Kyle Bass: "Japan Will Implode Under Weight Of Their Debt"

Tyler Durden's picture


As the fast-money flabber-mouths stare admiringly at the rise in nominal prices of Japanese (and the rest of the world ex-China) stock prices amid soaring sales of wheelbarrows following Kuroda's 'shock-and-awe' last night, it is Kyle Bass who brings these surrealists back to earth with some cold-hard-facting. Out of the gate Bass explains the massive significance of what the Japanese are embarking on, "they are essentially doubling the monetary base by the end of 2104."

It is a "Giant Experiment," he warns, but when you are backed into a corner and your debts are north of 20 times your government tax revenue, "you're already insolvent." Simply put, Bass says they have to do something and they have to something big because they are "about to implode under the weight of their debt." For a sense of the scale of the BoJ's 'experimentation', Bass sums it up perfectly (and concerningly), "the BoJ is monetizing at a rate around 75% of the Fed on an economy that is one-third the size of the US!"

What they are trying to do is devalue the currency to attempt to become more competitive while holding their rates market flat - the economic zealots running the world's central banks believe they can live in that Nirvana - and Bass believes that is not the case, as they will lose control of rates, since leaving the zone of insolvency is impossible now. His advice, "if you're Japanese, spend! or take it out of your country. If you're not, borrow in JPY and invest in productive assets." Do not be long JPY or Japanese assets as he concludes with the reality of Japan's "hollowed out" manufacturing industry and why USDJPY is less important that KRWJPY.



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Thu, 04/04/2013 - 18:44 | 3410177 FoolsAdvice
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Thu, 04/04/2013 - 18:50 | 3410204 ghandi
ghandi's picture

Speaking of heart:


now most Americans want weed legal!

Thu, 04/04/2013 - 19:09 | 3410245 DJ Happy Ending
DJ Happy Ending's picture

Any suggestions on how a normal working person in the US can borrow in JPY?

Thu, 04/04/2013 - 19:15 | 3410271 prains
prains's picture

reach over with extra long chopsticks while they're not looking

Thu, 04/04/2013 - 19:17 | 3410278 ghandi
ghandi's picture

Look past the Potemkin village erected by central banks.


Thu, 04/04/2013 - 23:02 | 3410948 jeff montanye
jeff montanye's picture

the date in dark in the post should be 2014 not 2104, right?

Fri, 04/05/2013 - 05:25 | 3411493 debtor of last ...
debtor of last resort's picture

No, no, 2013.

Fri, 04/05/2013 - 05:36 | 3411501 Boris Alatovkrap
Boris Alatovkrap's picture

Japan or Amerika - Boris cannot is decide more scary... When Central Bankster is only hammer, everything is look like nail.

Thu, 04/04/2013 - 20:20 | 3410434 smlbizman
smlbizman's picture

can we add a new one to the the list.....fuck you faber...asshole

Thu, 04/04/2013 - 19:33 | 3410316 El Oregonian
El Oregonian's picture

First you want to secure a wheelbarrow, you'll need one soon in order to transact business...

Thu, 04/04/2013 - 20:18 | 3410435 Papasmurf
Papasmurf's picture

Any suggestions on how a normal working person in the US can borrow in JPY?

I'm sure Goldman Sachs can help you out with your multi-national investments.

Thu, 04/04/2013 - 21:11 | 3410593 donpaulo
donpaulo's picture

DJ you would need to establish credit with a J-bank. Having done that about 4 years ago I can tell you that its no small undertaking

Thu, 04/04/2013 - 22:50 | 3410918 deKevelioc
deKevelioc's picture

It's called futures.  Sell yen and buy, say, norwegian krone.

Fri, 04/05/2013 - 05:47 | 3411510 qmhedging
qmhedging's picture

meanwhile in Italy


Couple found hanged in Marche

Macerata, April 5 - A couple in economic difficulties were found hanged Friday morning in the Marche region.

The man, 62, was one of thousands of so-called 'esodati' ('exiled ones') left without a pension or wages because of the government's hike in the retirement age 16 months ago.

Police told reporters there was "no doubt" the couple killed themselves out of desperation at their inability to survive economically. Neighbours who found the dead bodies in the town of Civitanova Marche told police the pair were unable to get by on the small pension of the 68-year-old wife.

"They couldn't even pay the rent," neighbours said. Suicides have risen during Italy's worst recession in years, deepened by outgoing Premier Mario Monti's austerity policies.

The government passed a law to help 40,000 esodati through till retirement but unions say their overall number is much higher, at least 150,000.

Thu, 04/04/2013 - 18:53 | 3410209 CClarity
CClarity's picture

On top of being insolvent, Japan needs to start importing young people ASAP. Plunge value of currency, Export products, import youth.  A new human experiment that will surely have unforseen, and tragic, consequences.  

Maybe they can import some of the starving North Koreans.  As much as the Japanese xenophobically don't like the Koreans, I'm not sure what ethnicity they would rather import.

Thu, 04/04/2013 - 19:43 | 3410334 tarsubil
tarsubil's picture

I think Bass has a point that the Japanese hate the Koreans and Chinese so they aren't inviting anyone in. I'm starting to think after Japan implodes, it will be invaded. Geez, who knows, maybe North/South Japan split between China and the US.

Thu, 04/04/2013 - 21:19 | 3410619 ATM
ATM's picture

The Chinese can have the radioactive part. They won't mind. The can put a computer part manufacturing plant there.

Thu, 04/04/2013 - 19:42 | 3410335 NoClueSneaker
NoClueSneaker's picture

Tamagochis ?

Fri, 04/05/2013 - 03:28 | 3411392 mfoste1
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Fri, 04/05/2013 - 08:00 | 3411651 Socialized Losses
Socialized Losses's picture

/PC filter OFF/  Need to import youthful workers to make export products?  May I suggest bringing in boatloads of young black Africans.  They have a good track record. /PC filter ON/  Im not so sure this can be called a "new human experiment"

Thu, 04/04/2013 - 18:58 | 3410222 zorba THE GREEK
zorba THE GREEK's picture

Japan will implode... 20 years and waiting....

Thu, 04/04/2013 - 22:51 | 3410922 deKevelioc
deKevelioc's picture

We really mean it this time.

Thu, 04/04/2013 - 19:14 | 3410246 Alexandre Stavisky
Alexandre Stavisky's picture

And the Sumo objective is to eat so much, napping between meals, that sheer size will overcome an opponent's skill and dexterity.

Central Banker Sumos feast only on QE and shihei hihei.  Unfortunately they've become so large that their kohai must perform a terrible function when they evacuate the bowels.  They are so large they CANNOT properly cleanse themselves.  Nice to have a fighting guild where gluttony is so open and positions so coveted that newcomers don't mind being a "damp rag" (as Nigel Farage might say.)

Ever watch a sumo match?  Hilarious as roly-polys in superdiapers huff and puff to toss another diapered dude out of an arbitrary ring.  30 seconds of exertion and their lungs virtually give out. Reminds one of the elephants and the grass.

Someday the dollar will be tossed from the ring.  Until then your every move to preserve yourself will be crushed with extreme prejudice.

Thu, 04/04/2013 - 21:09 | 3410573 Dr Benway
Dr Benway's picture

Sumo actually involves a great amount of technique, balance and timing.

Lyoto Machida has even pulled off sumo style throws in high level MMA matches.

Thu, 04/04/2013 - 18:45 | 3410178 francis_sawyer
francis_sawyer's picture

Talk your book bitchez!

Thu, 04/04/2013 - 18:49 | 3410193 nmewn
nmewn's picture

The Bernanke Swndler & LackofTrust has nothing on the japs...what the hell...we used to be number one!

Thu, 04/04/2013 - 20:14 | 3410420 jon dough
jon dough's picture

Maybe we can be number Won...

Thu, 04/04/2013 - 18:47 | 3410186 Timmay
Timmay's picture

And by "implode" you mean print more money, right?

Thu, 04/04/2013 - 18:51 | 3410201 McMolotov
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Thu, 04/04/2013 - 19:50 | 3410350 Crash Overide
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Thu, 04/04/2013 - 20:28 | 3410456 mt paul
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does the beast

like sushi..

Thu, 04/04/2013 - 18:48 | 3410192 KashNCarry
KashNCarry's picture

It's that post-Fukushima sucking sound!

Thu, 04/04/2013 - 18:50 | 3410194 Yellowhoard
Yellowhoard's picture

Bass is my profit prophet.

Thu, 04/04/2013 - 18:50 | 3410203 ar01
ar01's picture

Does anyone know what's actually stopping central banks from just canceling the debt on their books?

Thu, 04/04/2013 - 18:55 | 3410217 iDealMeat
iDealMeat's picture

oh...  only about a Quadrillion in derivatives would blow up..

Thu, 04/04/2013 - 19:08 | 3410243 you enjoy myself
you enjoy myself's picture

and what's stopping governments from declaring derivatives to be illegal insurance contracts?  i think that's the end game - they can't ever be settled once the great daisy chain starts, so they won't be.  they'll just all be voided retroactively.

Thu, 04/04/2013 - 19:19 | 3410282 iDealMeat
iDealMeat's picture

Central Banks / Banks are and own the governments.. Debt is the power..  They'll keep stealing (through printing, inflation, or outright theft) the minimum to pay off interest and keep the ponzi going.


It won't end until people wake up and cut their consumption.

Thu, 04/04/2013 - 19:42 | 3410333 calgal
calgal's picture

yes and everyone can kiss every dime in their bank accounts goodbye ala Cyprus

Thu, 04/04/2013 - 19:51 | 3410358 Crash Overide
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"and what's stopping governments from declaring derivatives to be illegal insurance contracts?"


Endless cocaine and hookers... MOAR!

Fri, 04/05/2013 - 07:44 | 3411631 GoldBricker
GoldBricker's picture

How many of those derivative contracts are tied to the debts of those very countries or their retainers (think not only big banks, but also US agencies, states, European Development Bank)? What happens to the interest rate you have to pay once the derivatives on your debt become worthless? Do JPM and GS even know the answer to this?

This is why nobody is defaulting now, except maybe Argentina. The modern nation-state must borrow, its debt must increase. To be cut off from the market is to have to live on what you take in, and nobody's ready for that.

Maybe this is why they wouldn't touch the senior bondholders in Cyprus banks. Easier to go after the depositors; there's no derivatives on their stake.

Thu, 04/04/2013 - 19:18 | 3410277 nmewn
nmewn's picture

Yes...and besides that perfect ponzi point of a commensurate drop in government spending (here) they'd be right back to a trillion dollar debt in what...fourteen months?

They may be goin to hell in a basket...but at least lets enjoy the ride ;-)

Thu, 04/04/2013 - 20:29 | 3410465 mt paul
mt paul's picture

before or after

rehypothication ..?

Thu, 04/04/2013 - 19:16 | 3410267 Mine Is Bigger
Mine Is Bigger's picture

Looking at the size of their bond purchasing plan, I actually wondred abut that, too, especially cosnidering the BOJ is majority owned by the Japanese government, unlike the Fed.

Thu, 04/04/2013 - 20:17 | 3410428 jon dough
jon dough's picture

Right, we're the other way around...

Thu, 04/04/2013 - 19:31 | 3410306 Diogenes
Diogenes's picture

You do that and the game is over.

Thu, 04/04/2013 - 20:36 | 3410422 slightlyskeptical
slightlyskeptical's picture

The current game needs to be over.  Isn't that a given by all the discourse on this site? That said, it doesn't have to be too painful if done properly. Especially if it was done unilaterally throughout the world. i do think this is the plan but they need to secure more power before pulling the last trigger.

i would print to pay off all the debt. The giant sucking sound in the financial system would cancel out any inflationary effects that such printing would cause and likely would be extremely deflationary in the end. Most banking institutions would go kaput. We need a new banking system anyways, so who cares. Those that played the game properly would do just fine but would have to adjust to a non-debt based money system with no fractional reserve lending.

To get the economy back up and rolling the government would print to buy all consumer debt. Lower interest rates and principal so most of this gets paid back. This would free up many hundred of dollars monthly in the majority of households, enough to get the economy moving again. Money would be free to invest in the production that we currently ship offshore. When that production comes back the job crisis is over.

After the reset there would be no taxes and no government debt to pay interest on. Simply print what is needed, starting from a baseline and limit the budget growth from there. If an occasion comes up where more money is needed then levy a one time tax to cover those particular costs (after a vote of approval by the taxpayers). Let social security invest in the new origination market - mortgages would be secured by the home and future benefits.

It would be a good place to start.


Thu, 04/04/2013 - 18:52 | 3410205 RobD
RobD's picture

"2104"? Whats the problem, that's like almost a hundred years from now lol. /sarc

Thu, 04/04/2013 - 18:52 | 3410206 Seasmoke
Seasmoke's picture

75% X 33% = BOOM !!!!

Thu, 04/04/2013 - 19:00 | 3410225 geewhiz
geewhiz's picture

Crack up boom

Thu, 04/04/2013 - 19:12 | 3410255 Snoopy the Economist
Snoopy the Economist's picture

wrong math.

it means 3x75%=225% relative to fed reserve printing

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