Trump Truth
(Any views expressed here are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.)
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Four steps: that is the distance from the wall where a vertical plank of wood is affixed to a movable stand. My yoga teacher instructs me to place the heel of both hands in line with the point where the plank and stand meet. I curl over like a cat to ensure the back of my head is flush against the plank. If the distance is correct, I can walk both feet up the wall behind me, transforming my body into an L shape with the rear of my skull, back, and sacrum all touching the plank. I must resist the tendency to flare out my rib cage by engaging my abdominal muscles and tucking in my tailbone. Phew – I’m sweating already, just from keeping my body in the correct position. But the real work hasn’t yet begun. The challenge is kicking one leg up into a fully vertical position while maintaining the alignment.
The stick is a truth serum that reveals incorrect posture. It is instantly observable if you’re out of alignment, and you can feel parts of your back and hips detach from the stick. Raising my left foot up while my right remains pressed against the wall reveals all my muscular skeletal issues. My left lats flare, my left shoulder rolls in, and I look like a lopsided scrunchy. But I knew this already as my movement coach and chiropractor both discovered that my left back muscles are weaker than my right, which causes my left shoulder to sit higher and roll forward. The handstand exercise with the stick only serves to make the imbalances present in my body painfully clear. There is no quick fix to my issues, only a long road ahead replete with sometimes painful exercises to slowly correct my imbalances.
If the vertical wood plank is my body alignment truth serum, US President-elect Donald Trump, the Orange Man, acts in a similar capacity for the various geopolitical and economic issues the world faces today. The reason why the global elite establishment hates Trump is that he tells the truth. The Trump Truth I’m referring to is restricted to a narrow band of subjects. I’m not talking about whether Trump would tell you the truth about his dick size, his net worth, or his golf handicap. Rather, Trump Truth speaks to the actual relationships between different nation-states and the opinion of average American voters when they are at home in their safe space, away from the political correctness nazis.
As a macroeconomic forecaster, I attempt to make predictions that inform the asset mix of my portfolio based on publicly available data and current events. I love Trump Truth because it acts as a catalyst that forces other heads of state to acknowledge the issues their countries face and swing into action. It is these actions that ultimately bring about the future state of the world from which Maelstrom hopes to profit. Even before Trump reascends the throne, countries are acting in ways I predicted, further enhancing my confidence about how money will be printed and the methods by which financial repression shall be enacted. This year-end essay aims to step through the major changes afoot within and between the four major economic blocs and nation-states (US, European Union “EU”, China, and Japan). It is very important to my near-term positions whether I believe money printing will continue and accelerate after Trump’s 20 January 2025 coronation. That is because I think there exists a wide gap between crypto investor’s high expectations for how quickly Trump can change things and the reality that there are no politically acceptable solutions available to Trump to quickly bring about such change. The market will instantly wake up to the reality that Trump has at best one year to enact any policy changes on or around January 20th. This realization will lead to a vicious sell-off in crypto and other Trump 2.0 equity trades.
Trump has one year to act because most US elected legislators start campaigning at the end of 2025 for the November 2026 mid-term US elections. The entire House of Representatives and a large number of senators must stand for re-election. The Republican House and Senate majority is razor thin, and they will likely lose their governing power post-November 2026. The American people are rightfully angry. However, fixing the underlying domestic and international issues that negatively affect them would take even the most astute and powerful politicians over a decade, not just one year. Therefore, investors are setting themselves up for severe buyer’s remorse. But can the wall of printed money and reams of new regulations aimed at financially repressing savers overcome the “buy the rumor, sell the fact” phenomena and keep the crypto bull market alive deep into 2025 and beyond? I believe so, but let this essay be my cathartic attempt to convince myself of this eventuality.
Monetary Phase Change
I will crib Russell Napier in my very simplistic post-WW2 monetary structure timeline.
1944 – 1971 Bretton Woods
Countries fixed their currency’s exchange rate to the dollar, which was, in turn, worth $35/oz of gold.
1971 – 1994 Petrodollar
US President Nixon left the gold standard and allowed the dollar to float against all currencies because the country could not keep its peg with gold whilst funding a larger welfare state and the Vietnam War. He made a deal with the oil-exporting Persian Gulf countries, specifically Saudi Arabia, that they would price oil in dollars, pump as much oil as requested, and recycle their trade surplus in American financial assets. And if you believe certain reports, the US maneuvered certain Gulf countries to increase the price of oil so that it could serve as the backing for this new monetary structure.
1994 – 2024 Petroyaun
China devalued the yuan massively against the dollar to fight inflation, a banking system collapse, and reignite its export industry. China and the rest of the Asian tigers (e.g. Taiwan, South Korea, Malaysia, etc.) ran a mercantilist policy that provided cheap exports to the US, resulting in the accumulation of dollars offshore as currency reserves so that they could afford energy and high-quality manufactured goods priced in dollars, and ultimately introduced over a billion low-wage workers into the global economy which depressed inflation in the developed West that allowed their central bankers to keep interest rates at rock bottom levels because they erroneously thought endogenous inflation had secularly declined.
USDCNY in white, China GDP in constant dollars in yellow.
2024 – Present?
I don’t have a name for the system that is currently under development. However, Trump's election is the catalyst that will change the global monetary system. To be clear, Trump isn’t the cause of the realignment; instead, he speaks plainly about the imbalances that he believes must change and is willing to enact highly disruptive policies to bring about the change quickly he believes will benefit Americans first and foremost. These changes will end the Petroyuan. Ultimately, as I argue in this essay, these changes will increase the supply of fiat money and financial repression globally. These two things must happen because no US, EU, Chinese, or Japanese leaders wish to deleverage their system to bring it into a new sustainable equilibrium. Instead, they will print money and destroy the real purchasing power of long-term government bonds and bank savings deposits so that the elite remain in charge of whatever the new system becomes.
I will start with a high-level synopsis of Trump's goals and then evaluate how each bloc or nation reacts.
Trump Truth
To function, the US must run a current and trade account surplus for the Petroyuan system. The result is a de-industrialization and financialization of the American economy. If you want to understand the mechanics, I suggest reading the entirety of Michael Pettis’ body of work. Not that I believe this is the reason the world should change its economic system, but the average American white male, whom the Pax Americana supposedly exists to serve, has lost out since the 1970s. Average is the key word here; I’m not talking about highfalutin folks like Jamie Dimon and David Solomon, the CEOs of JP Morgan and Goldman Sachs, respectively, or the wage cucks who toil for them. I’m talking about the bro that used to have a job at Bethlehem Steel, a house, and a spouse and now the only female he sees is the nurse at the methadone clinic. That is plainly evident as this cohort in America is committing slow suicide using alcohol and prescription drugs. Everything is relative, and relative to the higher standard of living and job satisfaction they enjoyed post-WW2 vs. the rest of America/globe, the current state of play is no bueno. As everyone knows, this is Trump’s base, and he spoke to them like no other politician dared. Trump promises to bring back industry to America and meaning to their sad lives.
For the cohort of bloodthirsty Americans who delight in playing video game war, which is a very powerful political group, the current state of the American military is an embarrassment. The myth of the supremacy of the American military vs. a near or peer rival (currently only Russia and China fit the bill) started with the idea that the US military liberated the world from the onslaught of Hitler. That is not correct; the Soviets died in the tens of millions to defeat the Germans. The Americans were the mop-up crew. Stalin was distraught with how long it took the Americans to commit a massive offensive on the Western European front against Hitler. US President Franklin Delano Roosevelt let the Soviets bleed so that fewer American GIs died. In the Pacific theatre, whilst the US bested Japan, they never faced the full onslaught of the Japanese army, as Japan committed the majority of their fighting force in Mainland China. Instead of lionizing D-day in films, Hollywood should depict the Battle of Stalingrad and the heroism of General Zhukov and the millions of Russian soldiers who perished.
After WW2, the US military drew against the North Koreans in the Korean War, lost to the North Vietnamese in the Vietnam War, withdrew chaotically after 10 years in Afghanistan in 2021, and now is in the process of losing to Russia in Ukraine. The only success the American military can point to is the use of highly sophisticated and overly expensive weapons against third-world countries like Iraq in the two Persian Gulf Wars.
The point is that success in war is an expression of the robustness of an industrial economy. The American economy, if you care about warfare, is fugazi. Yes, Americans can conduct leveraged buyouts like none other. However, their weapons systems are an amalgamation of Chinese imports with a high price tag peddled to captive clients like Saudi Arabia, who must purchase these systems under their geopolitical agreements. Russia, whose economy on paper is less than 1/10th the size of America’s, produces unstoppable hypersonic missiles for a fraction of the cost of a conventional American-made one.
Trump is no kumbaya peace-loving hippie; he fully believes in the military supremacy and exceptionalism of America and delights in slaughtering humans using said military might. Remember that in his first term, he assassinated Iranian General Qasem Soleimani on Iraqi soil to the delight of a large swath of America. Trump gave no fucks about violating Iraqi airspace and unilaterally deciding to murder a general of another country against whom America was not officially at war. As such, he wants to properly re-arm the empire so that its capabilities match the hype.
Trump advocates the re-industrialization of America to help those who want good manufacturing jobs and those who wish to possess a strong military. To do so requires reversing the imbalances built under the Petroyuan system. This will be accomplished by weakening the dollar, providing tax grants and subsidies to produce things domestically, and deregulation. All these things combined will make it economically prudent for companies to move production onshore because China is currently the best place to produce things due to the combination of three decades in the making of pro-growth policies.
In my essay “Black or White?” I talked about quantitative easing (QE) for poor people and how this will finance a re-industrialization of America. I believe incoming US Treasury Secretary Bessent will pursue such an industrial policy. However, this takes time, and Trump needs to show immediate results that can be sold to voters as progress within his first year in office. Therefore, I believe that Trump and Bessent must immediately devalue the dollar. I want to discuss how this is possible and why it must happen in the first half of 2025.
Strategic Bitcoin Reserve
“Gold is money, everything else is credit”
– J.P Morgan
Trump and Bessent repeatedly discuss the need to weaken the dollar to achieve their economic goals for America. The question is, what should the dollar be devalued against, and when?
Other than the US, the largest global exporters in order of size are China (currency: yuan), the EU (currency: euro), the United Kingdom (currency: pound), and Japan (currency: yen). The dollar must decline against all these currencies to encourage a company on the margin to relocate production inside America. A company doesn’t necessarily need to be domiciled in America; Trump is ok with Chinese manufacturers placing factories within America to sell goods locally. But Americans must buy things made in American factories.
Coordinated currency accords are so 1980s. Currently, America, relative to the rest of the world economically and or militarily, is less powerful today than it was back then. Therefore, Bessent doesn’t have the ability to unilaterally dictate to other countries their exchange rate vs. the dollar. Of course, there are carrots and sticks Bessent can use to cajole each country to agree to devalue their domestic currency vs. the dollar. This could be accomplished with the surgical use of tariffs or threat thereof. However, that takes time and a lot of diplomacy. There is an easier way.
At 8,133.46 tonnes, the US holds the most gold of any sovereign nation, at least on paper. As everyone knows, gold is the real money of global commerce. The US has only been off the gold standard for 50 years. Gold standards have been the rule throughout history, and the current fiat currency regime is the exception. The path of least resistance to accomplish Bessent’s goals is to devalue the dollar compared to gold.
Currently, gold is valued at $42.22/oz on the American balance sheet. Technically speaking, the Treasury issues a gold certificate to the US Federal Reserve (Fed), which the Treasury values at $42.22/oz. Suppose Bessent can convince the US Congress to change the statutory price of gold, thus devaluing the dollar vs. gold. In that case, the Treasury’s General Account (TGA) at the Fed receives a dollar credit, which can be spent on the economy. The larger the devaluation, the higher the TGA balance immediately grows. This makes sense because, essentially, dollars are being created out of thin air by valuing gold at a specific price. Every $3,824/oz increase in the statutory price of gold generates a $1 trillion increase in the TGA. For example, adjusting the carrying cost to the current spot price of gold would generate a $695 billion TGA credit.
By government fiat, dollars can be created and then spent on goods and services by changing the carrying cost of gold. This is the definition of a fiat currency devaluation. Because every other fiat currency also implicitly has a gold value based on the amount of gold held by its respective government, these currencies will all automatically rise relative to the dollar. Overnight, without consulting any other nation’s finance ministry, the US can achieve a MASSIVE dollar devaluation against all of its major trading partners.
The most important retort is, couldn’t the largest exporters attempt to regain their currency weakness by devaluing more than the US vs. gold? Of course, they could try, but none of these currencies are the global reserve currency with an inbuilt demand due to trade and finance flows. Therefore, they cannot match the US’ gold devaluation, which would quickly cause hyperinflation in their economies. Hyperinflation is assured because none of these countries/blocs can become self-sufficient in terms of energy or food like the US. This is politically unacceptable because inflation-inspired social unrest will drive the ruling elites from power.
Tell me the amount of dollar weakness needed to re-industrialize the US economy, and I’ll tell you the new gold price. If I were Bessent, I would go big. Big means conducting a $10,000 to $20,000/oz revaluation. Luke Gromen estimates that returning to the 1980s ratio of gold to Fed dollar liabilities would result in a 14x rise in the price of gold over the current levels, which post devaluation would be close to $40,000/oz. That is not my expectation, but an illustration of how overvalued the dollar is vs. gold at the current spot price of ~$2,700/oz.
As many of you know, I am a mini gold bug. I own physical gold bars in vaults and junior gold mining exchange-traded funds (ETFs) because the easiest way to devalue the dollar is vs. gold. Politicians always press the easy button first. But this is the Crypto Trader Digest, and thus, how does a $20,000/oz gold price pump the price of Bitcoin and crypto?
Many crypto hopefuls first focus on the Bitcoin Strategic Reserve (BSR) chatter. US Senator Lummis proposed legislation that would force the Treasury to purchase 200,000 BTC annually for five years. Funnily enough, if you read the bill, she proposes funding the purchases by raising the price of gold held on the government’s balance sheet, as I described above.
The argument in favor of a BSR is similar to the US’s rationale for stockpiling the largest amount of gold vs any other nation-state; it allows the US to assert financial supremacy over every other nation in the digital and physical realms. If Bitcoin is the hardest money ever known, then the strongest government fiat currency is the one whose central bank owns the most Bitcoin. Furthermore, a government whose finances ebb and flow with the price of Bitcoin will enact policies favorable to expanding the Bitcoin and crypto ecosystem within its borders. This is similar to how governments encourage the domestic mining of gold and the establishment of robust gold trading markets. Look at how China encourages domestic ownership of gold via the Shanghai Gold Futures Exchange as an example of national gold-positive policies aimed at increasing the nation's and its citizens' financial strength in real currency terms.
If the US government creates more dollars via a gold devaluation and uses some of those dollars to buy Bitcoin, its fiat price will rise. This will in turn spur competitive sovereign purchases by other nations who have to play catchup with the US. The price of Bitcoin then would rise asymptotically, because why would anyone sell Bitcoin and receive fiat, which the government is actively devaluing? Of course, there is a fiat price at which long-term hodlers will sell their Bitcoin, but it ain’t $100,000. This argument makes logical sense, but I still don’t believe the BSR will happen. I think Politicians would rather spend the newly created dollars on goodies for the population to ensure their victory in the next soon-to-be-held election. However, it doesn’t matter if a US BSR happens because just the threat of it creates buying pressure.
While I don’t believe the US government will purchase Bitcoin, it doesn’t affect my positive price outlook. At the end of the day, a gold devaluation creates dollars which must find a home in real goods/services and financial assets. We know empirically that the fiat Bitcoin price rises faster than the rate at which the global supply of dollars grows due to its finite supply and diminishing circulating supply of coins.
The Fed’s balance sheet is in white, and Bitcoin is in yellow. Both are indexed to 100 as of 1 January 2011. The Fed’s balance sheet rose 2.83x, while Bitcoin rose 317,500x.
To summarize, quickly and dramatically weakening the dollar is the first step towards Trump and Bessent achieving their economic goals. It is also something they can accomplish overnight without consulting domestic legislators or foreign finance ministry heads. Given that Trump has one year to show progress on some of his goals to help Republicans maintain their hold on the House and Senate, my base case is a $/gold devaluation in the first half of 2025.
Next, let’s mosey over the middle kingdom and speculate on how they will respond to Trump Truth.
Choyna
Xi Jinping, the president of China, has two big problems. He needs to generate jobs for the over 20% of educated youth who are unemployed and stop property prices from declining. Trump's Truth creates problems because America also needs better-paying jobs for its plebes and more financial investment in productive capacity. The cudgels I discussed in the previous section that Trump and his lieutenants will wield are a weak dollar and tariffs. What are the weapons at Xi’s disposal?
I believe Xi has made it clear that ideologically, China must engage in QE and by extension allow the yuan to float freely. Until now, China has done very little fiscal stimulus paid for with central bank printed money. I believe that’s because they didn’t want to exacerbate the domestic economic imbalances. Furthermore, they were in a holding pattern until the new Pax Americana emperor was chosen. But in the past few weeks, it has been very clear that China will engage in massive stimulus through the tried-and-true QE financial channels and let the yuan trade where it trades.
For those of you who are puzzled as to why the yuan must weaken because of QE, remember that QE expands the supply of yuan. If the yuan supply grows faster than another fiat currency, then mathematically, it weakens compared to that currency. Also, holders of yuan may front-run the central bank by selling yuan today for a financial asset of fixed-supply like Bitcoin, gold, US stocks, etc., to protect their future purchasing power. This also causes a currency to weaken.
Comrades are already starting to pull money out of China.
As I explained earlier, due to China’s food and energy deficiency, they cannot go toe-to-toe with the US to weaken the yuan vs. gold. It would cause hyperinflation and ultimately the demise of the Chinese Communist Party (CCP). But that doesn’t mean that China can’t dramatically grow the supply of yuan to put a floor under the property crisis, causing deflation. The signal that Xi is ready to go full retard with QE is a recent headline that the People’s Bank of China (PBOC) is willing to let the yuan depreciate due to Trump’s tariff threats.
China's top leaders and policymakers are considering allowing the yuan to weaken in 2025 as they brace for higher U.S. trade tariffs as Donald Trump returns to the White House.
I believe the PBOC is being a bit coy with the actual reason why they must allow the yuan to float freely and ultimately depreciate against the dollar in the short term because they don’t want to exacerbate the pace of capital flight. Directly telling wealthy comrades that PBOC policy is now expressly focused on printing yuan and purchasing government bonds will only cause alarm bells to ring inside the investing public’s mind, and lead to a rush to spirit capital across the border first into Hong Kong and from there to the rest of the world. The PBOC would like for investors to take the hint and purchase domestic equities and property instead.
Ultimately, as I predicted in my article “加油比特币 Let's Go Bitcoin”, the PBOC will engage in enough QE and monetary stimulus to stop deflation. We will know whether the policies will work if Chinese government bond (CGB) yields start rising. Currently, CGB yields are the lowest ever as investors would instead purchase a yuan principal-protected investment vehicle, a government bond, than risk losing money in the stock and property market. This speaks to a pessimism about the medium-term strength of the Chinese economy. Converting pessimism to optimism is easy, just print a fuck-ton of yuan and remove CGBs from investors’ portfolios through central bank open market operations. That’s the definition of QE. Please refer to my T charts in the “Black and White?” essay for an explanation of how this process works.
The problem with printing money at a macro level has always been the yuan's external value. There are a few positive externalities of a strong yuan. It helps Chinese consumers buy imports cheaper. It increases the likelihood of Chinese trading partners invoicing goods traded with China in yuan, because they can turn around and spend that yuan on Chinese-made goods and have confidence the real value of the yuan will remain stable over time. And it helps Chinese companies borrow yuan at affordable interest rates. However, all these positives mean nothing in the face of Trump Truth. Let me be clear: the US can print more money without hyperinflation than China can. Trump and Bessent have made it very clear that this is what they intend to do. Therefore, Xi will allow the yuan-dollar exchange rate to float, which in the near term means the yuan will depreciate.
Until Bessent conducts a massive dollar vs. gold devaluation, a cheaper yuan will allow Chinese manufacturers to export even more stuff. In the short term, this will front-load production and help give Xi a better negotiating position vis-à-vis Trump when he must agree to certain demands of Team Trump in exchange for more favorable access to American consumers for Chinese producers.
The question that crypto investors should be pondering is how wealthy Chinese investors will react to the signals that the PBOC will crank up the growth in the supply of yuan. Will capital flight through various legal channels in Macao (casinos) and Hong Kong (HK registered companies with Chinese owners) be allowed to operate normally, or will Xi shut them down to sequester capital onshore? Given that the path of travel in the US is to restrict the ability for certain pools of money, like Texas public university endowments, to invest in Chinese assets, why would Xi allow newly created yuan to flow out through Hong Kong into the US and help finance Trump’s economic goals? Printed yuan must purchase Chinese equities and Chinese property instead. Therefore, whilst the door is open, I expect the yuan-to-dollar capital flight to intensify because sooner rather than later, this opportunity will vanish.
For crypto, at least in the short term, Chinese capital will flow out through Hong Kong into dollars and purchase Bitcoin and other shitcoins. In the medium term, once Xi reciprocates and bans Chinese capital from escaping through the liquid and obvious channels, the question is whether Hong Kong crypto ETFs will be allowed to accept southbound capital flows from Mainland Chinese investors. If Xi comes to the belief that defacto CCP-controlled ownership of crypto via state-owned asset management companies in Hong Kong strengthens China or at the very least renders China pari-passu competitive with the US within the crypto field, then the Hong Kong ETFs will quickly gather assets. This will add another pillar to the crypto bull market, as these ETF managers must purchase spot crypto in the global open market.
Across the Sea of Japan, the elites who run China’s exporting nemesis, Nippon, are contemplating how they handle Trump Truth.
The Land of the Setting Sun
As proud as Japanese elite politicians are of their culture and history, they are still the towel bitch boys of America. Japan got nuked, carried on, and with the assistance of dollar loans and tariff-free access to the American consumer, rebuilt the country into the world’s second-largest economy by the early 1990s. And most importantly to my lifestyle, Japan built the highest number of ski resorts of any country in the world. Like today, in the 1980s trade and finance imbalances caused a ruckus within elite American political and financial circles that necessitated a re-balancing. Some argue that the currency accords in the 1980s weakened the dollar and strengthened the yen, which eventually popped the 1989 Japanese stock and property market bubbles. The logic is that to strengthen the yen, the Bank of Japan (BOJ) had to tighten its monetary policy, which caused the bubble to burst. As always, property and stock bubbles are blown with printed money and popped when easy monetary policies slow down or cease. The point is that Japanese politicians will commit financial seppuku to please their American daimyos.
Today, just like in the 1980s, there are insanely large financial imbalances between Japan and America. Japan is the largest US Treasury bond holder of any nation. Japan also pursued aggressive QE that morphed into yield curve control (YCC), which resulted in an extremely weak dollar-yen exchange rate. I spoke about the importance of the dollar-yen exchange rate in these two essays: “Shikata Ga Nai” and “Spirited Away”.
The Trump Truth is that the dollar should strengthen against the yen. Trump and Bessent are very clear that this must happen. Unlike in China, where there will be an adversarial currency realignment, in Japan, Bessent will dictate where the dollar-yen must go, and the Japanese will follow.
The problem with strengthening the yen is that it means the BOJ must raise interest rates. The following, absent any government intervention, will happen:
1. As interest rates rise, Japanese Government Bonds (JGB) become more attractive and Japanese corporates, households, and retirement funds will sell foreign stocks and bonds (mostly Treasuries and US stocks), exchange the foreign currency proceeds for yen, and buy JGBs.
2. A higher JGB yield means a lower price, negatively impacting the BOJ balance sheet bigly. Also, the BOJ owns a lot of Treasuries and US stocks, which will also go down in price as Japanese investors dump them to repatriate capital. In addition, the BOJ must pay higher interest on yen banking reserves. Ultimately, this is bad news bears for the BOJ’s solvency as this process unfolds.
Trump has an interest in the Japanese financial system staving off implosion. US Naval bases in Japan offer Chinese maritime containment, and Japan’s production of semiconductors for example helps ensure the US has friendly supplies of critical components. Therefore, Trump will instruct Bessent to do what is necessary to ensure Japan financially survives a strengthening yen. There are various ways to do this; one way is for Bessent to use the US Treasury's power to offer dollar-yen central bank currency swaps to the BOJ so that any sales of Treasuries and US stocks are absorbed off-market. Here is a depiction of the flow from my essay “Spirited Away”.
The Fed - they increased the amount of dollar supply or, in other words, in return, received yen previously created by the growth of the carry trade.
CSWAP - the Fed is owed USD by the BOJ. And the BOJ is owed JPY by the Fed.
BOJ - they now hold more US stocks and bonds, which will increase in price because the amount of USD rises due to the growing CSWAP balance.
Japanese Banks - they now hold additional JGBs.
This matters for crypto because the amount of dollars will increase to fund the unwinding of the massive Japanese dollar-yen carry trade. The unwind will happen slowly, but trillions of dollars will be printed to maintain the financial solvency of the Japanese financial system.
Rectifying the Japanese-American trade and finance imbalances is quite easy because Japan ultimately has no say in the matter and is so politically weak currently that it cannot offer any real opposition. The ruling Liberal Democratic Party (LDP) lost its parliamentary majority, bringing Japan's governance into a state of flux. The elites are in no political shape to oppose Trump Truth, as much as they secretly detest uncivilized Americans.
The Last Shall Be Last
While many Europeans, at least the ones not named Muhammad, are kinda sorta Christian, the biblical phrase “the last shall be first” definitely does not apply to the EU economically. The last shall be last. For whatever reason, European elite politicians continue to assume the position and accept a relentless pounding from Uncle Sam. Europe should be doing whatever it can to integrate with Russia and China. Russia offers the cheapest energy delivered via pipeline and a bread basket of grains to feed the people. China offers cheap, high-quality manufactured goods and is ready and willing to purchase European luxury in quantities that would make Marie Antoinette blush. Instead of trying to integrate into a colossal, unstoppable Eurasian co-prosperity sphere, continental Europe is perennially under the spell of two island nations, the United Kingdom and America.
Because Europe is unwilling to buy cheap Russian gas, ditch the green energy transition hoax, or trade on a mutually beneficial basis with China, the German and French economies are figgity fucked. Germany and France are the economic engines of Europe – the rest of the continent might as well be a vacation home for Arabs, Russians (well, maybe not anymore), and Americans. This is quite ironic, given how much European elites detest folks from these regions, but money talks and bullshit rides a Vespa.
Two very important speeches were given this year by Super Mario Draghi (The Future of European Competitiveness in September 2024) and Emmanuel Macron (Europe Speech in April 2024). The depressing thing, if you are European, about these speeches is that both statesmen correctly identify the issues Europe faces – namely, expensive energy and lack of domestic investment – but offer solutions that ultimately amount to “we need to print more money to finance the green energy transition, and engage in more financial repression”. The correct solution is to abandon the unwavering support of elite American misadventures, achieve a détente with Russia to access cheap natural gas, embrace nuclear energy, trade more with China, and completely deregulate financial markets. The other depressing fact is that many European voters who believe as I do that the current policy mix is not in their best interest went to the polls and elected parties that want to effect these changes. But the elites in charge are pulling out all the undemocratic stops to blunt the will of the majority. The political upheaval is ongoing as both France and Germany are effectively without a ruling government.
The Trump Truth is that America still requires Europe to shun Russia, restrict trade with China, and buy American-made weapons to defend itself from Russia and China to prevent a strong integrated Eurasia. Due to the negative economic impact of these policies, the EU must resort to financial repression and money printing to make ends meet. I will step through a few quotes from Macron to illustrate the future of European financial policies and explain why you should be afraid if you hold capital in Europe. You should be fearful that your ability to escape the European capital crypt will be shut and the only thing you will be able to buy in your retirement account or with your bank savings are dogshit long-term EU government bonds.
Before I quote Macron, here is an amuse bouche of a statement from Enrico Letta, former Prime Minister of Italy and current President of the Jacques Delors Institute, a think tank:
The European Union is home to a staggering €33 trillion in private savings, predominantly held in current accounts (34.1%). This wealth, however, is not being fully leveraged to meet the EU’s strategic needs; a concerning trend is the annual diversion of European resources towards the American economy and U.S. asset managers. This phenomenon underscores a significant inefficiency in the utilization of the EU savings, which, if redirected effectively within its own economies, could substantially aid in achieving its strategic objectives.
Letta leaves no doubt about what he believes is the problem; subsequent quotes from Macron reiterate these points. European capital should not be funded by American companies but by European ones. There are various ways in which the authorities who know better than you what to do with your capital can force you to own poorly performing European assets. For those who hold money with institutional money managers via pension funds or retirement accounts, for example, the EU financial regulators can define the universe of suitable investments such that your investment manager may only legally buy EU stocks and bonds. For those who hold money in a bank account, the regulators can prohibit the bank from offering non-EU stocks and bond investments because they are not “appropriate” for savers. Any time your money is held with an EU-regulated fiduciary, you are subject to the whims of folks like Christine Laggard and her merry band of muppets. Maybe you like her, but make no mistake, her job is to financially ensure the EU project's survival as the head of the European Central Bank (ECB), not to help your savings grow faster than the inflation her bank requires to keep the system solvent.
In case you thought that it was only the Davos World Economic Forum crowd advocating such things, here is a quote from the infamous racist, fascist, [fill in the blank]-ist … so they say … Marine Le Pen:
Europe to wake up… given that the U.S. will defend its interests even more vigorously.
Trump Truth is equally triggering across the left and right of the EU political spectrum.
Back to the point that the EU politicians refuse to do the easy and less financially ruinous thing to fix their issues, here is Macron spelling it out for the plebes:
“And so, yes, the days of Europe buying its energy and fertilizers from Russia, outsourcing to China and relying on the US for security are over.”
Macron continues and reinforces the point that EU capital must not be directed to the best-performing financial products but get squandered in the barren wasteland of Europe:
“Third shortcoming: every year, our savings, amounting to around 300 billion euros a year, go to finance the Americans, whether we look at treasury bills or capital risk. This is absurd.”
Finally, in the coup de grace, Macron speaks to suspending the Basel III banking regulations. Essentially, this would allow banks to buy infinite quantities of high-priced, low-yielding EU government bonds in infinite quantities. The losers would be anyone who holds euro-denominated assets as this essentially allows for an infinite increase in the supply of euros.
“Secondly, we need to review the way Basel and Solvency are applied. We cannot be the only economic region in the world to apply it. The Americans, who were the source of the 2008-2010 financial crisis, chose to not apply it.”
Macron rightly points out that Americans don’t follow these global banking rules and concludes that Europeans don’t need to either. Hello, fiat financial collapse against Bitcoin and gold.
Draghi in his most recent report goes on to argue that in addition to funding the massive welfare state – France, for example, has the highest government expenditure to GDP ratio of any developed nation at 57% – the EU needs to invest €800 billion per year. Where is that money supposed to come from? The money will come from the ECB printing it into existence and EU savers being financially repressed into buying dogshit long-term EU government bonds.
I’m not making this shit up. These are direct quotes from the EU political spectrum's left and right. They are telling you that they know best how to invest EU savings. They are telling you that banks should be able to employ infinite leverage to buy the bonds of EU member countries, and ultimately, the ECB will issue pan-euro bonds once they are created. And the rationale for this is Trump Truth. If Trump’s America is going to weaken the dollar, suspend prudential banking regulations, and force Europe to sever ties with Russia and China, then EU savers must accept subpar returns and financial repression. EU cucks should sacrifice their capital, and their real standard of living, to preserve the EU project. I’m sure you notice the healthy dose of eye roll in the tone of this section, but I ain’t mad at you if you want to reduce your standard of living for EuropeTM. My bet is that many of you like to wave the flag in public, but at home will scurry to the computer and try to get the fuck out as quickly as possible. You know the way to escape is to buy Bitcoin and self-custody it before it is forbidden. But EU readers, it's your choice.
Globally, as the amount of euros increases in circulation and the noose tightens around EU domestically held capital, Bitcoin will surge. It is the stated policy of the elites. However, I believe it will be a “do what I say, not what I do” sort of situation. Those in power will secretly transfer assets to Switzerland and Lichtenstein and buy crypto hand over fist. All the while, those they rule, who refuse to listen and safeguard their savings, will suffer under state-sanctioned inflation. That’s just the way the croissant flakes.
Truth Terminal
Our truth terminal is the 24/7 crypto-free market. Bitcoin’s rise post-Trump’s victory in early November is a leading indicator of the acceleration in the growth of the fiat money supply. In response to Trump Truth, every major economic bloc/nation must react NOW. And the reaction is to debase the currency and increase financial repression.
Bitcoin (yellow) is leading an increase in US bank credit (white).
Does this mean it is up only straight to Bitcoin $1 million without any nasty corrections? Absolutely not.
I don’t believe the markets realize how little time Trump actually has to accomplish anything. The market believes that Trump and his people can immediately achieve economic and political miracles. The issues that gave rise to Trump’s popularity are decades in the making. As such, there are no immediate solutions regardless of what Elon Musk tells you on X. Therefore, it is almost impossible for Trump to appease his base sufficiently to prevent the Democrats from retaking both legislative bodies in 2026. The people are impatient because they are desperate. Trump is an astute politician and knows his base. To me, that means he must go big early, which is why my money is on a massive dollar vs. gold devaluation early into his first 100 days in office. It is an easy way to make production costs globally competitive in America quickly. It will lead to an immediate re-shoring of productive capacity, leading to an increase in hiring today and not five years from now.
Before we get to the crack-up-boom phase in this crypto bull market, I believe the crypto markets will experience a harrowing dump around Trump’s January 20th 2025 inauguration day. Maelstrom will be lightening up on certain positions in advance, hoping to rebuy some core positions at lower prices sometime in 1H25. Obviously, every trader says this and believes they can time the markets. And most often they end up selling too early, and subsequently lacking the conviction to re-buy at higher prices than if they had just HODL’d. Said trader is then underinvested for the rest of the bull market. Knowing this, we are committed to admitting defeat if the bull market steamrolls through January 20th, licking our wounds, and getting back on the bull. Trump Truth shows me the structural deficiencies of the global order. Trump Truth tells me the best way to maximize returns is to own Bitcoin and crypto. And therefore, I will be buying dips and rips.
Yahtzee!!!
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Legendary article as always. Thanks, Arthur!
outside of solid macro takes, AH knows that the intros are like catnip for the critical thinking thirst trap