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 ...
I had heard he did that. LOL.
It’s too bad the morons in this country have decided to go down the same path the Europeans took. Even as we watch them go over the cliff, we skip merrily along behind them.
But brass and lead.
This is how wars start.
The money is running out.
Nothing left to loot.
Jesse's Cafe Americain
May. 11, 2010, 5:35 PM
The return on each new dollar of US debt is plummeting to new lows according to figures from the Federal Reserve.
The chart below is from the essay, Not Just Another Greek Tragedy by Cornerstone.
I have been watching this chart for the past ten years, as part of the dynamic of the sustainability of the bond and the dollar as the limiting factor on the Fed's ability to expand the money supply.
The ability to expand debt is contingent on the ability to service debt. If the cost of the debt rises over the net income of the country's capital investment, or even gets close to it, the currency issuing entity is trapped in a debt spiral to default without a radical reform.
In other words, if each new dollar of debt costs ten percent in interest, largely paid to external entities, and it generates less than ten cents in domestic product, it is a difficult task to grow your way out of that debt without a default or dramatic restructuring.
[snip]
John Maynard Keynes was from the UK. The UK is going to drag us down into the abyss of destruction one way or another.
We’re pushing rope now
Obama urged Merkel to go along with the bail out. He knew that if Europe went down the drain that he would also. We already bailed out the European banks with Tarp money via AIG..now we are sending more via the IMF. The game is over for socialist Keynesian methods. They have run out of over peoples money.
Yes, thats the plan.
Now ask yourself what they do then.
They blame it on capitalism and the “markets”.
This must be where the People’s States of “Atlas Shrugged” came to be.
They've run out of other peoples money to. ;)
Stock-Markets / Stock Markets 2010
May 11, 2010 - 01:04 PM
By: PhilStockWorld
Does anything about this ride feel familiar? Oh yes, that’s right - good old 2008, when the "minor correction" of 2007 was behind us and the Dow rallied back from 11,500 to 13,200 based on stimulus packages, fake economic data and even faker earnings reports where banks, builders, automakers and retailers all lied, lied and lied (or perhaps they were just totally, densely ignorant) about their outlook and their operations and CNBC et al lied to investors and told them to BUYBUYBUY while the smart funds were SELLSELLSELLing as fast as they could.
[snip]
It coming much sooner that people realize.
Those owning gold and silver will be the only ones left stnading in a few years. Very sad
And it will become much worse as the annual interest expense on the federal debt mushrooms with Obama’s trillion plus deficits being added to the national debt. More and more of the new borrowing and government revenues will used to simply pay annual interest on the debt.
Less and less of the debt increase will support any sort of efficient economic activity.
It’s people’s, you dunce, not peoples. Correct somebody else’s post CORRECTLY.
It was only a month or so ago when most liberals thought that Europe was doing swimmingly. I kid you not, I drew blank stares when I would mention to friends, family, or acquaintances that there were debt problems that superseded ability to pay. It was breaking news to them. Some of them had been tourists and were sucked in by the orderliness and great train service. And, of course, health care and the benefits packages. They REALLY thought that Europeans were more advanced, rational, and had whipped past socialist failures once and for all.
Needless to say, the past month has been shocking and very upsetting. Except to me, because I got to gloat.
Germany went along with the bailout because the EU is a vehicle for Germany to control Europe via economics (instead of panzers). PM Merkel had to make a decision. If she does not help EU bailout Greece, EU (especially the Eurozone) will cease to exist as individual countries will convert back to their own currencies instead of relying on the ECB. Germany will lose their ability to control Europe. No German leader will relinquish such power.
I have been predicting this since 1965, when I was twelve years old, and they took the silver out of the coins. The closing of the gold window in 1971 just made it more certain.
Anyone with a grasp of what money really is has known this would happen ever since then. It was just a matter of time.
The printing presses will be run faster and faster and faster and faster and faster. There will be one final flurry of absolutely worthless paper (worthless except for burning in barrels for warmth under the underpass) and it will be all over.
We can start with a new monetary system on the Monday morning after. A monetary system based on the gold and silver that smart people hoarded.
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