Thursday, April 04, 2013

Kyle Bass – Japan Risks Losing Control of Interest Rates by Pushing for Inflation

Bass Kyle small facing rightAre we near a Keynesian endpoint, just an ordinary full scale trade war? 

Hayman Capital’s Kyle Bass checked in with CNBC’s David Faber today, Thursday, on the surprise announcement by the Bank of Japan that they intend to double the monetary base in two years and suspend the “Banknote Rule” for Japanese Government Bond issuance. 

Bass, who has been warning that Japan has “already sailed into the zone of insolvency” and has reportedly been positioning a portion of his firm’s hedges in order to profit from it, says he doubts that Japan will be able to keep interest rates under control as they implement the massive bond buying and other measures intended to arrest deflation and force inflation announced last night.

“What they're trying to do is materially devalue the currency in order to become slightly more trade competitive while attempting to hold their rates marketplace flat,” Bass said.  “The economists and central bankers believe they can live in that nirvana, and I believe that is not the case. I think they will end up losing control of (interest) rates,” he added.  (More, video below.)

In a presentation at the University of Chicago Booth School of Business previously,  responding to a question as to how a retail investor might profit from a coming restructuring of Japanese debt in the future if their actions do spiral out of control, Bass replied:  “Sell yen, buy gold and go to sleep.”  Meaning short the yen currency and buy gold to effect a long gold trade in yen terms - a trade similar to one put on late last year by newsletter writer Dennis Gartman. 

The too brief interview of Bass below is worthy of sharing.

GGR Comment:  Some observers are calling the move by Japan “bold” and “courageous,” but we at Got Gold Report have to wonder if it signals an irreversible escalation in a now raging global currency war.  If so, then productive and hard assets will soon see mirror images of their weak chart signatures of late. 

The world has never seen such a pace of money printing by so many governments as we have underway today.  

Source: CNBC


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Trading gold, silver and mining shares since 1980 with a focus on taking advantage of volatility extremes, Gene Arensberg analyses the markets through a basket of technical and fundamental indicators and shares his findings from time to time here at Got Gold Report. Mr. Arensberg has been quoted in the Wall Street Journal, Dow Jones MarketWatch, USA Today and dozens of other news organizations.

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