Issue #1367: Nations are losing control
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Japan bonds (JGBs, corporates, etc) have come under tremendous pressure since the BOJ's mild tweak to yield curve control.
Group just clocked the worst 2-day slump in at least 23 years pic.twitter.com/lhkxN2BHJj
— David Ingles (@DavidInglesTV) July 31, 2023
As everyone and their mother seems to be mentally prepping for a soft landing, it seems that things are starting to go terribly awry in the world of sovereign debt. Late last week the Bank of Japan made a surprise policy change and didn't put a confident foot forward when changing the range within which they plan to employ yield curve control. Since the policy change JGBs have experienced their worst two-day slump in at least 23 years and the yen has weakened significantly against the dollar. Reaching 142.5 earlier today. In layman's terms, markets are signsling that the little confidence they had left in the Bank of Japan's ability to maintain the monetary system was just destroyed with this spastic move. This move follows their abrupt policy change around Christmas of last year, which spooked markets at the time.
In a world that runs on a hyper-connected and intertwined financial system where everything everywhere needs to be in place for everything to function properly, the Bank of Japan, the JGB market, and the yen are the canary in the coal mine that signal turbulance on the horizon. And if we pan over to the US, things aren't looking so hot on the sovereign debt side of things either.
Earlier today, Fitch downgraded the US governments sovereign debt rating to AA+ from AAA. Joining S&P which downgraded to AA+ in 2011. Leaving the US with no AAA rating to point at while declaring that it has iron clad credit. While we've learned to be wary of credit ratings coming from these ratings agencies due to their abject negligence and pandering during the lead up to the 2008 finacial crisis, it is safe to say that the US debt situation is becoming impossible to ignore. These agencies tend to be very generous with their ratings. If they're downgrading the US government, you know things have to be pretty bad. Likely much worse than a AA+ status. Just look at how much debt Treasury is looking to take out to finish out their pillaging of the American people in 2023.
The Treasury's new guidance today is that they want borrow
::checks notes::
$1.85 trillion during the second half of this year. pic.twitter.com/zIYTB38oDe
— Lyn Alden (@LynAldenContact) July 31, 2023
If my back-of-the-napkin math is in the right ballpark, we're about to increase the national debt by ~10% this year. Utter insanity. And don't look now, but oil prices have been creeping higher and look like they are about to break out. Especially when you consider the inventory draws we've seen recently.
WTI first consecutive closes over the 40-week MA since July 2022. pic.twitter.com/oGLXTy2lQL
— Larry Tentarelli, Blue Chip Daily (@LMT978) July 31, 2023
Your Uncle Marty thinks the inflation problem is still pervasive, but it will begin to become even more obvious as it will be forced to be recognized by CPI prints because of energy costs rising. Let's hope this superconducter stuff is legit.
I don't think there's anything more attractive on the planet than bitcoin hovering between $28,500 and $31,000. The tremors are beginning to rumble louder and louder, the central banks have lost control of their monetary systems and the governments have absolutely no ability to stop themselves from binging on debt, which makes for a pretty precarious situation. It's not shocking that they want you focused on aliens, climate change, and the latest round of Trump indictments. They have completely lost control of the money behind the scenes.
Final thought...
Headed to the Big Apple tomorrow. Come check out the mining mert up at PubKey tomorrow night if you're in town.
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