How about listing the key points for lazy folks?
No attempt to summarize; that is not my portfolio.
Now to the article. ++++! Carmen Reinhart is very smart, and not afraid to speak out. She says that governments have passed the baton of handling the indebtedness in advanced economies over to the central banks. She does not explicitly say this, but I took it that Mr. Bernanke or his Euro and Japanese counterparts cannot be expected to raise interest rates. Their whole goal is to shift wealth from debtors (banks and governments) to savers, the rest of us. And if some foreign buyers of our debt go on strike, the rest can always be bought by China and Mr. Bernanke. China, because they need to prevent the from renminbi rising, and Mr. Bernanke because this is what he does. This process is called financial repression.
She points out that interest rates were kept very low after WW2 to allow governments to retires a lot of debt, and it wasn't until the 70s that central bankers achieved some independence.
A very similar point was made by Kyle Bass in response to a typically intelligent Bloomberg TV reporter. She asked, will Mr. Bernanke raise interest rates soon? Bass said no, he can't. That would turn a stealthy default (via negative real interest rates) into an obvious default when interest costs would overwhelm the federal budget.
I took a position with puts against the yen which has worked out, but to be short the yen I must also be long something else, in this case the USD. I have begun to trade out of this, and into some longs on gold mining stocks,. I have mucked around with these things since the late 60s, and always made some money but not a lot, as the risks are pretty clear. There really are no conservative yet appealing plays.
Thanks for posting this great interview Lsbcal.
Ha