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The USD/JPY exchange rate is the most important macroeconomic indicator. In my previous article, “The Easy Button,” I wrote that measures must be taken to strengthen the resilience of the yen. The solution I proposed was for the Federal Reserve to exchange unlimited newly printed dollars with the Bank of Japan for yen. This way, the Bank of Japan could provide unlimited firepower of dollars to the Ministry of Finance, allowing them to buy yen in the global foreign exchange market.
While I still believe in the effectiveness of this solution, the central bank scammers responsible for the “Fool’s Group” (also known as the G7) seem to be choosing to make the market believe that the interest rate differential between the yen and the dollar, euro, pound, and Canadian dollar will decrease over time. If the market believes in this future state, it will buy yen and sell all other currencies. Mission accomplished!
To make this magic work, the central banks of the G7 countries, which have “high” policy rates, must lower their interest rates.
It is worth noting that the policy rate of the Bank of Japan (green) is 0.1%, while the policy rates of other countries are 4-5%. The interest rate differential between domestic and foreign currencies fundamentally drives the exchange rate. From March 2020 to early 2022, all countries were playing the same game. As long as you don’t leave the house when you have a cold and inject mRNA heroin, everyone can get dollars for free. When inflation manifests itself in such a significant way, the elites cannot ignore the pain and suffering of the common people, so the central banks of the G7 countries are actively raising interest rates.
The Bank of Japan cannot raise interest rates because it holds over 50% of the Japanese government bond market. As interest rates fall, the prices of Japanese government bonds rise, making the Bank of Japan appear solvent. However, if the Bank of Japan allows interest rates to rise, causing the Japanese government bonds it holds to fall, this highly leveraged central bank will suffer catastrophic losses. I calculated a terrifying account for readers in the article “The Easy Button.”
That is why if the “bad woman” Yellen, who is giving orders in the G7, decides to narrow the interest rate differential, the only choice is for the central banks with “high” policy rates to lower them. In conventional central bank thinking, lowering interest rates is a good thing when inflation is below target. What is the target?
For some reason, I don’t know why, the inflation targets of the central banks in the G7 are all 2%, regardless of cultural, growth, debt, population, and other differences. Is the current inflation rate rapidly exceeding 2%?
Each colored line represents the inflation target of different central banks in the G7. The horizontal line is 2%. No G7 country’s government has announced **vertical and dishonest inflation statistics below the target value. In my opinion, the inflation rates in the G7 seem to be forming a local bottom in the range of 2-3% and will then explode higher.
Considering this chart, orthodox central bank governors would not lower interest rates at the current level. However, this week, the Bank of England and the European Central Bank lowered interest rates despite inflation being above target. This is very strange. Did financial turmoil lead to the need for cheaper currency? No.
The People’s Bank of China lowered its policy rate (yellow) while inflation (white) was above the target (red).
The European Central Bank lowered its policy rate (yellow) while inflation (white) was above the target (red).
The problem is the weak yen. I believe the “bad woman” Yellen has stopped the rate hike show. Now is the time to take care of the global financial system led by the United States. If the yen does not strengthen, the Chinese will unleash the dragon of depreciating the yuan to match their main export competitor, Japan, with its super cheap yen. In this process, US Treasury bonds will be sold off, and if this happens, the peace under US rule will become a joke.
Next Steps
The G7 will hold a meeting in a week. The post-meeting statement will be of great interest to the market. Will they announce some coordinated currency or bond market manipulation to strengthen the yen? Or will they remain silent but agree that everyone except the Bank of Japan should start lowering interest rates? Stay tuned!
The biggest question is whether the Federal Reserve will start lowering interest rates as the November US presidential election approaches. Normally, the Federal Reserve does not change its policy stance near the election. However, normally, the favored presidential candidate does not face potential imprisonment, so I am prepared to think flexibly about my question.
If the Federal Reserve lowers interest rates at the upcoming June meeting while their preferred manipulated inflation indicator is above the target, the USD/JPY will significantly drop, meaning the yen will strengthen. I don’t think the Federal Reserve is ready to cut rates because slow-starting Biden is being questioned in opinion polls due to rising prices. It is understandable that ordinary Americans are more concerned about whether the vegetables they eat are more expensive than the cognitive abilities of vegetables running for re-election. Fairly speaking, Trump is also a vegetable as he likes to chew McDonald’s fries while watching “Shark Week.” I still think rate cuts are political suicide. My basic view is that the Federal Reserve will stay put.
On June 13, when these scoundrels sit down to enjoy a lavish meal paid for by taxpayers, the Federal Reserve and the Bank of Japan will have already held their policy meetings for June. As I mentioned before, I expect the Federal Reserve and the Bank of Japan to not change their monetary policies. The Bank of England will hold a meeting shortly after the G7 summit, and while it is widely expected that they will keep policy rates stable, considering the rate cuts by the Bank of England and the European Central Bank, I believe they will unexpectedly lower their policy rates. The Bank of England will have nothing to lose. The Conservative Party will be trounced in the next election, so there is no reason to defy the orders of the former colonial rulers to suppress inflation.
Exiting the Slump Zone
The June central bank fireworks, which kicked off with rate cuts by the Bank of England and the European Central Bank, will drive cryptocurrencies out of the summer slump in the northern hemisphere. This is not the basic scenario I anticipated. I thought the fireworks would start in August, around the time of the Federal Reserve’s Jackson Hole Symposium. That is usually the place where sudden policy changes are announced as we enter the autumn.
The trend is clear. Central banks on the edge are launching an easing cycle.
We know how to play this game. We’ve been playing this damn game ever since our savior Satoshi Nakamoto gave us the weapon to defeat the TradFi devils in 2009.
Go long on Bitcoin, and then shitcoins.
Given the change in the macro situation compared to my baseline, my strategy should also change accordingly. For the Maelstrom investment portfolio project, they asked me whether they should launch their token now or later. I said, “Just fucking start now!”
As for my excess liquidity in synthetic USD cash in cryptocurrencies, also known as Ethena’s USD (USDe), it is earning a generous annual interest rate. Of course, I will tell readers what these are after I buy them. But I just want to say that the bull market in cryptocurrencies is awakening and will soon skin and tear apart the spendthrift central bank governors.
Tags:
Bitcoin
Carbon Value
Note: The opinions expressed in all Bitpush articles only represent the author’s views and do not constitute investment advice.
Original article link: https://www.bitpush.news/articles/6856241
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