NO WAY OUT: U.S. WARNS Japan Over Saving Its Currency As The Dollar FLIPS On Exporters

NO WAY OUT: U.S. WARNS Japan Over Saving Its Currency As The Dollar FLIPS On Exporters

so for many weeks now we have seen the Yen dropping in value on one hand this is a good thing a weaker Yen allows Japan to sell more to the world Japanese Goods gets cheaper it is not a surprise that exports from Japan grew by 7.3% in March if you are outside Japan especially if you hold dollars you can buy more for Less is another reason why tourism has sit an alltime high as well the issue here is domestic consumption a lot of Japan Goods especially food and fuel are imported from the rest of the world and this Imports are bought using the dollar as a result the prices of everything goes up Japan’s real wages tells us the dark side of a collapsing currency for 23 months now earnings after adjusting for inflation has been negative and in February the drop has accelerated hitting 1.3% just imagine working month after month and progressively earning less your defense mechanis M will kick in it’ll be to cut back on spending you’ll tighten your belt and consume less which is exactly what we are seeing Japan’s household spending has dropped for entire year with the worst month hitting minus 6% even with record pay increases we still have a negative drop in spending in the latest print this isn’t good for Japan’s economy if you can’t encourage your population to spend you’ll be hollowed out you’ll be at the mercy of the global consumer sooner or later China will eat Japan’s lunch in exports and that’s why it’s Paramount for Tokyo to save the Japanese consumer and the only way to do it is to protect the Yen that’s why the boj went on the intervention spree and intervention is really simple you sell off your Holdings of US dollars in the market and you buy back the Yen you pop up the strength of your domestic currency in the latest intervention Japan spent around $23 billion to pop up the yen the currency appreciated by 3% against the dollar the dollar went from 158 against the Yen down to nearly 153 now this is good news for Japan it helps local inflation come down but our best friend Janet Yellen wasn’t impressed in fact it seems that she wasn’t consulted on this Yellen has hit back against Japan’s intervention according to her the US expects interventions to be rare and for consultations to take place in other words Japan has to ask for permission before saving their own currency plus there’s also a limit to how many interventions the US Treasury can tolerate this statement has wrecked confidence in the Yen causing it to Trend down again future interventions will get tougher now it’ll be harder to build confidence in the currency once again this is not a video about Japan’s collapsing Yen it’s more about why yen is panicking about currency interventions it really reveals the precarious state of the US economy and how Reliant it is on the dollar understand what happens during currency interventions if enough countries dump their dollars this could crash the strength of the dollar and this has a whole host of negative effects for the US and let’s talk about inflation first because it kind of works both ways a stronger dollar allows the US to import cheaper stuff from the world it helps bring down the rate of inflation otherwise known as disinflation in March this year the CPI Rose by 0 4% month on month this Jacks the overall inflation rate to 3.5% that’s leaks away from the fed’s target of 2% this prevents the Federal Reserve from lowering interest rates which is hammering down on the US economy what Yellen wants is for the US dollar to remain strong to fight inflation without needing the FED to stay higher for longer a strong Dollar in itself is equivalent to a rate hike without there ever being one the longer the dollar stays strong the easier the inflation fight will be the faster the F can bring rates down before the economy implodes a few days ago the jobs report came out and is not looking good us jobs posted the smallest gain in 6 months payrolls Rose by only 175,000 jobs meanwhile unemployment Rose to 3.9% as well wage growth is also a big problem it grew by only 3.9% the slowest increase in nearly 3 years this is a big problem where the US still has an inflation crisis going on the Fed rate hikes are already crippling the US economy borrowing costs are still astoundingly high when companies come borrow money at cheap rates and inflation is clobbering consumers growth is definitely going to stall it’s not a surprise that unemployment has gone up there’s also another time bomb going on the US Bing sector is at risk of collapse a week ago CNBC came up with this shocking hitline of why hundreds of US Banks maybe at risk of failure once again this ties together the risk of staying higher for longer they analyzed 4,000 Banks and came to the conclusion that over 280 are at risk of collapse nearly $900 billion in total assets could implode these assets are tied to commercial real estate and are suffering horrible losses from the rate hikes we have 265 smaller Banks 16 midsize Banks and one big bank with $116 billion in assets at risk rates today are higher than even when svb collapsed and really let that sink in for a bit if we get a banking collapse this will shake the US economy and the worldwi SC trust in the system will take a brutal heat and this is something that Biden kind of fall especially in an election year Yellen needs rates to come down soon and for that to happen keeping the US dollar strong is in her best interest it prevents inflation from resurging higher at let let’s talk about the elections here specifically what is leading up to it a whole lot of spending is needed to keep the gravy train going until November and that of course means the selling of more US debt because of the Endless Wars and the economic fight against China us spending can’t possibly stop just in this quarter alone from April to June Yen has to borrow 41 billion more that’s 20% more than a previous estimate of $200 billion when you flood the market with 40 billion more in bonds you going of need to give the market an incentive to buy there has to be a good reason to purchase the bonds because if you don’t demand for the debt will be weak and they will push yields higher that isn’t good for the real economy especially the banking sector it could cause something in a plumbing to burst it’s a big reason why the dollar has to be kept as strong as possible it doesn’t mean the dollar Index has to break all-time Highs but at least stay Stronger versus other currency ceas this week alone the US has to sell $125 billion in three 10 and 30y year bonds that is a lot of money flooding into the market and if the demand isn’t there there’s a real risk of bond yield spiking that’s the last thing Yellen once in the latest fomc meeting power told the world that rate hikes were off the table that was a bullish signal for us bonds he essentially told the market that Bond values have nowhere else to go but higher as a result the Traders started buying into us treasuries that in turn cause yields to fall and this is good for the US economy it allows them to delay Financial armag Gaden what Yellen needs is another tail win she needs to send a signal that inflation is coming down and rate cards are indeed coming and that will drive further demand and push yields down lower and the easiest way to do this is by making the dollar stronger than other currencies a strong dollar means you can buy more stuff if investors will invest because it’s appreciating right and when you have a ton of dollars where do you park them in you invest them in US bonds and that’s why Yellen is watching currency interventions today like a hwk as it stands the market is still betting on the Yen collapsing further there’s around $4 billion betting in the direction of the currency falling to hell and there is a lot of selling pressure on the Yen just imagine if Yen allows Japan to intervene without permission suddenly these short positions would reverse and B on the Yen Rising that in turn will cause the US dollar to fall and if this momentum turns against the dollar this could Spike inflation higher together with bond yields not exactly good for the US economy now that’s just on a fiscal front that’s just the short-term crisis facing Janet Yellen the long-term disaster is the US debt crisis by now we kind of know Biden is making the debt worse the more he spends when rates are higher the bigger the Bur will be and that’s why the dollar has to stay strong for this game to continue the foreign Holdings of us treasuries have been dropping year after year he has gone from over 55% to 30% within 15 years this should be very alarming less for buying means more capital is needed locally to fund the US government and this takes money away from the real economy which further destabilizes companies on Main Street to attract more foreign buyers Yen needs to give the world a reason to whole dollar assets a stronger Reserve currency is a very powerful incentive the former treasury hit mishkin admitted it a strong dollar is a good thing it allows the US to finance this very large deficits everything today is priced in dollars so if you’re holding green bags the price of everything else drops against it it’s a very simple relationship but it underpins the entire Global Financial system a strong dollar helps Finance the US debt at lower interest rates now other countries might experience higher inflation but at least in America it’s the exact opposite inflation goes down now even for countries that manufacture a stronger dollar is a very big problem unless you are flash with cheap Commodities like China and Russia your input cost will rise one great example is South Korea because of the stronger dollar exporters are feeling the Heat their input costs are rising because their imported materials are getting more and more expensive if this goes beyond a certain point it could impact the exports the overall price tag could rise it could counter the export benefits of a falling currency in other words demand for their goods could drop this chart shows us how much intermediate Goods countries buy these are Imports that their manufacturers need to make their end products for example silicon and rare herbs are considered intermediate Goods South Korea buys them from China as raw materials to make their semiconductors as it stands over 50% of their Imports are intermediate Goods since everything is priced in dollars a stronger dollar will mean a higher import Bill and that directly translates into higher manufacturing costs other manufacturers like Germany and France also import a ton of intermediate Goods over 40% are inputs needed to make their exports like cars and airplanes conversely a stronger dollar makes us Imports of raw materials cheaper 38% of American Imports are intermediate goods and this allows them to manufacture cheaper and compete with the other industrial powers like Germany once you understand this is simple to see why the dollar is a powerful weapon a strong dollar allows the us to fight inflation and stay competitive at the expense of other countries and this is simply how the game is played this is the power of the global Reserve currency this is a big reason why many countries are shifting towards bilateral trade using local currencies Russia and China for example have almost dollarized their trade more than 90% of settlements are carried out in their National currencies the ruo and the Yuan they don’t want to be at the mercy of the system if there’s a shortage of dollars they want to be able to buy and sell their goods without destroying their local currency this is also happening in the oil markets as well according to JP Morgan 20% of global oil last year was bought and sold outside the dollar that’s 1 of the entire Market ditching the dollar in trade countries are starting to organize and negotiate with each other to transact bilaterally while everything is still pric in dollars this move allows countries to defend against a stronger dollar at the very least they don’t need to sell their currencies to acquire dollars for global trade they can simply use the Yuan the rupe or the Saudi real directly so don’t expect yelen to devalue the dollar willingly keeping the reserve currency strong is necessary for the US economy it actually helps prevent a collapse there but let me know what you think will Yellen allow currency interventions to push the dollar down let me know in the comments below stay safe be sure to smash the like button and subscribe as we navigate through these crazy times

As Japan scrambles to save the collapsing Yen, Yellen has warned that any intervention has to be rare, limited and must be consulted with the US. We’ll go through why the US dollar has to stay strong to prop up the US economy. On the flip side, a stronger dollar is causing manufacturers to hurt, contrary to the narrative of helping exports through a weaker local currency. Here’s what you must know!

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✅ Timestamps & Chapters:
0:00 Yellen Warns Against Currency Interventions
3:03 The US Needs A Stronger Dollar
6:00 US Spending Simply Can’t Stop
8:45 Global Exporters Face Dollar Pain
11:54 De-Dollarization Will Accelerate

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