“Prepare For a European Default.” That’s the stark message from both GMO Investments and Kyle Bass on the inevitability of Europe's demise.
Why inevitable? Because the huge need for capital and the dire dearth of it available. Capital needs are almost EUR300 billion. Short of the central bank printing money (with everything that implies) no-one is gong to risk their own capital on this rapidly opening black hole. Says Bass: “There is no saviour large enough with a magic potion of capital to stave off this unfortunate conclusion to the global debt super cycle."
Time for banks, investors and pontificators to start treating “sovereign loans,” i.e., government debt, as the risky asset class it really is, says GMO.
Here’s Bass, who made a fortune predicting previous crashes: