Key Master

"What he means is Old Testament stuff, Mr Mayor. Real wrath of God type stuff."
--Dr Ray Stantz (Ghostbusters)

More well reasoned discourse from Kyle Bass on our central problem: excessive debt.

To Bass, revenues at the national level (GDP) are at or near the level where servicing debt is impossible without making significant sacrifice.

Interesting question asked during the convo: Since nearly all countries owe mountains of money, why not agree to knock a few zeros off everyone's tab. Viola--no more debt, problem solved.

However, as Bass notes, if current debt is 100 and people agree that it should now be 30, then someone is out 70.

This is because that 70 represented resources that someone in the past had lent out and had expected to get back. If someone makes the debt 'disappear' (default), then the creditor will not regain those resources and his/her standard of living falls.

Bass observes that making debt disappear thru default is likely--perhaps soon. But it will not come without pain. Standard of living will fall on average. Moreover, social unrest and perhaps political upheaval will arise(see Greece).

At the end, he notes that it's a matter of making difficult decisions today vs. apocalyptic decisions later.'

position in Treasuries