Posted on 12/01/2011 8:22:21 AM PST by blam
CHART OF THE DAY: KYLE BASS: This Is What The End Of The Global Debt Super-Cycle Looks Like
Joe Weisenthal
Dec. 1, 2011, 10:39 AM
In his latest investor letter (via Gurufocus), Kyle Bass lays out his case that a wave of hard defaults is coming.
His basic argument: The world is just saddled with too much debt.
Throughout history, he says, total debt-to-GDP only ever breached 200% when nations were spending on war. Today we're at 310%.
Says Bass: "There is no savior large enough with a magical pool of capital to stafe off this unfortunate conclusion to the global debt super cycle. We think hard defaults are imminent."
(Excerpt) Read more at businessinsider.com ...
Ludwig von Mises could have told anyone this a long time ago, but none of the geniuses who learn economics at Harvard and Yale nowadays want to listen to anything he said.
Didn’t he star in “The Pick Of Destiny” (one of my favorite rock n roll movies after “This Is Spinal Tap” and “The Wall”) with Jack Black?
LLS
That’s Kyle Gass.
Ahhhhh. I miss the rock n roll history museum up there in Sacramento. Thanks for clearing that up.
Ohm, look, mushrooms. I want to be a Sasquatch too.
I suppose I should check my portfolio again too...
LLS
Wanna read a jaw-dropping stat that make you poop twinkies?
Uganda’s debt to GDP ration is 30.3%. In fairness, it has grown by 10% since 2007, but I’ve read the government is taking measures to bring it under control. I selected Uganda because one of my current students is from Kampala; I’m helping her in brushing up her English (she’s an online student, btw), and she’s an economist by training.
What’s ours these days? 100%, if I’m not mistaken?
Yeah, that’s right folks. Economically speaking, Uganda....yes, that Uganda, the land of Idi Amin Dada, is actually on sounder financial footing then the USA (and a good many parts of the EU as well).
I forgot who it was who said it, but wasn’t there a former US Representative that used to say, “Beam me up!” ?
Yeah. Beam me up. Please.
And here’s the link to the stats I cited:
http://www.gfmag.com/gdp-data-country-reports/155-uganda-gdp-country-report.html#axzz1fIp5Oezy
Well first things first, food and energy. We need to be self reliant on food and energy the rest can wait. Oh and control of our borders is a must.
Would you rather have 100% debt to GDP that costs you 2% in interest, or 30% debt to GDP that costs 11% in interest?
In terms of cash cost of debt service, the US pays out proportionally two-thirds of what Uganda is paying out.
Uganda is functionally more indebted than the US - certainly not on a sounder footing.
Where Bass, Denninger, Mish and a host of others get it wrong is not correctly identifying the sequential doubling periods (ie the last one is @ 11:59, not 6:00). Sure, they go on about exponents & math, but they never seem to realize that if the end-game is obvious once a credit cycle has started, why isn't the end-game obvious when it started?
I believe the end-game is very well known from the very beginning. It's not difficult to understand the progression, therefore the outcome is easily modeled from the git-go.
So then the question becomes: why? In, why was a debt-money system that was designed to fail adopted by the USA? That's a question no one seems to want to explore.
Not sure why this is relevant.
What we need to do is cut spending - reduce our indebtedness back to an acceptable level.
We are already self-reliant on food - while quite a bit of our produce is imported, our domestic grain, meat and dairy production provides probably 90% or more of the calories we consume.
We import some of our energy from abroad because it is cheaper that producing it here due to regulatory and labor costs. Cut government overhead and our domestic energy contribution grows automatically.
While government money is indeed spent on illegal immigration, that number pales in comparison to Medicare fraud, to cite one example.
Illegal immigration is, in terms of public finances, one of the least of our problems.
If we were to embark on a program of compulsory autarky in food and energy, our public indebtedness would go up, not down - and it would go up by much more than the savings realized on more aggressive border enforcement (which we do need).
No.
Too soon. Not NEARLY enough suffering to permit doing what must be done.
Why? Because politicians back in 1913 were clueless? Anyone with an IQ above 100 can readily understand compound growth. The guaranteed failure of debt-money can be (and is) easily modeled. So why was it not only embraced, but made sacrosanct via legal tender laws?
The Fed has "lent" 7.77 Trillion to various global entities. Where did that money come from? That is 2x the entire Chinese enconomy. The Fed has that much capital available to loan???.
HardTalk & Kyle Bass 1 of 2 on The Global Economy & Finance Situation - BBC Interview
The whole interview is golden.
It was your comment about rebuilding now that got my attention.
Having just finished the book, “One Second After”, about an EMP strike, now I’m concerned about more than just the dollar, which I will agree is done for.
I seem to be genetically predisposed to believe that I should grab all of the toothpaste on the rack in case it is not there the next time I come by.
However, no one listens to me now. As a serious prepper for Y2k, my credibility is pretty much shot as far as giving anyone advice on the future.
I visited my daughter in Atlanta over Thanksgiving and looked in her pantry. She has two small children and going to the grocery store is entertainment. I counted 7 cans total and no dried staples.
Her eyes glazed over when I said something about her putting in some non-perishable items and water. Being surrounded by 3 million people who might compete with her for food, water, etc. does not bother her.
I will have plenty, but I doubt that her family could get to me if anything major happens.
I get a lot of things right, but I always underestimate how hard people will work to keep things the way they are, to maintain the “status quo”. If that means ignoring potential trouble, they will do it. I don’t know how to wake them up.
Great.
Please post a testable model for us.
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