Fire And Brimstone: John Mauldin Edition

Tyler Durden's picture

Roughly five years ago, when we first started warning that the Fed's QE program, which we predicted will never end (five years later this is as true as ever), instead of leading to a virtuous economic cycle would result in a world where the labor force is increasingly converted from full-time workers to part-time labor, in which spending on growth capital is entirely replaced with such short-term shareholder friendly actions as dividends and buybacks, where the government is more broken than ever and where, courtesy of monetary policy, Congress can just tell the Chairman to "get to work" any time there is a crisis, and in which the record wealth disparity between the wealthiest few (0.6% control 40% of the world's wealth) and the poorest 99% (now that the middle class is on the path to extinction) will inevitably lead to a 18th century French outcome complete with guillotines, or worse, one of the more traditional financial pundits, John Maudlin, espoused the "Muddle Through" theory - in a nutshell, that all, even if at a far lowered output and standard of living, would be well, one which we (much to the chagrin of Cypriot - to start - depositors) refuted.

Some five years later, now that the prevailing mainstream media consensus has finally caught up with our "tinfoil" view, which for years was mocked by the same media, usually on an ad hominem basis, and even the Fed has realized (confirmed by the latest Jackson Hole symposium) it is in a trap as it understands it has to end the market's dependency on monetary heroin but has no idea how to do it without in the process undoing five years of central planning, we have seen some spectacular opinion flip flops take place. Which aside from the occasional headscratcher such as David Rosenberg going bull-retard (we once again wonder: just what does Ray Dalio serve in his cafeteria?) have been almost exclusively from optimistic to pessimistic, or as we call it, realistic. And as the case may be, such as with John Mauldin and his latest missive to potential clients, A Code Red World, a very deep and red shade of pessimistic.

Some extracts from the man whose Muddle Through has now become the Fumble Through and Through:

The arsonists are now running the fire brigade. Central bankers contributed to the economic crisis the world now faces. They kept interest rates too low for too long. They fixated on controlling inflation, even as they stood by and watched investment banks party in an orgy of credit. Central bankers were completely incompetent and failed to see the Great Financial Crisis coming. They couldn't spot housing bubbles, and even when the crisis had started and banks were failing, they insisted that the banks they supervised were well regulated and healthy. They failed at their job and should have been fired. Yet governments now need central banks to erode the mountain of debt by printing money and creating inflation.


Investors should ask themselves: if central bankers couldn't manage conventional monetary policy well in the good times, what makes us think that they will be able to manage unconventional monetary policies in the bad times?


And if they don't do a perfect job of winding down condition Code Red, what will be the consequences?


Economists know that there are no free lunches. Creating tons of new money and credit out of thin air is not without cost. Massively increasing the size of a central bank's balance sheet is risky and stores up extremely difficult problems for the future. Central bank policies may succeed in creating growth, or they may fail. It is too soon to call the outcome, but what is clear (at least to us) is that the experiment is unlikely to end well.


The endgame for the current crisis is not difficult to foresee; in fact, it's already underway. Central banks think they can swell the size of their balance sheet, print money to finance government deficits, and keep rates at zero with no consequences. Bernanke and other bankers think they have the foresight to reverse their unconventional policies at the right time. They've been wrong in the past, and they will get the timing wrong in the future. They will keep interest rates too low for too long and cause inflation and bubbles in real estate, stock markets, and bonds. What they are doing will destroy savers who rely on interest payments and fixed coupons from their bonds. They will also harm lenders who have lent money and will never be repaid in devalued dollars, if they are repaid at all.


We are already seeing the unintended consequences of this Great Monetary Experiment. Many emerging market stock markets have skyrocketed, only to fall back to earth at the hint of an end to Code Red policies. Junk bonds and risky commercial mortgage-backed securities are offering investors the lowest rates they have ever seen. Investors are reaching for riskier and riskier investments to get some small return. They're picking up dimes in front of a steamroller. It is fun for a while, but the end is always ugly. Older people who are relying on pension funds to pay for their retirement are getting screwed (that is a technical economic term that we will define in detail later). In normal times, retirees could buy bonds and live on the coupons. Not anymore. Government bond yields are now trading below the level of inflation, guaranteeing that any investor who holds the bonds until maturity will lose money in real terms.
We live in extraordinary times.


When investors convince themselves central bankers have their backs, they feel encouraged to bid up prices for everything, accepting more risk with less return. Excesses and bubbles are not a mere side effect. As crazy as it seems, reckless investor behavior is, in fact, the planned objective. William McChesney Martin, one of the great heads of the Federal Reserve, said the job of a central banker was to take away the punch bowl before the party gets started. Now, central bankers are spiking the punch bowl with triple sec and absinthe and egging on the revelers to jump in the pool. One day the party of low rates and money printing will come to an end, and investors will make their way home from the party in the early hours of sunlight half dressed, with hangovers and thumping headaches.


The coming upheaval will affect everyone. No one will be spared the consequences – from savers who are planning for retirement to professional traders looking for opportunities to profit in financial markets. Inflation will eat away at savings; government bonds will be destroyed as a supposedly safe asset class; and assets that benefit from inflation and money printing will do well.

Such fire and brimstone , such a dramatic shift in perception? Well, better late then never, right... But one wonders - why now?

This book will provide a roadmap and a playbook for retail savers and professional traders alike. This book will shine a light on the path ahead. Code Red will explain in plain English complicated things like zero interest rate policies (ZIRP), nominal GDP targeting, quantitative easing, money printing, and currency wars. But much more importantly, it will explain how what is in store will affect your savings and offer insights on how to protect your wealth. Code Red will be an invaluable guide for the road ahead.


Code Red will be available on Amazon on Monday, Oct. 28.

... and suddenly it all makes sense.

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GetZeeGold's picture



market's dependency on monetary heroin


We can stop at any time.....we just chose not to.

We're's not like we're junkies.

GMadScientist's picture

So you're in this "dance til you drop" competition, and doing pretty well, 80% of the floor is emptied, only you and a few other couples, when you notice that your partner happens to actually be dead.

Do you stop dancing or just lead them more in the hopes of not even having to split the prize?

Greshams Law's picture

Well, they shoot horses, don't they?

CPL's picture

Only when someone cares about the Horse.

redpill's picture

So basically everything Peter Schiff has been saying for the last decade?


"Welcome to the party, pal!"

GetZeeGold's picture



Loved the "Peter Schiff was right" Hitler bunker version.

OutLookingIn's picture

So much for "Mauldin's Muddle Through Theory."

Abi Normal's picture

I was talking to a "financial advisor" friend the other day.  We got into the economics a bit, but bottom line he see's a decade of "real growth" ahead, just like late 70's early 80's.  He also says w/o hesitation, banks do not carry trade, there is no increase in part time workers, no one is losing health insurance, and unfunded liabilities are not a debt in the current sense.  He also said the debt can be paid off, if I remember that part correctly.  He thinks a weak dollar is good, in that import exports imrpove.  All in all, he is definately BULLISH on the mkt and growth right now!  He thinks we can continue with QE (in other words the debt is ok), but does like the idea of term limits (keep terms as they are and serve max two terms), get rid of lobbying and special interest groups.  The last three things we agree on, other than that, zero.

I am glad he is not my financial advisor, very smart guy and all, but he is woefully ignorant as to what is going on generally economically.  That is somewhat scarey?! 

brewing's picture

it's scarey if you actually listen to financial advisors...

TwoShortPlanks's picture

First Rule of Bankruptcy: When faced with certain Bankruptcy and subsequent Liquidation of assets, transfer all good assets and equity into a newly created entity, and hang the creditors with the toxic assets and debt of the old.

China’s Bretton coup d'état:

SWRichmond's picture

your friend sounds like a Wharton School MBA douchebag.

jbvtme's picture

 i read an article recently that said that 47% of the jobs done by workers will be lost to robotics in the next twenty years.  i ride the bus iong distances and talk with the young passengers who don't own cars and live three/four to an apartment. i see alternative currencies like ithaca dollars and berkshares and bartering for services in the rural areas. airbnb, flightcar, couch surfing, sluglines, craigslist ride share apartment share, used books on amazon...everywhere i look entrepreneurs are undercutting corporate america.  the industrial revolution is taking it last breaths. 

jbvtme's picture

also, this kind of thing will send the lizards and reptiles packing

trainhard's picture

He is freaking clueless as most financial salespeople are. All they know is buy MF's and hold them for the long term. Not to mention a modicum of self-delusion.

Groundhog Day's picture

Would you please share with us where he works.  I had a meeting with a jpm rep who was so full of himself, their wasnt enough room in his office for me and his ego.  He went on and on about how the corrections don't come until 5% fed funds rate and so bonds are dangerous and stocks are the place to be for at least the 2 to 3 years.  I said 5% fed funds from here, wouldnt that have adverse effects on us debt? His reponse, deficits dont matter, they never have in the past.  The next 30 min were torture

MarsInScorpio's picture

Reminds me of how the dot com evangelists said that debt - and profits - didn't matter either . . .


Professor Fate's picture

Always kind of liked Mauldin but he lost me with Muddle Through.  Good to see he's come back to his senses but Jeezus Christ...what deck of the Titanic are you lounging on that you can't see this fuckin' iceberg.

Fate the Magnificent
"Push the Button, Max" 

dtwn's picture

There was a Schiff vs Mauldin debate earlier this year:


In my opinion Schiff owns Mauldin.  Now, I don't know enough about Mauldin to know if "Code Red" represents a change of opinion, but it is interesting that when even Jamie Dimon comments about the reality of the US debt


that we may be seeing more and more changes of opinion as additional public commentators realize they don't want to be on the wrong side of history (and the wrong side of a noose) when this thing unfolds.

El Tuco's picture

Mauldin is in the book business. Unfortunately he spouts the same shit everyone else has been saying packaged differently. This should be taken as a contrarian indicator.


noless's picture

Normally I'd agree, but contrary to what at this point?

Are you saying i should take out loans and go to university of Phoenix for a degree in medical billing?

HardlyZero's picture

It is a change in Mauldin's course...maybe Muddle Through with the Code RED claxon siren.

Maybe its more of the same, but John Mauldin is like PIMCO...they keep warning and keep selling.

John M. and Peter Schiff are on the same side of the arguments, only John thinks it will take longer to devolve than Peter.

Peter has believed the economy jumped off the cliff 10 years ago and is just waiting to hit bottom, so maybe Mauldin is 5 years behind Schiff on these matters.


It could take decades for this to play out...or a few hours...that is the nature of this economic monster.

Jafo's picture

"It could take decades for this to play out...or a few hours...that is the nature of this economic monster."


You are probably far mor correct than you realise.  This party will roll on unabated for years but the moment when everyone realises that the party is over will become global within a few hours.

Crisismode's picture

Everybody, and I mean




in the mainstream thinks that



The Japanese are a dying race on a dying island, but they had the foresight

to NOT

invite a huge number of foreigners in as their captive workforce, like, oh say,






Japan is dying becaue they have lost the will to live, and, quite frankly, to even


They will go down as one of the best examples of decadant self-indulgent living in the history

of the planet.

And the USA is following right in their footsteps.

March, sonny-boy, March.



Anusocracy's picture

Ron Paul or Harry Browne or any one of hundreds of thousands of average libertarians would have been a better choice than Peter Schiff to epitomize scorn for the system.

Not that Schiff is not okay.

0b1knob's picture

Actually in the movie "They Shoot Horses Don't They" didn't they find out at the end that the whole contest was fixed and they never had a chance to start with?

DanDaley's picture

You only win by not playing, like the lottery.

TheFourthStooge-ing's picture


Do you stop dancing or just lead them more in the hopes of not even having to split the prize?

"As long as the music is playing, you’ve got to get up and dance."
Chuck Prince

Yeah, it's all good, right Chuckie?

ToNYC's picture

When you are the only one left standing, you win and enjoy the prize with the dead. Nice game for losers all around.

max2205's picture

No of us will be alive to trade the turn so keep long

Leonardo Fibonacci2's picture

That is what happens when you have a Kenyan running Amerika.

GMadScientist's picture

I see quite a few more white faces in the "fucking up the world royally" column, but keep barking at the "shadow puppets", ya yappy little shitbag.

Creepy Lurker's picture

And when Coleman Young was first elected Mayor in Detroit, the city council was mostly white, but that's beside the point. He said Kenyan. Didn't say black or white, the point being that the guy isn't an American. It's not a good idea to let a foreign national (whether in spirit or in fact) run your country.

But then, he criticized "The One" so that automatically makes him RAAAAAYCISSSSS, right?

Stackers's picture

John Mauldin has never been openly short term optimistic, he has simply said that if the powers at be chose to they could institute policies that would allow us to muddle through. Watch his 45 min lecture or read his book "End Game" and you will see he has always been a "realist" He is a very staunch long term optimist, like myself, and believes we have much potential if we can get past this centrally planned mess we are in.


His argument was never that we "would" or "should" muddle through ..... simply that we "could" if they chose to.


The End Game lecture. - circa 2010

Cognitive Dissonance's picture

I have been reading John Mauldin for well over a decade and during that time I have watched him muddle through. John, like so many 'centrists', does not form his own opinion......though he most certainly believes that he does. John's opinion is developed by the herd that follows him. His view is greatly influenced, if not actually formed by, the feedback he receives from those who PAY for his opinion. That feedback often comes in the form of decreasing or increasing membership fees.

When your email list is well over a million and you live off the selling of your opinion, it does not pay (both literally and figuratively) to venture too far off the consensus path. In short John Mauldin's opinion is crafted by his court to suit his court. His value is actually as a wordsmith, in his use of elegant prose and paragraph while explaining to the herd what the herd wants to hear.

<BTW my opinion and $795 will get you an iPhone, thus exposing the value of my opinion as well as Mauldin's.>  :)

SWRichmond's picture

Then Mauldin's piece is all the more noteworthy, as it means the consensus is changing significantly.  Those of us here at ZH knew, well in advance, where the road led, and I suspect many have "prepped" for the destination.  If the mainstream opinion is changing, as indicated by Mauldin's "I'm their leader, which way did they go?", then the window of opportunity for gold newbies to actually get their hands on some physical is closing, because the herd is coming.

Cognitive Dissonance's picture


The herd is always right....even when it is wrong. :)

woolly mammoth's picture

That was an enlightning desciption of Mauldin CD.

Hulk's picture

COG's been hitting em out of the park for two days now. Country living must suit him nicely !!!

TheFourthStooge-ing's picture

"Any way the wind blows,
is fine with me.
Any way the wind blows,
it don't matter to me."

Abi Normal's picture

Ain't that somethin'...such a wasted talent, in the vein of Hendrix, Elvis, Joplin, Morrison and the like.

All prognosticators, including myself, are guessing, may be an educated one, but more like throwing a dart at the board!!!

I feel a strange brew, an ill wind brewing, my friends, and for a long, long time now! Warning Will Robinson, danger, danger, danger, lies ahead!

Most of us here at ZH, know this fact, we ran off the tracks some time ago, and there is no fixing this stupid mess we are in easily.  There will be much pain and suffering, but in the end, long term, we may just get out of this hell, and be better for it.

When does the final death throws come, the death rattles are being heard now, so it is just a short time away, I give the patient 6-9 months, maybe a year, then pooof, it will make that 'giant sucking sound' sound like a gurgle!

Urban Redneck's picture

I have some cranial-rectal separation surgeries that I have been putting off for a while, and at least one of them involves someone who often forwards Mauldin's stuff...

Calmyourself's picture

Good luck, the toughest operation in nature.  Mine invariably turn into Friend estrangementdectomies in short order..  Gave that one up and concentrated on the homefront..

TuesdayBen's picture

I hear Facebook offers a tool for that surgery.

El Tuco's picture


or it's a good contrarian indicator...DOW 20000 here we come....

Creepy Lurker's picture

You know, that's a good thought. At least for the first lttle while, TPTB will work harder to stop the herd going in the wrong (to them) direction.

SWRichmond's picture


Without a doubt, though timing is questionable and buying power of DOW is dubious going forward IMO. 

CPL's picture

It stands to reason that centrist isn't really a position when applied to a system you can only be pro or contra.  Everything in between is just marketing to pay John or someone else to provide a model and rationale to how orthodox the buy position is.  It's only justification based on the loose assumption that the system is worth anything.  John is as much part of the problem as the central banks are. 

It's at a point where it doesn't matter if one is optimistic or pessimistic about current market and business indications or actions.  The system all these objects are contained in (currency) has already self destructed and is described as 'worthless'.  Yet people are still talking about the corpse, only in past tense if you've noticed.  It's always a comparison to the past, never a deliverable guarantee of the future. 

That's an indicator of one of two things.  No one know how to do the math to project properly.  Or they are stalling and lying.

Like it or not, John has unwittingly become part of the controlled opposition to a problem created by other people.  Right now guys like Maudlin and the rest of them should be putting pen to paper to develop something new and cease screwing around with the rusted out POS everyone hopes can get one more mile out of.


Cognitive Dissonance's picture

Very well articulated CPL.

John and the rest of them will never most likely not do as you suggest (unless or until forced to) because this requires that they break from the herd and seriously compromise their income stream. The herd at large does not want to hear that pain is coming and that they (the herd) are the problem. They want to be told how to profit from, or at least avoid, the pain. The CBs simply cannot do what they are doing without consent from the herd.

Courage is easy to come by until it is not.