Submitted by Tyler Durden: As the fast-money flabber-mouths stare
admiringly at the rise in nominal prices of Japanese (and the rest of
the world ex-China) stock prices amid soaring sales of wheelbarrows
following Kuroda's 'shock-and-awe' last night, it is Kyle Bass who
brings these surrealists back to earth with some cold-hard-facting. Out
of the gate Bass explains the massive significance of what the Japanese
are embarking on, "they are essentially doubling the monetary base by the end of 2014."
It is a "Giant Experiment," he warns, but when you are backed into a
corner and your debts are north of 20 times your government tax revenue,
"you're already insolvent." Simply put, Bass says they have to do
something and they have to something big because they are "about to
implode under the weight of their debt." For a sense of the
scale of the BoJ's 'experimentation', Bass sums it up perfectly (and
concerningly), "the BoJ is monetizing at a rate around 75% of the Fed on
an economy that is one-third the size of the US!" What they are trying to do is devalue the currency to attempt to become more competitive while holding their rates market flat - the economic zealots running the world's central banks believe they can live in that Nirvana - and Bass believes that is not the case, as they will lose control of rates, since leaving the zone of insolvency is impossible now. His advice, "if you're Japanese, spend! or take it out of your country. If you're not, borrow in JPY and invest in productive assets."
Do not be long JPY or Japanese assets as he concludes with the reality of Japan's "hollowed out" manufacturing industry and why USDJPY is less important that KRWJPY.
Source
banzai7
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