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Breaking The Bank
In "One Trade To Rule Them All," I characterized the yen's worst year on record as the quintessential example of how 2022's macro cross-currents have conspired to upend markets. The yen, I wrote, encapsulates the macro zeitgeist.
I also flagged a paradox. In better times, dollar-yen rallies were risk-on events. Not so currently.
The free-falling yen is indicative of the perils associated with central banks sitting idly by in the face of rampant Fed tightening. In the Bank of Japan's case, dome
I find Macro Economics fascinating. I would love H to do another pass at the “Milkshake theory” that he analyzed a couple of years back. To me (the ignorant) it looks like things are shaping up that way. Also, how high can interest rates go before the US, UK, Europe and Japan cant pay their debts. Where will that money come, if it is created wouldn’t that increase inflation.
Hasn’t the Fed been buying treasuries and MBS for many years following the GFC with barely any inflation?
I know the Fed is concerned with taming inflation in the US but if their actions continue to support an unabated climb in the dollar against the Euro and Yen we all lose in the end. A seriously weakened EU and Japan means a higher possibility of success for Russia and bigger dominance in Asia for China, the rising dollar will wreck havoc and destroy the economies of our allies faster than sanctions will affect Russia and inflation will likely remain north of 5%. The Fed’s single mandate is starting to look like insanity to me, the Fed’s credibility is not worth the demise of the western world.
Great point.
Crowded positioning. Overextended carry trade. Real rates in Japan highest in years compared to other currencies. Time to buy the yen.