You Know How This Ends Right? THIS ENDS WITH WORLD WAR
In 2006, when Americans were flying high on ever-expanding credit and double digit real estate growth,Â hedge fund managerKyle Bass came to the conclusion that something was very wrong.
He and his investors determined that a massive real estate bubble was forming in sub-prime mortgages. But rather than just making a prediction, they put their money where their mouth was, and took a $4 billion gamble that the real estate market was about to detonate.
At the time, many in the industry and within financial circles thought him crazy.
History, however, proves he was right.
When theÂ real estate bubbleÂ did finally burst, stock markets plummeted and mortgage backed securities fell to pennies on the dollar. Bass and his hedge fund made billions in the process.
Bassâ foresight was 20/20, and now he has issued a warning so dire that it, like the real estate crisis and recession that followed, is unimaginable for most Americans.
In many of these situations the quantitative analysis is already done.
Itâs just a question of when will this unravel and how will it unravel, which I think is the key when weâre thinking about the chronology of events and the likelihood of events going forward.
Something that I think is really important to pay attention to, in the last 10 years debts around the world â this is total credit market debts, this is on balance sheets, sovereign obligations, corporate debt, household debt â has grown from $80 trillion to just over $200 trillion.
We sit today at the worldâs largest peacetime accumulation of debt in world historyâŠ
âŠYou know how this ends right?
This ends through warâŠÂ
âŠI donât know whoâs going to fight who, but Iâm fairly certain in the next few years you will see wars erupt, and not just small onesâŠ
Youâre going to see more social unrest.
You saw HUGE riots in Greece, and youâre seeing HUGE riots in other parts of the world over food (and lack of food) and those are actually derivatives of the financial problems that weâre seeing. Weâre exporting inflation to some other nations. Going forward itâs going to be a problem.
Theyâre not going to tell you [that a collapse is coming]. Youâre going to have to see it for yourself. [During the Tequila crisis], the Mexican government affirmed they would not default, that they would not devalue, almost daily. The day after they said âwe wont devalue,â they devalued by 60%.
The governmentâs never going to tell you that itâs going to happen.
Greeceâs Yunker said recently, âWhen it becomes seriousâyou have to lieâ. These guys are never going to tell you the truth, because they canât tell you the truth. Their job is to promote confidence, not to tell you the truth.
Watch Kyle Bass:
Full SpeechÂ at the AmerCatalyst 2012 ConferenceÂ (Approx 1 hour)
The United States, Europe and the rest of the world have created more debt than has ever existed in the history of the world. Debt is nothing more than a representation (and expectation) of future earnings â future work.
But, as many of us know, there has been so much money borrowed that we canât possible every expect to pay it back. In fact, the only thing we can expect is that we will continue to take on even more debt.
At some point in the (near) future, the plug is going to be pulled and no one is going to lend anyone any more money. We saw this on a small scale in 2008 when credit markets around the world froze up.
No one wasÂ lending money. There was so much risk that banks not only refused to lend money to individuals and businesses, but they refused to even lend each other money.
Central banks around the world, namely the U.S. Federal Reserve, calmed financial markets by pumping out trillions of dollars in emergency lending.
This gave many a perception that things were returning to normal, but as Kyle Bass points out, we are in anything but a normal situation.
Debt has sky rocketed and weâre not going to pay it back â ever.
Like the mafia does when debts donât get paid, our creditors are eventually going to resort to âbreaking some legs.â
But weâre talking about debts of entire sovereign nations here, so the tools used to âtake care of itâ wonât be crowbars or baseball bats, but rather, soldiers, tanks and intercontinental ballistic missiles.
War is coming â just as it has throughout history.
And the 99% of Americans who believe in aÂ benevolent,Â all knowing, all caring government will be the last ones to get the memo.
Ignore the warnings at your peril.
ByÂ Mac Slavo
January 1, 2012