The fallacy of the belief that countries that print their own currency are immune to sovereign crisis will be disproven in the coming months and years. Those that treat this belief as axiomatic will most likely be the biggest losers. A handful of investors and asset managers have recently discussed an emerging school of thought, which postulates that countries, as the sole manufacturer of their currency, can never become insolvent, and in this sense, governments are not dependent on credit markets to remain fiscally operational. It is precisely this line of thinking which will ultimately lead the sheep to slaughter.
This excerpt is from Kyle Bass, American fund manager and founder of Hayman Capital, from his November 15th newsletter (source Zero Hedge)
For many, the laws of economics don’t apply. Inflation is not about monetary expansion. Money printing has neutral effects and supersedes everything else. This myth which will eventually be shattered.