Carry trades, far right riots, and upside down flags
2024-08-13 10:45:00 +07:00 by Mark Smith
The Yen Carry Trade situation is pretty dire. Each account I read or listenned to explores it in ever more detail. The blast radius just keeps widening. I'm no longer able to follow all the logic, but I can see it’s making people realise how messed up things are.
Especially for the US, which is essentially being reset back to emerging market status. Luke Gromen has described it as "US with Argentine Characteristics". Witty fortune cookie pun very much intended, I presume.
I mentioned recently that France might be in trouble having raised the Olympic flag upside down at the Olympics openning ceremony. It occured to me that Japan wouldn’t even be able to do that given that their flag is the same in every orientation.
I find it really really weird that the far right riots in the UK occurred the same exact time as the Yen Carry Trade fell apart. That carry trade by the way had been going on for just over a decade, which by the way was around the same time the UK’s previous riots occurred. I was in the UK during those riots and it was kind of scary.
Correlation is not causation, but it’s so unbelieably strange seeing all these events appear to be so correlated, like a slow moving train crash. And it wouldn’t suprise me at all if these events turn out to be much more closely linked than we previously realised. The world after all is to a large extent driven by money.
Anyway, this Peruvian Bull bit from his appearance on the most recent TFTC podcast [42:35] sums up the Japan situation pretty well and how it affects the US:
They have finally walked themselves into a situation where it’s a catch-22. It’s a situation of damned if they do, damned if they don’t. If they keep rates at this level or hike further they exacerbate the US debt problem both at the private and public level, and then if they lower rates they cause an unwind of the carry trade but then also will re-stimulate lending growth and increase debt in the private sector as well, and eventually lead to inflation, because usually with a rate cutting cycle comes QE, and comes monetary accommodation.
And with fiscal deficits at 7% of deficit to GDP, and debt to GDP at 132% and rising every single year. We are seeing this acceleration of the debt problem to the point that we are having $1tn of debt every 100 days. And last year we passed $1tn of gross interest expense within 9 months of the year for the first time in US history. And if we keep rates at this level that will just continue to accelerate. That financial gravity will start pulling in public sector debt, private sector debt, and everything will just start to get repriced higher and higher and higher.
And no-one can swallow that amount of debt issuance other than ultimately the central bank. And so what I’ve been writing about is this monetary dilemma that the FED faces, and there really isn’t any good options. They are in their own version of the Bank of Japan’s black hole. Luckily we are not as far and as deep into it as they are, but we are getting there, we will be there eventually.
The crazy thing is that the US is considering creating a strategic Bitcoin reserve. Some have said it could amount to up to 4 million Bitcoin, or approximately 1/5 of all Bitcoin in existence. That would potentially be a way for the US to get out of the debt problem. But as I’ve been trying to illustrate in this post, everything is so globally connected these days, would that even work? What would happen to the bigger Japan black hole?
It’s like two completely insane people jumped out of a plane with no parachutes. They discover as they fall that they are attached. They continue falling, hurtling towards the ground, and one of them, the smaller of the two, comes up with a crazy plan to make a parachute. They figure it all out, it can be done but they need the bigger of the two to also create a parachute.
You would think that, the situation being as bad as it clearly already is globally, that now would be a good time for anyone and everyone to start making a parachute, to start creating a strategic bitcoin reserve, just in case.
If Japan can destabilise the entire global economy by changing their interest rate by 0.25%, including the economy of the country who’s currency is the global reserve currency, doesn’t that mean they control the board right now?
At this point, I think the most crazy thing that could happen would be for some of Satoshi’s OG coins to suddenly move. What if Japan already had a strategic bitcoin reserve? What if they already knew mathematically they would never need to hoist their flag upside up down?
Update: Since writing this blog post a few hours ago I listenned to the latest WBD episode with American HODL and Erik Cason. There’s so much in there that’s relevant. Rather than try and find some clever way to integrate it here, I’m just going to add a quote. My head is already spining too much from the insanity of all the bizare sinchronicities.
Here’s the quote 1:30:31:
American HODL: Well like this is embarrassing though right? This is our fucking country. We are like talking about the future of our children and none of us can predict what we can leave to our children because of how much the political establishment has actually fucked up every single economic and monetary standard that there is.
We literally have put our life savings into magic internet money from a man that we don’t even fucking know, because our governments have failed us so miserably. And like 10 years ago, I was like, you know what, magic internet money man that I don't even know, he’s got a better idea than these dumb motherfuckers, so I’m just going all in on this, and if it doesn’t work out it’s fucking better than participating in the war economy.
Erik Cason: It’s so fucking true. It’s so true. I had the exact same feeling you had 10 years ago. Okay random japanese guy, let’s do this thing!
Go listen to the full episode, it’s awesome.
One thing I do take issue with is their view, that they express earlier in the episode, that people without kids are themselves still kids. That’s fucking bullshit. Motherfuckers, at least you have fucking kids. Priveledged much? Don’t be telling me how hard things are for you and your family while simultaneously infiniti belittleing me, when because of all this bullshit I can't even get onto the fucking track to start the fucking race. I don’t think I’ve even made it into the god damn stadium yet. You’re fucking welcome assholes.
If I ever do get going, will I too have to belittle those that arrive after me, who if we extrapolate, will likely be older, even more shriveled and even more broken than me? I can tell you, right now this doesn’t feel like magic internet money to me. More like infinite slavery tokens.
I’m too broken and tired to even figure out if all the metaphores and logic I’ve used here even check out. Please dear reader just imagine that this post was brilliant. Thank you.
God darn it world, what is this craziness you have us all in?