Kyle Bass: A top central banker once told me something that he'd never say publicly
Texan hedge fund manager J. Kyle Bass, the founder of Hayman Capital, said he had this “out of body” experience when he had a private meeting with a top central banker.
“I had a fascinating kind of out of body experience meeting with one of the world’s top central bankers, in a private meeting, about three years ago. And he said, ‘You know Kyle, quantitative easing only works when you’re the only country doing it.’ Now he would never say that publicly,” Bass told Grant Williams, the author of the newsletter “Things That Make You Go Hmmm,” in a wide-ranging interview on Real Vision Television, a subscription financial news service.
Bass didn’t name the central banker he met, but he noted that he was “one of the four top central bankers in the world.”
“But it was one of those moments where I…it was one of those epiphanies almost, where it’s something you and I knew, but hearing him say it….it was a jarring experience for me, because when I look around the world today, everyone’s in the same boat. So we’re all trying…we’re attempting through our Treasury and our Fed to get the rest of the world to not devalue against us, while we quietly attempt to devalue ourselves against them, and it’s all this…it is the race to the bottom, it is the beggar thy neighbor policies that we all talk about. And I believe that there is no way out.”
In the aftermath of the financial crisis, central bankers around the world unleashed ultra easy monetary policy. One of the efforts involved the Fed making large-scale purchases of bonds, aka quantitative easing. Eight years later, interest rates are still at or near zero, and in some cases, negative.
In the end, Bass thinks central bankers will move to an even more aggressive easy policy referred to as helicopter money.
“I believe that there is no way out. But going from a problem of Ricardian equivalence to helicopter money is like a natural, logical step for them. I’m glad I’m not them. But as a global participant, and more importantly as a global citizen, you know how to allocate your assets in that scenario, and you need to own productive assets to try to defend yourselves from this.”
During the hour-long interview, Bass discusses position sizing, gold, the U.S. economy and investing around central banks. He also focuses heavily on China, which he’s predicted will have a meltdown greater than the 2008 financial crisis. The full interview is available with a free 7-day trial of Real Vision Television.
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Julia La Roche is a finance reporter at Yahoo Finance.
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