country's economy took an estimated 1.5 billion-dollar punch to the face.

    This appears to be the tip of the iceberg for Egypt's economical woes, however - as you'll read in the piece below from STRATFOR, a global intelligence company I've come to know and love. Mubarak's gone... as are his son's banking reforms. Resurrected is the military's practice of borrowing money from banks with no intention of paying it back - likely leading to a debt level of bailout proportions. The nation's not about to find the extra $16 billion a year it needs in its couch cushions.

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  • The Importance of Start-ups

    This weekend I wrote about the problems of being an entrepreneur in our Muddle Through Economy. I would like to follow that up with two brief (but somewhat controversial) essays on two aspects of starting up small businesses. The first, by Vivek Wadhwa, points out that start-ups account for all of the net new jobs, and is a summary of a paper from the Kaufman Foundation. (You can read the 12 page paper at http://www.kauffman.org/uploadedFiles/firm_formation_importance_of_startups.pdf)

    The second is by my friend William C. Dunkelberg, the Chief Economist of the National Federation of Independent Business. He asks a very simple question: Why is thrift getting such a bad name? And if we take the potential savings from “the rich,” where will the savings come from to invest in start-ups?

    Vivek Wadhwa is an entrepreneur turned academic. He is a Visiting Scholar at the School of Information at UC-Berkeley, Senior Research Associate at Harvard Law School and Director of Research at the Center for Entrepreneurship and Research Commercialization at Duke University.

    The both make for thought-provoking reading, and offer some challenges to the conventional wisdom, which is what Outside the Box is supposed to do.

    Your doing his part by creating start-ups analyst,

    John Mauldin, Editor Outside the Box

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