Germany to Go “All-In”, or Leave the European Monetary Union?

The fate of the euro zone rests on Germanys decision over whether to go all-in
in an attempt to save the peripheral European nations, or to exit the European
Monetary Union according to hedge fund manager Kyle Bass. Bass who as the head
of Hayman Capital Management in Dallas has risen to prominence after
successfully shorting subprime securities in 2006 and 2007, and more recently
betting against the sovereign debt of Greece and other euro zone countries
discussed his views on Germanys likely next steps in a CNBC interview. Although
he did not discuss gold in this interview, Bass has also been bullish on the
yellow metal for many years due in large part to his view that governments
around the world will continue to resort to currency debasement to combat
ongoing deflationary risks across the globe. His comments are presented in their
entirety below: I believe that Germany and the balance of the Eurocrats will
attempt to default Greece within the euro zone first. The frictions associated
with such an event will prove to be problematic and the usual benefits of a
substantially weakening currency that would historically accrue to the country
in default will not be available to Greece. Greece will therefore be forced to
go back to the drachma at some point in the near future. In the end, it is most
likely that after Greece and the next peripheral country begin to hard default,
Germany will exit the [European Monetary Union] and recapitalize their own
banks. After recently conducting a population study on the German people, we
have determined that the overwhelming majority of the people of Germany think
that they would be better off never having formed the euro in the first place.
Two thirds of the people do not think that they have any obligation to bail out
profligate members of the EMU. The markets hopes rest upon Germany and the
[European Central Bank] going all-in at some point in the future. I dont think
that is likely at all. There is no playbook for how the world will most likely
deal with a cluster of sovereign defaultsI believe it will all read like fiction
from here. The organizers and members of the EMU are desperate and have nowhere
to turn. The circular references of the optical backstops [International
Monetary Fund and European Union] are showing in broad daylight.