Posted on 04/17/2016 7:46:42 AM PDT by dennisw
Central Banks China Federal Reserve Hayman Capital Kyle Bass Kyle Bass Lehman Monetary Policy Reality Recession Yuan
Hayman Capital founder Kyle Bass sat down recently for a conversation with Maria Bartiromo and Gary Kaminsky on Wall Street Week. He covered a variety of topics such as NIRP, income inequality, and the U.S. presidential race. As our regular readers know, Kyle correctly predicted the housing crisis, and is now calling for the yuan to be dramatically devalued.
On the growing use of negative interest rates as a central bank policy tool, he pointed out that while the central planners have their PhD's and elaborate excel models, the reality is that not all people behave rationally, and thus in the real world those types of policies won't necessarily work as intended. He also touched on the fact that a concern that should be on the front of everyone's mind is the fact that if NIRP goes full Shinzo Abe and banks start charging customers for keeping cash at their banks, that there will be a run on cash.
"I think this is where the academics are kind of clashing with the practitioners. I think on paper negative rates make a lot of sense if you're running academic models, but in reality they make no sense. Having seven or eight trillion dollars of debt trading at negative rates, having thirty year JGB's trading at fifty basis points is absolutely ludicrous. This experiment that's going on we all know will end poorly at some point in time, I just don't know when that time is."
"I think that one of the fears that they have is a run on cash. If they told you and I that they're going to tax your deposits by a hundred basis points, well it's better to put it in a safe or under your mattress. And that's why you see a resurgence in gold. The more they move to negative rates, the more gold is gonna take off because there's no carrying cost."
Regarding what's going on in Asia, he reiterates his call that there's a giant credit bubble (as we discussed here, here, and here) that's reached its breaking point and it's going to burst over the next two or three years. He says that he believes the implosion of the china credit bubble will have a 40-50% chance of causing a recession in the U.S. within the next year.
"From the perspective of what's going on in Asia, Asia has a giant credit bubble that they've been building for the last ten years or longer that has reached its atrophy level, and it's going to happen over the next two or three years. Whether that causes the U.S. to have a brief, minor recession, I think it's kind of forty, fifty percent chance in the next year personally."
He goes on to hammer the central banks' monetary policy decisions, saying that they can't generate true organic growth and that we've been doing the same thing for the past eight years and we're still in the situation we're in. Something Zero Hedge has been pointing out consistently over the past seven years.
"I don't buy this idea that monetary policy can generate true organic growth. It can help us out of a crisis, and it's proven to do so, but listen we've had eight years of full out excessive monetary and fiscal policies and here we are today. So when Lagarde goes to the G-20 and says we all need to work together, we've been working together. Everybody has been on easy monetary policy, we've pulled all the demand forward that we can, and now we're stuck with kind of stagnation and excess capacity and a lot of debt."
"Economics assumes that everyone is a rational actor, and we all know in this world there aren't many rational actors. That's where there's a divergence between academia and practitioners."
When the conversation turns to the U.S. presidential race, Bass said that Hillary would be the best choice given everyone that's running. When Maria mentioned that Hillary would raise taxes, Kyle lambasted the federal reserve easy monetary policy that only made the rich richer.
"So I'll give you a crazy answer, I think it's Hillary. I think she's the most sane actor of them all."
"Raising taxes, I mean, one thing you have to think about is this divide between the haves and the have-nots. One unintended consequence of Fed easy monetary policy has been this distributive nature where it made the rich richer. How many rich people do you know today that are worse off than they were at the peek of 2006. I don't know one, minus some of the Lehman people, I don't know one. What happened is we went to this policy where we went to QE, QE what that did was raise asset prices, well the only people with assets are rich people in general, so they became much more rich."
IOW cash under your mattress or in a safe deposit box will be 100% accessible while withdrawing your cash from the bank will become a hassle plus you will be charged interest rate for keeping your money in the bank.
***** already a hassle if you want to take $20,000 cash from your bank. Look at what happened to Dennis Hastert.
His prediction agrees with all the betting sites which have correctly predicted the winner of the General and in each state correctly for years.
Stopped right there. A Wall Street Hillary support piece. The author himself even says that if the China credit bubble pops there's a 40% chance of a minor recession. So really this is an, "I support Hillary" propaganda piece.
Lead, copper, steel, brass and gunpowder are the safety net. Gold is a luxury only in an environment it isn’t taxed by the useless or stolen by the evil among us.
I wouldn't count on the safety deposit box since the banks may be ordered to seize cash and deposit it "For You....!"
I wouldn't count on the safety deposit box since the banks may be ordered to seize cash and deposit it "For You....!"
Wow, zerosensehedgehog blog has really sunk low.
Oh, wait. zerosensehedgehog blog was always a bottom-feeder.
zerosense has a perfect record of interviewing folks with zero sense.
With banking becoming a very one-sided relationship, I wonder what sort of alternatives could arise? There’s next to no interest paid to depositors now, combined with fees there is no gain for depositors as it stands. Actually charging interest on deposits will drive out a lot of depositors. Some sort of account will be required for paying bills, it can’t all be cash. I don’t see people paying for money orders to pay bills. Something akin to cash cards probably, with the cost subsidized via ad revenue? I don’t know, but lower and middle income people won’t be willing to absorb being charged for bank deposits.
This is the disaster QE has foisted on the country.
It will be a simple mark in the form of a microchip that you take on your hand or forehead, whichever is most convenient to you.
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