Chilling Davos: A Bleak Warning on Global Division and Debt

It's about high time American citizens wake up to the fact that WE are not the problem. Too many have been hoodwinked into supporting that very premise. Shame on us.

Can you include a hyperlink to his actual letter so we plebs can read it, too? Or is it for Bono’s eyes only?

If only the wealthy could recognize that greed is every bit as deadly a sin as envy.

Does anyone know where can I read the complete letter?

“There is no way to know how much debt is too much, but America will inevitably reach an inflection point whereupon a suddenly more skeptical debt market will refuse to continue to lend to us at rates we can afford,” he wrote. I don't care how rich he is. If he thinks the US government has to worry about what it can "afford", he doesn't understand how money works. The US can pay any amount in US currency at any time. The debt market understands this. That's why "dire warnings" about the debt never amount to anything. The statement doesn't even make sense. If there's no way to know how much debt is too much, then what is the point??

Two views of the debt a) Paul Krugman " But what matters for government solvency isn’t the absolute level of debt but its level relative to the tax base, which in turn basically corresponds to the size of the economy. And the dollar value of G.D.P. normally grows over time, due to both growth and inflation. Other things equal, this gradually melts the snowball: even if debt is rising in dollar terms, it will shrink as a percentage of G.D.P. if deficits aren’t too large." b) Jeffrey Gundlach Investment Manager "The Fed wants to raise rates. They've gone from a regime two years ago of, “We'd like to raise rates, but the data isn't helping us” to now, “the data is good enough and unless it gets worse, we're going to keep hiking.” So the Fed is going to keep raising rates per their own words, and the deficit is going to continue to expand, it's already expanding at something that should be an alarming rate to global investors. The official deficit for fiscal-year 2018 was around $800 billion. But the growth in the national debt was $1.271 trillion. So which is the real number? Seems to me that the debt is the debt. And so the reason that there's a difference in those numbers is the loans to the Social Security system, which, of course, will never be repaid. So it's a true deficit. So the deficit is already 6% of GDP in the United States".. Take your pick

We will muddle through. Very soon, when it becomes apparent to all that Trump will not win re-election (and I say that as a moderate), we will look past Trump and the chaos he brought. The next president (whether the democratic nominee or a surprise like Romney) will be more globalist in outlook and more interested in leading the world. Despots who rule for life (you know who they are) take the long view and keep a leader like Trump at arm's length because they know they can outlast him. Unfortunately, they also do it to leaders we may like more than Trump. In the midst of battle, things can seem hopeless, but with perspective from a little distance, we can find hope. Yes, we have lots of turmoil in the world, but that has been the case at all times in my six decades of life.

I think how many ordinary lives have been destroyed in the West by ruthless global capitalists and remember the history of the revolution against the Czars in Russia and the Cultural Revolution in China. I read the Hare with Amber Eyes and think about the rich elites, so smug in their compliance, thinking they and their families will not be destroyed in the coming revolution, that they will be safe because of their virtue signaling and their hideouts in New Zealand. I sigh because people do not learn from history and instead of instructing their minions in Congress to respect their fellow Citizens, they try to destroy them. Well, we'll see how that turns out for you. There is a reason why old money is not too flashy. You don't want the mob to focus on you. What annoys the heck out of me is now we are all sitting ducks because of the newbie Elites unwillingness to share the wealth around and then call people ugly names if they don't agree with you. Idiotic behavior.

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"Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration." - Abraham Lincoln. (at one time, long long ago, defined as a Republican)

Honestly find it wild this article is in the most shared. Yeah, no kidding the world is in chaos: it’s because of Y’ALL Davos folk and your project of neoliberalism that we’re on a planet whose climate is rapidly accelerating toward collapse; in a country that is rapidly rediscovering its socialist heritage; and bound to a market system that one can only politely call socially, economically, ecologically, and morally unsustainable. WHY should we care what these billionaire thieves think? We all already know what they say to be happening true. It’s true that those with extra capital to invest require social cohesion. But, the solution is not social cohesion, it is social, economic, ecological, and moral revolution. I can’t wait for the day when worker’s cooperatives will decide how to invest THEIR surplus benefit after socializing the Davos elite’s ~spare~ capital. I’d invoke harsher images, but this is The NY Times comment section after all, I suppose.

I'll note that he complains a lot about sovereign debt, but stays silent on the huge piles of money his plutocrat pals have piled up. Where does he think the money missing from public coffers is going?

In the immortal words of Billy Bragg "the third world is just around the corner." Don't forget to vote for the Russiacan Party in 2020 because trickle up is working just great!

There are three "tipping points" to consider when doing future forecasts. Climate change, financial crises and social upheaval are interwoven and interactive now and will be in the future. Probably the most damaging of these factors is climate change. In the future the impacts of climate change well may cause expansive social unrest and roil the markets. Simultaneously prioritizing financial gain above social concerns and the environment just adds fuel to the fires. Addressing societal struggles and disasters will be made all that much more difficult for debt ridden nations. How does the one-time leader in the world on these issues respond? Turn a blind eye to climate change. Profits are God. Stir the social pot and place citizen against citizen. Well played America.

He is a way way way way better man than Charles Munger and Warren Buffet. My respect for Seth K. and Ray D. has gone way up. Not only are they smart investors, but they are willing to say it like it is. Munger has thrown mild praise on Trump after saying he his personality was unsuitable to be a president before the election and saying Wells Fargo has already been punished enough and it should not have to pay any fines for its litany of misdeeds.

And this is why we have to be on the alert for fascism. Big business has historically aligned itself with fascists rather than choose to go along with more mild democratic socialism, because they want all of the control and all of the authority. The man who writes this investment letter talks about "social cohesion." There are various routes to that goal. One is democratic socialism, which spreads the wealth, encourages the notion that everyone has responsibilities to each other as well as to ourselves, and decreases inequality. Then there's fascism, which involves eliminating the opposition, consolidating power, and passing laws to force citizens into compliance. The ruling classes are clearly moving toward the latter, while the middle and working classes want the former. We live in interesting times.

Beyond the Klarman letter, I'd recommend reading "Big Debt Crises," by Bridgewater hedge fund maestro Ray Dalio. It's a great financier's study of capitalism's relentless cycle of depressions, panics, recessions, bubbles--from the Roman empire through tulip manias, South Sea Bubbles, Great Depressions down to the "Great Deleveraging of 2008." "Rather than seeing lots of individual things happening, I saw fewer things happening over and over again," he writes. It's not an overly tough read, and an essential exercise in separating signal from noise--and there is a LOT of noise, perhaps in Klarman's letter and certainly in many of the responses to it--in our media-drenched world today.

“betrayed by a massive national debt that was incurred without any obvious benefit to them.” Of the 193 countries on the planet, the US has troops in 150 of them and bases in 80. We have troops in 50 of the 54 African countries. The US spends 1/3 of the total world military spending but makes up only 4.4% of the world population. China, the next biggest spender spends less than half of what we do and they are our largest trading partner, so hardly an enemy. Most of the rest of the world’s military spending is by our direct military allies. And yet Trump and his supporters and enablers are afraid. They are very afraid. Since our debt is the result of our massively bloated military and its foreign adventures and it hasn’t made anybody feel safe, and no amount of military or border security spending is going to help them feel safe, how about slashing the military budget?

I would like to see more reporting on Davos. Specifically, which of our Congress members and their staff are in attendance. It is good to know who is being influenced by foreign agents and corporate interests and globalists so we can understand why they advocate such things as removal of "immoral" border security.

The fundamental flaws in capitalism are coming home to roost in the western democracies. The modern nation state was founded on Enlightenment philosophy and ideals, but financed and empowered by slave trade, unfettered capitalism and nation sponsored colonialism that prioritized power, capital and return on investment for the few over notions of equality and individuality and opportunity for the many. The internet and social media have democratized political conversation and given long disenfranchised groups and oppressed minorities outsized influence to expose the dirty shadow side of both Enlightenment ideals and the capitalism and economic colonialism that empowers it. Add to that a growing sense of existential doom driven by capitalism's excess and the result is a volatile admixture for revolution. We should buckle our seatbelts.

Mr Klarman's letter indirectly points out the race to the bottom started way back during the Reagan administration. We have been on this glide path for decades, it isn't new. Republicans have not wanted their supporters to be taxed, and Democrats think that if they empty the pockets of anyone who advanced from the bottom rungs of the ladder, everyone will live in a utopia. Rarely does either side listen to the other or compromise, they just allow the most extreme people in their parties to force them to double down on policies that have been proven don't work or can't be sustained past one election cycle. There is no ideal formula for governing or managing the economy, but getting some honest independent leaders (regardless of party) that have a long term view in the same room, might allow that mythical middle ground to re-emerge. I hope it does, because otherwise the average millennial is living in the house of cards that has been built by their parents and grandparents that Mr Klarman is hinting at.

Sounding the alarm bell to the Public, Mr Karlman, omits the the Principal Cause for this World Situation is by the Business Leaders, The Investors themselves. Creating This unheard Wealth thru the Control Of Governments,The Owning Of Politicians, Writing the Laws in favor for Their Advantage, The Results Are That Now That The Ruling Class’s Existence is at stake...They want Their Charge to Bail Them Out.

What Davos shows, just as Trump's election, is we have a crisis of leadership on a global scale. Sure, there are a lot of factors at play, but when you really reduce it down to its lowest level it comes down to extremely poor leadership. Study the demise of any empire and usually the decay of the leadership class proceeded the destruction of the empire. It is no different this time. We are not producing those highly intelligent, gifted and self sacrificing leaders that we need. Both our economic and political systems are too corrupt to produce quality leaders that will put the welfare of the people and the planet first and not just because they add to the bottom line. Our supposed leaders have lost the ability to balance well thought out decisive action with humanity towards our fellow man. It is a sad state. At one time the military and the extremely well off did produce some quality leaders, but those days appear long gone. Unfortunately I do not see anyone on the horizon, in the vein of FDR, that is going to bail us out here in the U.S. Definitely will not find any answers in Davos, but I hear the booze and food is pretty good.

Trump should be congratulated on not going to Davos and thus saving considerable amounts of carbon footprint. This annual celebration of the uber-wealthy/elephant-bumping ritual should be done, if at all, by Skype or similar teleconferincing.

An acquaintance of mine makes roughly $1.5 million a year. He just received a tax break of $235,000. Does this make sense when we’re running massive federal deficits? He, the beneficiary, says it’s a horrible idea. We’re borrowing against our future with these tax giveaways to the wealthy.

‘Citing the “yellow vest” marches in France that spread throughout Europe, Mr. Klarman said, “Social frictions remain a challenge for democracies around the world, and we wonder when investors might take more notice of this.” He added, “Social cohesion is essential for those who have capital to invest.”’ Compare this casually cynical warning with Martin Luther King’s admonition, made from the Birmingham jail, about white liberals who were “more devoted to order than to justice.” Clearly, at least among the Davosistas, little has changed.

Chilling! At the helm we have Trump who was unable to come up with an answer when Howard Stern asked him what 7 x 16 is. At the end of FY 2019 the gross US federal debt is estimated to be 22.7 trillion. We all need to stop reacting to the silliness of Trump's bad behavior and take this deep hole we are in very seriously. Trump does not have one person on his team that I would hire, not one. Seriously America, this is much more than a really bad sitcom, it's our future.

Mr. Sorkin, can you share a copy of this letter as a part of your reporting?

The rich getting richer while the poor were getting poorer caused the fall of the Roman Empire (arguably) , the French, the Chinese and the Russian revolution. And today we see a lot of the same social strains in most of the Western hemisphere. the 1 % are sawing the branch on which they are sitting. Greed makes you blind.

Seeing the full text of the letter would have gave a better understanding of what was conveyed. His intentions to be helpful most likely were misplaced. Each nation attending Davos has their own best interests first, not that of the US. Openly advertising the Achillies heel of the US to the attendees of the summit doesn't help the US but hurt it. There are converstations that need to be "in house" or private. Its called couth. You don't go blasting out your company's weaknesses at a business conference to your competitors. If you did, you would be fired. The time and place for that conversation is internal, and with your management. In an attempt to be seen as right over survivability, Klaman hurt both the US and himself here.

Mr. Klarman is a former Republican supporter, which lead us to Donald Trump and George W. Bush and the Iraq War and huge public debt of which he has been the beneficiary. Now what? The huge debt and lack of social cohesion are a growing concern. Not for him, tucked in safely behind "walls" and on high ground.

Thanks to Mr.Klarman for his letter warning of the consequences of social inequality and dislocation.This is not just aimed at investors but is a cautionary tale for politicians and the rest of us.He particularly takes on Trump and his erratic statements and criticism of the free press.His warning is global but he has singled out the United States as the great threat to global stability- this has been our role traditionally to work for stability.Under Trump chaos is being subsidized and spread.

And he didn't mention climate change and the latest ten-year timeline in terms of the effects of more frequent severe weather events.

It is ironic to think the technocrats will be in attendance at the forum. As this legion of young uber wealthy are slowly eroding the prospects for their own generation. And they have the platforms and data manipulation to deflect attention from them at every turn. It seems disruption is seen as the new idol. We have fewer voices looking to create wealth and opportunity. We just have the ridiculously wealthy, and the endless click stream of the aggrieved.

"The letter, written by Seth A. Klarman, a billionaire investor known for his sober and meticulous analysis of the investing world, is a huge red flag about global social tensions, rising debt levels and receding American leadership." I don't know about anybody else, but the last person I would to look for moral guidance is a Wall Street operator.

“It is not hard to imagine worsening social unrest among a generation,” he wrote, “that is falling behind economically and feels betrayed by a massive national debt that was incurred without any obvious benefit to them.” There is “no free lunch!!” Running massive deficits, loading up on debt and kicking the “can down the road” have serious consequences. Although inheriting an economic expansion Trump, aided and abetted by his fellow Elected Politicians, is running our country like his Atlantic City casinos – “hype,” “glitz,” irresponsibly borrowing,” “little or no risk management,” ultimately leading to financial ruin for others. Same story line - different victims! We must find a way to hold self-interested and self-enriching Elected Politicians, government officials, their staffers and operatives from both parties personally and financially liable, responsible and accountable for the lies and half-truths they have told US, their gross mismanagement of our county, our $22 T and growing national debt (106% of GDP), and our $80 T in future, unfunded liabilities they forced on US jeopardizing our economic and national security, while benefiting themselves, their staffers, their party and special interest donors.

“you don’t need a weatherman to know which way the wind blows” Bob Dylan

The US will shift more and more towards socialism over the next couple of decades due to the strong resentment of capitalism by our millennials. While capitalism clearly benefited most of their parents and grandparents, these kids have seen the ugly side of it as well. And they look to socialist European countries that are thriving and think, why not us? Both political parties are guilty of not taking better care of the middle class.

Yep, we forgot about the lessons from out forefathers. This damage won't go away for a while, people aren't angry enough yet to enact social change. The system won't collapse, where else could they do this kind of theft and have the poor just stare at them for 30 yrs. while they are doing it. It benefits them if they keep the system in tact and just cream off the wealth every 50-100 yrs. I estimate they have room for one maybe two more bubble pops then people will have the political will to enact reforms on them. Hey baby boomers how could something like this happens in your watch? (I love that one, they never have an answer)

When Reagan came into office the national debt was approximately $1 trillion. Republican inspired and enacted tax cuts have transferred enormous wealth to the richest in our society, to where the debt is $21 trillion plus. This has been the the greatest theft of a nations resources in the history of man. Spending has increased steadily with no end in sight. There is never any appetite to control spending and no amount of economic growth will ever reduce the debt. We are headed to a reckoning for sure. God help us!

The wealthy need to spread the wealth more or there will be dramatic repercussions. If they do not tone down their capitalist system they may find the others doing it for them.

Investors should pay attention to Mr. Klarman's concerns. Tectonic shifts in the world order are taking place before our eyes and the financial markets cannot escape the impact indefinitely.