"Things which cannot continue, don't."
Those on this board know that Trump and his team are doing EPIC things to repair America -- judicially, militarily, socially (buh-bye, gov't-sanctioned DEI), and in other ways -- including ECONOMICALLY.
I never thought I'd see such single-minded, honest, and EFFECTIVE campaigns from an American president to Make America Solvent Again (and MAGA generally, of course).
But the Flood is going to hit soon, and the Ark is not yet ready. Trump can only do so much in the short time he has. Unwinding a CENTURY+ of malfeasance, theft, and other corruption cannot be done so quickly. A good start has been made, but . . . please do what you can NOW to prepare for bank failures, for loss of income, for whatever else you believe might come your way if the current situation turns to 1930's style depression.
I don't expect that to be long-lived, but it'll hurt. Believe me.
The most dangerous number in finance right now is 1.71%.
That’s Japan’s 10-year bond yield. Highest since 2008. Here’s why your retirement just got obliterated:
For 30 years, Japan printed infinity money at 0% rates and exported it worldwide. $3.4 trillion flowed into US Treasuries, European debt, emerging markets. This invisible bid kept YOUR mortgage cheap, YOUR stocks inflated, YOUR government solvent.
November 10th, 2025: The bid disappeared.
. . . Here’s the extinction event nobody sees coming:
Japanese pension funds are pulling $1.1 trillion OUT of US Treasuries right now because keeping money in America LOSES them money after hedging costs. The largest foreign buyer of American debt is becoming a seller.
When Japan stops buying, interest rates don’t stay flat. They explode. US 10-year yields will jump 40 basis points minimum from flow dynamics alone. Your 7% mortgage becomes 8%. Corporate debt refinancing costs spike 60%. Zombie companies holding $3 trillion in junk bonds start defaulting in waves.
The yen carry trade just reversed. $1.2 trillion in borrowed yen funding crypto, stocks, emerging markets must unwind. Every hedge fund, every momentum trade, every leveraged bet built on free Japanese money is getting margin called simultaneously.
This breaks in three places:
Stock valuations were built for 2% bond yields forever. At 3.5% yields, the S&P 500 fair value drops 35%. Emerging market currencies collapse without Japanese capital inflows. Europe’s debt crisis returns because Italy and Spain lose their silent buyer.
December 18th the Bank of Japan meets. 50% chance they hike again. If they do, sell everything not nailed down.
Your 401k doesn’t price this in yet. The Fed can’t stop this. No central bank can.
The world’s biggest piggy bank just cracked open and the money is flowing backwards.
This is by design. Its not just Japan but all countries. Let me explain. USD has always been the mode of financial control over the world. First it was based on Petro-Dollar - force countries to sell oil only in USD and boom, every country needs to maintain USD reserves to be able to survive. You create artificial demand for the USD you print. After 2008 it became far more complicated than just petro dollars. They motivated and induced many big countries to keep expanding their USD holdings - Japan and China the biggest two.
Japan esp. was forced to print money at 0% and use it to buy up USD. The Big Banks would buy up those Yens at 0% interest and invest them in Euros etc and make free money.
One of the ways they did this is by the trade deficit. Countries running surplus against US end up with large USD reserves. But this was also a powerful weapon. Countries got weaned into this system and could be hugely punished by "sanctions" if they did not bend to the will of the US.
This is basically the USD hegemony - controlling the world using USD, printed with the borrowing against future of American people, used to control the world. This is how Globalism spread its winds and the woke ideology, the Climate cult, the forever wars, etc etc got funded.
Trump is de-weaponising the USD. It will still be a world reserve currency, but without the world hegemony - without coercing and controlling the countries around the world.
There are two parts to this: Countries need to be able to safely unload the US treasuries AND US should be able to create demand to these treasuries so that USD would not collapse. USD would be expected to be devalued, and this is good news for American exporters, but it wont collapse.
The first part is done by allowing countries to calculate their gold holdings as reserves and so countries are moving to buy gold and divest USD.
The second part is where the GENIUS Act and the new stable coins will come into picture. This will allow US Treasuries to be held by any person in the world - billions of people holding it without Banks in the middle. They will also be backed by assets. When the Gold holdings of US are revalued to market price suddenly the US reserves will shoot up. There is more to this, but that is effectively what is happening.
TL;DR: USD is being deweaponised while still being able to act as a world reserve currency on its own merits without any hegemony.
That's nicely put and it's pretty much how I see it as well (although I'm not as comfortable with the crypto component as I wish I were). But getting rid of fiat and the fed, putting the dollar on a solid foundation including a large gold component, and ending the income tax in favor of tariffs and fees -- overturning most of the (corrupt) financial foundations of the past century -- that won't happen without serious disruption.
I suspect it'll be a rough ride for awhile. We'll see.
A year ago, I thought I had a good idea how this disruption was going to happen - like a collapse under Biden's watch - which sounded perfect on paper but in reality would have caused uncontrolled Chaos - exactly what the enemy wants.
From what I am watching Trump do, I feel might not be a serious disruption at all. The entire pathway has already been etched, and every country - even the ostensibly adverse ones - are following this path, (even though they make it sound like they are dumping USD and trying to crash US). I am starting to believe that there may be a final "switch" that coincides with the rest of the precipice but its only to grab people's attention.
😮 Genius Act indeed!
Good explanation. Thanks. And probably what POTUS was conspiring to do when he recently visited the new Japanese Prime Minister.
I think what Trump did with Japanese PM and also other countryies' leaders is outlining the change in US interaction with each of those countries - how US will give up the chains (USD hegemony) and replace it with handshakes (Trade deals), and I am sure some of the final points had to be discussed personally.
Here's another story on the topic:
The Creditor’s Revolt: How Japan’s Bond Market Just Ended the Era of Free Money and Triggered the Greatest Capital Repatriation in Financial History by Shanaka Anslem Perera
https://substack.com/inbox/post/179099797
I don’t get it. We add a trillion in debt every year, printing, borrowing, whatever... How is Japan pulling 1.1T out of US treasuries create any noticeable inflationary impact, market change, anything?
For several reasons; here's one, from the comment I posted below yours (although who knows where it'll be when you read this):
https://substack.com/inbox/post/179099797
This massive stream of profitable loan resources kept many banks and other businesses IN business. Borrow cash (yen) at near-zero interest, loan it out at 18% or whatever. Whoopee, free money!
Now, not so much.
Again, there are other reasons as well.
Thanks Narq. I’m a little slow on the global economic front
Chat gpt:
It’s very unlikely that Japan alone will trigger a full-blown depression through pulling out of Treasuries.
That said, Japan could contribute to increased financial stress if it shifts significantly away from U.S. Treasuries — which markets would watch closely.
The biggest risk is not “Japan causes depression” but “global bond markets and fiscal systems face increased fragility” because of multiple forces (including but not limited to Japan).
So: the claim has kernels of truth (Japan has large holdings; sell-offs would have consequences) but the dramatic conclusion (impending depression) is not supported by current facts.
Grok:
Was it "massive"? In the context of Japan's $1.1+ trillion total holdings and the $880 billion daily Treasury trading volume, $20 billion is a drop in the bucket—equivalent to about 0.002% of annual turnover. Analysts like Moody's Stefan Angrick noted the market impact was "minimal" in scale.
Did it continue? No. By May 2025, trends reversed: Japan clarified it had no plans to use Treasuries as a "bargaining chip" in trade talks, with Finance Minister Katsunobu Kato walking back earlier "nuclear option" rhetoric. A former Bank of Japan policymaker, Sayuri Shirai, emphasized there's "no alternative investment" to dollar-denominated assets given the U.S. dollar's reserve status. Holdings stabilized and then grew through the summer and fall.
Could This Cause a Financial Depression?
A true depression would require sustained, economy-crushing events like widespread bank failures, 10%+ unemployment, and GDP contraction over years—far beyond what even a larger sell-off would trigger. Here's why this isn't a realistic risk:
Market Resilience: The April episode caused temporary yield spikes and stock dips (e.g., a 6% S&P 500 drop in mid-2024 from a similar BOJ rate hike echo), but markets recovered quickly. The Fed could intervene with bond purchases if needed, as it has in past crises. No such emergency measures were required in 2025. Japan's Incentives: Selling aggressively would hurt Japan more—it relies on U.S. Treasuries for yen intervention liquidity and as a safe haven amid its own challenges (260% debt-to-GDP ratio, aging population, and sluggish 1% growth potential). Officials have repeatedly stressed holdings are for "financial stability," not leverage.
Broader Context: U.S. tariffs have strained Japan (its Q1 2025 GDP shrank 2.2% annualized due to export weakness), but this risks Japan's recession, not a U.S.-led depression. Global forecasts for 2025 show subdued but positive U.S. growth (around 2%), with no depression signals. Alarmist claims (e.g., carry trade "implosion" triggering a $20 trillion unwind) overstate interconnected risks without evidence of escalation.
I think Trump has this covered. And I think Trump will soon be buying treasuries with tariff money, in part to drive down interest rates that the government is paying and by extension the people. And some countries will need to buy up some bonds to help stabilize their country. Plus the dollar is and will continue to increase vs the yen. So the Japanese are looking at the potential of the bond value going up as rates come down and the dollar exchange value going up.
I guess I better start adding more canned goods to my supply. Let’s go!
A lot of 17........ But here is a hypothetical that explains the Yen carry trade:
Groks response on a Hypothetical:
You're absolutely right in your reasoning — and you've nailed the core risks of a leveraged yen carry trade. Let's run through your exact hypothetical with real numbers (as of November 19, 2025) to show why it’s not always “stuffing your pockets,” even if the underlying asset moons.
Hypothetical Scenario
You borrow ¥150 million JPY (roughly $1 million USD at USD/JPY ≈ 150, common rate in late 2025).
Current rates (Nov 2025):
So your annual interest cost on the yen loan ≈ ¥1.5–2.25 million (~$10k–15k).
You convert to USD and buy an asset that does 2x in 12 months (e.g., Bitcoin Cash did ~120% from Nov 2024 to Nov 2025, close enough).
Looks amazing on paper… until the yen moves or the asset corrects.
The Two Killers in Carry Trades
Let’s say over the next 12 months the BOJ keeps hiking and the Fed keeps cutting → USD/JPY drops from 150 to 130 (only a 13% yen rally — very plausible, happened multiple times).
Your $1M position is still worth $2M in nominal terms (if BCH 2x’d), but:
If USD/JPY goes to 120 (20% yen rally, happened in 2024), you’re underwater ~$300k+ even though BCH doubled.
Most retail or even prime-brokerage yen loans are collateralized (you post the BTC/BCH or whatever as collateral).
Typical haircut on crypto: 50–70% loan-to-value. So with $1M collateral you can only borrow ~$300–500k in yen anyway (not the full $1M), but let’s be generous.
BTC example you gave: from theoretical $126k peak to $92k = −27% drawdown (happened multiple times).
Your collateral drops from $1M → $730k, but your yen loan is still ~$1M equivalent (or more if yen strengthened).
→ Instant margin call. You must post more collateral or get liquidated.
No short in place? You get force-sold at the bottom. The whole building comes tumbling down, exactly as you said.
Real-World Recent Example (2024–2025)
Many crypto funds and Japanese retail (“Mrs. Watanabe”) were doing exactly this:
Even the funds that were up 80–100% YTD got wiped or took massive drawdowns because of the double whammy (yen strength + crypto volatility).
Bottom Line
Yes, if:
→ you print money (this is how some Japanese retail traders became multimillionaires 2022–2024).
But the trade is fundamentally a leveraged bet on:
As soon as any one of those reverses — especially #2 or #3 — the geometry turns against you extremely fast because you’re short a low-volatility funding currency (yen) and long a high-volatility asset.
That’s why pros who still run yen carry into crypto or equities in 2025 do it with:
Otherwise, as you perfectly put it: “living on a prayer” until the whole building comes tumbling down.
So yes — in theory you can stuff your pockets. In practice, the yen carry trade into crypto is one of the fastest ways institutions and retail traders alike have blown up over the past few years.
Bottom line: If the BOJ actually marched to 1.7% (or markets priced it convincingly), it would be the final drying-up of that particular well of dark money. Hundreds of billions (possibly low trillions) in notional carry-trade exposure would have to either hedge expensively, roll at a loss, or simply exit. The liquidity that quietly supported US equities, crypto, high-yield EM debt, and all sorts of leveraged bets would evaporate. So yes — gear ratio slammed from 5:1 or 10:1 down to 1:1 (or worse). The era of “borrow in yen, buy anything risky, collect carry, and let the yen weaken as a bonus” would effectively be over for this cycle. A lot of players who built their entire P&L around that arbitrage would be left very publicly undressed.
But .... there is a little disturbance in the force here ....
I get the feeling that at least two things are confused. As if Bond YIELDS say anything about borrowing costs .....
But ... Should the interested being upped, Meaning the gear ratio decreases, it may introduce a pressure to unwind speculative bets, which makes creating/ accumulating dark money a lot less easy.
And it may force the investment/ production path, the US is on. Holding real assets is the trick.