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Author: Arthur Hayes, founder of BitMEX; compiled by Deng Tong, Bitchain Vision
The dollar-JPY exchange rate is the most important macroeconomic indicator.In my previous post“Arthur Hayes: Why the weak yen may push BTC to $1 million”In the meantime, I wrote that measures must be taken to make the yen appreciate.The solution I propose is that the Federal Reserve (Fed) can exchange unlimited amounts of freshly printed dollars with the Bank of Japan (BOJ) in exchange for the Japanese yen.This will allow the Bank of Japan to provide unlimited amounts of dollar firepower to the Japanese Ministry of Finance (MOF), which can be used to buy yen on the global forex market.
While I still believe in the effectiveness of the solution, it seems that the central bank scammers in charge of the Group of Fools (i.e., the G7) chose to convince the market that the interest rate differences between the yen and the US dollar, the euro, the pound and the Canadian dollar are the same as the US dollar, the euro, the pound and the Canadian dollar.Will shrink over time.If the market believes in this future state, it buys the yen and sells out all other currencies.The mission is completed!
To make this magic work, the G7 central banks (the Federal Reserve, the ECB, the Bank of Canada “BOC” and the Bank of England “BOE”) with “higher policy interest rates must be lowered.
The key point to be paid attention to is,The Bank of Japan’s policy rate (green) is 0.1%, while all other countries are 4-5%.The difference in interest rates between the domestic currency and foreign currency fundamentally drives the exchange rate.When inflation was so severe that elites could not ignore the pain and suffering of civilians, the G7 central banks (except the Bank of Japan) all raised interest rates sharply.
The Bank of Japan cannot raise interest rates because it owns more than 50% of the Japanese government bonds (JGB) market.The interest rate cut has caused JGB prices to soar, making the Bank of Japan seem to be able to afford it.However, if the Bank of Japan allows interest rates to rise and its holdings fall, then a high-leverage central bank will suffer catastrophic losses.I am here“Arthur Hayes: Why the weak yen may push BTC to $1 million”It has done some terrible calculations for readers.
That’s why if Bad Gurl Yellen, the helm of G7, decides to reduce the spread, the only option is a central bank with a “high” policy rate to lower the interest rate.According to the orthodox central bank thinking, if inflation is below the target, interest rate cuts are a good thing.What is the goal?
For some reason, I don’t know why, every G7 central bank’s inflation target is 2%, regardless of the differences in culture, growth, debt, population, etc.Has the current inflation rate exceeded 2%?
Each colored line represents a different G7 central bank inflation target.The horizontal line is 2%.No G7 government released manipulative and dishonest inflation statistics below targets.From my technical analysis, G7 inflation seems to be forming a local bottom in the 2-3% range, and then an explosive rise.
Given the chart, orthodox central bank governors will not lower interest rates to current levels.However, this week, the Bank of Canada and the European Central Bank lowered interest rates as inflation was above target.This is very strange.Is there any financial turmoil that requires cheap funds?No.
The Bank of Canada lowered its policy interest rate (yellow) when inflation rate (white) is higher than target (red).
The ECB lowered its policy interest rate (yellow), while inflation (white) was above the target (red).
The problem is that the yen is weak.I believe the bad girl Yellen blocked the Kabuki performance of the interest rate hike.It is time to start to maintain the US-dominated global financial system.If the yen does not appreciate, U.S. Treasury bonds will be sold, and if that happens, it will be a game, setting and match of the US-led peace.
Next step
The G7 will meet in a week.The communiqué issued after the meeting will arouse great interest in the market.Will they announce some kind of 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 cutting interest rates?Stay tuned!
The biggest question is whether the Fed will start cutting interest rates as the U.S. presidential election approaches in November.Normally, the Fed will not change direction as the election approaches.
If the Fed cut interest rates at its upcoming June meeting and their favored inflation indicators are above target, the dollar will fall sharply against the yen, meaning the yen will strengthen.I don’t think the Fed is ready to cut interest rates because “Slow Joe Biden” has been criticized for rising prices in the poll.Understandably, American civilians are more concerned about whether the vegetables they eat are more cognitively more expensive than those running for re-election.To be fair, Trump is also a vegetative person because he likes to watch Shark Week while eating McDonald’s fries.I still think the rate cut is a political suicide.My basic point is that the Fed keeps interest rates unchanged.
On June 13, the Federal Reserve and the Bank of Japan will hold a policy meeting in June.As I said before, I do not expect the Federal Reserve or the Bank of Japan to change monetary policy.The Bank of England will meet shortly after the G7 meeting and while everyone agrees that they will keep policy rates unchanged, I think the downward trend may be a surprise given the rate cuts of the Bank of England and the ECB.The Bank of England has nothing to lose.The Conservatives will lose a crushing defeat in the next election, so there is no reason to disobey the orders of their former colonial rulers in order to control inflation.
Many central banks start the prelude to cut interest rates
This week, the Bank of Canada and the European Central Bank rate cuts kicked off the June central bank governor, which would lift cryptocurrencies out of the summer downturn in the Northern Hemisphere.This is not the basic situation I expected.I thought the event would start in August, just as the Fed held the Jackson Hall seminar.This is usually where sudden policy changes are announced in the fall.
The trend is obvious.Fringe central banks are beginning a cycle of easing.
We know how to play this game.It’s the same game we’ve been playing since 2009, when our savior, Satoshi Nakamoto, gave us the weapon to defeat the TradFi devil.
Long Bitcoin, then junk coins.
Compared to my baseline, the macro landscape has changed.Therefore, my strategy will change as well.
For my extra Ethena’s USD (USDe), it’s making some great APY, and it’s time to deploy it on firm junk coins again.Of course, I will tell the reader what they are after purchasing.But it can be said thatThe crypto bull market is reawakening, about to pierce the skin of the overly splurged central bank governor.
