Kyle Bass: Fallacies Are “Leading The Sheep To Slaughter” And “We Believe War Is Inevitable”!
” … all too often war is the manifestation of simple economic entropy played to its logical conclusion. We believe that war is an inevitable consequence of the current global economic situation.” – Quote
- Kyle Bass: Fallacies Such As MMT Are “Leading The Sheep To Slaughter” And “We Believe War Is Inevitable”!
by Tyler Durden, http://www.zerohedge.com/
Below are some of the key highlights from Kyle Bass’ latest, and as usual, must read letter:
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On central banks and the final round of global monetary debasement:
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Central bankers are feverishly attempting to create their own new world: a utopia in which debts are never restructured, and there are no consequences for fiscal profligacy, i.e. no atonement for prior sins. They have created Potemkin villages on a Jurassic scale. The sum total of the volatility they are attempting to suppress will be less than the eventual volatility encountered when their schemes stop working. Most refer to comments like this as heresy against the orthodoxy of economic thought. We have a hard time understanding how the current situation ends any way other than a massive loss of wealth and purchasing power through default, inflation or both.
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In the Keynesian bible (The General Theory of Employment, Interest and Money), there is a very interesting tidbit of Keynes’ conscience in the last chapter titled “Concluding Notes” from page 376:
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Central banks have become the great enablers of fiscal profligacy. They have removed the proverbial policemen from the bond market highway. If central banks purchase the entirety of incremental bond issuance used to finance fiscal deficits, the checks and balances of “normal” market interest rates are obscured or even eliminated altogether. This market phenomenon does nothing to encourage the body politic to take their foot off the spending accelerator. It is both our primary fear and unfortunately our prediction that this quixotic path of spending and printing will continue ad?infinitum until real cost?push inflation manifests itself. We won’t get into the MV=PQ argument here as the reality of the situation is the fact that the V is the “solve?for” variable, which is at best a concurrent or lagging indicator. Given the enormity of the existing government debt stock, it will not be possible to control the very inflation that the market is currently hoping for. As each 100 basis points in cost of capital costs the US federal government over $150 billion, the US simply cannot afford for another Paul Volcker to raise rates and contain inflation once it begins.
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read more!
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