Posted on 05/11/2010 9:09:17 PM PDT by blam
Kyle Bass: Europe Is Nearing Its "Keynesian End", Now Expect To See Japan Crisis Headlines Next
Joe Weisenthal
May. 11, 2010, 7:18 PM
Kyle Bass, one of the hedge fund managers who made a killing betting against subprime, sent a letter to his investors containing his thoughts on this weekend's big bailout in Europe.
Absolute Return + Alpha has posted a copy of it, and not surprisingly, he's rather concerned about what he sees.
For one thing, he notes the wild amount of moral hazard that's been established.
Beyond that, he's stunned that Germany (Germany!) would make such a concession, and allow other members of the European family to spend recklessly on its dime.
But most importantly, he sees the endgame nearing -- or as he puts it the "Keynesian End," when bailouts just don't work anymore.
We at Hayman believe this theoretical endpoint is reached when debt service exceeds government revenues. Of course, any particular country has certain fixed expenses beyond debt service; therefore, the real endpoint occurs significantly in front of our definition. Outside of Greece and “Club Med” countries, Japan will begin to grace the front pages of newspapers very shortly. Japan has already reached a point where its central government tax revenues are eclipsed by debt service and social security payments alone. Coupled with its debt and demography problems, the world's second largest economy is about to enter a real bond crisis.
Bass' bearishness on Japan is well known. The mortgage on his home is in yen, meaning his home will basically be free when the yen turns to toilet paper.
He goes onto predict another round of competitive devaluations from Tokyo to DC to Brussels.
Meanwhile, his "play" is already going to plan.
We increased our holdings of gold on Monday morning
[snip]
(Excerpt) Read more at businessinsider.com ...
You must break the system before you can rebuild it.
‘I have been predicting this since 1965, when I was twelve years old”
Umm that just seems strange to me. That you knew enough about economics at 12, that you cared at 12, and that you remember it.
Another well said post. Is the position of stalker filled? ;-)
I’ve always been strange.
I read a book by Irwin Schiff, and had a grasp of the fundamentals.
I did not and do not know anything about “finance” or “the market.”
I just know that silver and gold coins are worth more than slugs and pieces of paper.
Correct, and I think the rest of the EU weenies go along with it as they know what happens when Germans put on funny hats and do a little Farfenegueth in their Armored Wagons.. (forgive the misspelling LOL)
bttt
Probably. I sometimes get the sense that somebody is too interested in tracking down the traces I’ve left on the intertubes. I posted on Little Green Footballs a couple of months ago, and four or five people immediately posted quotes of me from several years ago, and I was banned about five minutes later.
They’ve run out of OTHER PEOPLE’S money, TOO.
In some states that’s how you spell the word other: Pronounced “Uh-ver”.
LOL
“I have been predicting this since 1965, when I was twelve years old”
“Umm that just seems strange to me. That you knew enough about economics at 12, that you cared at 12, and that you remember it.”
Seems a bit of a stretch doesn’t it?
I will say when I was around 10 I can remember looking at a 20 bill, and thinking what made money “real” versus fake monopoly money.
I remember thinking what was to stop them from just printing more and more of it.
Here is the thing I think most people are missing when it comes to the inflation / deflation arguement. I know the government is printing massive amounts of currency which should spark inflation, but inflation is not just the amount of currency, but also velocity of that money. People are not really spending their money. Basically monetary and fiscal policy (not including tax cuts) are broke. I am betting on deflation and the old fiat currency system finally crumbling.
It’s just that voodoo that you do so well. . .
I guess I was strange, too. I remember hearing adults using terms like debasement, and had no trouble understanding that money without anything of value behind it, must become worthless. Even a 9-year-old could grasp it. But not the head of the Federal Reserve.
So when this Bass guy increases his holdings of AU, do they have physical Gold locked up in a vault somewhere or is it in paper or mining stocks?
I do know, but AU is energy self sufficent and a net exporter of gas and coal not to mention its resources.
I don't know. I'd guess some sort of certificate.(?)
They have no debt. Ergo, when the system crashes, they won’t be affected.
I just wish we could do the same here in Canada.
Sorry, I should have used the whole word: Aurum.
They will do what we, the USA, did during the 19th Century in Central America.
Land Marines at their ports, who then assess a tariff on incoming goods, payable to Uncle Sam, for payment of their debt.
That is the history of the banana republics, and why the US was resented in Nicaragua.
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