John Mauldin's Presentation: "Thoughts On The Continuing Economic Crisis"

john mauldin

At a recent event in Buenos Aires, investment guru John Mauldin delivered an excellent presentation titled “Thoughts on the Continuing Crisis.”

Through a series of charts, he lays out his case that we are indeed entering a long, Japan-like period of deflation. Everywhere you look, you see undercapacity and lower monetary velocity, and more debt.

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The CPI shows deflation for the first time in years

More Americans than ever before, 9 Million, are involuntarily working part time

A record 33% of the unemployed have been so for six months

The bottom line, with respect to jobs, is that this is NOT a typical recession

Discouraged Workers Push Unemployment To 21.1%

Without wage pressure, there is little chance of inflation. Look at how few strikes there are these days.

Meanwhile, the impossible is happensing: the U.S. consumer stops borrowing

Savings has exploded upward

The savings rate blasts higher (be careful what you wish for!)

Housing: it's not just a subprime problem

Check out the collapse in government tax receipts

The trade balance is diappearing, but be careful what you wish for

Volume of world trade has collapsed

So capacity utilization has fallen off a cliff

Bank lending has collapsed, too

It's not just lending to consumers, lending to businesses has fallen, too

Velocity of money has ground to a standstill

As for the government, there's bothing but trillion dollar deficits as far as we can see

Bottom line: the US is the next Japan

Mauldin's overall sentiment seems to be that we're not ending this recession anytime soon as long as the Fed keeps handing out free money. He likens it to that of Japan's economic crisis from the early 1990s:

'Total Japanese debt to GDP is about where it was 20 years ago, but the government debt to GDP has risen from 51% to 178% and rising fast. What did they get for all that debt? The Japanese have not added any jobs for two decades, and their nominal GDP is where it was 17 years ago.'

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