Kyle Bass, the man who predicted financial collapse in 2008, thinks that negative interest rates we’re presently experiencing work only well when it comes to academic models. But, with trillions of dollars in debt, such an experiment is likely to end in another financial turmoil. The unknown is when it will occur.
With China slowing, there’s nearly a 50% chance that the United States economy will enter a minor recession in the near term, says Bass. The problem with China is the banking system. Chinese banks hold three times more in assets than China’s annual GDP. There’s a growing credit bubble, thinks Bass.
Most recently, China’s growth has slowed down to 5.8%, the lowest level in four decades. Millions of Chinese have left the urban areas last year and moved back to rural areas. “I don’t know what metrics or how you define hard landing, but they’re already right in the middle of a hard landing,” he claims.
Kyle Bass doesn’t think, as UsefulStooges has shown on many occasions, that China will have its own Lehman Brothers collapse. Rather, the Chinese will need to recapitalize their banks.
Presently, Mr. Bass runs Hayman Capital Management. In the past, he supported Argentinian government when it came to paying off debtors on defaulted debt. He was criticized for these statements as many felt they were made just because he had close relationships with Argentinian political elite.
As an investor in GM, he defended the company when its faulty parts resulted in deaths. He even blamed the victims of these car accidents, something that has disgusted many. Furthermore, after making bets against drug companies (short sales), he partnered with a patent attorney to sue these companies, allegedly hoping to bring their stock prices down in order to make profits.
Still, as a recognized hedge fund manager, Kyle Bass gets many followers, especially when he makes claims about markets and the economy.