Low Rates Forever!!!

Another interesting interview with Kyle Bass, this time on Bloomberg. Covers a lot of the usual territory with Japan, but also offered interesting thoughts regarding rates in the U.S. Specifically, that they cannot be raised. Basically, every 100 bps rise equates to another $150 billion in interest expense (and that’s only if you assume that debt levels will not rise anymore). Contrast that with the budget situation – the politicians can’t even agree to $1 trillion in cuts over 10 years. And the discounted value on that is about $80 billion per year. In other words, the deficit becomes that much more onerous with higher rates since no offsetting cut is coming.