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Japan's Money Is Collapsing — Transcript

by Andrei Jikh · 4,794 words · 814 segments · language en · Watch on YouTube

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0:00So, Japan's economy is starting to
0:01break. And why that's so important to us
0:03is because all of our stock markets and
0:05all of our portfolios and 401(k)s are
0:08partially built on borrowed Japanese
0:12money. And that money is being asked to
0:15come back home.
0:16Now, there was a couple of very
0:17interesting tweets that went viral
0:19recently. And here's what they said.
0:21Quote, "The measures being prepared by
0:23the Bank of Japan will affect the lives
0:26of billions of people.
0:27To the people of the Western countries,
0:29I offer my deepest apologies. This is
0:32not a personal matter. May God's
0:34blessings be upon you." End quote.
0:36That tweet got millions of views. Now,
0:39no one really knows who this person is.
0:41The account goes by the name Yuto. It
0:43posts exclusively in Japanese. And over
0:46the last few months, they've sort of
0:48developed a reputation as someone who's
0:50somewhat of a market oracle and a Bank
0:53of Japan insider cuz the things they
0:55keep posting kind of keep coming true.
0:59So, 12 days after that first post, they
1:02posted again. Quote, "Japan's wealth is
1:05returning to its homeland by any means
1:07necessary. The Bank of Japan has so
1:10decided." End quote.
1:12That post also got millions and millions
1:15of views. And then last week, they
1:17posted a third time. Quote, "Article 589
1:21will be cited far more frequently than
1:22you imagine.
1:24Foreign borrowers should not assume that
1:25past approvals guarantee future funding.
1:28A warning to all borrowers who think
1:31they can continue to refinance through
1:32Japan. Article 589 is universal." End
1:36quote. I'll explain Article 589 later in
1:38the video because as these tweets were
1:40going viral, Japan's economy started to
1:42sort of break. For example, the Japanese
1:45yen has gone down to the lowest level
1:47against the dollar in about 40 years.
1:50Japan's government bond yields, aka
1:52their interest rates, went way up. And
1:54that usually only happens to what are
1:56called emerging markets when they're in
1:58what's called a debt crisis. This should
2:01not be happening to the world's biggest
2:03creditor country.
2:04Japan then spent $73
2:08defending its currency and they
2:11increased their interest rates to levels
2:13that we haven't seen since 1995.
2:17But, despite spending that $73 and
2:21raising their interest rates,
2:23it did nothing to help the yen.
2:26Which is also why they're now doing
2:28something they have never done before in
2:31the history of the modern world.
2:33Which is that Japan wants its money to
2:37return back home.
2:39Why?
2:40Because Japan is essentially being
2:41forced to choose whether it wants to
2:43save its bond market or its currency,
2:47its money.
2:48So, in this video, I'm going to try to
2:50explain what all these cryptic messages
2:52mean, like Article 589, what Japan's
2:55wealth returning home could mean, why
2:58they're passing their own stablecoin
3:00acts, and ultimately what all this means
3:02for the United States and our own
3:03investments. So, with that said, let's
3:06get into it. Hi, my name is Andrei Jikh.
3:08Hope you're doing well. Come for the
3:09finance and stay for Japan's economy.
3:11Now, in the nerdy world of economics,
3:13they say there's supposed to be two
3:15types of economies,
3:16but in reality, there's actually four.
3:19The developed, undeveloped, Argentina,
3:22and Japan.
3:23And that's because Japan has broken
3:25every rule of economics and still
3:28somehow got away with it.
3:30Because Japan has more government debt
3:33relative to the size of its economy than
3:35any developed country in the world. Over
3:37200% of GDP.
3:39Basically, that means Japan has more
3:41debt than Greece when Greece collapsed.
3:43They have more debt than any country
3:45that's ever hyper-inflated. So, any
3:48textbook would tell you a country like
3:50that should have collapsed decades ago.
3:54But Japan somehow did not.
3:56Now in the 1980s, Japan was what they
3:59called a miracle economy.
4:01Cuz at one point, the land under the
4:03Imperial Palace in Tokyo was worth more
4:07than all the real estate in California.
4:09And then, in the early '90s, that bubble
4:12popped. And Japan went into something
4:15that no modern economy had ever
4:17experienced. Which was three decades of
4:20deflation.
4:21The price of stuff did not go up.
4:23And their incomes didn't go up.
4:25So to fight it,
4:27the Bank of Japan lowered interest rates
4:29to zero, and basically left them there
4:31for 30 years.
4:33Money in Japan essentially became free
4:35to borrow. And when money's free to
4:37borrow, a 200% of debt to GDP doesn't
4:41really matter. Because the interest cost
4:43of having that debt is basically
4:45nothing.
4:47Now there's this second reason why Japan
4:49never collapsed, which is
4:51because of who Japan owes all that money
4:54to.
4:54You see, when Greece collapsed, they
4:57owed money to foreigners. When Argentina
4:59defaulted, they owed money to
5:00foreigners.
5:02Foreigner countries and investors, they
5:04panic. When they panic, they sell their
5:06assets.
5:08And that's when it's game over for that
5:09country.
5:10But Japan owes the money
5:12to Japan.
5:13The Bank of Japan itself holds about 48%
5:17of all Japanese government bonds.
5:20So the central bank literally owns half
5:22of its own government debt.
5:23Japanese insurance companies hold
5:25another 20%, Japanese banks 14%, and the
5:29foreigners own less than 8%.
5:32Now, here's why that's so important to
5:34Western nations.
5:36While the rest of the world spent the
5:38last 20 years printing money,
5:41Japan did not.
5:43Since 2004, the US money supply grew by
5:46about 280%
5:47Canada grew by 370%
5:51but Japan only grew by 90. Japan was the
5:53only major economy in the world that
5:55kept its money relatively scarce and its
5:58interest rates at zero.
6:00That combination created something
6:02called the Yen carry trade.
6:05Now the Yen carry trade meant if you
6:07were a hedge fund or a bank or an
6:09investor
6:10you could borrow Yen at 0% interest
6:13convert it to dollars
6:14you could buy basically anything in the
6:16world that paid you more than zero.
6:18Meaning you could buy US Treasuries
6:20paying 4 5% you could buy tech stocks,
6:23Bitcoin, anything you wanted.
6:26And you made free money.
6:27That's estimated to be worth trillions
6:30of dollars of investments all around the
6:33world funded by borrowed Japanese money.
6:38So Japan was like we want to get in on
6:40this too.
6:41So Japan took its savings overseas
6:43because for 30 years
6:44there was nothing worth buying in Japan.
6:47Japanese pension funds, insurers, banks,
6:49households they all shipped their money
6:51overseas to get some of that interest.
6:54And in the process
6:56Japan became the world's biggest foreign
6:59holder of US government debt. Holding
7:01something like over a trillion dollars
7:03of US Treasuries.
7:04Japan's pension fund for example the
7:06GPIF which is the biggest pension fund
7:08in the world holds hundreds of billions
7:11of dollars in US bonds and stocks.
7:14So think about it like this.
7:15When the US borrows money, when tech
7:17stocks go up, when Bitcoin goes up there
7:20is a strong chance that somewhere in
7:23that process it was partially funded by
7:26Japanese money.
7:27But remember this only works because
7:30interest rates were zero.
7:33They are no longer zero.
7:35Japan's interest rates are going up and
7:38because of that the economy is starting
7:40to break. Let me explain. Now before I
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8:36segment, and now let's get back to it.
8:37So, here's how Japan's economy is
8:39starting to break. Remember that 0%
8:41interest rates were only possible
8:43because of the circumstances that Japan
8:45was in. AKA, the prices in Japan never
8:48went up, which means when inflation is
8:50zero, you can keep your interest rates
8:52at zero forever because everyone's
8:54happy.
8:55The government can carry infinite debt
8:56for free, the world could continue
8:58borrowing cheap money, everyone's
9:00getting richer, and no one's
9:01complaining.
9:02Okay, so then, what changed? Why did
9:05they have to raise their interest rates?
9:08It's because of something that happened
9:09in 2020.
9:11That was the pandemic, which led to
9:13trillions and trillions of dollars
9:15flooding the market. There were broken
9:17supply chains, right? Energy prices went
9:19way up, and the whole world got
9:21inflation.
9:22By 2022,
9:24Japan got 2% inflation for the first
9:27time in decades.
9:29So, the Bank of Japan was like, "Okay,
9:30we've got some inflation. What do we do?
9:33All these other countries are raising
9:34their interest rates to fight inflation.
9:37Oh, look, the US raised interest rates
9:38to 5%. That's a lot. Europe's doing it.
9:41Canada's doing it. What do we do?
9:44I know, let's not raise our interest
9:45rates. We also have 200% of debt to GDP.
9:49Let's do nothing. Let's not rock the
9:51boat.
9:52Japan held their interest rates at zero
9:54and hoped that inflation would go away.
9:56That decision started to break their
9:58money, the yen.
10:00Cuz think about what happens when the US
10:03pays 5% on cash
10:05and Japan pays zero.
10:07What happens is money continues to flow
10:10out of the yen and into dollars.
10:13There is no demand for yen,
10:15so the strength of the yen collapses
10:17from around 110 per dollar to 150, then
10:21160.
10:23That might continue working if the
10:25country was self-sustaining,
10:27right?
10:28But Japan almost has no natural
10:30resources of their own. They make
10:32arguably the best culture in the world,
10:34right? The best food and Pokémon cards,
10:35and I personally love Japan, but they
10:37don't make their own oil, right? They
10:40import almost all of their energy, and
10:43all of it is priced in dollars. So, a
10:46collapsing yen means
10:48everything that Japan buys from the
10:51world gets more expensive for them,
10:53which means more inflation,
10:55which means more pressure on their yen.
10:58And all of that pressure eventually
11:01leads to the biggest change that
11:04economists thought would never happen to
11:06Japan.
11:07That change
11:09was a change to their psychology and
11:11culture.
11:12What does that mean? It means people now
11:15want a pay raise.
11:17You see, for 30 years, Japanese workers
11:19never really asked for pay raises
11:21because mostly that's a Western idea,
11:23because their prices never went up. So,
11:26why would you need a pay raise? Zero
11:28percent inflation
11:29froze Japan's need for pay raises. But,
11:33once inflation started to happen,
11:36workers started demanding those pay
11:38raises, and they started getting them.
11:40In fact, they got the biggest pay raises
11:43in over three decades. And once wages
11:47and prices start chasing each other
11:49higher, it's really hard to sort of put
11:53that genie back in the bottle.
11:55But then, things started to get worse
11:57because
11:58the world got this oil shock from the
12:00war in the Middle East, pushing energy
12:01costs even higher, and they got a new
12:04government in Tokyo that wanted to spend
12:05even more money, meaning they wanted to
12:08issue more bonds, aka more debt, at a
12:10time when they already have an insanely
12:14high debt to GDP.
12:15So, now Japan is at a crossroads. They
12:18have two options.
12:20Option number one, keep rates at zero,
12:22keep their high levels of debt
12:23manageable, and watch the yen get
12:25destroyed. Okay, watch inflation eat the
12:28retirees' savings.
12:30Basically, watch a country of savers get
12:31poorer every single month.
12:34That option could eventually lead to a
12:35revolution.
12:36So, you have option two.
12:38Increase interest rates to save the yen.
12:42Now, picking option two means that 200%
12:45of debt to GDP,
12:47that starts accruing real interest.
12:50The bond market that's been asleep for
12:5130 years starts to wake up. The Bank of
12:54Japan, remember, owns half of those
12:56bonds. So, they'll start bleeding losses
12:58on their own balance sheet. They need to
13:00start paying interest on their very high
13:03levels of debt.
13:04Now, there's no third option where
13:06everything stays the same way that it
13:08was before.
13:10So, the option is save the currency or
13:13save the bond market. Okay, choose one.
13:16Now, what's interesting though is that
13:16Japan actually tried an option three
13:18where they increased their interest
13:20rates just a little, and they intervened
13:22a lot,
13:23and they got the worst of both worlds.
13:26The yen started going down and bond
13:29yields started going way up. So, both
13:31markets, their money and their bond
13:34market broke at the same time.
13:36Let me show you what that breakage sort
13:38of looks like. First, I just want to say
13:40that this section is going to get pretty
13:41complicated, so stick with me because at
13:43the end of it, it'll make a lot more
13:44sense. But, let me start with their
13:46money breaking, the yen.
13:48As I'm making this video, the yen is
13:50trading at about 160-ish
13:53yen per dollar, which is also the lowest
13:56level that it's been against the dollar
13:57in about 40 years. And the last time
13:59this was happening, Ronald Reagan was
14:01president and Nintendo had just come
14:03out.
14:04Banks like JP Morgan are saying that 164
14:08yen per dollar is kind of like the magic
14:10line in the sand where Japan will
14:13supposedly not allow the yen to fall
14:14past.
14:16As of today, we are very close to that
14:19line and depending on when you're
14:20watching this video,
14:22it could have already crossed it. So,
14:23that's how their money's breaking.
14:26But now, let's look at how their bond
14:27market's breaking.
14:28In 2022, Japan's 10-year government bond
14:32paid just a quarter of 1%. Very small
14:35amount.
14:36Today,
14:37it pays about 2.7%,
14:40which is more than 10 times higher in
14:42just 4 years.
14:44The 30-year bond is at about 4%.
14:47And I know that those numbers seem small
14:50compared to US interest rates,
14:52but remember, this is a country with
14:54over 200% debt to GDP.
14:57Every one of these percentage points
14:59applied to a debt of this size
15:02is a huge amount of money in interest.
15:04But Japan also has a weird paradox
15:07that's happening.
15:09Last week, two things happened in Japan
15:10on the same day.
15:12The first thing that happened was
15:13inflation came in at 1.6%,
15:16which is good. It's below the Bank of
15:18Japan's 2% goal. That happened for the
15:20fifth month in a row.
15:22The second thing that happened was
15:24the Japanese stock market went down over
15:262%, which is bad. That was about 30
15:29trillion yen lost.
15:31And bond interest rates went up, too,
15:32which is also bad.
15:34This is the opposite of what should be
15:36happening.
15:37Normally, when inflation comes in low,
15:40bonds typically do well.
15:42Cuz low inflation means the central
15:43banks can relax.
15:45That's how it works in the US.
15:47But in Japan right now,
15:48inflation
15:50looks like it's under control. It's
15:51under target.
15:53But interest rates are still going
15:54higher, which is not good. Why?
15:57It's because Japan's bond market is not
16:00trading on inflation anymore.
16:02It's trading on a scarier question,
16:05which is
16:06who's going to be buying all these
16:07bonds?
16:09Right? The government wants to spend
16:09more,
16:11but the Bank of Japan,
16:12which is the buyer of last resort that
16:14owns half the market,
16:15they're trying to spend less.
16:18Investors are looking at the supply, and
16:20they're demanding to be paid more to
16:21hold it. Right? Cuz it's more risky for
16:23them. They're like, "I don't care what
16:24inflation does. Pay me more interest."
16:27This is why the world's investors
16:30are betting against Japan with huge
16:33amounts of leverage. Check this out.
16:35You're looking at 18 years of hedge fund
16:37bets on the Japanese yen.
16:40This data comes from the CFTC,
16:42which is publishing actual disclosed
16:44positions by big hedge funds.
16:47What this chart is showing us
16:49is that when this line is above zero,
16:53hedge funds are betting on the yen. They
16:55think the yen will go up.
16:57When it's below zero, they're betting
16:59against it.
17:00So, the lower this line goes, the more
17:03money is shorting the yen.
17:07Now, look at where we are today.
17:08We're all the way down here.
17:10Right? This is around -150,000
17:13contracts. In dollar terms, it's roughly
17:1611-12 billion dollars of bets against
17:19the yen.
17:20But that's only what's visible.
17:22Most currency trading happens in private
17:25deals between banks that never show up
17:27in this data. So, I can't show you that
17:29cuz we don't have it. But this might be
17:31just the tip of the iceberg.
17:33So, what they're all doing right now is
17:35they're borrowing yen, they're shorting
17:36the yen because they're assuming Japan
17:40is helpless to stop this.
17:43Now, the Bank of Japan sees all this.
17:45And what are they doing about it?
17:47Well, they tried to fight it.
17:49In April and May, Japan's Ministry of
17:52Finance spent 73 billion dollars buying
17:55their own currency, the yen.
17:57And it worked for about 3 weeks.
18:00The yen went up and then it went back
18:02down again.
18:03Then in June,
18:05the Bank of Japan increased rates to 1%
18:08and the yen went down anyway.
18:10One economist said that doing this while
18:12your economy still runs on cheap money
18:14is like tapping the brakes while keeping
18:16your other foot on the gas. You're going
18:18to burn through your brake pads and the
18:19car is not going to stop.
18:21Now, Japan still has enough money for 15
18:25more interventions of this size.
18:27But they're not using it.
18:29They're not using it because
18:31Japan has figured out you cannot defend
18:34your own currency by buying it.
18:37Every intervention is just going to feed
18:40the short sellers more fuel.
18:42So, if Japan wants the yen to actually
18:45go up and strengthen,
18:47it does not need to buy the yen.
18:49All it has to do
18:51is change where the money lives.
18:55And that is why Japan's policy is for
18:58its wealth to return to its homeland.
19:01So, there's an official word in
19:02economics for money returning back home
19:04and it's actually called repatriation.
19:06And here's how we know it's happening.
19:09Because for the first time in a
19:10generation, Japanese bonds are actually
19:12paying something. The 30-year bond pays
19:15about 4% right now. Which means for the
19:17first time in 30 years, a Japanese
19:20pension fund or insurance company can
19:22now look at a Japanese government bond
19:24and say,
19:25"Hey, maybe we should put our cash here
19:28instead, where we get a guaranteed yield
19:30at home, in my own currency, with no
19:32exchange rate risk." It's making sense
19:35for Japanese money to return back home
19:38for the first time since the '80s. Now,
19:41on July 10th,
19:42the Japanese government made an
19:44announcement about this.
19:46The finance minister of Japan said she
19:48wants the GPIF.
19:51That's the Government Pension Investment
19:54Fund, which is the biggest pension fund
19:56in the world, worth $1.8 trillion, to
19:59start moving its
20:00to start moving its investments away
20:01from foreign assets and into Japanese
20:04assets.
20:06Now, that fund holds roughly
20:08$230 billion of US Treasuries alone,
20:11plus
20:13hundreds of billions of dollars in US
20:15stocks.
20:16The government is like, "Okay guys, time
20:18to bring it all back."
20:20And what happened then was
20:22the yen went up and their bond interest
20:25rates went down. The biggest drop in a
20:27month. That's what they want.
20:29So, now every Japanese insurance company
20:31and every bank and every institution,
20:33they're watching what the government
20:35told the GPIF to do,
20:38and now they know that this is a sign of
20:40what is coming. Right? And we can
20:42already see them start to move their
20:44money. Check this out. This is data from
20:47Bloomberg showing Japanese life and
20:50casualty insurance companies purchases
20:53of long-term Japanese government bonds.
20:56For most of the last 2 years, you can
20:58see that these bars were negative.
21:00Insurers were what's called net sellers
21:03of Japanese bonds.
21:05But, look at the far right of the chart.
21:07The last bar shows the biggest buying in
21:103 years.
21:12The insurance companies just flipped
21:13from being sellers to being the biggest
21:14buyers in years.
21:16Now, hold on.
21:17Where are they getting the money
21:19to buy their own treasuries then?
21:22And the answer is
21:23US treasuries.
21:25By selling US treasuries, they get
21:27dollars, which they convert to yen.
21:30Their yen gets a buyer, and their bonds
21:32get a buyer. And the US assets they get
21:35a seller.
21:36And this is where it becomes a US
21:38problem.
21:39Here is how all of this is connected
21:42back to the US.
21:44Remember, for decades, Japan was the
21:46most reliable customer at US bond
21:49auctions.
21:50They were the number one foreign holder
21:51of US debt.
21:53And now our biggest customer
21:55is not buying our debt.
21:57In fact, they might start selling a lot
21:59of it.
22:00Fewer buyers means the US has to do what
22:03to get new customers?
22:05The US has to offer higher interest
22:07rates to attract new buyers.
22:09That is partially why interest rates are
22:13expected to go up here in the US.
22:16And if you look at the most important US
22:17Treasury bond, the 10-year bond, which
22:20is what sets our borrowing costs as
22:22consumers to buy things like 30-year
22:23mortgages,
22:24you'll see that right now it's paying
22:27about 4.7%,
22:29which is close to all-time highs.
22:32That's not good.
22:34Part of why that's happening is because
22:36a major foreign buyer of our debt is
22:38stepping back.
22:39So, even if you might not own any
22:41Japanese assets, your mortgage rate is
22:43partially set thanks to Japan. Now, hold
22:46on. Doesn't this sort of upset the US?
22:49I think it might.
22:50That's maybe why Japan wants to build
22:53its own intelligence agency for the
22:55first time since World War II.
22:57Maybe that's nothing. Maybe that's
22:58something.
22:59Maybe this is why we're seeing all these
23:01cryptic tweets about apologizing to the
23:04West, right?
23:05Okay, if you're in Japan, there's a
23:07problem with your plan.
23:09Because
23:11Japan does not control what investors do
23:13with their money.
23:15So, what if the money doesn't want to
23:16come home?
23:18What if foreign buyers or borrowers just
23:20keep rolling their cheap yen loans
23:22forever?
23:24Article 589 is how they'll make sure
23:27their wealth comes back home. Now, I'm
23:29not going to go too in-depth with
23:31Article 589 cuz there's no confirmed
23:33policy. There was no official statement
23:35other than that anonymous account, so we
23:37should be skeptical, but Article 589
23:40basically says a lender cannot charge
23:42interest on a loan unless the interest
23:45was agreed to, which essentially allows
23:48Japan to have a little more control over
23:50where their money's going. So, that's
23:52one way they're forcing the wealth back
23:54home.
23:56The second way they're doing it is
23:57through incentives, and that is why on
24:00July 20th, Japan passed something that's
24:02being called their version of America's
24:05Clarity Act, which means crypto in Japan
24:09is now legally recognized as a financial
24:12asset, which also means Japanese banks
24:15can now hold those assets.
24:17Now, the crypto bros are like, "Yeah,
24:19XRP and Bitcoin's going to the moon."
24:20But, why Japan is actually adopting
24:23crypto has nothing to do with trying to
24:26pump crypto.
24:28It has everything to do with
24:30incentivizing capital to return back
24:33home, and even more importantly, it's a
24:36system for them to buy back their own
24:38bonds.
24:40For example, one of the ways they've
24:41incentivized crypto is proposing tax
24:44cuts from 55%
24:47where Japanese crypto wealth stayed
24:49offshore
24:50down to 20% where it might come home
24:53onto their regulated exchanges in yen in
24:56their tax system, right?
24:58They're giving those people an incentive
25:00to return the wealth back to Japan.
25:02But even more importantly, they are
25:04using crypto as a means to offload their
25:08debt onto the world and their own
25:11companies.
25:13How we know this is because here in the
25:15US, stablecoin companies have become
25:18some of the biggest buyers of US
25:20government debt. And Tether is an
25:22example of this, right? It's a company
25:24that is the biggest corporate owner of
25:26US Treasuries. Because every single
25:29digital dollar that they issue has to be
25:31backed by something safe one to one,
25:35like US Treasury bonds.
25:37So Japan is looking at this US model
25:40and they're like, "Yeah, we got to get
25:42in on this, too." Right? So this will
25:44allow Japan's stablecoins
25:48to be backed by their own government
25:51bonds.
25:51Which means now they'll have a buyer of
25:54their huge amount of debt.
25:55I hope all that makes sense. If it
25:57doesn't, press the J button on your
25:58keyboard and watch it again. But Okay,
26:01let's say that all of this is true and
26:04this works exactly like Japan wants it
26:06to. The yen starts going up, right?
26:09Proving all the short sellers wrong.
26:11What happens to the US?
26:13All else being equal, here's what
26:15happened to the markets when the yen got
26:17stronger throughout history.
26:19Check this out. You're looking at 30
26:21years of the yen versus the dollar.
26:24The gray bars are official US
26:27recessions.
26:28And every red part here is when the yen
26:31got stronger relative to the US dollar.
26:34Here's what happened.
26:35In 1998,
26:38the yen went up 15% in just 3 days.
26:41What was happening at the time was a
26:43collapse of long-term capital
26:45management, which was a hedge fund
26:47blowup so big
26:49the Federal Reserve had to organize a
26:50rescue.
26:51And at the center of that problem
26:54was an earlier version of that carry
26:56trade that was unwinding.
26:58Then in 2008, the yen goes higher all
27:01year long.
27:02That's the global financial crisis.
27:04Every borrowed yen bet in the world was
27:07starting to unwind.
27:09Then 2011, record yen high, peak global
27:12fear. 2016, Brexit, same thing. March
27:162020, COVID crash, yen goes up while
27:19everything else in the world was being
27:20sold. Then August 2024,
27:23the Bank of Japan increased interest
27:26rates by just a little, a quarter of 1%.
27:29The yen went up and a part of that carry
27:32trade started to unwind and in one day
27:35Japan's stock market went down 12%.
27:38The worst day since 1987 and the US
27:41stock market went down 3%.
27:43Millions of people here in the US
27:46watched their portfolios lose money that
27:49day with no idea what was happening.
27:52Nothing happened in the US,
27:53but something was happening in Japan.
27:56So basically what we know is that every
27:58single time the yen got stronger really
28:01fast,
28:02it meant that markets somewhere in the
28:04world were starting to break.
28:07Now to be fair, the yen going up is not
28:10what causes these things to happen. It's
28:13usually the other way around. A crisis
28:15happens, the borrowed yen trade unwinds,
28:19everyone buys back yen, right? And the
28:21yen goes up really fast as everything
28:23else goes down.
28:24So the yen is kind of like a proxy or a
28:27measure for how much global leverage
28:30there is, how much money borrowing is
28:32going on.
28:33Now today, obviously the yen is not
28:35going up. It's a very weak money. It's
28:38having a hard time going up partially
28:40thanks to the world betting against
28:41them.
28:42But what makes this time so different is
28:46that in 1998
28:48in 2008 and 2020, 2024
28:51the yen going up was not intentional.
28:54But this time, a stronger yen is the
28:57plan.
28:58So all the things we talked about in
29:00this video, like the repatriation, the
29:02rate increases, Article 589, all these
29:05rumors all of that looks like that the
29:08goal of Japanese policy right now
29:10is to make this line go up. To make the
29:13yen stronger.
29:15What happens next is anybody's guess.
29:18If you're interested in seeing how I'm
29:19preparing and more of my thoughts about
29:21the economy, those videos live in the
29:23premium member section where you'll also
29:24get access to my main videos earlier. If
29:26that is valuable to you, the link is
29:28down below. And don't forget to deposit
29:29$100 with WeBull to grab your 12 free
29:31stocks. Thank you for watching this very
29:33long and complicated video. I hope you
29:35have a wonderful rest of your day. Smash
29:37the like button. Subscribe if you
29:38haven't already. Love to see you back
29:40here next time. Take care.

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