Kyle Bass’ bet against Japan has has not been working so far, but that has not stopped his conviction that he will be proven correct. According to a letter obtained by ValueWalk, Kyle Bass defends his bets against Japan. The 30 page paper does not discuss returns, but states why Japan will inevitably default. Additionally, Kyle Bass responds to criticism from many in the Modern Monetary Theory (MMT) school of thought that a currency issuer like Japan cannot default. To that, Kyle Bass states that this theory will ‘be dis-proven in the coming months and years.’ Furthermore, Kyle Bass believes that ‘this line of thinking which will ultimately lead the sheep to slaughter,’ and those who adhere to the theory will be the ultimate losers. However, the founder of Hayman Capital does not explain why currency issuers are different than countries like Greece, which cannot issue money or print it.
Additionally, Kyle Bass has some thoughts on the Sovereign debt crisis and states, ‘sadly, looking back through economic history, 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.’
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The full document, from November 15th, is embedded below:
Kyle Bass Hayman Capital on why Japan will default November 15th 2012