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In case anyone was curious, Kyle Bass continues to bet on a full-blown Japanese currency (FXY)...

In case anyone was curious, Kyle Bass continues to bet on a full-blown Japanese currency (FXY) and government debt (JGBT, JGBL, JGBS, JGBD) crisis. "This gross vs. net argument is just silly," says Bass alluding to large official and other domestic holdings of JGBs. "If they go to try and sell any of those assets, it will create a panic." Bass commissioned a poll of Japanese investors asking their reaction if the government asked them to buy JGBs amid a crisis: 8% said they would buy, 83% said they would "run, not walk" from the paper.
Comments (2)
  • Jake2992
    , contributor
    Comments (825) | Send Message
     
    How is the gross vs. net argument silly? One represents money that WILL be spent in Japan, another does not. Bass says IF JGB sell of it will create a panic, and if there is a panic JGB will sell off. Sounds like he is using circular reasoning, instead of saying why there would be a sell off. The worst is behind them for Japan. There will be a correction in the markets, but after the Reinhoff Rogoff scandal most people realize debt isn't the boogeyman some make it out to be, and stimulus is the only way to end crippling deflation and stagnation.
    21 May 2013, 12:00 PM Reply Like
  • longboren
    , contributor
    Comment (1) | Send Message
     
    The Reinhoff Rogoff "scandal" even when corrected does't appreciably change their conclusion: at some point too much debt interferes with an economy's growth. Different societies may experience "tipping points" at different levels of debt, but common sense tells us that there is such a point. Now what confuses the issue is that some of the debt is owned by the Japanese government itself and their Central Bank. The former should cancel out, and the latter is essentially exogenous to the system, except for whatever effects there may be on confidence in the system. Even on a net basis, the Japanese debt combined with their demographic situation indicates an insurmountable problem, unless the Japanese are willing to take their licks (not likely) and let the economy deflate to rid itself of the excessive debt overhang.
    21 May 2013, 02:14 PM Reply Like
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