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Kyle Bass Destroys The Ponzi-Prone Debt Sustainability Arguments Of The Status Quo...And Why Germany Can't Save The World

Tyler Durden's picture


Another noteworthy Kyle Bass moment as he discusses debt sustainability among major global sovereign nations. Simply and proficiently, the hedge fund manager describes how a dwindling current account surplus in Japan, US welfare economics, and the peripheral-to-core European stressors are all Madoff-like and unsustainable. Switching from broad-brush terms to the idiosyncratic complexities of each region, Bass offers his inimitable take - in a mere six minutes - on how the status quo is quivering under its own self-deception. His rightful conclusions remain extremely worrisome and should be required reading/watching for every central banker and politician trying to keep the dream alive.


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Sun, 11/20/2011 - 17:16 | Link to Comment Smithovsky
Smithovsky's picture

Gold, guns and nickels, mom. 

Sun, 11/20/2011 - 17:34 | Link to Comment nope-1004
nope-1004's picture

Kyle Bass is coherent, precise, intelligent, and correct.

Too bad politics is for the idiots of the world..... we could use a leader like Bass.


Sun, 11/20/2011 - 17:58 | Link to Comment aleph0
aleph0's picture


This interview is even better :

Kyle Bass on the greek euro financial crisis


25 minutes, but worth every one of them !


Great guy BTW !

Sun, 11/20/2011 - 18:42 | Link to Comment dlmaniac
dlmaniac's picture

Japan's end game is either default or hyperinflation, just like the rest of the West. There's really no other possibility to handle that massive debt.

Sun, 11/20/2011 - 19:21 | Link to Comment A Man without Q...
A Man without Qualities's picture

There is an alternative - something similar happened before.  The Japanese government announces a one off asset tax of say 50%.  Given the precentage of debt held domestically by old people who just sit on it, not really spending it, but dreaming of passing it down to their children (who will be about 60 by the time their parents die anyway), this would reduce the debt by about 40%.  Add to that, Japan is one of the few countries where they could get away with it without creating a revolution.  However, the net result is the same - investors in JGBs are not going to get back what they thought, whether a consequence of an asset tax, inflation or default.

Sun, 11/20/2011 - 19:39 | Link to Comment LeBalance
LeBalance's picture

Fukushima + Your Proposal = No Revolt? ??????

Japan is dying financially, but it is dying much faster due to the radioactive disaster.

Sun, 11/20/2011 - 19:53 | Link to Comment eureka
eureka's picture

Anyone know the comparable numbers and dire straits for the US...???

Sun, 11/20/2011 - 20:21 | Link to Comment Marco
Marco's picture

The US is coasting along on reserve currency status and Saudi Arabia's support for it to buy US military protection from Iran ... the EU and Japan don't have that luxury, so the numbers wouldn't mean much.

Mon, 11/21/2011 - 01:42 | Link to Comment Harlequin001
Harlequin001's picture

Where were all these people years ago when it first became clear that failure was an inevitability? 

This work-in-progress has been ongoing for long enough now for anyone with any sense to be well positioned for it, or they should be...

Mon, 11/21/2011 - 08:28 | Link to Comment Going Loco
Going Loco's picture

Easier said than done. Very hard to be well positioned for a future event which cannot be timed because while you are waiting you look like a twit compared with all the momo-chasers. You have to work out what is going to happen (and be right), position for it, and take the flak from your investors (or your family) while your positions are chewed up during the period before the event actually occurs. Even Michael Burry couldn't stand that pressure which is why he closed his firm.

Sun, 11/20/2011 - 20:24 | Link to Comment Vlad Tepid
Vlad Tepid's picture

And the body count is what again, LeBalance?

More Japanese have died from choking on mochi this year than from your radioactive apocalypse.  Fukushima is seriously serious, but Japan's financial problems loom much larger.

Mon, 11/21/2011 - 02:25 | Link to Comment jeff montanye
jeff montanye's picture

different time frames?  i'd rather financial markets disasters than the long term runoff of uncontrolled nuclear fission.

Mon, 11/21/2011 - 03:35 | Link to Comment Vlad Tepid
Vlad Tepid's picture

Japan's financial implosion is in it's 20th anniversary.  If things are worse in Fukushima 20 years from now, I'll eat my hat.  

Even one death is a tragedy there, but this article back up my opinion that cancers from Fukushima may end up being a statistical zero.

Sun, 11/20/2011 - 21:19 | Link to Comment CuriousPasserby
CuriousPasserby's picture

Inflation would do the same thing without instantly infuriating people like a 50% wealth tax would.

Sun, 11/20/2011 - 19:14 | Link to Comment unununium
unununium's picture

She really deserved it when he admonished "Don't hate the mirror because you're ugly!"

Mon, 11/21/2011 - 09:35 | Link to Comment Snidley Whipsnae
Snidley Whipsnae's picture

aleph0... excellent interview catch.

Interesting to see the money honey interviewer attempt to 'stay on the message'... The message was obviously to demonize K Bass for 'capitalizing on the misery of others' which was a false dichotomy since Bass continually pointed out that he was carrying out his fiduciary responsibility to his investors.

Also, when the interviewer pointed out that Bass was using derivatives to place bets on soverign defaults, Bass pointed out that the biggest derivatives holders of Greek Soverign default were Greek banks.

Typical of money honey and money male interviewers on US MSMedia. Bass took this interviewer into deep water and turned her loose.

Sun, 11/20/2011 - 18:27 | Link to Comment Reese Bobby
Reese Bobby's picture

What's with all the man love for Kyle Bass?  "We could use a leader like Bass."?

Bass is a clear thinking hedge fund manager who likes to manage money for other hedge fund managers he respects.  He is not looking to solve the world's problems but rather profit from them.  And there is nothing wrong with that in my mind.  However there is nothing particularly noble about it either.

However I always look forward to his insights when he is on a "talking-his-book" tour.


Sun, 11/20/2011 - 18:46 | Link to Comment Michael
Michael's picture

The financial innovations from the Harvard whiz kids don't necessarily mean their products are beneficial to society. On the contrary, they are detrimental to society on a macro level and should be determined as such by the House banking comity and the legislature and banned from implementation and use. In other words they ar weapons of mass financial destruction and should be outlawed.

Sun, 11/20/2011 - 18:58 | Link to Comment WestVillageIdiot
WestVillageIdiot's picture

The goal was not to make them beneficial.  The goal was to make them complicated and destructive.  They had to interweave all of these bombs so that if one blew up it would blow up the entire world.  This way there would be no way to dismantle a single entity without blowing up everything.  Simplicity was the enemy and still is. 

Sun, 11/20/2011 - 22:48 | Link to Comment stirners_ghost
stirners_ghost's picture

You brainwashed fool; bankers don't hold the guns.

Mon, 11/21/2011 - 02:28 | Link to Comment jeff montanye
jeff montanye's picture

their hirelings do.  (and michael seemed to be being metaphorical -- financial wmd)

Sun, 11/20/2011 - 20:06 | Link to Comment citrine
citrine's picture

Reese Bobby:

I cannot speak for men, but as a woman I find it difficult not to admire this brilliant man. He appears to be very sincere, kind and confident without being cocky. He has class, which has nothing to do with money (or profit). His job is to find investment opportunities, and he is obvioulsy exceptionally good at it. He is not creating the problems, he is only identifying them clearly.  And speaking about them openly, he does offer a chance for the problems to be resolved by those who have control over it. 

Sun, 11/20/2011 - 20:21 | Link to Comment Reese Bobby
Reese Bobby's picture

I know Kyle and he is not a bad guy, (and by the way he has one of the hotter female marketers I have met).  If you want to imagine him a certain way far be it from me to interfere.  I even forgive you for entirely missing my points.

Sun, 11/20/2011 - 20:34 | Link to Comment citrine
citrine's picture

 I even forgive you for entirely missing my points.


That is very kind of you. Obviously, you are a wise person and agree with Antoine de Saint-Exupery that "words are a source of misunderstanding". 

Sun, 11/20/2011 - 21:39 | Link to Comment McNooder
McNooder's picture

You are correct sir. 

Sun, 11/20/2011 - 20:52 | Link to Comment DeeDeeTwo
DeeDeeTwo's picture

The idea that Bernanke (and his billionaire cronies)... don't know 10 times what Bass knows... (and days or weeks sooner)... is crazy, baby.

Sun, 11/20/2011 - 23:27 | Link to Comment Imminent Crucible
Imminent Crucible's picture

The problem with Bernanke is not that he knows too little. It's that most of what he knows is wrong.

There's no advantage to having bad intelligence ahead of everyone else, and there's no strength in believing that you can make water run uphill or substitute credit for capital. Bernanke is a very highly educated fool.

Among many.

Mon, 11/21/2011 - 01:48 | Link to Comment PiranhaEatingGo...
PiranhaEatingGoldfish's picture

Crucible, I think you are wrong but that is just my opinion.

So get ready for the conspiracy nut rant:

I think Bernanke has a great deal of very correct information. I believe he could get us out of debt and back on track in a few months with a lot of pain, but it can be done.

The REAL PROBLEM is that he doesn't WANT to. He and his friends are getting richer by the second and it is no accident. And it's not ALL through theft. The correct info is being used by those who are "chosen" and they are intentionally leading the masses down the path of destruction like St. Patty leading the snakes out of Ireland and into the sea to drown.

The bigger picture, in my opinion, is one where there is looting an rioting in the streets and the "chosen" are safely tucked away from danger while they wait for the cretins to kill themselves off to a managable number. Then they will emerge as the lords of their new world and rule with ease and plenty of everything to go around.

Now I know that sounds a bit on the nutjob side (I warned you at the beginning) but I think if you look at the way this whole thing is structured and how everyone is now handcuffed to each other in a way that is detrimental to nearly everyone else, I feel there are only 2 possible conclusions.

1. This whole thing is a coincidence of astronomical proportions AND everyone that should have seen it coming was asleep at that wheel AT THE SAME TIME.

2. This has been constructed and designed in a way that has taken decades to get into place in the most perfect manner so as to be completely effective with just the slightest of pushes.

Now, I think there is a way to save the ship before it is completely under. It won't be pretty but it will work and save things for the future. A massive all encompassing Egyptian/Tunisian style revolt that takes place in nearly every major city in the EU & US. Then, we just might have a chance.

I really hope I am wrong and there is another way and it doesn't go down like this. I hope!!!!

Sun, 11/20/2011 - 21:29 | Link to Comment azusgm
azusgm's picture

It is great to have someone show up prepared as Kyle Bass. It is hard to fool someone who checks the facts rather than falling for the common assumptions that are bandied about.

Sun, 11/20/2011 - 22:40 | Link to Comment Freddie
Freddie's picture

He boils it down in less than 6 minutes where even the average Joe can just about understand.  Morons who watch TV might not get it.

Sun, 11/20/2011 - 20:56 | Link to Comment azusgm
azusgm's picture

"Kyle Bass is coherent, precise, intelligent, and correct.

Too bad politics is for the idiots of the world..... we could use a leader like Bass."

Too bad neither Harvard B School nor MIT could produce what Texas Christian University did with Kyle Bass.

Sun, 11/20/2011 - 21:04 | Link to Comment DosZap
DosZap's picture


Kyle has what we call COMMON SENSE.

The idiots destroying the country, are book smart, with NO Common sense.

Just a misplaced,socialist agenda,that's screwed the world, and us.

Sun, 11/20/2011 - 17:43 | Link to Comment sabra1
sabra1's picture

you forgot beavers!

Sun, 11/20/2011 - 17:55 | Link to Comment augie
augie's picture

guess your not a fan of oedipus. 

Sun, 11/20/2011 - 18:19 | Link to Comment Carlyle Groupie
Carlyle Groupie's picture

Also forgot silencers.

Learn from Argentinians:

The most sought after items were silencers.

Sun, 11/20/2011 - 18:59 | Link to Comment DarkestPhoenix
DarkestPhoenix's picture

Fucking Iowa.  I thought I was a genius when I realized, "Hey, I need one of these!"  Then I found out Iowa is of the 13 states that outlawed them.  Thanks to a tip from a friend of mine who is a policeman, he said (correctly) that an empty 2 liter bottle taped to the end of a 9 mm does almost the exact same job for the first shot, and seriously muffles consecutive shots.  Looks ghetto as hell, but something tells me that in a post-apocalypse world, a lot of things will.


Anyone know if I could still get them with an FFL Class 3?  May be worth looking into.  Well, that and the fact you could own almost anything.....grenades, machine guns, et cetera.

Sun, 11/20/2011 - 21:44 | Link to Comment LasVegasDave
LasVegasDave's picture

Beucoup thank yous for the article on Argentina

It really is must reading.

Sun, 11/20/2011 - 23:57 | Link to Comment Lord Koos
Lord Koos's picture

It's a great read -- I notice he doesn't recommend livling in the sticks.

Sun, 11/20/2011 - 19:27 | Link to Comment 1000pips
1000pips's picture

K Bass sounds great until the market goes up another 2000 points.  Euro to 1.40 in a week...

Sun, 11/20/2011 - 19:43 | Link to Comment LeBalance
LeBalance's picture

squid just got stopped out on that bet. sore sphincter?

Sun, 11/20/2011 - 20:23 | Link to Comment Terragram
Terragram's picture

"The market" doesn't reflect macro economic reality right now, so whatever it does is unrelated to what he is saying.  

Sun, 11/20/2011 - 20:57 | Link to Comment jeaton
jeaton's picture

Not to worry...

The flea bags in the park will save us!

Sun, 11/20/2011 - 17:12 | Link to Comment junkyardjack
junkyardjack's picture

Well of course Germany can't but China can right???  Baaaa

Sun, 11/20/2011 - 17:13 | Link to Comment apberusdisvet
apberusdisvet's picture

I don't if anyone saw his interview with the BBC bitch, but I'll wager her elite puppet masters were not too happy.

Sun, 11/20/2011 - 17:59 | Link to Comment Oracle of Kypseli
Oracle of Kypseli's picture

He blew her doors away. She used the analogy of buying insurance on your neighbor's house as if the neighbor's house is trading in the markets. What a dope! Limouzine liberal bail out the world 'cause of fiscal irresponsibility of nanny states



Sun, 11/20/2011 - 19:39 | Link to Comment Temporalist
Temporalist's picture

Right!  I would buy insurance on my neighbors home if it was owned by investors, traded on the markets and the CEO was a suicidal pyromaniac.

Sun, 11/20/2011 - 20:21 | Link to Comment Mike2756
Mike2756's picture

Yep, what about corporations that take out policies on their employees?

Sun, 11/20/2011 - 18:21 | Link to Comment Carlyle Groupie
Carlyle Groupie's picture

Neither was her mirror.

Sun, 11/20/2011 - 17:16 | Link to Comment AndrewCostello
AndrewCostello's picture

This guy is right.  Nobody can pull all this back from the edge, because people and governments continue to spend more money than they earn - that is the reality of the worlds false wealth.



Sun, 11/20/2011 - 17:53 | Link to Comment LMAO
LMAO's picture

You Sir are mistaken,

"15 minutes, yes 15 is all it takes to turn the tide"

Ben Shalom B.

Polymath and Saoshyant

Sun, 11/20/2011 - 18:00 | Link to Comment sun tzu
sun tzu's picture

Somebody owns the debt and that somebody is going to be pissed off when all of it is repudiated or repaid in debased paper or electronic currency. There is no other way out of it. Congress just shot down a balanced budget amendment

Sun, 11/20/2011 - 19:19 | Link to Comment Pladizow
Pladizow's picture

Those who are owed, also owe!

Sun, 11/20/2011 - 18:20 | Link to Comment Citxmech
Citxmech's picture

The bigger irony is that we have to continue spend more than we earn just to be able to pay the interest on all the debt-based fiat currently in the system.

Sun, 11/20/2011 - 18:24 | Link to Comment falak pema
falak pema's picture

what happened to that guy who kept saying "Oh so boring, it'll get fixed, merry xmas"...Amazing something? I miss him as we head for the rapids. Oh so boring as the financial world melts!

Sun, 11/20/2011 - 17:24 | Link to Comment bartek
bartek's picture

Yes, Germany can save the world. By NOT LETTING ECB PRINT. By letting Eurozone default 70-80%, cut wages and restructure, euro would survive as a hard currency. As a bonus putting Goldman Sachs and NY based criminals out of business and finally putting the Greenspan paradigm in the dustbin of history.

Sun, 11/20/2011 - 17:31 | Link to Comment GeneMarchbanks
GeneMarchbanks's picture

And then you woke up?

Seriously though, Germany will have to usher a new ideal for 'core' Europe.

Sun, 11/20/2011 - 17:35 | Link to Comment Ghordius
Ghordius's picture

You mean by joining the Swiss Confederation?

Sun, 11/20/2011 - 17:25 | Link to Comment prains
prains's picture

Japan,Germany,the beaver dam......blow it up

Sun, 11/20/2011 - 17:26 | Link to Comment Tao 4 the Show
Tao 4 the Show's picture

I love this phrase: "Recap the banks".

Such a loaded expression. When a whole world of assumptions are squeezed into one phrase, it's time to ask questions. Was this the 2008 move by Paulson-recapping the banks? Who says citizens owe "recapping" to the banks?

There are dirty secrets hidden here. The money expansion that The Merk and others are worried about already happened when the loans were made. So much is not what it seems. The loaned money can not be paid back at this point.

Sun, 11/20/2011 - 17:58 | Link to Comment willien1derland
willien1derland's picture

Total agreement - Why recap the banks? Why is Goldman Sachs & Morgan Stanley still considered banks? They have no retail banking or depositor footprint? The best part is 98% of all Americans do not meet the minimum account requirement to have an account at Goldman Sachs? And here is the best part - I know Lloyd Blankfein would rather sacrifice his family than lose acces to the Federal Reserve Discount Window! How much longer does this hypocrisy endure?

And even with practically FREE money that the Federal Reserve provides the banking system their stocks are at all time one has any confidence in the financial sector however no one in Washington DC will do anything but throw more money at it as Bankers & Politicians are one in the same - both know it is a Ponzi - both trying to hang on long enough awaiting for the next crisis in order to exploit the American people one more time.

I for one am SICK TO DEATH with this nonsense & pray that the truth be made public & the guilty removed from their positions so perhaps in some way we can resolve to bring honest & integrity back to the American financial sector as well as to Washington DC


Sun, 11/20/2011 - 19:49 | Link to Comment LeBalance
LeBalance's picture

"How much longer does this hypocrisy endure?"

Please define the time when it did not.

Sun, 11/20/2011 - 22:45 | Link to Comment Freddie
Freddie's picture

You do know that those whores at Goldman Sachs and Morgan Stanley went out and bought smaller banks back in 2009 (or so) to get TARP money.  True. 

It should be on the web useless the Muslim's Administration and Google SkyNet erased it from history.

Sun, 11/20/2011 - 18:02 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Hehe. Guess you don't see what they did by recapitalizing failed banks plus an entire rotted food-chain that feeds off the Fed. They made it law that debt owed to TPTB must be repaid, if not directly out your own pocket then indirectly through your taxes. Even extended through taxes your kids and grand kids will have to pay. PLUS you will repay through the burden of government austerity (defaulting on promises made for health and retirement benefits) and finally through a reduction in your standard of living through Zero interest rate policy, deflating real estate, declining real wages and under-the-radar inflation in the cost of everything you need to live or work. 

This is the New Social Contract, making the post world-war 2 contract obsolete with you and future generations liable for the deficit

Sun, 11/20/2011 - 21:50 | Link to Comment Greenhead
Greenhead's picture

CE you get it!  No doubt the issues involve funding current expenses on the backs of future taxes and/or inflation to repay the debts.  It is a clear form of slavery.  The shackles are every bit as real and hard as if they were made of steel.  The IRS will collect the interest due and there isn't anything you, your children or your grandchildren can do about it.  We won't deal with living within our means.  We've created a culture of dependency and folks are scared out of their minds that their benefits might stop.  "We can't throw Granny out in the snow" as if we would ever do that but the emotional impact of that image freezes us and the bonds grow tighter. 

Sun, 11/20/2011 - 18:15 | Link to Comment LMAO
LMAO's picture

"Recap the banks"

Ahhh, damage control


Sun, 11/20/2011 - 18:08 | Link to Comment LawsofPhysics
LawsofPhysics's picture

I prefer "make investors whole and fuck the banks".

Sun, 11/20/2011 - 18:18 | Link to Comment GMadScientist
GMadScientist's picture

Re-pop a "recap" in they're re-ass!

Sun, 11/20/2011 - 17:29 | Link to Comment Triple A
Triple A's picture

Did Japan think they could carry on forever spending the way that they do. I  mean over 200% debt to GDP, that is just ridiculous. It is just like like close your eyes and wishing all the debt away and pray no one ever talks about it. 

Sun, 11/20/2011 - 17:31 | Link to Comment Tao 4 the Show
Tao 4 the Show's picture

Watching the way they deny the reality of Fukushima, you can understand how the Kamakazi mentality is a Japanese creation.

Sun, 11/20/2011 - 17:32 | Link to Comment Ghordius
Ghordius's picture

Damn! Where were you when they were at 130% ?? ;-)

Sun, 11/20/2011 - 17:48 | Link to Comment Clint Liquor
Clint Liquor's picture

Japan has 200% of GDP, a population with a median age of 44.8, and just south of a Trillion is UST and USD. Do you think that Trillion will ever make back to the US?

Sun, 11/20/2011 - 21:49 | Link to Comment Vlad Tepid
Vlad Tepid's picture

Japan could clear a lot off their books by dropping that right fast.  If I were them, I'd ask for Idaho silver mines, phosphate deposits and stacks of non-tungstenated gold.

Sun, 11/20/2011 - 18:06 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Ahh but put yourself in the shoes of greedy self-interested leaders getting rich from the elite paymasters and you can easily see it was no accident. It was criminally negligent. And as long as they're riding a gravy train that still moves, they'll keep right on doing it till it reaches the cliff-edge and jump off just in time

Sun, 11/20/2011 - 21:00 | Link to Comment DosZap
DosZap's picture

Triple A

Twenty years ago, Japan, and the US, should have instituted a program of married couples having MORE children, and rewarding them for doing so.

This is how you RE CAP,a country.Roe v.s.Wade, we have allowed over 50 Million potential American taxpayers to be murdered.(vast majority).

The 40+million we have now paying taxes have absolutely no help coming.(and what has is not productive enough, and doesn't have the skills necessary to PULL Us up.

Why do you think the Illegal immigrant situation has not been stopped?.We know we do not have new worker bees.

So we must import them.

The generations of boomers that get so hammered here have carrried this country by producing,not using.Well,  not enough were born to replace those worker bees.(save the ones we allowed to be killed).

Sun, 11/20/2011 - 21:03 | Link to Comment Mike2756
Mike2756's picture

They live on an island, though.

Sun, 11/20/2011 - 21:06 | Link to Comment DosZap
DosZap's picture


Mike, people die, retire, stop MUST have at least an equal maount coming in, as going out.

Exactly what Kyle said.Media age for Japanese is around 45yrs old.

Sun, 11/20/2011 - 23:59 | Link to Comment Mike2756
Mike2756's picture

To keep it going. In the long run, this is better for them. Have we reached peak population?

Mon, 11/21/2011 - 01:37 | Link to Comment ItsEvolutionBaby
ItsEvolutionBaby's picture

You social engineering scum bags. People shouldn't be encouraged to do anything, i want a free society, not one where you use the levers of the state to enable your economic nirvana.

The system is the problem, not the people. 

Sun, 11/20/2011 - 17:29 | Link to Comment ghostfaceinvestah
ghostfaceinvestah's picture

Yet the yen and JGBs keep grinding higher in Kyle's face.  Maybe Kyle is missing part of the equation?

Sun, 11/20/2011 - 17:32 | Link to Comment Mike2756
Mike2756's picture

Think of it as one of those cigarette/matchbook ignition devices, not exactly precise. If i read him right, it's burned down to the matches.

Sun, 11/20/2011 - 17:54 | Link to Comment Right-on Left-off
Right-on Left-off's picture

Maybe Kyle is missing part of the equation?

The only missing item is the 'reversal' event moment.  That's when escape velocity is not reached and gravity takes more and more effect.

Sun, 11/20/2011 - 17:47 | Link to Comment GhostTrader
GhostTrader's picture

It's is grinding higher in Japan's face, actually. The more valuable your currency is against other major trading partners' currencies, the more difficult is to service the debt. Hence why all central banks love to print (and Japanese central bank actually intervenes in FX markets directly to bring down yen, even if their actions are futile). So, Kyle is spot on.


Love GFK, btw

Sun, 11/20/2011 - 19:05 | Link to Comment drivenZ
drivenZ's picture

90% of JGBs are held by the japanese people...your point doesnt really matter that much. The fx appreciation does stress their exports though.

Sun, 11/20/2011 - 21:54 | Link to Comment azusgm
azusgm's picture

And the Japanese people are getting older and not earning a yield on their JGBs so will have to go into spend-down mode. The elderly Japanese will not be able to continue to buy and hold JGBs.

Does anyone have any comments to offer on how the carry trade has influenced the credit market in Europe or visa versa?

Sun, 11/20/2011 - 18:04 | Link to Comment Clint Liquor
Clint Liquor's picture

Grinding higher against what? Gold? Other fiat currencies don't count. In case you didn't know, they make that shit from paper and ink.

Mon, 11/21/2011 - 00:39 | Link to Comment aminorex
aminorex's picture

Paper and ink have too much intrinsic value.  Nowadays they make it from 1's and 0's.  Mostly zeros.  In fact, ontologically, it's zeros all the way down.

Sun, 11/20/2011 - 17:31 | Link to Comment Ghordius
Ghordius's picture

He does not really explain WHY Germany should be separated from the other Targets For Speculation, even though he explains that it's position is only marginally better...

Uppss... Did I give it away?

Sun, 11/20/2011 - 18:11 | Link to Comment augie
augie's picture

please correct me if i'm wrong (seriously), but isn't the prospect of the German economy recovering from a default a little more likely than any of the peripherial states by sheer virture of their manufacturing base? 

I understand if no one wants to buy their kitchen knives or leederhosen they are as herbed as everyone else, but with the world still humping the consumerist model like it's 07' how likely is that? 

Sun, 11/20/2011 - 18:28 | Link to Comment High Plains Drifter
High Plains Drifter's picture

well at least their arab  and turkish workers produce things .....which is more than i can say for us...........

Sun, 11/20/2011 - 20:15 | Link to Comment augie
augie's picture

I think we still lead the world in printing...

Sun, 11/20/2011 - 23:06 | Link to Comment AustriAnnie
AustriAnnie's picture

Manufacturing was a money maker for them while the ponzi was going because the PIIGS bought everything they manufactured.  Ponzi schemes only work when they are growing and more money coming in than going out.  Austerity for people who buy the goods translates to austerity for those who sell the goods, no?

Mon, 11/21/2011 - 04:01 | Link to Comment Ghordius
Ghordius's picture

augie, are you really serious?

ok, I'll try...

what every commentator stalking about an EZ break up forgets is how strongly the economies of Germany, France, Italy, Austria and Switzerland are integrated. Millions of smaller parts that go around the continent to be joined together in one of them

Of course the German economy would be quite quick in recovering from a default - the only thing is that for a default of any kind you need some political will, which is lacking

sorry, this rampant consumerism theme is not that useful in the EU context, try investment (industrial) products instead (think machines, plants, turbines, etc.)... Germany's exports (with parts from the others) in this sector are huge

Mon, 11/21/2011 - 10:40 | Link to Comment augie
augie's picture

Thank you for the honest response. I'm aware of their manufacturing base's main outputs, i was just trying to be "cute."

I guess i really need to better understand the integrations before i can understand the individual strengths of the nations involved and their ability to recover from the unlikely defaults.

Sun, 11/20/2011 - 17:31 | Link to Comment Siggy
Siggy's picture

Kneecap the Banks!

Sun, 11/20/2011 - 21:41 | Link to Comment El Viejo
El Viejo's picture

You hurt the banks you hurt a lot of innocent people. KNEECAP THE CEOS.

Kneecap the pyromaniacs running through the fireworks factories throwing lit matches and collecting huge salaries for their fun.

Of course it's too late for that now. So Kneecap the politicians and regulators for being asleep at the wheel !!!

But really, it truly may be: GAME OVER.


Sun, 11/20/2011 - 17:32 | Link to Comment Mactheknife
Mactheknife's picture


Sun, 11/20/2011 - 17:36 | Link to Comment Hulk
Hulk's picture

Innumerate citizens...Biatch!

Sun, 11/20/2011 - 17:40 | Link to Comment disabledvet
disabledvet's picture

Card carrying member of the CDS community. If those things aren't actualized it blows a big hole in monetizing his obviously correct thesis.

Sun, 11/20/2011 - 17:35 | Link to Comment Mike2756
Mike2756's picture

I'm wondering if Japan can devalue and peg to avoid a messy devaluation?

Mon, 11/21/2011 - 00:42 | Link to Comment aminorex
aminorex's picture

"Beggar thy neighbor" has been tried before.  It's a circular firing squad, when all the major partners are in the same boat.

Sun, 11/20/2011 - 17:36 | Link to Comment fonestar
fonestar's picture

Love watching this guy's interviews!  I'm somewhat suprised they still put him on the air though, given how he makes the interviewer look like a total dumbass each and every time, cutting through their BS with total concision.

Sun, 11/20/2011 - 18:32 | Link to Comment Carlyle Groupie
Carlyle Groupie's picture

University of Virginia Darden School of Business.

The Durden School of Business has a certain ring to it, no?


The Tyler entourage should carry a few cans of spray paint with them...

Sun, 11/20/2011 - 17:43 | Link to Comment alien-IQ
alien-IQ's picture

Reuters headline 3 hours ago:

UPDATE 2-Greek party chief resists EU/IMF pressure on pledge

ATHENS, Nov 19 (Reuters) - Greece's creditors failed on Saturday to persuade the leader of the main conservative party to drop his refusal to sign a pledge that he will back austerity measures under a bailout deal aimed at saving the country from financial ruin.

Antonis Samaras, leader of New Democracy, one of three parties in a new national unity coalition struggling to avert a disastrous default, says there is no need to provide a written guarantee because his word can be trusted.




The "trust me" satrategy...who doesn't love that one?


Mon, 11/21/2011 - 00:15 | Link to Comment Nobody special
Nobody special's picture

It isn't a matter of saving nations. It's the banks that are being saved, and the corrupt financial power structure. This problem only exists because nations are no longer sovereign, having gifted their power to the bankers. 

It would be helpful if the notion of 'saving nations' was expelled. True sovereigns are not at risk.

Sun, 11/20/2011 - 17:47 | Link to Comment Atomizer
Atomizer's picture

Multi nationalist monopolies will be soon heading for the hills.  The agenda for selected control will be revealed. GPS, DHS, NSA, DARPA and other social networking means will hinder the architects from ever going underground.

Grab your popcorn and watch a new unscripted "epic failure globalization" reality show. Some high ranking individuals are going to experience a spider moment


The Spider situation 



Sun, 11/20/2011 - 17:51 | Link to Comment ThisTimeIsDifferent
ThisTimeIsDifferent's picture

The Eurozone will be thriving long after the United States has been thrown into the dustbin of history.

Look at this, gringos:

Current accounts -

Greece : - € 30,5 bn (2008)  --> - € 12,6 bn (2011)

Ireland: + € 16,3 bn (2008) --> + € 35,4 bn (2011)

Spain: - € 62,2 bn (2008) --> - € 10,6 bn (2011)

Portugal: - € 17,3 (2008) --> - € 7,3 bn (2011).

Government deficit -

Greece: - 15,4% (2009) --> - 9% (2011) in spite of -10% GDP shrinkage and -44% investment downturn. 

European structural reform works - even in Greece.

The only catastrophe I see is the US super committee and 500+ legally and officially (chapter 8) bancrupt US cities and counties -- coming soon to a metropolis near you.


PS. come on lazy beer drinking red necks - book a flight to Athens and learn how to work efficiently for a change.


Sun, 11/20/2011 - 17:57 | Link to Comment honestann
honestann's picture

It will be interesting to see whether the world gets a front row seat to watch the difference between:

defaults versus hyperinflation

This assumes, of course, that Germany/Europe doesn't go the way of the federal reserve and Weimar Germany.

Sun, 11/20/2011 - 18:10 | Link to Comment High Plains Drifter
High Plains Drifter's picture

well the rothschilds did not creat the eurozone to destroy it. that is for sure. 

Sun, 11/20/2011 - 23:18 | Link to Comment AustriAnnie
AustriAnnie's picture

Unless of course, they make money off of its destruction.

Sun, 11/20/2011 - 17:52 | Link to Comment Amish Hacker
Amish Hacker's picture

Right or wrong, agree or disagree, that's about the clearest statement of the problem you're likely to find anywhere.

Loved the part about the "spring loaded" debt scenario, though now I'm afraid that the financial metaphor which once seemed so descriptive of Europe's future--- dominoes falling--- must be upgraded to something involving a mushroom cloud.

Sun, 11/20/2011 - 18:08 | Link to Comment High Plains Drifter
High Plains Drifter's picture

this leveraging bullshit combined with these cds's are the end of this program, no doubt about it.........

Sun, 11/20/2011 - 18:00 | Link to Comment honestann
honestann's picture

What almost nobody says is that government financing via debt is inherently unethical and downright evil.

First of all, giving money to the banks that lend to the government is pure theft.  Remember, the banks do not produce anything real and earn a profit which they might lend, they create money out of thin air without producing or saving anything.  That is just theft from producers and giving to predatory thieves.

Second of all, financing government via debt is an inherent fraud and corruption because the taxpayer who supposedly pays for government services does not receive the services he paid for.  For example, currently the government only collects 40% to 60% of what it spends, and borrows the rest (mostly from the federal reserve who simply pokes a few keys on a keyboard to create the funds it "lends").  This means the taxpayers in the future who must pay the principle and interest on that debt are paying for OTHER people receiving those services now.  This disconnect is clearly and fundamentally predatory criminal behavior, just as for anyone who forces someone else to pay his bills.

So the "math" is not the only problem.  The more fundamental problem is, the entire worldwide system is pure, unadulterated, predatory criminal behavior, patently evil, and massively destructive.  This is why the standard of living is falling like a rock in the western world, even as productive efficiency of the few people still performing productive work keeps climbing due to new technology, equipment and techniques.

At least two things must happen:
  #1:  balanced budgets without borrowing
  #2:  all government "services" by subscription

Otherwise the entire planet will totally spiral down the tubes.  And it will NOT stop or level off at a lower level, unless the causes are eliminated.

Sun, 11/20/2011 - 18:06 | Link to Comment High Plains Drifter
High Plains Drifter's picture

yes you are correct. so let us stop it. let us stop doing this. let us put a end to this insanity. but , be forewarned.  like the junky who is locked in a cell to go cold turkey and then proceeds to climb the walls for a while.....we too , will go cold turkey. what does this mean?  i am not sure most amerikans would want to know the answer to that question.  hey its sunday and football is on the boob  toob and turkey day is right around the corner.  why must you be so negative about all of this?  

Sun, 11/20/2011 - 20:04 | Link to Comment Tompooz
Tompooz's picture

If there is any society on earth that can do it, the Japanese will be capable to go cold turkey.

Just need to look back to 1945 and they know they can cope with anything.

Declining population also means increased asset-wealth per inhabitant and increased revenue from taxing estates. 


Sun, 11/20/2011 - 18:20 | Link to Comment augie
augie's picture

If the game is rigged, change the game.

in case anyone wants to think outside the box:

Sun, 11/20/2011 - 18:03 | Link to Comment High Plains Drifter
High Plains Drifter's picture

he is invited to speak at the university of virginia school of business i suppose. he speaks on the subject of unsustainable debt to students who if the truth was known, were in hock  up to their eyeballs in unsustainable student loan debt..........oh the irony of it all.

Sun, 11/20/2011 - 18:07 | Link to Comment rambler6421
rambler6421's picture

Yup.  They can't print.  Bass is right.

Sun, 11/20/2011 - 18:09 | Link to Comment El Gordo
El Gordo's picture

Keep hope alive...Keep hope alive...

Sun, 11/20/2011 - 18:09 | Link to Comment FoieGras
FoieGras's picture

Last time the Japanese 10y was at 1% was in 2002. 9 years ago. It's still at 1%.

Bass could well be wrong for another 9 years.

Sun, 11/20/2011 - 22:21 | Link to Comment chindit13
chindit13's picture

Yes, Bass could be wrong for another nine years, but rest assured he has not taken his position (paying 6 tenths of a basis point per year on a multi-year position) blindly.

This year was the year Japan's savings rate went negative and its federal borrowing needs exceeded the combined savings, corporate profits and current account of the country.  Bass put on his position anticipating this crossover from "domestically funded" to "other", "other" being printing, default or foreigners picking up the slack.  Maybe he was early, but while early can well mean wrong, it also means cheap.  Six tenths of a pip, with a potential payoff of 10x to 200x, probably constitutes cheap.  So long as his counterparty (JPM) can post margin if and when a Japan collapse begins, Bass will get paid something.  If it collapses in one fell swoop, I suppose Bass would merely be left holding the winning lottery ticket for the Harrisburg, PA City Lottery.

If Japan can entice foreign buyers to "diversify" with some of those attractive 1% JGBs, Japan can buy some time.  Nine years, however, would be a stretch.

Sun, 11/20/2011 - 18:15 | Link to Comment falak pema
falak pema's picture

"When Germany recapitalizes its banks its private banking debt ratio will be worse than the US's"...Kyle Bass in this video.

That is the official view. If you include off balance sheet and derivative bubble netting, US private banking will shoot through the roof. How can a responsible HF manager then make this assertion?

Any IDeas? This guy is touted as great guru...!


RM AND TD views welcome.

Sun, 11/20/2011 - 18:57 | Link to Comment Hulk
Hulk's picture

No TG here, but I think we have FASB 157 to thank for hiding all our banking debt. Fannie and Freddie are all off balance sheet crap..

Patience fp, its Europe's day in the sun today, our day in the sun will come soon after.

Got Gold?

Sun, 11/20/2011 - 18:36 | Link to Comment CTG_Sweden
CTG_Sweden's picture


My impression is that Kyle Bass forgets that the Japanese government has smaller pension commitments than many other countries in Western Europe. People in Japan are saving for their retirement by buying government bonds. If you combine governmental pension commitments with the public debt, the Japanese debt to GDP ratio does not seem to be that bad compared to other countries. But I guess that they can not increase the public debt perpetually.


Furthermore, I assume that both pensioners and the Japanese society would have been better off if the Japanese people would have invested in well diversified stock portfolios, or perhaps some kind of well diversified holding companies, with lots of foreign, Asian stock rather than government bonds. Of course, that would probably have forced the Japanese government to increase taxes, which I guess would not have been a very popular solution. Of course, they could have cut spending on their defence, spending on schools etc. I have previously pointed to the fact that it seems as if you can cut about 70-80 % of the spending on teacher salaries by recording one lesson and broadcast this lesson on the Internet rather than having thousands of teachers doing the same thing at different locations simultaneously. If Japan would cut its number of teachers and soldiers there would definitely be no lack of labour in Japan. It also seems as if less women work in Japan than in Northern Europe. Furthermore, I don´t understand why Japan should need more labour right now, given their current unemployment figures.


I can agree with Kyle Bass that Japan seems to have a serious public debt problem and that Germany is very close to the point when public debt becomes a very serious problem. My impression is that both Japan and Germany should raise taxes and cut spending. And if they do that there will definitely not be more demand for labour in those countries, but rather the opposite. The same is probably also true for the rest of Europe and for the United States. However, the United States is so lucky that the government still can print money rather than raise taxes and cut spending (even if that means negative real rate of interest for many pensioners and other people who are reluctant to hold stock and other risky investments). Furthermore, I am not sure that the United States has prepared for the moment when the Federal Reserve no longer can print without causing hyperinflation.


Sun, 11/20/2011 - 18:59 | Link to Comment exportbank
exportbank's picture

The edcation system will be one of the next to experience a huge shift in how it's delivered. BUT - then there's the union and a huge voting block so maybe not.

Mon, 11/21/2011 - 00:01 | Link to Comment Lord Koos
Lord Koos's picture

Yep teacher's unions, the source of America's problems.   A nation without public education will be even dumber than the one we have now.

Sun, 11/20/2011 - 20:00 | Link to Comment BigInJapan
BigInJapan's picture

Nope. Wrong. Stop.
Bond sales are falling yearly and even the national pension scheme (actually name, by the way) has become a net seller of bonds in Japan

Make no mistake, this place is worse off than anywhere. It will go Commie faster than you can blink.

Sun, 11/20/2011 - 20:13 | Link to Comment Tompooz
Tompooz's picture

When I lived in Japan I always thought that Japan might be the only country in the world that makes a success of "going commie".

Mon, 11/21/2011 - 04:32 | Link to Comment chindit13
chindit13's picture

You might enjoy studying up on Japan's National Pension Scheme, as well as the history---and in particular the accounting methodology---of Japan's Postal Savings (Yucho) and Postal Insurance (Kampo).  Remember that it was the two latter entities that were used in the PKO (Price Keeping Operation) aimed at bolstering Japan's stock market back in the early to mid 1990s.  Owing to the bizarre accounting method where winners are sold and losers are retained, the actual book level of the equity portions of those entities is well above even where the Nikkei/TOPIX were during the years the PKO was active.  With a current Nikkei of 8350, and a book in excess of 25000, Japan's "savings" are in fact obligations of the state.

Private pensions use the same bizarre accounting methods and are also greatly underwater.

Sun, 11/20/2011 - 18:25 | Link to Comment GlenD
GlenD's picture

Fiat is affected by accelerated decrepitude. Time for usury to die.



Sun, 11/20/2011 - 18:25 | Link to Comment Atomizer
Atomizer's picture

The snake is eating its tail. "we must gag order everyone we know" No one can figure out our fleecing plot. Our regime must erase all internet leaks.  LOL

Start reading your local/national obituaries. The crony power is clawing at retaining control. Nothing will stop them, loose lips will be snipped. Once their killing program unfolds, many will be arrested. Do you remember me stating strange figureheads will appear in the news? People you never saw before?


Another comedy clip to connect the dots 

Stacks Edwards "Late For Your Own Fuck'n Funeral"


Sun, 11/20/2011 - 18:26 | Link to Comment jbc77
jbc77's picture

You just have to absolutely love Kyle Bass. In this day and age it's a beautiful thing to see a guy destroy the central bank lunatics with no more than the truth. Reggie Middleton has been all over this thing as well. The New York Times even stole his hook -"Pan European Bank Run....". How long ago did Reggie coin that phrase? Two years ago.....

Although I feel happy that the maniacs may soon be exposed, I am scared as how this plays out for the common people like myself. When you have young kids, their always on your mind. If they end up being hurt by this my anger towards these animals will surely only grow. The time may come where the citizens of every country will need to stand side by side. We're up for the challenge. A lot of good people still out there. Right after the 9/11 attacks Americans we're shoulder to shoulder. We have it in us to get through this, but we're going to need each other. We'll need to rely on each other.

Sun, 11/20/2011 - 18:26 | Link to Comment navy62802
navy62802's picture

It is the most complex, spring-loaded scenario I've ever seen in history ...

A classic line. And very true. The same can be said of the global economy at this point in history.

Mon, 11/21/2011 - 00:22 | Link to Comment AustriAnnie
AustriAnnie's picture

I thought he said "convex spring loaded scenario" and I assumed he was talking about bonds/interest rates?

Sun, 11/20/2011 - 18:26 | Link to Comment bob_dabolina
bob_dabolina's picture

Rick Santelli/Kyle Bass ticket would be amazing

I would vote that all day long

Sun, 11/20/2011 - 18:31 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

the status quo is quivering under its own self-deception. His rightful conclusions remain extremely worrisome and should be required reading/watching for every central banker and politician trying to keep the dream alive

desilu, BiCheZ!

Sun, 11/20/2011 - 22:15 | Link to Comment azusgm
azusgm's picture

The emperor's tailor wants to short Kyle Bass.

Sun, 11/20/2011 - 18:46 | Link to Comment kito
kito's picture

i still dont hear bass talking about the u.s.  this is the third interview i have heard from him and i get the sense he feels this country is the least of the major problem countries.

Sun, 11/20/2011 - 23:03 | Link to Comment SDRII
SDRII's picture

Exactly every argument he makes about Japan is an argument about the USA. He is merely betting on the sequential payer failing before the sr tranche goes bust.

The irony of the Japan deflationary decade is that the yang was a western world carry driven risk asset orgy. The fact that the US + g20 have shirked at Japan request for yen intervention tells you all you neyou know. Who needs a boj proxy for asset inflation when the fed and boe have gone nuclear?

Go back and review the rise and fall of ozawa and his views on Japan's role in the world as something than a US protectorate. Noda last week agreed to Open trade discussions after heavy us pressure to remove agriculture barriers (no irony here).

The nuke shutdown makes them exceedingly CFO unstable to the us blue water strategy - and the us Burma slash south china sea push this week isn't an accident. Go back and se the us state undersecretary who was thrown out of Japan a day or so before the big quake for calling he japanese ungrateful for the us base presence in Okinawa.

Japan's noda is now under 50% popularity months after winning the election. He has proven himself thus far another lackey. The more countries are picked off the ring probability the Nash breaks. The us basing troops in Australia and bending to Myanmar is not a sign of strength.

Yen is a pillar of the us "savings glut" central bank axis that appears to have outlived it's usefulness. One wonders I the Japanese suffer from the same learned helplessness.

Sun, 11/20/2011 - 20:43 | Link to Comment gjp
gjp's picture

Yeah that really drives me crazy. The us has a current account deficit of 7%' fiscal deficit greater than 10% for three years running and no end in sight, its banks are sitting on the biggest mountain of derivatives, its social security and Medicare promises are the most expensive and among the least funded, yet he goes on and on about everyone else's problems .... There's only one difference - the US can still monetize for the time being and is doing so with gusto. He should be more vocal abut that,, especially as an american who is thriving in the one industry most responsible for bringing the country and the world to this lamentable state.

Sun, 11/20/2011 - 20:47 | Link to Comment XitSam
XitSam's picture

Please note that in this interview, he was asked about Japan and Europe.

Sun, 11/20/2011 - 22:05 | Link to Comment kito
kito's picture

as i stated, over the past several interviews i have not heard a peep from bass about u.s.  implosion

Mon, 11/21/2011 - 03:26 | Link to Comment besnook
besnook's picture

as long as the dollar is the reserve currency it can come out of this smelling like a rose even as the people of the usa smell like the rotting compost fertilizing it.

Sun, 11/20/2011 - 19:14 | Link to Comment San Diego Gold Bug
San Diego Gold Bug's picture

Kyle Bass changed my life when I read an article he wrote back in 2005.  I bought gold, silver, ammo and guns and some land in the Rockies thanks to that article, all of which have protected my money from the giant Ponzi scheme which is Wall Street and Washington.  Thank you for not being afraid to voice your thoughts KB!!

Sun, 11/20/2011 - 21:24 | Link to Comment laosuwan
laosuwan's picture

Me, too, I finally found buyers for the worthless land we stupidly bought in Colorado in the 1980s.

Sun, 11/20/2011 - 19:36 | Link to Comment ennuihenry
ennuihenry's picture

I guess I should have emailed this to Tyler directly, since I posted this link here on 11/17.  

Sun, 11/20/2011 - 21:05 | Link to Comment TK7936
TK7936's picture

"Japan is xenophibic" Ive never met a xenophobic japanese neither in japan nore out of japan. All they want is for there country to stay japanese that doesnt mean they hate foreigners. Also the most indebted coubntry is the UK, the elephant in the room noone wants to talk about because Kyle Bass probably needs the city for his crap investments. "Recap the Banks" lol. Its like saying the Problem is the solution. Recap his head.

Mon, 11/21/2011 - 13:20 | Link to Comment BigInJapan
BigInJapan's picture

You don't live here and have to deal with the xenophobia on a daily basis, nor have you met that many Japanese.

Sun, 11/20/2011 - 21:19 | Link to Comment laosuwan
laosuwan's picture

Cogent analysis but why not include the fact that the earthquake prone country sits in the sea on top of what is essentially a volcano, and has no oil or natural resources except a few that are now radioactive and that its trading partners are broke? 

Anyway, I wonder why, in every video I have seen where he references Bernie Maddoff, does he touch his nose (body language for lying) see at 0.46. What doe he really know about Maddoff?

And something of a Republican presidential debate moment there at 1.27 when he includes Japan as part of the Western World.

And on behalf of my Japanese friends I would like to say that Japan is not xenophobic. In a country where Madonna and Rockabilly are universally popular and two of the top 40 magazines are about French Wine, it is pretty hard to make a case the Japanese are fearfull of foreigners. They just like their own culture, which is something of a rarity these days and I think is to be admired.

Sun, 11/20/2011 - 21:37 | Link to Comment Waterfallsparkles
Waterfallsparkles's picture

To be honest with you the Banks created this Crisis with their profligate lending and selling bad loans all over the World.  Now they want the People of the World to bail them out, again.  Just do not see where there is enough Money that can be extracted thru taxes and austerity from the People of the World to pay off or even keep even with the Debt that has been created.

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