January 23, 2013
The Japanese yen will likely “weaken significantly” against the dollar according to him. He spoke to Reuters at the GAIM Hedge Fund Conference in Florida this week.
Kyle Bass stated that because Japan never allowed creative destruction which was necessary, it probably has no choice but to inflate and devalue. He said the Japanese government just smoothed over the volatility, and he believes that everyone in Japan is in denial about what is happening to their nation’s economy.
“I think what you have to realize is when your debts are 24 times your central government’s tax revenue and you have a secular decline in population, and all of the things are finally catching up to you, what happens when you have a debt crisis?” Bass asked. “Your currency collapses.”
He also said he believes that when the Japanese yen does collapse, it will have a major social impact on the nation, with many Japanese losing 30 to 50 percent of their savings. According to Bass, “there’s no way out for Japan.” He says it’s “when and not if” the nation’s currency collapses.
Bass also believes that the rest of the world will follow in Japan’s footsteps, although he said he feels the U.S. and possibly Europe are years away from going through what he expects Japan will very soon.
According to Bass, the central banks are enabling spending to go higher and higher, and eventually all of that debt will negatively impact the currency.
Kyle Bass, an American hedge fund manager, is the Founder of Hayman Capital. He received extensive coverage in the financial press for profiting $590 million by short selling the sub-prime mortgage bond market, before that market crashed. In 2011, Bass initiated a huge position in Greek sovereign debt through CDSs. Media reports were that he could profit up to 650 times his investment should Greece default on its debt obligations.