Most of the public has not taken the time to become informed at the sorry state of this current scam being ran by all the insiders. The MSM and business press would make PRAVDA from Stalin’s days proud by the level of disinformation and rainbows, unicorns, and sunshine they pump out 24/7 to the masses.
None of this matters of course. Kyle Bass refers to this stage as the Keynesian endpoint for the world super debt cycle begun by recovering from WW II. It is a giant vacuum cleaner sucking trillion after trillion down it at zero percent as the world debt is 3.5 times larger than the world GDP. Over leveraged and trapped, the masters of the universe keep playing musical chairs because they have no other choice. Over time one chair after another will be removed until the game is over. Greece bond holders lost 90 cents on the dollar and they will lose more because Greece is still broke. No one can stomach the solution so they cling to the hope that another bubble can be created to postpone the mathematical end game of exponential debt growth.
One thing we know from history, is that in the end, what goes up will come down. The final economic reset will reshape the world. Who owes who what will no longer matter. Some think this is a precursor to global government, some think this will lead to every man, corporation, and country looking out for itself.
Kyle Bass is a good analyst but conflicted in how to make the play in observance of his fiduciary duty against what he lectures others about.
He correctly infers this ends in a world war because of sovereign debt ratios to GDP causing societal entropy or disorganization, meaning a huge swath of people unable to meet basic needs and a government that has printed their currency to the point that payments for servicing sovereign debt exceed government revenues.
Kyle says Japan is the one to watch and I agree. If interest rates move 2 or 3 hundred basis points up, then Japan is finished. All of their revenue will be needed to service their debt. If they default and they will, then creditor nations will be faced with the question of do they allow their own government and banking to collapse at the expense of the Japan default without Japan restructuring (coming up with assets to liquidate to keep all governments afloat).
This structural conflict will of necessity result in armed conflict as creditors attempt to seize Japanese assets in order to survive themselves. And as Kyle points out Japan is xenophobic with less than 3% of its population Japanese. This means with certainty that as a scapegoat is sought, the Japanese people will and must become militant to survive and protect what they have to survive.
And there are many others besides Japan that are in the same situation.
And Kyle is correct in calling out that governments will devalue even as they say until the last minute that they will never devalue their currency. He has plenty of historical examples of presidents and prime ministers saying there will be no devaluation and then the next day there is a devaluation. As soon as there is a default or a devaluation (the latter occurs first or follows the former), then their currency is finished and inflation runs out of control.
Where Kyle is conflicted stems from where he made his fortune which is in sun-prime RMBS. He is conflicted because his firm manages a lot of non-agency RMBS and he is recommending clients and investors to move into non-agency RMBS.
The bottom-line is nobody knows yet where to make money as currencies race to the bottom.