Book Corner: Endgame – The End of the Debt SuperCycle and How It Changes Everything

A review of the book Endgame: The End of the Debt SuperCycle and How it Changes Everything.

To be an actuary is to be someone who attempts to model the complex interconnections between risks and the causes of those risks. As such, the Society of Actuaries is always reviewing new books that help distill the nature of macro-economic risks. In the case of the book “Endgame: The End of the Debt Supercycle and How it Changes Everything,” we found two authors that should be honorary actuaries. John Mauldin and Jonathan Tepper took the highly charged debate over the U.S. debt ceiling and boiled it down to what we need to know about the economics of debt.

This book is a sobering analysis of the financial crisis, the events leading up to it and what is likely to happen if adequate action is not taken.

Divided into two sections, Part I, an explanation of the Debt Supercycle and Part II, country-by-country analyses, the authors elucidate that the endgame will be

“a period of time in which many of the developed economies of the world will either willingly deleverage or be forced to do so. This age of deleveraging will produce a fundamentally different economic environment, creating a profoundly different economic world from the one we have lived in for the last 60 years.”

Moving from the debt supercycle to the endgame is characterized primarily by a transfer of debt from the private sector to the public sector. As such, Part I focuses on where we are in terms of the debt cycle, and Mauldin and Tepper give color to why the world economy is experiencing volatile markets and unrelenting recessions.

In a round-the-world review of global markets, Part II details the difficult, unpleasant or cataclysmic choices the individual countries must now make – and candid assessments on the likelihood they will be able to accomplish what is necessary. According to Mauldin and Tepper we have run out of band-aids, and the more we put off addressing long-term problems, the more we will be met with higher levels of macroeconomic volatility and systemic instability.

The solutions to end the debt supercycle that the authors put forth basically are that we restructure our debt or reduce it through austerity measures. Not exactly the “silver bullet” solution anyone was hoping for. To the end, Mauldin and Tepper should be applauded for their frank risk assessment of the choices that must be made. They do not get into a moral debate about the choices; instead they educate us about economic consequences that would stem from either restructuring or cost-cutting.

But the book is not all doom and gloom. The message, while a somber one, is delivered from a well-balanced perspective. It offers investors practical advice on how countries can live within their means and use the policy-making process to support both private and public debt reduction.

All in all the book shows that while there are no good choices, the worst choice would be to continue to debate the efficacy of debt without understanding the economics of financial leveraging and deleveraging.

If you have read the book, leave your reviews in the comments section.

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