Weak Dollar? Strong Dollar? Friday Dollar?

I present below, way below, a transcript of Sean Foo’s latest. It’s relevant to the turmoil involving King Dollar and the Japanese Yen. The two are closely linked, given that the yen carry trade has been a key to supporting US equity markets. Early in the weak Trump boasted about how great his weak dollar policy was working out. That caused enough panic that Bessent had to come out and insist that, actually, the US is pursuing a strong dollar—which makes the policy look like an abject failure. That flip flopping was followed with Trump’s warning to the world not to do business with China—a warning that is being totally ignored. Even the nomination of Kevin Warsh to the Fed is widely viewed as Trump responding to the market freakout.

All this is simply an illustration of the fact that the dollar, while still important, is no longer King. The levers of control that the US used to be able to count on to enforce global discipline to the dictates of the Anglo-Zionist empire are no longer responding reliably. It’s about a lack of trust brought on by abuse. Getting into a major war that could devastate the world economy—but enrich Russia—doesn’t seem like the smartest strategy at this juncture.

Just a note on gold and silver:

Peter Schiff @PeterSchiff

7h

With gold “crashing” back down near $5,000 and silver briefly trading below $100, gold and silver mining stocks got crushed. But these stocks are still extremely cheap at current prices, let alone the prices they crashed from.

Hey, got silver to sell? China is still buying—at a premium.

We’re looking at long term trends here, not day to day fluctuations. Here are some data points that came out today re Trump’s greatest economy—ever:

The Kobeissi Letter @KobeissiLetter

9h

Recent Layoff Announcements:

1. US Government: 307,000 employees

2. UPS: 78,000 employees

3. Amazon: 30,000 employees

4. Intel: 25,000 employees

5. Nissan: 20,000 employees

6. Nestle: 16,000 employees

7. Microsoft: 15,000 employees

8. Bosch: 13,000 employees

9. Dell: 12,000 employees

10. Verizon: 13,000 employees

11. Accenture: 11,000 employees

12. Ford: 11,000 employees

13. Novo Nordisk: 9,000 employees

14. Microsoft: 7,000 employees

15 PwC: 5,600 employees

16. Salesforce: 4,000 employees

17. IBM: 2,700 employees

18. American Airlines: 2,700 employees

19. Paramount: 2,000 employees

20. Target: 1,800 employees

21. General Motors: 1,500 employees

22. Applied Materials: 1,444 employees

23. Kroger: 1,000 employees

24. Meta: 1,000 employees

AI is officially replacing jobs at mass scale in the US.

Where will all of these people go?

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BREAKING: December PPI inflation comes in at 3.0%, above expectations of 2.7%.

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US long-term unemployment is surging:

The number of Americans unemployed for 15+ weeks is up to 3.1 million, the highest since October 2021.

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BREAKING: The US’ goods trade deficit widened by -$27.6 billion, or -95%, in November, to -$56.8 billion, the highest since July.

This marks the largest monthly increase since 1992.

This comes as the value of all US goods and services exports fell -$10.9 billion, to $292.1 billion, the lowest since September.

At the same time, imports jumped +$16.8 billion, to $332.1 billion, the highest since July.

This was driven particularly by a surge of inbound shipments of pharmaceuticals and a decline in gold exports.

More Epstein file releases. This excerpt from reporting by an FBI CHS sheds light on Trump’s business model:

Finally, on to Foo:

Bessent Triggers Japan YEN CRASH, China Cancels USD Globally, Trump Furious Over UK Pivot

Let’s talk about Japan’s currency crisis, because we are moving closer towards a reckoning even before the snap election [in Japan]. February 8th is the day, and the global markets could really have a nasty reaction here. Now, US stocks are at an all time high. A lot of Japanese money is supporting the US equity markets. And if there’s a rug-pull, the flash crash we saw yesterday is just a preview. It would be just the appetizer. There’s over $2 trillion from Japanese investors holding up US stocks and bonds, of which $450 billion comes from the risky yen carry trade. If the yen continues to weaken and Japanese yields continue rising, a lot of money will unwind. The yen carry trade is going to break.

Japan faces a very impossible task. All the traditional levers of finance have been broken. And that’s what happens when you print money for over a decade to suppress yields. It just doesn’t work long term. It might have worked during a war of free trade and globalized supply chains, but since the Ukraine war and Trump’s tariff war Japan has been hammered with inflation. All imports to Japan, especially energy, are much more expensive today. Japan’s 5-year inflation is expected to exceed the US in 2026.

That’s a big problem because the entire country is used to deflation-- falling prices. Prices going up for Japan is horrible news for the PM trying to win the election. With the yen falling, this is going to add even more pressure on prices. Japan imports 90% of their energy needs. If the currency continues to fall, it raises the cost of virtually everything. Manufacturing will get more expensive. Just turning the lights on is going to hurt wallets.

So how do you prevent an implosion? If the yen continues to weaken, it creates a deadly domino effect. It creates a tailwind on inflation. Japanese bonds will continue to get shunned. The yen carry trade breaks and money could leave US markets. But the bank of Japan can’t raise rates because of the debt levels. The only way out is for the US to help Japan, for the US Treasury to weaken the dollar further to help prop up the yen. But even that option has collapsed. After Trump’s comment about a weaker dollar being a good thing [which caused an crisis reaction], Scott Bessent went into damage control mode. Bessent is suddenly now all about a strong dollar and how the Treasury won’t intervene in a currency market. Basically, no selling of dollars to buy up the yen to prop its value up.

Q: Are we intervening in the currency market right now? Strengthening the yen--is that happening?

Bessent: Absolutely not.

Q: Is that something you’re planning to do?

Bessent: Uh, again, we we don’t com comment other than say uh we we have a strong dollar policy. And again, I think President Trump has the the past year 2025 was about setting the table. And now I think we’re going to have a very strong economy this year. The Atlanta Fed uh GDP now numbers 5.4%. When was the last time we saw that?

Now, Bessent is afraid of the dollar collapsing even further because if it does, it’s the death knell for almost every type of US asset. Stocks and bonds will start collapsing because their underlying value just simply corrodes. But this move isolates Japan. Now that the US Treasury doesn’t have their back, Japan has to weigh serious options to save their currency. It’s really crazy, but Bessent himself controls the fate of the Japanese yen.

Almost immediately [after Bessent’s refusal to defend the yen], the yen weakened, and this exposes how vulnerable Japan’s currency is today. The US used to be very adamant about driving the value of the dollar down, but the markets just gave Trump a wakeup call. So now the US is terrified of the dollar plunging too much, which means sacrificing their ally’s currency at this exact moment. To put it bluntly, someone has to lose this currency struggle. As it stands, the US still holds more cards than Japan. Tokyo will be left to their own devices to save the currency.

But this could backfire very badly. If the yen continues to weaken, the bond market could blow up. Investors would exit JGBs and the only money coming in would be from the Bank of Japan itself, the central bank. The BOJ is going to buy 2.9 trillion yen of their own government bonds in Q1 this year. They are trying to lower this amount by a further 200 billion yen going forward. But is that even possible? If the currency continues to collapse, the BOJ will be forced to soak up even more bonds, we could reach a point where the central bank owns more than half of all JGBs. This will ironically break the currency even further. The Forex markets will punish Japan and inflation expectations and actual inflation will rise.

Bessent refusing to help Japan through a coordinated intervention means Japan has to go about it themselves. But every single intervention has failed. Japan will have to do a nuclear move that will piss off the United States. And we are talking about devaluing the dollar while propping up the yen at the exact same time. Japan’s stash of US debt is now at risk. They hold well over $1.2 trillion worth and is the single biggest foreign holder of US treasuries [next biggest is UK at $888.5B]. That’s a huge amount of money that can be sold to save the yen. Hundreds of billions could be dumped to either buy back the yen--to strengthen the currency directly--or they could be used to buy back Japanese bonds to create demand for the debt and, by extension, drive more demand for the yen.

Bessent’s refusal to help Japan could be the nail in the coffin. It might just drive Japan to dump their bonds to save their own economy. To put it simply, both the US and Japan get trapped. Japan needs a stronger yen, while the US needs a slightly stronger dollar. But both can’t possibly coexist at the same time without disaster. We can see this from Trump’s likely pick for Fed chair. There’s a reason why stocks fell and gold corrected down as well. Trump is preparing to nominate Kevin Warsh to be the next Fed chair. Now, of all the people on the panel like Kevin Hasset or Ryder, Kevin is the most hawkish, which means interest rates might actually stay higher than usual. It’s a signal to the market that Trump is trying to U-turn his disastrous statements on the dollar just a few days back. He’s living in regret. The US is trying to defend the dollar but it’s not going to work long term because the fundamentals are still horrible. Deficits aren’t going to end and the trade war also isn’t going to stop.

Meanwhile, China is also making moves to prepare for dollar collapse. If the dollar falls, the Chinese RMB stands to gain. Most countries will flock to it and Beijing is actively taking steps to make sure it happens. The People’s Bank of China [PBOC] is preparing to give Hong Kong more Chinese currency to help meet growing demand. Hong Kong is the Asian financial capital of the world, and Beijing is going to use it to push global RMB demand. They will be doubling liquidity to RMB200 billion or $29 billion in just a few days. This allows Hong Kong banks to issue more RMB loans to borrowers around the world. These can be importers looking to buy Chinese goods. These can be countries or companies looking to borrow RMB to fund their expansion. Now, what’s important is the rates being offered to the Hong Kong banks. The rates are dirt cheap compared to Western currencies. The borrowing is based on a Shanghai interbank offered rate. The one-year lending rate is at 1.63%, which is less than half the US borrowing cost across the board. It’s a bit lower for global borrowers. The cost of money in China is much cheaper.

Now, China doubling this facility isn’t a coincidence. It’s coming during a time where the dollar is collapsing. After Trump’s outburst in Davos and his celebration of a falling dollar, the world is now in doubt about holding the reserve currency. And even if we take away the threat of sanctions, the idea of holding dollars is still risky. Countries that trade with China will find it more natural to just deal in the RMB. After all, they are earning revenue in local Chinese currency and they are buying stuff from China using the local currency. It’s a natural progression of trade relations here. Think of it as vendor financing but with a Chinese flavor to it. China used to vendor finance Washington by buying up US bonds, but things are reversed. China is lending money to the world to get them used to the Chinese ecosystem.

Overseas yuan loans have been growing tremendously fast. We have gone from RMB600 billion to 2.5 trillion in just 4 years. And this allows China to kickstart a virtuous cycle of currency demand. Let’s say you borrow a billion RMB from Hong Kong. Sooner or later, you need to pay back the loan. And if the Chinese currency keeps appreciating, your best move is to earn RMB from China’s markets itself. And how do you do that? You start exporting and selling more goods and services to China. You earn the Chinese currency to pay back your loan. It’s just like the US dollar system except China’s main plan is to drive trade and not just to inflate asset prices.

Meanwhile, what is China doing with their stash of western currencies? They are moving to buy real assets here. We know the Chinese have been busy accumulating silver. Buying silver in China is 10% or 20% more expensive than other markets. The hunger for real assets there is real. They are moving to dump the dollars to bring in the physical metal. Beyond that, Chinese firms are busy buying up precious metal supply chains. China’s Zijin mining company just paid C$5.5 billion to buy gold mines from a Canadian company. They just added three operating gold mines in Africa to China’s portfolio. The buyout was transacted at a 27% premium which tells us that the Chinese miner was willing to pay top dollar for it. They believe the price of gold will continue to rise while western fiat currency will continue to fall in value. And just this one company will produce more than 400,000 ounces of gold annually. China understands the fate of the dollar and they want out.

We are witnessing an acceleration to de-dollarize under our noses. That’s a reason why world leaders are running all the way to Beijing. Why is everyone from Carney to Starmer visiting China? It’s to find alternatives to trade, to get China to open up their markets to them. The Chinese, of course, want to trade with the West, but on their terms as well. UK - China trade reached over 100 billion pounds last year. That is a lot of trade to get de-dollarized.

Starmer’s visit to China isn’t just to increase trade. A big agenda is also for Britain to get access to China’s new technology. And this, of course, includes Chinese EV and Chinese battery technology. To replace US car factories and to rebuild their shattered manufacturing base but, of course, the Chinese would want something in return. Exporting more EVs to the UK is just one outcome. Beijing would most definitely want the UK to hop onto the de-dollarization trade. We just need to listen to Trump’s statements over the British pivot to the Chinese. He’s concerned not just about the UK, but he’s having flashbacks to Canada’s shift as well.

Q: Mr. President, what do you think about the UK getting into business with China? Keir Starmer is in Beijing.

Trump: Well, it’s very dangerous for them to do that and it’s even more dangerous, I think, for Canada to get into business with China. Canada is not doing well. Uh, they’re doing very poorly, and you can’t look at China as the answer. That’s, I know China very well. I know, President Xi, he’s a friend of mine. I know him very well. But that’s a, that’s a big hurdle to go over when you get Canada.

And he’s right to be worried. If more Western currencies, Western countries start trading with China, we could see more dollar trade evaporate. China’s whole agenda from 2025 is to decouple from the US. It’s not just about exporting less to them or being less dependent on chips from Nvidia. It’s more than that. The plan is to secure trade away from dollars. And this gives China even more free reign to eventually dump more of their US bonds. Trump is beginning to realize that the whole [US] economy is based on the dollar system, and he is now trying to fight a delaying action to prevent an outright collapse.

Can Japan find an escape route without collapsing US markets? Which country is next to pivot to China? Is it the EU’s turn now?