Kyle Bass Again: Japan's Keynesian End Point

[AvidFan]

http://www.cnbc.com/id/15840232/?video=1568296901&play=1

Worth a watch. I posted the "Penny's dropped" thread with him elsewhere.

He's now betting on the demise of the Yen, with an immediate rise in interest rates in the short term.

Oh, and 7 minutes 20 seconds in, they start talking about the global and US economies in general. He says "I don't see how you can be long stocks today"

[The Masked Tulip]

Rise in interest rates where? Japan? How does that help us?

[AvidFan]

Rise in interest rates where? Japan? How does that help us?

Erm... you have a point. I was just peddling doom and gloom. He's a delight, isn't he?

I suppose failure in Japan would mean risk off, locked credit markets and falling asset prices globally again?

[plummet expert]

Erm... you have a point. I was just peddling doom and gloom. He's a delight, isn't he?

I suppose failure in Japan would mean risk off, locked credit markets and falling asset prices globally again?

In fact all of the 'West' is at severe risk of a sudden change from slow recovery mode to downturn mode. I was speaking to a US private banking person I know and he says that most of them think Europe is in a worst state than they are! Their problems are currently more exposed and their property collapse is in full swing, but they view the Euro as a real risk. The USA will recover more easily over the next few years they think, than the much more 'socialist' economies in Europe. There is now further for the Eurozone to fall on the next leg down.

We will see. This will affect us as it will encourage the HPC to take firmer hold this winter. Nothing about this will be pretty, even for those wanting a HPC. On currencies, you can be sure that the dollar will rise quite substantially as there is flight from stocks and assets, before it will later fall back and probably lose its status as the worlds reserve currency. In fact, I suspect the $ has laready begun the process of becoming firmer. Do not mistake that for recovery over there!

[council dweller]

High returns on the Yen (1% is high compared to around 0.2%) should send Japanese cash home and keep a crisis away for 1 or 2 years and the Yen fairly high. Meanwhile, here in the UK the same period looks horrific. I think we're looking at moderately higher interest rates here...high enough to destroy the economy (the housing market!) but not high enough to save the Pound.

Speaking as a Yen bug btw.

[LuckyOne]

Erm... you have a point. I was just peddling doom and gloom. He's a delight, isn't he?

I suppose failure in Japan would mean risk off, locked credit markets and falling asset prices globally again?

A failure in Japan would expose the folly of the Keynesian approach to dealing with the consequences of asset price bubbles.

It would probably cause a fairly rapid and dramatic repricing of assets globally and an adoption of an Austrian approach to dealing with the post bubble world. Austerity and depression always follows asset price bubbles. The Keynesians think that you can finesse the problem and escape the consequences. Japan will probably demonstrate that the Keynesian dream is just a dream.

[AvidFan]

http://www.zerohedge.com/article/must-watch-kyle-bass-interview-there-no-way-i-can-be-long-stocks

this interview was posted on ZH t'other day and there is a second 10 min part well worth watching.

personally loved the bit when he tried to stifle the disbelief when the CNBC permabull declares US public at 53% of GDP.

That video is the same as the link I posted.

Love the way the US always says its national debt is around 53% of GDP.

$4.5T in pension liabilities means they've another 30%+ to add.

They're at 83% easily an they're at 90% by some measures.

There's no way they aren't going over 100%.

C = NG.

That's all I'm saying.

[DabHand]

We will see. This will affect us as it will encourage the HPC to take firmer hold this winter. Nothing about this will be pretty, even for those wanting a HPC. On currencies, you can be sure that the dollar will rise quite substantially as there is flight from stocks and assets, before it will later fall back and probably lose its status as the worlds reserve currency. In fact, I suspect the $ has laready begun the process of becoming firmer. Do not mistake that for recovery over there!

What is the current balance of payments in the US? i.e. dollars out vs dollars into the US, (not necessarily trade balance). Or do you know where l could find this figure?

[AvidFan]

What is the current balance of payments in the US? i.e. dollars out vs dollars into the US, (not necessarily trade balance). Or do you know where l could find this figure?

It's running at about 3% of GDP - or just over. Growth is about the same. Although it could be revised lower.

Hence N, the fraction "national debt divided by GDP" should be 1.0. I.e. 100% of GDP or higher if GDP growth goes under 3%.

If they run bigger deficits and can't "inflate" (grow nominally) at the same % rate, the debt's going higher.

Peak oil would do it, given that demand for finished goods has fallen off a cliff.

5% structural deficit + 5% energy deficit with Saudi Arabia means inflation/growth of 10%. Hence the prediction of an inflationary depression.

Works for me.

Edited August 23, 2010 by AvidFan

[DabHand]

It's running at about 3% of GDP - or just over. Growth is about the same. Although it could be revised lower.

Hence N, the fraction "national debt divided by GDP" should be 1.0. I.e. 100% of GDP or higher if GDP growth goes under 3%.

If they run bigger deficits and can't "inflate" (grow nominally) at the same % rate, the debt's going higher.

Peak oil would do it, given that demand for finished goods has fallen off a cliff.

5% structural deficit + 5% energy deficit with Saudi Arabia means inflation/growth of 10%. Hence the prediction of an inflationary depression.

Works for me.

I am currently reading the "Dying of Money" which l can't recommend enough. It should be compulsory reading for all wondering about inflation, deflation, and the more esoteric aspects of what money is.

Its free as a PDF, and was originally linked by a poster on ZH.

http://esocap.com/uploads/files/Dying%20of%20Money.pdf

I'm half way through it atm, and will certainly start a new thread on it when l finish.

Anyway, one point l have read, is that when a countries balance of payments reverses into a surplus against all immediate logic, we are seeing the repatriation of foreign held monies seeking surer assets and is a neon warning sign that a currencies end game is nigh.

[AvidFan]

Anyway, one point l have read, is that when a countries balance of payments reverses into a surplus against all immediate logic, we are seeing the repatriation of foreign held monies seeking surer assets and is a neon warning sign that a currencies end game is nigh.

Interesting, because BoP being mostly made up of trade and service balances to me just means the country has stopped consuming and still has something to sell to other countries doing better.

We always run BoP positive balances for a quarter or two at the bottom of a recession. Look at the 80s and 90s. In the 90s at least, sterling didn't "fail". It entered and exited the recession at the same trade-weighted levels.

But I've heard the opinion that BoP positive means its over. I think they mean "long running" positive BoP, like Japan.

[AvidFan]

without wishing to start a flame war with you old friedn,the link you psoted has one 8-45 long clip,the other part of the interview is 10-25 long and was up first(my fault sorry),try as I might I can't find the first bit of the interview on your link.

apologies if I'm being really dumb but people are missing something special in the first bit as well.Kyle bass interviews well.

Sorry - I'll check. Did the search for him myself and found the zero hedge link - but heard some of the same points in both and realied it was the same content - although obviously now I realise with abot 2 minutes edited out of it...

Edited: The first part is my other link - "Penny drops..." posted on the main forum and still on the first page just about AFAIK. I agree the first video is even more interesting than this one.

Edited August 23, 2010 by AvidFan

[DabHand]

But I've heard the opinion that BoP positive means its over. I think they mean "long running" positive BoP, like Japan.

Check out Jesse:

http://jessescrossroadscafe.blogspot.com/2010/08/us-money-supply-figures-dude-wheres-my.html

[JustYield]

Has sentiment on Japan ever been this negative?

Just asking.

[Georgia O'Keeffe]

Has sentiment on Japan ever been this negative?

Just asking.

i doubt they were too smiley after Hiroshima

[JustYield]

i doubt they were too smiley after Hiroshima

And then what happened? (After Nagasaki, of course.)