"Detonating The Japanese Debt Time Bomb" With Kyle Bass

Tyler Durden's picture

The hyper-correlation of Japanese stocks and the JPY have led many to believe that Abe's miracle promise will be just the ticket to bring the nation's two-decade slump to an end - a 2% inflation target is all you need. However, in a brief CNBC interview, Kyle Bass explains that not only are 99.9% of people wrong about the crisis (explaining the critical aspect of the abrupt turn of twenty years of the 'procylicality of thought' - that deflation is the norm), but Abe's actions have actually brought forward the date of the "detonation of Japan's Debt Time Bomb.

It is the Japanese institutions that own JGBs and they own them at meager rates of interest simply because of the ingrained belief in deflation; when the government begins to target 2% inflation, the swing in forward expectations (he notes to monitor inflation swap breakevens) will be the trigger for Japan's implosion. Bass warns that "Japanese debt is around 24x central government tax revenue and when you sail into the zone of insolvency, nothing you can do will help," though he realizes that calling the end of the 70-year debt super-cyle to a specific date is naive, he does expect the 'bomb' to explode within 18 month to two years.

All of the components for this [bomb] to go off 'all of a sudden' are in place. The clock has started on the qualitative shift in participants' minds that the situation is untenable as the realization that Japan spends 25% of revenue on interest now - and with higher rates (via this supposed inflation) the entire situation becomes farcical as every 1% rise in their cost of capital (or rates) costs them another 25% of revenue!.


On JPY devaluation - The signs are already there that elites are exiting the JPY - with recent M&A transactions - he warns. 20% of exports go to China; this could be halved given the tensions, and a JPY devaluation is not going to restore the competitiveness of that secular decline.

On Japanese stocks - The people buying Japanese stocks, are picking up dimes in front of a bulldozer.

Bass goes on to discuss the US Housing stabilization, European stress, and China's economic opacity.


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Silver Bug's picture

The Japenese debt bomb will explode on its own. As will all western debt bombs. It is only a matter of time.



Half_A_Billion_Hollow_Points's picture

Time for hyperinflation and war, gangnam style

Pinto Currency's picture


There's a worldwide debt bomb in place.

BKbroiler's picture

Japan is not Greece, we are not japan, so on and so forth.  Here's an easier way to look at it:


Ever since the Lochness monster decided that economic cycles are bad things to be avoided via interest rate manipulation, we haven't had necessary deflations, just like japan hasn't for following our model.  What color do you guess is next on the chart?

secret_sam's picture

Trying to see how high a junk-count you can pull?  I'd call for deflation too if I didn't think WWIII is going to be chosen as the less painful option.

BKbroiler's picture

oh yeah, cuz I'm so loved here as it is.  After the mother of all inflation we will get the opposite.  You can delay a cycle, not prevent it.

EnslavethechildrenforBen's picture

All the governments have magic checkbooks. They all already bought everything worth buying. Now if you want to buy it back it will cost you more than you can afford, because you will never be able to work enough hours to make your checkbook worth more than a loaf of bread. Game over. Go back to sucking your mommys tit. We only outnumber them 100 to 1. We could never defeat them.

Dr. Engali's picture

If only we outnumbered them one hundred to one, but 51% of the people love government and the "free" stuff they offer.

SGS's picture

If kyle was gay, and if I were gay, I'd bang his frontal lobes.

Carp Flounderson's picture

I can't wait until this guy loses all his (aka other people's) money, so we don't have to hear his foolish rants anymore.

strannick's picture

''When the swap curve indicates inflation'', bitchez

Jendrzejczyk's picture

".... not for CNBC audience"




GetZeeGold's picture




I've learned everything I know from the MSM......equities good.....guns bad.


To infinity.....and beyond!!!

Popo's picture

Bass is 100% right on Japan, but frankly his housing call is way off base.   His general thesis of 6.5 years from peak-to-trough in a housing cycle is accurate, but his statement that this cycle is always 6.5 years regardless of Federal Reserve actions is silly.  The down-cycle has been extended, but not mitigated. 

For Bass to make this statement is to make the claim that central banks *do* in fact reduce collapses and not simply postpone them -- and ultimately Bass IMHO inadvertently justifies CB stimulus.

I give him an "A" on his Japan thesis, but unless there's much more to his housing thesis than cycicality then he certainly hasn't convinced me.  And it's important to note that Bass has whiffed quite a few times since '08. 

I just wish timing the Japan collapse was easier done that said.  There are a whole lot of widow-maker trades in that department...

francis_sawyer's picture

 "For Bass to make this statement is to make the claim that central banks *do* in fact reduce collapses and not simply postpone them -- and ultimately Bass IMHO inadvertently justifies CB stimulus"


Ummm ~ Why don't we simply say that CB's "cause" collapses... Fucking with a free market so that a few can siphon off profits for themselves eventually CAUSES a collapse... PERIOD... They do this purposefully & at their own whim based on other macro & socioeconomic situations which are either already in place, or come to be on their own...

Even before the Fed, the 'crises' occurred when the money supply was jockeyed around with [mostly on purpose]... Before the Fed, these games were played in order to get people to believe that a SYSTEM was needed to be put in place to avoid these things [which were engineered in the first place]... 1907 comes to mind, as well as the the War of 1812, & the Coinage Act of 1873... There are many others & they pre-date even the United States...

Classic Hegelian dialectic...

FEDbuster's picture

Kyle has plenty of nickles, gold and guns for the coming black swan events.  His mortgage play may be a little counter intuitive, but as I understand it, he thinks the yield curve will flatten and his MBS will rise in value due to tighter spreads.  Japan is just a matter of time, patience. 

RebelDevil's picture

Regarding the timing: I first heard about Japan being the trigger of the grand hyper-flationary collaspe from Max Keiser. His prediction - Japan will be the first of the G7 nations to dive into hyperinflation. There is a 99.9% chance this will happen BY April 2013. (He expicitly said this in an interview on Alex Jones' radio show, which is posted on YouTube as the Dec. 4th show. He also repeats this on the Keiser Report and on his site.) 

He seems confident. Lets just hope he's wrong, because if he is right, then we are almost at the 3 month countdown!

mkkby's picture

Don't worry, silly boy.  It won't happen in 2013.  Probably not 2023 either. 

Europe goes first, and the bankers have drug Greece out since 2008.  They still have to play out Spain, Italy, France and the southern countries.  At least a decade, probably 2.

prains's picture

Carp your dick is so lodged into your left ear you can piss out the right


good luck with that

GetZeeGold's picture



+1 for the visual.

CPL's picture



Guy forgets to put one in the chamber before whacking a Bulgarian politico publically on stage.


BREIVIK Execution style not.

GetZeeGold's picture




...leader of Bulgaria’s Movement for Rights and Freedoms


Obviously rights and freedoms is frowned on over there.

CPL's picture

Someone took it down on copyright claims.  lol

CPL's picture

It was too weird to pass up.


Guy runs up to one of the leadership and forgot to put a round in the chamber.  The look on both of their faces is completely priceless, then the old man gunning him with the boots after is funny ass shit.

nmewn's picture

lol...well, they certainly do have "interesting ideas" of restraining & arresting over there ;-)

CPL's picture

The old man and the cane....lol  Like a tiger.

nmewn's picture

lol...just saw that...hold him for me!!!

Svendblaaskaeg's picture

Gun Safety Rule 2. fail

2. Assume That Any Gun, at Any Time, is Loaded


"I did not fail to load that gun all by myself, There was a great teacher somewhere in my life. Somebody helped me fail to load that gun"




fonestar's picture

Gun Safety Rule 3.  Do not go in the woods with Dick Cheney.

fonestar's picture

Spoken like a true 2005 bubble-buyer.

SafelyGraze's picture


Report: Ronaiah Tuiasosopo confessed hoax to friend

Ronaiah Tuiasosopo, the California man suspected of being behind the Manti Te'o "girlfriend hoax". The elaborate, cruel hoax led Te'o to believe he was in love with a woman named Lennay Kekua, who then supposedly died of leukemia, leaving Te'o grief-stricken.

Tulasosopo has a long history of staging hoaxes. "I made people think that you still own stuff after you lend it to someone who sold it. Crazy! I also told people that a promise-to-give-you-something is just as good as the actual something. And they believed it!" 

Experienced reporters tiptoed to the edge of the truth and didn't quite believe where their reporting took them. The story was too important to let the absence of verifying facts get in the way. Just like fans in the stands, the reporters wanted the story to be true.

GetZeeGold's picture



Thank goodness we have a solid media.

Dr. Engali's picture

Nobody said anything about giving up. I'm just stating the reality of the situation, that the majority of the people are plugged into and will defend the system.

JeffB's picture

Yeah, I know.

I was being a little facetious, and yet I am hoping that at some point we'll have the perfect storm of circumstances such that the people will wake up enmasse and listen to a real leader with some sense, sooner rather than later.

We have some of those leaders, believe it or not.

Unfortunately, it appears that we may not get a critical mass until far more damage has been done.


Dr. Engali's picture

Personally I think they came close to losing control, and people might have galvinated, but now this thing has drug out for so long that they have successfully divided us again. If you ask me I'd say they are angling to push us towards a civil war so we kill each other off then they can re-establish order.
There is a reason that they are branding Obama as the new Lincoln.

Diogenes's picture

Lincoln ha, more like the new Ford. Hope he doesn't turn into the new Edsel.

NoDebt's picture

Well, we all knew that the Fed's ad-hoc response to the '08-09 crisis was of the "extend and pretend" variety.  Somehow, magically, valuations would rise again and make all that worthless paper worth full-face again.  Almost laughable at the time, right?

Well, looks like they succeeded.  Not without a few "minor" unintended consequences along the way, of course.  Once again, a "temporary" program becomes more permanent than 50 year old concrete.

Welcome to Japan, everyone.  We're following the script to the letter, we're just an act or two behind.  If you're waiting for some quick resolution to this I think you'll be very disappointed.

GetZeeGold's picture



Obama might be the new sheriff.....but he sure as hell ain't no Abe Lincoln.


Bush was polling better for the love of Pete.


francis_sawyer's picture

 "Personally I think they came close to losing control"


You give 'THEM' too much credit for having any control in the first place...

Wanna talk about 'CONTROL' [& how much of it these 'Masters of the Universe' have]?... OK ~ perfect ~ I'll play...

Miss about 2 EBT card 're-ups' & we'll see how much CONTROL you have over anything...

samcontrol's picture

personally dr , i think you are full of it with your 8ball.

Shell Game's picture

Yes?  What do your instincts tell you?

Calmyourself's picture

In between jabs at the GW religionists I have been saying the same for 2 years and 24 weeks.  If you or I had the switch for say hyperinflation, the word to collapse the confidence in the reserve currency would we say it?  Knowing the hell to be unleashed could you look at the swollen bellied children and remind yourself it was for the greater good?  No, me either, which is what it means to have everyone spiritually invested in the ponzi, think on that long and hard.

We are all plugged into supply chains which for our intents and purposes is the system, we all protect it every day and will continue to do so becasue who doesn't wish for a happy ending?  This is what  the PTB know and count on; most men don't want the world to burn.

secret_sam's picture

      We are all plugged into supply chains which for our intents and purposes is the system,...

It's hard to figure how those supply chains justify TARP, a trillion dollar Federal deficit, "targeted inflation," and the current banker salaries, tho.

Everyone wants a paycheck.  The rot runs deep.  It's just what you do for a living, right?

Make your own excuses and realize they don't apply to *everyone.*

tango's picture

You have to understand that the vast majority of those twits salivating over finanial ruin are clueless as to what will really happen. It will not be survivalist fun.  When credit disappears we face utter poverty, starvation (particularly in areas depending on daily deliveries) and almost certainly, tremendous social unrest as suddenly all those checks from the government cannot buy anything. 

And yet I see no way out.  Producers are giving up or opting out, zombies seem to multiply like rabbits and our "leaders" seem blind, deaf and dumb.  It's like being on an island in a rising flood and going about your activies as the water slowly rises. 

Doña K's picture

I am reading the comments in detail and the past several days it seems to me that there are way too many down arrows for established Zerohedgers. I am convinced there is a concerted affort by (???) to infuence thought.

Does anyone else feel that way? 

akak's picture

I have noticed that same thing too Dona, and what I have noticed more specifically is certain intelligent, reasonable but very anti-establishment comments almost immediately receiving multiple downarrows within a very short time after being posted.  I suspect malicious trolls with multiple sockpuppet handles being responsible for this.

Gazooks's picture

when markets or opinion overburden to one side, not a good thing, here/anywhere


problem is, that's exactly what's happened w/monetary authority in the modern era


it's different this time until it, suddenly, just isn't


bring the malicious mf trolls