Kyle Bass On The Resurgence Of Gold And The Looming "Run On Cash"

Tyler Durden's picture

Hayman Capital founder Kyle Bass sat down recently for a conversation with Maria Bartiromo and Gary Kaminsky on Wall Street Week. He covered a variety of topics such as NIRP, income inequality, and the U.S. presidential race. As our regular readers know, Kyle correctly predicted the housing crisis, and is now calling for the yuan to be dramatically devalued.

On the growing use of negative interest rates as a central bank policy tool, he pointed out that while the central planners have their PhD's and elaborate excel models, the reality is that not all people behave rationally, and thus in the real world those types of policies won't necessarily work as intended. He also touched on the fact that a concern that should be on the front of everyone's mind is the fact that if NIRP goes full Shinzo Abe and banks start charging customers for keeping cash at their banks, that there will be a run on cash.

"I think this is where the academics are kind of clashing with the practitioners. I think on paper negative rates make a lot of sense if you're running academic models, but in reality they make no sense. Having seven or eight trillion dollars of debt trading at negative rates, having thirty year JGB's trading at fifty basis points is absolutely ludicrous. This experiment that's going on we all know will end poorly at some point in time, I just don't know when that time is."

 

"I think that one of the fears that they have is a run on cash. If they told you and I that they're going to tax your deposits by a hundred basis points, well it's better to put it in a safe or under your mattress. And that's why you see a resurgence in gold. The more they move to negative rates, the more gold is gonna take off because there's no carrying cost."

Regarding what's going on in Asia, he reiterates his call that there's a giant credit bubble (as we discussed here, here, and here) that's reached its breaking point and it's going to burst over the next two or three years. He says that he believes the implosion of the china credit bubble will have a 40-50% chance of causing a recession in the U.S. within the next year.

"From the perspective of what's going on in Asia, Asia has a giant credit bubble that they've been building for the last ten years or longer that has reached its atrophy level, and it's going to happen over the next two or three years. Whether that causes the U.S. to have a brief, minor recession, I think it's kind of forty, fifty percent chance in the next year personally."

He goes on to hammer the central banks' monetary policy decisions, saying that they can't generate true organic growth and that we've been doing the same thing for the past eight years and we're still in the situation we're in. Something Zero Hedge has been pointing out consistently over the past seven years.

"I don't buy this idea that monetary policy can generate true organic growth. It can help us out of a crisis, and it's proven to do so, but listen we've had eight years of full out excessive monetary and fiscal policies and here we are today. So when Lagarde goes to the G-20 and says we all need to work together, we've been working together. Everybody has been on easy monetary policy, we've pulled all the demand forward that we can, and now we're stuck with kind of stagnation and excess capacity and a lot of debt."

 

"Economics assumes that everyone is a rational actor, and we all know in this world there aren't many rational actors. That's where there's a divergence between academia and practitioners."

When the conversation turns to the U.S. presidential race, Bass said that Hillary would be the best choice given everyone that's running. When Maria mentioned that Hillary would raise taxes, Kyle lambasted the federal reserve easy monetary policy that only made the rich richer.

"So I'll give you a crazy answer, I think it's Hillary. I think she's the most sane actor of them all."

 

"Raising taxes, I mean, one thing you have to think about is this divide between the haves and the have-nots. One unintended consequence of Fed easy monetary policy has been this distributive nature where it made the rich richer. How many rich people do you know today that are worse off than they were at the peek of 2006. I don't know one, minus some of the Lehman people, I don't know one. What happened is we went to this policy where we went to QE, QE what that did was raise asset prices, well the only people with assets are rich people in general, so they became much more rich."

 

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Cognitive Dissonance's picture

"From the perspective of what's going on in Asia, Asia has a giant credit bubble that they've been building for the last ten years or longer that has reached its atrophy level, and it's going to happen over the next two or three years. Whether that causes the U.S. to have a brief, minor recession, I think it's kind of forty, fifty percent chance in the next year personally."

So.....an asteroid is going to impact Asia, and China in particular, and Bass says we might get a few minor waves in America? I want what he's smoking. 

<Don't Bogart that joint my friend.>

 

"So I'll give you a crazy answer, I think it's Hillary. I think she's the most sane actor of them all."

Now he's just talking his book and seeking to maintain the status quo. Fucking rich people are always predictable.

HRH of Aquitaine's picture
HRH of Aquitaine (not verified) Cognitive Dissonance Apr 16, 2016 9:38 PM

He must be smoking something if he thinks Hilliary is the "best choice." Best choice for whom? That would mean four more years for the globablists to scheme.

Mr Pink's picture

Hillary?? Kyle Bass is now DTM(dead to me)

DownWithYogaPants's picture

I think he does not completely understand Hillary.

GRDguy's picture

I bet he understands who butters his bread.

clymer's picture

Kyle. fuck you, you have officially sacrificed principle and character for pragmatism and chess-like positioning. fuck you again, you pompous puke

Theonewhoknows's picture
Theonewhoknows (not verified) clymer Apr 16, 2016 11:33 PM

They need to do something with the humongous amount of debt. While they will print for bailing out energy sector, students, auto loans and other bubbles they created - they want to simultaneously escape the debt. Problem with this inflationary escape of debt - idea that through increased money supply (gov spending) you can have inflation bigger than your interest rates accrue on your debt - is that you are TAXING everyone with savings through destruction of money. What is more - if you could have some sort of a guarantee that whatever government spends money WILL WORK - you don't have it. If it is a failure, it is huge and I mean bigger than 2008. Now we have many examples of such risks - Auto loan bubble, student loan bubble, S&P bubble not to mention bankrupted governments that can go to war not to pay the debt... 

this is called war on cash. We see it in front of our eyes and it will be bad.  http://independenttrader.org/war-on-cash-a-piece-of-a-bigger-puzzle.html

Joe Trader's picture

In Canada - when you buy gold - it gets reported to the government. Is it that way in the U.S. as well?

All it takes is a thief politician writing a new "law" that legalizes taxing whatever gold they have on file for you.

Nage42's picture

It's reported if you buy more than $3,000 CAN, and/or if you use credit/debit to do so (the credit/debit institution must also be a Canadian institution that they have visibility into to confirm on both sides.

Solution:  use cash and buy 1 ounce at a time...

Pinto Currency's picture

 

 

"the reality is that not all people behave rationally"

Actually, they all act differently - in their own interest.

That is one of the key reasons that central planning doesn't work.

Everyone needs to read Human Action by von Mises.

 

Also, negative rates make no sense.  No senes ever.

Read about the Austrian theory of Time Preference.

Negative rates completely distort the productive capital structure ultimately imploding the economy.

 

Money Counterfeiter's picture
Money Counterfeiter (not verified) Pinto Currency Apr 17, 2016 7:17 AM

Sad Kyle doesn't see the 348% of GDP debt bubble in the USA.  WFT does he think will happen even with 0% growth?  Throw in some Black Swans, China, oil, negative rates.

Pretty obvious bankers with nail guns have surrounded him and he shut up. 

chubbar's picture

I sold my gold at a gun show, sorry.

chunga's picture

LOL!

In other important news tReasury sEcretary Jack (Jacob) Lew is expected to announce a change for the new 20 dollah bills. Kaitlyn Jenner's face is gonna be on there and going forward it ain't worth a $hit.

August's picture

My understanding, which at some time in the past was probably correct, is that the seller must be shown the buyer's government-issued photo ID for any purchase of CAD3,000 or more, but that this information is retained only in the seller's records, not sent to any government office.  The Canadian government is actively notified of all purchases of CAD10,000 or more.

If you have recent/solid information contradicting the above, I'd appreciate hearing about it.

If all else fails, wear a fake moustache and use a Simon Black-mediated Latin American passport.

quadraspleen's picture

All it takes is a thief politician writing a new "law" that legalizes taxing whatever gold they have on file for you.

Probably the same the world over. They still have to a) prove you still have that "taxable asset" and b) actually collect that tax.

Bring it.

xavi1951's picture

Actually, a) YOU would have to prove that YOU no longer have that "taxable asset" (like you have to now when you list real property sales) and b) they have the big guns.  You DO NOT want them to bring it!

BobPaulson's picture

You must buy bullion in small quantities in person if you can. 

Nage42's picture

Poor listening skills people.

 

He was asked [para.]: "imagine you're wall street, what's the best choice to max your gains?"

The answer is the corportate crony.  Of course.

 

You will note that they did not ask him: "what are your personal beliefs on who will be the best prez for all of america"

 

Please listen carefully to what specific questions are asked and understand that ingelligent people _can_ put themselves in the shoes of others and give a logical answer that may even controvient their personal beliefs.  As a high level investor, scenario skills that may go against your personal beliefs are incredibly important.

 

Blankone's picture

This answer was his personal thoughts:

"the U.S. to have a brief, minor recession, I think it's kind of forty, fifty percent chance in the next year personally."

 

I also took his comment that Clinton was the most sane choice/actor as his personal thought as well.

dogfish's picture

Bass is just another self serving pile of shit,hey Kyle go polish your fucken nickles.

Save_America1st's picture

precisely assessed and well-said.  it's not that this fucker is some mindless left-tard asshole like all the Shillary assholes out there.  He said that because he knows she will be an even bigger bankster puppet than O-shit-for-brains has been and he's positioning himself for her to give him a giant golden dildo up his ass. 

Twee Surgeon's picture

Loooks like Kyle took a payment, see you in Japan.

Uchtdorf's picture

Michelle Obama: For the first time in my adult lifetime, I'm really proud of my country...

Uchtdorf: For the first time ever, I'm ashamed to live in the same state as Kyle Bass.

vincent's picture

He was asked who was the best choice for the markets.

Selective retention much?

Farqued Up's picture

No mention of cutting government, typical.

MFL8240's picture

One unintended consequence of Fed easy monetary policy has been this distributive nature where it made the rich richer

 

Sorry Kyler, this was never unintended.  It was excatly what this group was intending!

August's picture

The enrichment of the rich, by a financial system they control.

Nobody could have seen it coming.

Jeffersonian Liberal's picture

"When the conversation turns to the U.S. presidential race, Bass said that Hillary would be the best choice given everyone that's running."

Thanks, Kyle.

I now know not to bother reading any articles by you or that quote your opinion.

You are no more intelligent than those fools who really thought Obama was going to bring change that would help this country.

The bigger fool is the one is accepts the opinion of other fools.

holdbuysell's picture

CD, in another part of that interview (not sure if it was in this clip as I saw this interview through a few clips on FOX), he said that Trump may be right that the US is about to face a massive recession but for the wrong reasons (and then went on to describe the Asian debt bubble to imply that was the issue through contagion).

It made me double-take to say, 'wait. what? which is it? a mild recession or a massive recession due to the asian debt bubble bursting.'

Frankly, Bass came across contradictory, even disingenous in this one.

Escrava Isaura's picture

 

 

Disingenuous? You’re being too kind.

Kyle Bass: Central banks' monetary policy can't generate true organic growth.

Of course not if it goes to speculative purposes and to shareholders instead invested directly on business and its workers/labors.

Also, just wonder how Kyle thinks gold could help grow business/GDP when gold is always a deflationary tool because of its scarcity.

 

Bendromeda Strain's picture

     Of course not if <blah blah blah>

Bzzzt. Should have quit while you were ahead. The answer is "of course not" <full stop>

PS - so sorry to hear that socialist darling Dilma turned out to be another disingenuous lefty crook. After all that "investment" in the laborers... so sad.

Bendromeda Strain's picture

Also, just wonder how Kyle thinks gold could help grow business/GDP when gold is always a deflationary tool because of its scarcity.

Who needs gold when we have something even more dense in our midst (take a bow). Gold isn't scarce, it is undervalued.

booboo's picture

Bass looks at politics and finance through the lense of what is best for him, no different than most people, it is not about what is best for the country or his neighbor or his childrens future. Hillary makes sense to him because she wont rock the boat, if she continues Obama's policy of killing american citizens abroad without due process, well that is fine with him, it's not conceivable that he could be on a government kill list one day. It surprises me that there are still people left in this world that would volunteer at their local Salvation Army we are so wrapped up in our self aggrandizement and to be honest I have very little hope for the country I grew up in.

CPL's picture

He understands the herd will run when they are scared and they will run where they've been programmed to.  Metal.  The market phrase of buy the rumour and sell the news applies very much.  Especially when all of it is scripted.  Again, they were going to get your gold by grabbing it or greed by jacking up the price to get people to let go of the metal.  Big $$ = big carrot which gets the horse and cart moving again. 

Once back in the market they'll inject it with slug metal of some kind and no one will even know the difference plus the 'value' of PM's will just too dangerous to store at home.  Means everyone is going to need banks again...cycle resets after everyone stores their PM's in a vault and the bank with the vault starts doing the fractional reserve thing again.

Bendromeda Strain's picture

"Programmed to"? In what world is that? We were recently treated to the venerable Financial Times telling us in a lengthy video that gold hoarding is akin to retaining your own poop. I wish I was joking.

Winston Smith 2009's picture

So.....an asteroid is going to impact Asia, and China in particular, and Bass says we might get a few minor waves in America? I want what he's smoking.

The same thing I thought. He's nuts. Also, he implied that it is the markets that are the irrational actors with respect to their lackluster or negative reactions to NIRP from the central banks instead of the central banks being the irrational actors and that was right after he'd just made the point that 30 year bonds at 50 basis points is nuts which means that NIRP is even more nuts. 

"So I'll give you a crazy answer, I think it's Hillary. I think she's the most sane actor of them all."

Now he's just talking his book and seeking to maintain the status quo. Fucking rich people are always predictable.

Exactly. They must maintain the corrupt status quo and Felonious will provide that.

38BWD22's picture

 

 

Cognitive Dissonance

Yes, it's always interested me how the super-rich seem to be OK with higher taxes.  Hmm, funny that.

$hillary?  Really?

RaceToTheBottom's picture

Higher Taxes?

I have people for that.....

joego1's picture

you have to be a B-ass to pick Kilary the lyin vagina.

rodocostarica's picture

My question is not what Bass thinks but why are people not mentioning how EXTREMLY FAT is this Maria Buttahuga?

Twee Surgeon's picture

https://www.youtube.com/watch?v=_N-9g3c3d-Y

Your usual academic ramblings are going down the shitter. Get on You Tube and have a listen to some Astrologers, 5 planets going retro, you do not like it, I wish the best for you and yours, we are reaching a point where we all get to find out how full of shit we are. Welcome.

Arnold's picture

You used to post with a Quasi sanity.

Did they leave a door open at  Bedlam?

ZH Snob's picture

these analysts always miss the X factor, the as yet unknown.  

what if china has a plan to broker PMs using only RMB?  

nations and corporations would be forced to acquire RMB to participate, because they would need these PMs to re-capitalize their banks and treasuries.

much like the petro dollar, behold the golden RMB.

that, in my mind, would not devalue the currency but would send its value upward.  the chinese will have then created a gold-backed currency with no real gold backing at all.  its value would be set by the price of gold, silver, platinum, etc.

chubbar's picture

OT, but everyone should really check out this video taken at 3,000ft depth off of Greenland. I don't know what the fuck that creature is but it sure looked like an ET. Watch to the very last scene (it's a short video)

https://www.youtube.com/watch?v=iuXPdQqMYW0

skinwalker's picture

Dude, it's a mockumentary. 

 

And even if it wasn't, how does an air breathing creature with a basically human physiology dive to 3,000 feet? Even a weddell seal, which is 5 times the size of a human and has evolved over millions of years to perfect diving can only manage 1,000 feet. 

 

A sperm whale can dive 3,000 feet or more, but it is huge and can store extra oxygen in it's muscles for extreme diving. A small, quasi human creature like a mermaid lacks these characteristics. 

Baldrick's picture

yeah, she hasn't come out against hedge funds.

H. Perowne's picture

My respect for Kyle Bass . . . aaaaaaaaaaand, it's gone.

Son of Captain Nemo's picture

H. P

Took the words right out of my mouth.

Thanks for throwing the "little people" a bone...  You elitest cocksucker that rubs elbows with the likes of Soros, Blankfein and Dimon from the "Lone Star" State that use to host for profit dinner engagements featuring none other than the mass murdering terrorist dead Navy "hero" Chris Kyle!!!

Guess you'll have to use the next best think at this stage which is that Zionist Jew ball washing director from California that is the life of the party with his tertiary Alzheimers Clint Eastwood!...

gmrpeabody's picture

" mass murdering terrorist dead Navy "hero" Chris Kyle!!!"

You are one sick MF...

Son of Captain Nemo's picture

And you're one of too many brain dead stupid fucking "rednecks"...

Please do the only responsible thing with that statement and join the U.S. military with these fellas!!!!