The Fed does currency swaps with a country like Japan. Japan gets dollars and the Fed gets yen. Japan takes those dollars we give them through the swap and buys U.S. Treasury bonds. The Fed then reverses the carry trade and gives Japan their yen back…
But what happens to those dollars Japan used (through the swap) to buy U.S. Treasury bonds when the reverse carry trade unwind happens ??
Those dollars are being monetized by the Exchange Stabilization Fund (ESF) There’s your Dollar Ponzi my friends.
Who’s remonetizing the $10 trillion debt roll-over? The ESF… The ESF had $93 billion before the rescue of the yen started last week.
This is why the world is dumping dollars. This is also why the U.S. Treasury is never going to have a failed auction. The ESF is monetizing primary dealer bonds when the yen reverse carry trade is unwound. This is why the yen is collapsing,
No “real investor” is going to buy U.S. Treasury bonds ever again.
The Treasury just announced $220 billion in additional Treasury issuance for Thursday with more announcements coming that same day 😶 t.co/WffXMNK26Z pic.twitter.com/5xcOGtLhc7
— Financelot (@FinanceLancelot) May 7, 2024
U.S. Treasury Bonds Have Gotten Harder to Sell. This Week Could Be Different.
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