I'm writing this with my bad hand, still bandaged from my surgery last week, but I can't help it, because I just had to chime in on Kyle Bass's latest, hysterically comical missive, in which he opines on what the next big crisis is going to be. And of course he doesn't dissapoint, for being the broken clock that he is, he's once again warning the world (or whoever is foolish enough to listen) that Japan is about to collapse under the weight of its unsustainable fiscal deficit.
Reading this, I can barely hold myself back from choking with laughter; the only thing keeping me from doing just that is the supreme awesomness I feel towards this guy whenever I think about how he gets people to give him their money. Talk about genius. But I digress...
Bass seems baffled by the market's seemingly low probability assessment of the likelihood (no...certainty) of a Japan default. Well, let's just call it market, smart, Bass, not. That's because Bass's big idea is the same stale, misinformed, ignorant, idea that has taken out so many other (ehem) "very smart people" in the past. In fact this is a trade that is so deadly that it has even been accorded its very own well-deserved nickname--The Widowmaker--due to the fact that it made financial "widows" out of the spouses of those who attempted to short JGBs for that very same reason that Bass wants to short them--on the false belief that Japan's debt was "unsustaiable."
Here's a sample of some of Bass's brilliance:
| Japan has no chance of ever paying off its debts, Bass said. “When your debts are 24 times your central government tax revenue, you are finished,” he said. “It is just a question of what sets it off.” |
Ummm...where do the Japanese people get the yen to pay those taxes, Kyle?
Poor Kylie-boy. Playing the Boy Who Cried Wolf over and over again must get so tiring. He must be having a hard time rationalizing his vast intellect with the fact that his call has been so wrong for so long. I guess he never played Monopoly as a child. How in the world did Parker Bros. figure out a way for the game to keep issuing money without hyperinflating or imploding under the crushing weight of its massive debt? And to think Boardwalk still cost $400 even after all that money printing!
Sigh...If only Kyle studied some MMT. Oh, but wait...he did! And he concluded that MMT's claim, that currency issuing nations can't face solvency issues, is a fallacy. He says that they are dependent on credit markets. Well, Kyle maybe you could point to an example of that, 'cause we haven't seen any so far. Or, maybe you could explain how Japan's debt went from 62 trillion yen in 1990 to 750 trillion yen today and the yield on JGBs went from 8% to 0.73%? Seems to me that if it were going to blow up, default, hyperinflate, whatever, it would have done so by now. If nothing else we should have seen some sign--SOMETHING--that things were not right. How about rates creeping up a bit, like, say, to 1.0%??? Or what about some inflation as opposed to the deep and pervasive deflation that Japan's monetary authorities have long acknowledged? The very deflation they've been trying to eradicate with all this "money printing?"
While you're at it, Kyle, could you also explain how America's national debt went from $800 bln in 1980 to $16 trillion today at the same time that rates went from 21% to zero? It's equally important because you say the United States is facing the same crisis unless we "embrace austerity" (his words).
More "Kyle-isms:"
| For the US, Bass said that QE1 was a “desperate need for countercyclical spending,” and QE2 was another “anomalous one-time emergency printing.” |
With that comment Bass confuses Federal Reserve monetary operations with Federal Gov't spending. And it goes on and on and on.
Bass's brain is so loaded with myth that I'm amazed at how he keeps his head from falling below his ass because that's where it belongs. This guy is a symbol of how dumb and irrelevant much of the financial sector has become. It adds nothing of value to society to have clowns like this running money. Even worse, it's destructive, 'cause he's probably playing with somebody's retirement money.
If we are stupid enough as a nation to allow this actvity then at least perform a civic duty by betting against this guy. If we can hasten the market's ability to put this guy out of business than we've done a great service to our country. I'm only sad for those folks whose pension funds have to be wiped out, but I am reminded that sacrifice is always a requisite to a greater cause.
