Kyle Bass again. You know, Mr. Japanese debt crisis.
These media outlets keep parading this guy around never once asking him about his ridiculous predictions of a Japanese debt crisis, which never happened. Japan's rates are negative, the yen is near parity with the dollar. The entire yen's decline has been reversed and investors are literally paying the government of Japan to hold its paper.
Now he says he met with a very well known central banker. Said it was like an out of body experience. Bizarre characterization, but the guy is weird. He doesn’t Says the central banker told him something that would never be admitted in public: that quantitative easing only works if you're the only one doing it.
Now I don't who is stupider, Bass or the central banker.
Only works if you are the only one doing it? Work in what way? Well, we know that it doesn't work in the way central banks think it works, i.e. as "stimulus." It's an asset swap so it does not change the net financial position of the public. Well, actually, it does because ZIRP and NIRP remove income so it's like a tax and therefore deflationary. It hurts income and by corollary, the economy.
Secondly, if the central banker means that QE is intended to drive down the exchange value of the currency and if everyone else is doing it then your currency really doesn't see any downward adjustment, then he or she is wrong there, too. Since it acts to remove income it is deflationary and therefore supports currency exchange rates, it doesn't devalue them.
Fiscal expansion can adjust the currency's exchange rate lower, but not rate cuts or ZIRP or NIRP. Bass doesn't know this nor does the banker.
He goes on to talk about "Helicopter Money,"saying central banks have no choice. Yet central banks CAN"T do helicopter money. That is fiscal policy and we're already doing it. It's called deficit spending.
Finally, Bass's new prediction is a China crisis. He says that there will be a crash greater than 2008. Well, China didn't crash much in 2008 because it did a stimulus that was 15% of GDP. It rebounded so fast and so hard that they had to cut back.
Meanwhile, right now, China is deficit spending at the fastest rate in six years. That means no crash. that means Bass is still a total moron.
