Subprime star investor (and China nemesis) Kyle Bass told CNBC on Thursday that while the Fed's "kneejerk" reaction to the Covid-19 pandemic was "let's say necessary," they're now grappling with how to remove the '40% more money' they dumped into circulation.
— Squawk Box (@SquawkCNBC) May 26, 2022
Echoing what has now become a consensus view (when just one year ago it was reserved for the tinfoil-hat, conspiracy-theorist corners of the interwebs, such as this website), Bass said that thanks to a "decade of bad policy," Americans are going to see higher food and energy prices, at the same time as the economy is cooling – which he says the Fed can't control with monetary policy, and will lead to a shallow recession at the end of 2022 or beginning of 2023.
"I think the economy is going to cool off and we will have a recession by the end of this year or the beginning of next year"
According to Bass, the Fed will be limited in terms of how high it can raise rates because it started with such a low base. As such, a true neutral rate will be impossible – as they'll have to pause hikes at around 200 basis points, or 2% on the key rate.
Pointing to yesterday’s minutes, he notes that Fed staff is still projecting 2.8% growth in 2022 which means growth would need to be at a 4% rate to hit that target after the negative Q1 GDP reading. -Bloomberg
"Clearly printing 40% more money than was in circulation in the first place was a little too much," he said.
As far as where he sees energy, Bass said that while he supports alternative energy, 'green' policies such as windfall taxes on oil producers only lead to higher prices.
"I believe this is a 30-40 year transition and I think that everybody else that is run by NGOs and some teenagers believes that we can just flip a switch and move to alternative energy," he said, adding "We need some adults in the room to map out a plan for energy transition."
That's a smart thing to say… if he is long old, boring fossil fuel companies – after all, as we have repeatedly said…
The best thing to happen to Exxon was Biden's "green" agenda
— zerohedge (@zerohedge) February 1, 2022
… there has been no greater gift for the Exxons of the world than Biden's "green" idiocy.