Trump is replaying 1985. But this time, China is at the table, not Japan.
Elon Musk said something a few months ago:
"Without AI and robots, this country would be 1000 percent bankrupt. Nothing else can solve this debt."
Think about it.
The richest man in the world fears his own country's collapse.
Why?
Because America's debt is $39 trillion. The interest on this debt has grown so large that America is now paying more in interest than it spends on its military.
Such a debt cannot be repaid. You can only escape it.
And America's escape route isn't new. It played this movie once before, 40 years ago.
Back then, it was Japan.
This time, it's China.
So how can this debt be escaped?
In only one way. By devaluing the dollar.
Because the debt is in dollars.
As the dollar loses value, the debt shrinks. The same debt remains, but it's worth less.
That's why Trump said, "I don't care about a strong dollar."
But lowering the dollar comes at a price. Everything gets more expensive, and the people get poorer.
That's where history comes in. Because America played this game once and saw the end result.
Let me take you back to 1985.
In those years, Japan was the world's factory. They were leading in cars, electronics, chips, everything. They produced both cheaper and higher quality goods. American companies couldn't compete with their Japanese rivals.
American exports were falling, factories were closing. Just like today.
Then America slammed its fist on the table.
September 1985, New York, Plaza Hotel.
America told Japan: either you strengthen your currency, or I'll impose heavy taxes on all your goods.
Japan accepted.
The aftermath was a disaster. The yen strengthened, Japanese goods became more expensive, and its global dominance ended. Its exports collapsed.
Japan lowered interest rates to rock bottom and injected a lot of money to save its economy. But that money didn't go to factories. It went to real estate and the stock market. A huge bubble inflated, then burst.
Japan never returned to its former glory. That's when the lost thirty years began.
Now America is making the same move again. The goal is the same: to devalue its own currency and raise the currency of its rival.
Elon Musk said something a few months ago:
"Without AI and robots, this country would be 1000 percent bankrupt. Nothing else can solve this debt."
Think about it.
The richest man in the world fears his own country's collapse.
Why?
Because America's debt is $39 trillion. The interest on this debt has grown so large that America is now paying more in interest than it spends on its military.
Such a debt cannot be repaid. You can only escape it.
And America's escape route isn't new. It played this movie once before, 40 years ago.
Back then, it was Japan.
This time, it's China.
So how can this debt be escaped?
In only one way. By devaluing the dollar.
Because the debt is in dollars.
As the dollar loses value, the debt shrinks. The same debt remains, but it's worth less.
That's why Trump said, "I don't care about a strong dollar."
But lowering the dollar comes at a price. Everything gets more expensive, and the people get poorer.
That's where history comes in. Because America played this game once and saw the end result.
Let me take you back to 1985.
In those years, Japan was the world's factory. They were leading in cars, electronics, chips, everything. They produced both cheaper and higher quality goods. American companies couldn't compete with their Japanese rivals.
American exports were falling, factories were closing. Just like today.
Then America slammed its fist on the table.
September 1985, New York, Plaza Hotel.
America told Japan: either you strengthen your currency, or I'll impose heavy taxes on all your goods.
Japan accepted.
The aftermath was a disaster. The yen strengthened, Japanese goods became more expensive, and its global dominance ended. Its exports collapsed.
Japan lowered interest rates to rock bottom and injected a lot of money to save its economy. But that money didn't go to factories. It went to real estate and the stock market. A huge bubble inflated, then burst.
Japan never returned to its former glory. That's when the lost thirty years began.
Now America is making the same move again. The goal is the same: to devalue its own currency and raise the currency of its rival.
✍1
🇨🇭 Global One SI - Prompt
Photo
Trump's stick is the same as in 1985: taxes.
He imposed taxes, which he calls "Independence Day" in 2025.
He imposed taxes on almost every good entering America.
The message is simple:
Either produce here, or pay the penalty.
Even his team doesn't hide it.
They've already given a name to a new agreement to lower the dollar: the Mar-a-Lago Agreement. In other words, they have 1985 in mind.
And pressure is working.
The other day, Toyota announced it will no longer produce its best-selling pickup truck in Mexico, but in Texas. A $3.6 billion investment.
The reason is clear. Producing it in Mexico adds a 25% tax to the car. Trump called this news "a huge deal."
It's not just Toyota. Stellantis announced its largest ever investment in America, worth $13 billion. Pharmaceutical giants are moving their factories to America one by one.
The same pressure brought Japan to its knees back then.
But there's a difference.
In 1985, America did this only because of its trade deficit. Today, there's that huge debt behind it. So the stakes are much higher.
This is where Elon's second point comes in.
Lowering the dollar will reduce the debt, but it will also crush the people with inflation. So how will America escape this trap?
Elon's answer is robots.
The logic is this:
Robots should produce day and night without stopping. Then there will be so many goods on the market that no matter how much money you print, prices won't rise. Money will fall, but the cost of living won't increase.
When Elon says "we'll collapse without robots," he means exactly this.
If the robots don't arrive in time, all the printed money will fall on the people. If they arrive, America will reduce its debt for the first time in history without impoverishing the people.
That's why Trump specifically appointed Kevin Warsh to head the Fed.
Warsh used to say "printing money causes inflation." Now he says: artificial intelligence has changed everything, even if we print money, inflation won't come anymore.
So Trump is lowering the dollar, Warsh is printing money, and Elon is building the robots.
The plan seems complete.
But the plan has two major flaws. Both are in the same place: China.
Firstly,
In 1985, Japan was forced to comply because America was protecting it; it couldn't say "no."
China can say no. It will use its own market as leverage, retaliate, and not back down. This time, America is playing this game with someone who won't submit.
Secondly, it's even worse.
The whole plan depends on robots.
But America isn't making those robots yet. There's someone else who's far ahead in this. China. Even Elon refers to China as "the biggest rival."
The other day someone wrote this:
"China produces 90% of the world's humanoid robots; we can't underestimate them anymore."
Elon wrote below:
"For now."
That brief answer holds all of America's hope.
China is ahead now, okay.
But Elon says that whoever is ahead today won't be the winner tomorrow.
America has to turn this race around. If it can't, those robots will never arrive, and the whole plan will collapse.
The current situation is this:
Forty years ago, America played this game and won. Because Japan had to say "yes."
This time, it faces a China that can say "no."
Moreover, China is making the robots that America needs to win.
So Trump is remaking the same movie. But this time, he's not writing the script alone.
Elon didn't say "for now" for nothing.
He imposed taxes, which he calls "Independence Day" in 2025.
He imposed taxes on almost every good entering America.
The message is simple:
Either produce here, or pay the penalty.
Even his team doesn't hide it.
They've already given a name to a new agreement to lower the dollar: the Mar-a-Lago Agreement. In other words, they have 1985 in mind.
And pressure is working.
The other day, Toyota announced it will no longer produce its best-selling pickup truck in Mexico, but in Texas. A $3.6 billion investment.
The reason is clear. Producing it in Mexico adds a 25% tax to the car. Trump called this news "a huge deal."
It's not just Toyota. Stellantis announced its largest ever investment in America, worth $13 billion. Pharmaceutical giants are moving their factories to America one by one.
The same pressure brought Japan to its knees back then.
But there's a difference.
In 1985, America did this only because of its trade deficit. Today, there's that huge debt behind it. So the stakes are much higher.
This is where Elon's second point comes in.
Lowering the dollar will reduce the debt, but it will also crush the people with inflation. So how will America escape this trap?
Elon's answer is robots.
The logic is this:
Robots should produce day and night without stopping. Then there will be so many goods on the market that no matter how much money you print, prices won't rise. Money will fall, but the cost of living won't increase.
When Elon says "we'll collapse without robots," he means exactly this.
If the robots don't arrive in time, all the printed money will fall on the people. If they arrive, America will reduce its debt for the first time in history without impoverishing the people.
That's why Trump specifically appointed Kevin Warsh to head the Fed.
Warsh used to say "printing money causes inflation." Now he says: artificial intelligence has changed everything, even if we print money, inflation won't come anymore.
So Trump is lowering the dollar, Warsh is printing money, and Elon is building the robots.
The plan seems complete.
But the plan has two major flaws. Both are in the same place: China.
Firstly,
In 1985, Japan was forced to comply because America was protecting it; it couldn't say "no."
China can say no. It will use its own market as leverage, retaliate, and not back down. This time, America is playing this game with someone who won't submit.
Secondly, it's even worse.
The whole plan depends on robots.
But America isn't making those robots yet. There's someone else who's far ahead in this. China. Even Elon refers to China as "the biggest rival."
The other day someone wrote this:
"China produces 90% of the world's humanoid robots; we can't underestimate them anymore."
Elon wrote below:
"For now."
That brief answer holds all of America's hope.
China is ahead now, okay.
But Elon says that whoever is ahead today won't be the winner tomorrow.
America has to turn this race around. If it can't, those robots will never arrive, and the whole plan will collapse.
The current situation is this:
Forty years ago, America played this game and won. Because Japan had to say "yes."
This time, it faces a China that can say "no."
Moreover, China is making the robots that America needs to win.
So Trump is remaking the same movie. But this time, he's not writing the script alone.
Elon didn't say "for now" for nothing.
✍1
Everyone is looking at the dollar. China's real move is elsewhere.
I'll show you something very few people know.
Everyone in the world who buys and sells gold has to go through the same door.
If a central bank is going to buy gold, it goes through that door. If a whole country is going to increase its reserves, it goes through that door. Even the price of gold is determined behind that door.
Where is it?
London.
For a hundred years, all the world's gold has passed through there. And the key to that door has always been in the hands of the West.
This week, China opened a path that never went through that door before.
In Hong Kong, together with major banks, it established a system where gold can be bought and sold without touching London.
The news seemed technical. Nobody paid attention to it.
Yet this is the first crack in the gold system.
But to understand why this crack is so big, we need to look at something else China did before.
Because London's power over gold is not just control.
It's manipulation.
Think of it this way...
There's a jeweler.
He has a certain amount of gold in his vault. But the receipts he gives to his customers show far more gold than he actually has.
Everyone looks at their receipt and feels comfortable saying, "I have gold." As long as no one goes to claim the metal, this system works flawlessly.
The world's gold market works exactly like this. There's a circulation of paper gold far exceeding the actual amount of gold that exists.
So what's the result?
Gold appears abundant. And because it appears abundant, its price remains low.
In other words, paper gold artificially keeps the price of real gold down.
The gold price you see on the screen today isn't the real price of gold.
China saw this. It began taking its own countermeasures against this Western game.
It took two steps.
First, it withdrew its own people from the game.
ICBC, Postal Savings, Ping An, Guangfa – China's largest banks successively sold paper gold to their citizens. Gold that doesn't exist, only appears on a screen.
Then it took the second step. The step we saw this week.
It established its own system where real gold is bought and sold without touching London.
At the same time, it is constantly accumulating real gold.
So China is doing two things at once. It is getting its people out of the fake system and filling its own coffers with real metal.
And this is not a single move.
For years, China has been building its own system against the West's system.
On one side, BRICS.
Against the dollar system. China is expanding this bloc, gradually moving international trade away from the dollar.
On the other side, this gold move. Against the West's gold order.
Both are part of the same plan. One is the independence of money, the other is the independence of gold.
While everyone is giving up hope on gold at low prices, China is silently accumulating real metal at precisely that price.
Because China knows this: the rule of paper lasts only until everyone wants the real thing.
When that day comes, it's not the one with the receipt who wins, but the one with the metal.
I'll show you something very few people know.
Everyone in the world who buys and sells gold has to go through the same door.
If a central bank is going to buy gold, it goes through that door. If a whole country is going to increase its reserves, it goes through that door. Even the price of gold is determined behind that door.
Where is it?
London.
For a hundred years, all the world's gold has passed through there. And the key to that door has always been in the hands of the West.
This week, China opened a path that never went through that door before.
In Hong Kong, together with major banks, it established a system where gold can be bought and sold without touching London.
The news seemed technical. Nobody paid attention to it.
Yet this is the first crack in the gold system.
But to understand why this crack is so big, we need to look at something else China did before.
Because London's power over gold is not just control.
It's manipulation.
Think of it this way...
There's a jeweler.
He has a certain amount of gold in his vault. But the receipts he gives to his customers show far more gold than he actually has.
Everyone looks at their receipt and feels comfortable saying, "I have gold." As long as no one goes to claim the metal, this system works flawlessly.
The world's gold market works exactly like this. There's a circulation of paper gold far exceeding the actual amount of gold that exists.
So what's the result?
Gold appears abundant. And because it appears abundant, its price remains low.
In other words, paper gold artificially keeps the price of real gold down.
The gold price you see on the screen today isn't the real price of gold.
China saw this. It began taking its own countermeasures against this Western game.
It took two steps.
First, it withdrew its own people from the game.
ICBC, Postal Savings, Ping An, Guangfa – China's largest banks successively sold paper gold to their citizens. Gold that doesn't exist, only appears on a screen.
Then it took the second step. The step we saw this week.
It established its own system where real gold is bought and sold without touching London.
At the same time, it is constantly accumulating real gold.
So China is doing two things at once. It is getting its people out of the fake system and filling its own coffers with real metal.
And this is not a single move.
For years, China has been building its own system against the West's system.
On one side, BRICS.
Against the dollar system. China is expanding this bloc, gradually moving international trade away from the dollar.
On the other side, this gold move. Against the West's gold order.
Both are part of the same plan. One is the independence of money, the other is the independence of gold.
While everyone is giving up hope on gold at low prices, China is silently accumulating real metal at precisely that price.
Because China knows this: the rule of paper lasts only until everyone wants the real thing.
When that day comes, it's not the one with the receipt who wins, but the one with the metal.
✍1
🇨🇭 Global One SI - Prompt
Artificial intelligence was supposed to make everything cheaper. The Fed says the opposite.
The Fed released the minutes of its June FOMC meeting.
Those minutes contained a silent admission.
When listing the causes of core inflation, a name appeared on the list for the first time:
Artificial intelligence.
Think about how strange that is.
For years, artificial intelligence was sold to us with a single promise:
It will make everything cheaper. It will reduce costs, increase efficiency, and end inflation.
Now, the world's most powerful central bank has included it among the culprits of inflation.
The thing that promised lower prices is now generating high prices.
This isn't even an opinion.
It's written in the Fed's own minutes, in their own words.
So how is the thing that was said to save us from inflation feeding today's inflation?
The answer lies somewhere no one is looking. In the cost of artificial intelligence.
Let's start like this:
Artificial intelligence isn't software floating in the cloud. It's a physical thing.
It needs massive data centers to operate. Those centers need chips, memory, copper, concrete.
And on top of all that, it needs a constant flow of electricity.
Companies are pouring unimaginable amounts of money into this. Hundreds of billions of dollars. Into chips, memory, data centers.
What happens when so much money flows into the same thing at once? Those things become more expensive. Chips have become more expensive. Memory has become more expensive. Building a data center has become more expensive.
These costs directly contribute to inflation. This is the picture the Fed sees.
But the real issue is energy.
Pay attention here, because two things are overlapping.
Energy was already expensive. The war with Iran, the tensions in the Strait of Hormuz, had reduced supply. Oil was high, electricity was high.
Just then, artificial intelligence arrived. It only wanted one thing: more electricity.
On one hand, the war is turning off the tap on energy. On the other hand, artificial intelligence is increasing energy consumption.
The same resource is being squeezed from two opposite directions. Like a vise.
If supply falls while demand increases, there's only one direction the price can go:
Up.
Energy is in everything. The goods you produce, the cargo you carry, the house you heat. When energy becomes expensive, everything becomes expensive.
So artificial intelligence didn't just add a new cost. It poured gasoline on an already burning fire.
Now for the second layer of the issue.
The Fed released the minutes of its June FOMC meeting.
Those minutes contained a silent admission.
When listing the causes of core inflation, a name appeared on the list for the first time:
Artificial intelligence.
Think about how strange that is.
For years, artificial intelligence was sold to us with a single promise:
It will make everything cheaper. It will reduce costs, increase efficiency, and end inflation.
Now, the world's most powerful central bank has included it among the culprits of inflation.
The thing that promised lower prices is now generating high prices.
This isn't even an opinion.
It's written in the Fed's own minutes, in their own words.
So how is the thing that was said to save us from inflation feeding today's inflation?
The answer lies somewhere no one is looking. In the cost of artificial intelligence.
Let's start like this:
Artificial intelligence isn't software floating in the cloud. It's a physical thing.
It needs massive data centers to operate. Those centers need chips, memory, copper, concrete.
And on top of all that, it needs a constant flow of electricity.
Companies are pouring unimaginable amounts of money into this. Hundreds of billions of dollars. Into chips, memory, data centers.
What happens when so much money flows into the same thing at once? Those things become more expensive. Chips have become more expensive. Memory has become more expensive. Building a data center has become more expensive.
These costs directly contribute to inflation. This is the picture the Fed sees.
But the real issue is energy.
Pay attention here, because two things are overlapping.
Energy was already expensive. The war with Iran, the tensions in the Strait of Hormuz, had reduced supply. Oil was high, electricity was high.
Just then, artificial intelligence arrived. It only wanted one thing: more electricity.
On one hand, the war is turning off the tap on energy. On the other hand, artificial intelligence is increasing energy consumption.
The same resource is being squeezed from two opposite directions. Like a vise.
If supply falls while demand increases, there's only one direction the price can go:
Up.
Energy is in everything. The goods you produce, the cargo you carry, the house you heat. When energy becomes expensive, everything becomes expensive.
So artificial intelligence didn't just add a new cost. It poured gasoline on an already burning fire.
Now for the second layer of the issue.
✍1
🇨🇭 Global One SI - Prompt
Photo
So much money is flowing in, but what's the return?
For now, not much. Artificial intelligence isn't yet making its own money. There are winners, but only those selling the chip and infrastructure. Those who use AI and expect returns are still paying out of their own pockets.
The money going in is many times greater than the money going out.
This leads to a very simple rule: AI has two clocks.
A cost clock. And a return clock.
The cost clock is running now. Chips, electricity, data centers. The bill is being paid today.
The return clock hasn't even started yet. The day AI will fulfill that promise is somewhere in the future, years from now.
I don't even need to say this.
The Fed itself said it. In the minutes, some members said that AI could one day reduce inflation through increased returns. But they immediately added that it would take time for this effect to manifest.
So right now, we're in the gap between these two clocks. The expensive years where the bill is paid but the return hasn't yet arrived.
This is where the big fight begins.
On one side, there's the Fed staff. They're looking at the cost clock. Inflation is where it is now, so they say interest rates should stay high for a long time.
According to the minutes, there will be no cuts until 2027, maybe a single cut in mid-2027 at most.
The market, however, is pricing in something beyond that. They're expecting an interest rate increase, not a cut.
On the other side, there's the Fed chairman.
Kevin Warsh. He says the exact opposite. He says artificial intelligence is a deflationary force. A productivity boom happens without creating inflation, so interest rates should go down.
Now, consider this:
The minutes were written by the Fed. And the Fed chairman is saying the exact opposite. The same institution, at its very top, is contradicting itself.
Both are looking at the same technology, but at different clocks. The staff at the cost clock, Warsh at the productivity clock.
So the real debate isn't whether artificial intelligence is inflationary or deflationary. The real debate is which clock will strike first.
And why does this concern us all?
Because almost all of this year's stock market gains are in a handful of AI stocks. Those stocks are carrying the entire market on their backs.
This means:
America's financial future is tied to AI paying for its future operations.
A massive amount of money is being poured into an asset that isn't yet profitable, creating inflation.
The market has bet its entire future on that.
And that's where the cycle ends.
This same rise inflates costs and drives up stock prices.
When costs inflate, inflation rises. When inflation rises, the Fed keeps interest rates high.
So what does high interest rates hit?
The valuations of those rising stocks. Because for a stock priced according to future profit, the biggest threat is high interest rates.
In other words, the rise of AI is setting a trap for itself.
Like a snake eating its own tail.
Now, let's look ahead.
If Warsh is right, the hour of yield will strike. AI will truly start making everything cheaper.
Inflation will fall, interest rates will decrease, and those massive valuations will be justified.
If the staff is right, the bill will take much longer to pay than the return on investment. Interest rates will remain high. High interest rates will erode the foundation that supports those valuations.
Right now, nobody is looking at those figures. Everyone is looking at the stocks.
For now, not much. Artificial intelligence isn't yet making its own money. There are winners, but only those selling the chip and infrastructure. Those who use AI and expect returns are still paying out of their own pockets.
The money going in is many times greater than the money going out.
This leads to a very simple rule: AI has two clocks.
A cost clock. And a return clock.
The cost clock is running now. Chips, electricity, data centers. The bill is being paid today.
The return clock hasn't even started yet. The day AI will fulfill that promise is somewhere in the future, years from now.
I don't even need to say this.
The Fed itself said it. In the minutes, some members said that AI could one day reduce inflation through increased returns. But they immediately added that it would take time for this effect to manifest.
So right now, we're in the gap between these two clocks. The expensive years where the bill is paid but the return hasn't yet arrived.
This is where the big fight begins.
On one side, there's the Fed staff. They're looking at the cost clock. Inflation is where it is now, so they say interest rates should stay high for a long time.
According to the minutes, there will be no cuts until 2027, maybe a single cut in mid-2027 at most.
The market, however, is pricing in something beyond that. They're expecting an interest rate increase, not a cut.
On the other side, there's the Fed chairman.
Kevin Warsh. He says the exact opposite. He says artificial intelligence is a deflationary force. A productivity boom happens without creating inflation, so interest rates should go down.
Now, consider this:
The minutes were written by the Fed. And the Fed chairman is saying the exact opposite. The same institution, at its very top, is contradicting itself.
Both are looking at the same technology, but at different clocks. The staff at the cost clock, Warsh at the productivity clock.
So the real debate isn't whether artificial intelligence is inflationary or deflationary. The real debate is which clock will strike first.
And why does this concern us all?
Because almost all of this year's stock market gains are in a handful of AI stocks. Those stocks are carrying the entire market on their backs.
This means:
America's financial future is tied to AI paying for its future operations.
A massive amount of money is being poured into an asset that isn't yet profitable, creating inflation.
The market has bet its entire future on that.
And that's where the cycle ends.
This same rise inflates costs and drives up stock prices.
When costs inflate, inflation rises. When inflation rises, the Fed keeps interest rates high.
So what does high interest rates hit?
The valuations of those rising stocks. Because for a stock priced according to future profit, the biggest threat is high interest rates.
In other words, the rise of AI is setting a trap for itself.
Like a snake eating its own tail.
Now, let's look ahead.
If Warsh is right, the hour of yield will strike. AI will truly start making everything cheaper.
Inflation will fall, interest rates will decrease, and those massive valuations will be justified.
If the staff is right, the bill will take much longer to pay than the return on investment. Interest rates will remain high. High interest rates will erode the foundation that supports those valuations.
Right now, nobody is looking at those figures. Everyone is looking at the stocks.
✍1
Everyone is talking about the Middle East. The real showdown between the US and China has already begun in Panama.
Trump made a brief statement a week ago:
"China will never have the Panama Canal."
At first glance, it's an ordinary sentence. But pay attention to the timing.
The war between Iran and America continues.
NATO just met in Türkiye. The whole world's eyes are on the Middle East.
In precisely this environment, the American President is pointing thousands of kilometers away.
But why?
While the entire front is in the Middle East, Trump's mind is on a canal.
Because the war in the Middle East is only the visible surface. The real showdown is taking place in a much quieter place, right above that canal.
Let me explain.
First, let's see what this canal is.
Look at the map.
America is flanked by two oceans. The Atlantic to the east, the Pacific to the west.
If a warship wants to cross from the Atlantic to the Pacific, it has two options. Either it sails around the entire southern tip of South America, which takes weeks. Or, a shortcut, it goes through the middle.
That shortcut is Panama.
Thanks to this canal, America can move its navy from one ocean to another in days.
This is what keeps America powerful both in the East and the West simultaneously.
And there's this:
Approximately forty percent of America's imports and exports pass through here.
Now, let's get to the critical point.
The Panamanian government operates the canal's water. But for twenty years, the ports at both ends of the canal were operated by a Hong Kong-based company linked to China.
Its name is CK Hutchison.
Every ship stops there before passing through. The person guarding the gate sees and records which ship will pass when, and slows it down if necessary.
In peacetime, nobody notices. In times of crisis, however, this becomes a huge weapon.
So, the key to that vital gateway that makes America a bi-ocean power was in the hands of a Chinese company for years.
And not in a distant sea, but right on America's own continent.
The key to your own house is in the pocket of someone you haven't known for years. That's what really bothered Trump.
Trump increased the pressure. Eventually, two things happened at once.
On the one hand, a Panamanian court canceled the company's contract.
On the other hand, the company itself gave up. It agreed to sell not just Panama, but all 43 of its ports worldwide, for $23 billion to a group led by the American company BlackRock.
The key was passing to the West. Up to this point, a complete American victory.
But that's exactly where China stepped in.
Trump made a brief statement a week ago:
"China will never have the Panama Canal."
At first glance, it's an ordinary sentence. But pay attention to the timing.
The war between Iran and America continues.
NATO just met in Türkiye. The whole world's eyes are on the Middle East.
In precisely this environment, the American President is pointing thousands of kilometers away.
But why?
While the entire front is in the Middle East, Trump's mind is on a canal.
Because the war in the Middle East is only the visible surface. The real showdown is taking place in a much quieter place, right above that canal.
Let me explain.
First, let's see what this canal is.
Look at the map.
America is flanked by two oceans. The Atlantic to the east, the Pacific to the west.
If a warship wants to cross from the Atlantic to the Pacific, it has two options. Either it sails around the entire southern tip of South America, which takes weeks. Or, a shortcut, it goes through the middle.
That shortcut is Panama.
Thanks to this canal, America can move its navy from one ocean to another in days.
This is what keeps America powerful both in the East and the West simultaneously.
And there's this:
Approximately forty percent of America's imports and exports pass through here.
Now, let's get to the critical point.
The Panamanian government operates the canal's water. But for twenty years, the ports at both ends of the canal were operated by a Hong Kong-based company linked to China.
Its name is CK Hutchison.
Every ship stops there before passing through. The person guarding the gate sees and records which ship will pass when, and slows it down if necessary.
In peacetime, nobody notices. In times of crisis, however, this becomes a huge weapon.
So, the key to that vital gateway that makes America a bi-ocean power was in the hands of a Chinese company for years.
And not in a distant sea, but right on America's own continent.
The key to your own house is in the pocket of someone you haven't known for years. That's what really bothered Trump.
Trump increased the pressure. Eventually, two things happened at once.
On the one hand, a Panamanian court canceled the company's contract.
On the other hand, the company itself gave up. It agreed to sell not just Panama, but all 43 of its ports worldwide, for $23 billion to a group led by the American company BlackRock.
The key was passing to the West. Up to this point, a complete American victory.
But that's exactly where China stepped in.
✍1
🇨🇭 Global One SI - Prompt
Photo
Because it was unacceptable for China that a Chinese company would hand over such strategic ports to the West.
So how was China going to stop this sale?
Simple.
That company also did business in China. Therefore, China's approval was needed for this massive sale to be completed. China did not give that approval. It froze the deal.
Then it made its own move.
It brought the state-owned shipping giant COSCO into the buyer group.
The goal is this:
To prevent the ports from completely falling into the hands of the West, and to ensure China retains a share.
So why is China resisting so much?
Because for China, the issue isn't Panama. It's about precedent.
Think of it this way:
This is the first time the West has openly taken back a strategic asset belonging to China. If China withdraws silently, it will send the following message to the whole world:
"When America exerts pressure, China's ports can be taken away."
The moment that perception takes root, China's ports in Greece, Pakistan, and Sri Lanka will suddenly become targets.
China, which silently gave up Panama today, will lose them all tomorrow.
That's why China is fighting not for two ports, but for the rule that "Chinese goods are untouchable."
If that rule collapses here, it will collapse everywhere in the world.
There's another reason.
For Xi, resistance is a matter of honor.
China's entire stance is built on this sentence: "We will not bow to American pressure."
Giving up Panama silently under threat would be a disgrace both internationally and in the eyes of its own people.
And that's where China's real plan comes into play.
China knows it can't defeat America at sea. The American navy is unmatched. That's why it's opening new routes that don't even enter the sea.
Railways, pipelines, and land corridors stretching from Beijing to Europe.
The reason is simple.
You can't stop a railway with an aircraft carrier.
The day some trade shifts inland, the value of all the sea passages controlled by America will decrease. Including Panama.
Do you see the two layers of Panama?
On the one hand, China held the key to that gate for years. On the other hand, it was building roads that would one day no longer be needed.
Now let's go back to the beginning.
Why did Trump point to Panama while the Middle East was burning?
Because the Middle East and Panama are both part of the same game.
Everyone is looking at the Strait of Hormuz. It's in plain sight, on everyone's lips. One of the world's most critical sea passages.
Panama, however, is the silent corner of the same game. Nobody is looking.
On the one hand, America is in the middle of a war in the Strait of Hormuz. On the other hand, without anyone noticing, it is reclaiming the gateway on its own continent from China.
The wars of the last century were for land. Whoever acquired more land was considered powerful.
The struggle of this century is not for land.
It's for roads.
Whoever controls the route through which world trade passes, controls the world.
He determines the money, the rules, and the future.
So how was China going to stop this sale?
Simple.
That company also did business in China. Therefore, China's approval was needed for this massive sale to be completed. China did not give that approval. It froze the deal.
Then it made its own move.
It brought the state-owned shipping giant COSCO into the buyer group.
The goal is this:
To prevent the ports from completely falling into the hands of the West, and to ensure China retains a share.
So why is China resisting so much?
Because for China, the issue isn't Panama. It's about precedent.
Think of it this way:
This is the first time the West has openly taken back a strategic asset belonging to China. If China withdraws silently, it will send the following message to the whole world:
"When America exerts pressure, China's ports can be taken away."
The moment that perception takes root, China's ports in Greece, Pakistan, and Sri Lanka will suddenly become targets.
China, which silently gave up Panama today, will lose them all tomorrow.
That's why China is fighting not for two ports, but for the rule that "Chinese goods are untouchable."
If that rule collapses here, it will collapse everywhere in the world.
There's another reason.
For Xi, resistance is a matter of honor.
China's entire stance is built on this sentence: "We will not bow to American pressure."
Giving up Panama silently under threat would be a disgrace both internationally and in the eyes of its own people.
And that's where China's real plan comes into play.
China knows it can't defeat America at sea. The American navy is unmatched. That's why it's opening new routes that don't even enter the sea.
Railways, pipelines, and land corridors stretching from Beijing to Europe.
The reason is simple.
You can't stop a railway with an aircraft carrier.
The day some trade shifts inland, the value of all the sea passages controlled by America will decrease. Including Panama.
Do you see the two layers of Panama?
On the one hand, China held the key to that gate for years. On the other hand, it was building roads that would one day no longer be needed.
Now let's go back to the beginning.
Why did Trump point to Panama while the Middle East was burning?
Because the Middle East and Panama are both part of the same game.
Everyone is looking at the Strait of Hormuz. It's in plain sight, on everyone's lips. One of the world's most critical sea passages.
Panama, however, is the silent corner of the same game. Nobody is looking.
On the one hand, America is in the middle of a war in the Strait of Hormuz. On the other hand, without anyone noticing, it is reclaiming the gateway on its own continent from China.
The wars of the last century were for land. Whoever acquired more land was considered powerful.
The struggle of this century is not for land.
It's for roads.
Whoever controls the route through which world trade passes, controls the world.
He determines the money, the rules, and the future.
✍1
China is hitting America not by fighting, but by stopping buying.
Wait a minute and imagine this.
You lent someone a large sum of money.
As payment day approaches, your borrower sits across from you and says:
"My payment schedule depends on a machine that hasn't yet proven itself being ready on time."
What do you do?
Do you continue lending, or do you gradually withdraw and invest your money in something safer?
This conversation isn't a fantasy.
It actually happened last week.
The speaker is Elon Musk, the world's richest man.
He said that America's debt interest now even exceeds the military budget, and added, "If AI and robots can't close this gap, it's the end of us."
Sitting in the creditor's seat is China.
One of the countries holding the most US Treasury bonds in the world.
Its response was published a few days later in a single-line table.
The People's Bank of China added another 10 tons of gold to its reserves.
For the 19th consecutive month. Moreover, with gold 25% below its peak and everyone else selling, this was also the strongest monthly buying since December 2024.
The question came from America, the answer from China.
Let me explain from the beginning why China chose gold.
There are two ways to stop a superpower.
Either you defeat its army, or you dry up the source of funding that feeds it.
The first option is impossible, because America has 11 aircraft carriers, 750 military bases spread across the globe, and the most powerful navy in history.
China knows this better than anyone and accepted years ago that it cannot defeat America at sea.
So what fuels that massive army?
The army's annual budget is $947 billion.
Because America spends more than it earns each year, this money cannot be covered by taxes.
It is covered by debt, and that debt is covered by selling bonds to the world.
In other words, the real fuel for the American army is not oil, but bonds.
Elon's confession is directly related to this fuel pipeline.
Wait a minute and imagine this.
You lent someone a large sum of money.
As payment day approaches, your borrower sits across from you and says:
"My payment schedule depends on a machine that hasn't yet proven itself being ready on time."
What do you do?
Do you continue lending, or do you gradually withdraw and invest your money in something safer?
This conversation isn't a fantasy.
It actually happened last week.
The speaker is Elon Musk, the world's richest man.
He said that America's debt interest now even exceeds the military budget, and added, "If AI and robots can't close this gap, it's the end of us."
Sitting in the creditor's seat is China.
One of the countries holding the most US Treasury bonds in the world.
Its response was published a few days later in a single-line table.
The People's Bank of China added another 10 tons of gold to its reserves.
For the 19th consecutive month. Moreover, with gold 25% below its peak and everyone else selling, this was also the strongest monthly buying since December 2024.
The question came from America, the answer from China.
Let me explain from the beginning why China chose gold.
There are two ways to stop a superpower.
Either you defeat its army, or you dry up the source of funding that feeds it.
The first option is impossible, because America has 11 aircraft carriers, 750 military bases spread across the globe, and the most powerful navy in history.
China knows this better than anyone and accepted years ago that it cannot defeat America at sea.
So what fuels that massive army?
The army's annual budget is $947 billion.
Because America spends more than it earns each year, this money cannot be covered by taxes.
It is covered by debt, and that debt is covered by selling bonds to the world.
In other words, the real fuel for the American army is not oil, but bonds.
Elon's confession is directly related to this fuel pipeline.
✍1
🇨🇭 Global One SI - Prompt
Photo
America's annual interest payments have exceeded $1 trillion, surpassing the military budget for the first time in history.
One in four tax dollars collected goes directly to interest payments without ever being used for a school or road.
Moreover, approximately $10 trillion worth of old bonds mature this year and need to be resold.
The entire system is dependent on one thing:
Buyers who will continue to buy those bonds.
This is America's real weakness.
Neither an aircraft carrier nor a missile shield can protect this weakness.
The date for China's decision to switch from bonds to gold is also set:
February 2022.
Russia invaded Ukraine, and the West responded by freezing $300 billion of Russia's reserves overnight.
The wealth accumulated over years by one of the world's largest countries became unusable in a single morning with one decision.
That night, all the central banks in the world learned the same lesson. Holding someone else's paper is being at someone else's mercy.
Look at what changed in China's treasury after that night.
The US Treasury bond stock fell from a peak of $1.3 trillion to $682 billion today.
This is the lowest level seen since 2008.
Gold purchases have not stopped for 19 months. Even as prices fell, they didn't stop; on the contrary, they accelerated.
During the same period, Saudi oil began to be sold in yuan for the first time, China expanded its international payment system, and trade with BRICS countries shifted to local currencies.
The dependence on the dollar is decreasing slightly each year, and as the dependence on the dollar decreases, the structural demand flowing into US Treasury bonds also decreases.
All this is happening without an attack, an announcement, or a press conference.
Just the same silent movement repeated every month: a little less paper, a little more gold.
Ray Dalio, who studied 500 years of imperial history, warned:
"When superpowers show they've lost military and financial control due to excessive debt, watch as they lose the trust of allies and creditors, lose their reserve currency status, and their currency weakens, especially against gold."
Read that sentence again.
One of the points Dalio mentioned is "the trust of creditors."
That point is no longer an abstract warning. It's the very picture at the beginning of this article.
Now, switch seats for a moment and put yourself in America's place.
You have an opponent who hasn't fired a single bullet at you. They don't touch your ships, they don't approach your bases, they don't even impose sanctions.
They're simply reducing what they buy from you.
Where will you send your navy? What will you set the price on?
A price is answered with a price, a ship with a ship, sanctions with sanctions.
But there's no answer to not buying.
There's always a counter-move to a noisy attack, but only emptiness to a silent withdrawal.
Years ago, everyone was asking, "Why is China silent?" The answer is the same today.
Silence is strategy itself.
We need to consider the other side of the picture, because this isn't a declaration of collapse.
China can't completely walk away from this table.
It still has $682 billion in paper assets, and a quick sell-off would burn its own fortunes.
Its factories are still working for American consumers; a sudden shock in America would also hit China.
That's why the withdrawal is spread over a decade.
America's counter-game is also on the field.
It's trying to lower oil prices to cool inflation, lighten the interest rate burden, keep Japan at the table, and deliver the AI that Elon is pinning his hopes on on time.
The race isn't over.
But this reality is rewritten with every scenario:
America's plan is based on a possibility. China's plan is based on a mine.
J.P. Morgan, America's greatest banker, said this under oath before Congress in 1912:
"Gold is money. Everything else is credit."
What China does every month is the cash equivalent of that statement: reduce credit, increase money.
America can respond to every move. It cannot respond to not receiving.
One in four tax dollars collected goes directly to interest payments without ever being used for a school or road.
Moreover, approximately $10 trillion worth of old bonds mature this year and need to be resold.
The entire system is dependent on one thing:
Buyers who will continue to buy those bonds.
This is America's real weakness.
Neither an aircraft carrier nor a missile shield can protect this weakness.
The date for China's decision to switch from bonds to gold is also set:
February 2022.
Russia invaded Ukraine, and the West responded by freezing $300 billion of Russia's reserves overnight.
The wealth accumulated over years by one of the world's largest countries became unusable in a single morning with one decision.
That night, all the central banks in the world learned the same lesson. Holding someone else's paper is being at someone else's mercy.
Look at what changed in China's treasury after that night.
The US Treasury bond stock fell from a peak of $1.3 trillion to $682 billion today.
This is the lowest level seen since 2008.
Gold purchases have not stopped for 19 months. Even as prices fell, they didn't stop; on the contrary, they accelerated.
During the same period, Saudi oil began to be sold in yuan for the first time, China expanded its international payment system, and trade with BRICS countries shifted to local currencies.
The dependence on the dollar is decreasing slightly each year, and as the dependence on the dollar decreases, the structural demand flowing into US Treasury bonds also decreases.
All this is happening without an attack, an announcement, or a press conference.
Just the same silent movement repeated every month: a little less paper, a little more gold.
Ray Dalio, who studied 500 years of imperial history, warned:
"When superpowers show they've lost military and financial control due to excessive debt, watch as they lose the trust of allies and creditors, lose their reserve currency status, and their currency weakens, especially against gold."
Read that sentence again.
One of the points Dalio mentioned is "the trust of creditors."
That point is no longer an abstract warning. It's the very picture at the beginning of this article.
Now, switch seats for a moment and put yourself in America's place.
You have an opponent who hasn't fired a single bullet at you. They don't touch your ships, they don't approach your bases, they don't even impose sanctions.
They're simply reducing what they buy from you.
Where will you send your navy? What will you set the price on?
A price is answered with a price, a ship with a ship, sanctions with sanctions.
But there's no answer to not buying.
There's always a counter-move to a noisy attack, but only emptiness to a silent withdrawal.
Years ago, everyone was asking, "Why is China silent?" The answer is the same today.
Silence is strategy itself.
We need to consider the other side of the picture, because this isn't a declaration of collapse.
China can't completely walk away from this table.
It still has $682 billion in paper assets, and a quick sell-off would burn its own fortunes.
Its factories are still working for American consumers; a sudden shock in America would also hit China.
That's why the withdrawal is spread over a decade.
America's counter-game is also on the field.
It's trying to lower oil prices to cool inflation, lighten the interest rate burden, keep Japan at the table, and deliver the AI that Elon is pinning his hopes on on time.
The race isn't over.
But this reality is rewritten with every scenario:
America's plan is based on a possibility. China's plan is based on a mine.
J.P. Morgan, America's greatest banker, said this under oath before Congress in 1912:
"Gold is money. Everything else is credit."
What China does every month is the cash equivalent of that statement: reduce credit, increase money.
America can respond to every move. It cannot respond to not receiving.
✍1
Forwarded from 🛢WTI, Brent Crude Oil, NGAS Trading 📊
America is lowering oil prices not for itself, but for Japan.
Two moves came in quick succession last week.
OPEC countries decided to increase oil production.
Around the same time, Trump asked American oil companies to invest $100 billion to increase production in Venezuela.
Both moves have one result:
Oil will become cheaper.
Everyone explained it with the same sentence: Trump wants to lower gasoline prices to appease his voters.
Logical, but incomplete.
Because the real target of this plan is not American gas stations.
Across the ocean, a country nobody has a connection to in terms of oil.
Japan.
At first glance, there seems to be no link between oil and Japan. But once the chain is established, none of the links break, and at the end of the chain lies America's $10 trillion debt.
Let's start with the first link.
America has a big problem this year.
The massive debts taken out during the Covid years when interest rates were zero are maturing.
In 2021, US Treasury bonds paid 0.2% interest. Today, the interest rate on a 10-year bond is 4.45%.
This year, approximately $10 trillion of debt will be refinanced. That's one-third of the total debt. Money borrowed at near-zero interest will be refinanced at today's interest rates.
The bill is already clear.
America pays more than $1 trillion in interest annually. This is more than it spends on its military. One out of every four dollars collected in taxes goes to interest payments.
This debt is unpayable. But it is manageable.
The way to manage it is to lower interest rates. Lowering interest rates requires lowering inflation. Lowering inflation requires the biggest commodity to become cheaper.
That commodity is oil.
Oil isn't just gasoline.
It's the fuel for trucks, the electricity for factories, the raw material for fertilizer. If oil becomes cheaper, all prices will ease within months, inflation will cool down, and the Fed will have more leeway.
Up to this point, the chain is familiar. This is the part everyone sees.
Now we come to the invisible link.
Interest rates alone are not enough for America to roll over its debt. Someone needs to buy those bonds, or at least not sell what they already hold.
Which country holds the most US Treasury bonds in the world? Japan. Officially, it's $1.1 trillion. Through invisible channels, it's much more.
That invisible channel is called carry trade.
For thirty years, Japan has had the cheapest currency in the world. Funds borrowed yen at near-zero interest rates and invested that money in US Treasury bonds, stocks, and gold.
Many of the prices you see on your screen today are underpinned by an invisible yen debt.
This system has only one condition: interest rates in Japan must remain low.
And that's where oil comes in.
Japan is a country that imports approximately 90% of its energy.
When oil prices rise, Japan is squeezed on three fronts: its import bill swells, inflation rises, and the yen depreciates.
What does Japan do when it's squeezed?
Two things, and both are hitting America.
First, it intervenes to defend the currency and finds that money by selling its US Treasury bonds. It spent $72 billion this year, and it didn't work.
Second, it can't withstand inflation and raises interest rates.
When interest rates rise, the thirty-year-old cheap money system begins to unravel. Funds that borrowed in yen and invested in dollars close their positions, meaning they sell US Treasury bonds.
Two moves came in quick succession last week.
OPEC countries decided to increase oil production.
Around the same time, Trump asked American oil companies to invest $100 billion to increase production in Venezuela.
Both moves have one result:
Oil will become cheaper.
Everyone explained it with the same sentence: Trump wants to lower gasoline prices to appease his voters.
Logical, but incomplete.
Because the real target of this plan is not American gas stations.
Across the ocean, a country nobody has a connection to in terms of oil.
Japan.
At first glance, there seems to be no link between oil and Japan. But once the chain is established, none of the links break, and at the end of the chain lies America's $10 trillion debt.
Let's start with the first link.
America has a big problem this year.
The massive debts taken out during the Covid years when interest rates were zero are maturing.
In 2021, US Treasury bonds paid 0.2% interest. Today, the interest rate on a 10-year bond is 4.45%.
This year, approximately $10 trillion of debt will be refinanced. That's one-third of the total debt. Money borrowed at near-zero interest will be refinanced at today's interest rates.
The bill is already clear.
America pays more than $1 trillion in interest annually. This is more than it spends on its military. One out of every four dollars collected in taxes goes to interest payments.
This debt is unpayable. But it is manageable.
The way to manage it is to lower interest rates. Lowering interest rates requires lowering inflation. Lowering inflation requires the biggest commodity to become cheaper.
That commodity is oil.
Oil isn't just gasoline.
It's the fuel for trucks, the electricity for factories, the raw material for fertilizer. If oil becomes cheaper, all prices will ease within months, inflation will cool down, and the Fed will have more leeway.
Up to this point, the chain is familiar. This is the part everyone sees.
Now we come to the invisible link.
Interest rates alone are not enough for America to roll over its debt. Someone needs to buy those bonds, or at least not sell what they already hold.
Which country holds the most US Treasury bonds in the world? Japan. Officially, it's $1.1 trillion. Through invisible channels, it's much more.
That invisible channel is called carry trade.
For thirty years, Japan has had the cheapest currency in the world. Funds borrowed yen at near-zero interest rates and invested that money in US Treasury bonds, stocks, and gold.
Many of the prices you see on your screen today are underpinned by an invisible yen debt.
This system has only one condition: interest rates in Japan must remain low.
And that's where oil comes in.
Japan is a country that imports approximately 90% of its energy.
When oil prices rise, Japan is squeezed on three fronts: its import bill swells, inflation rises, and the yen depreciates.
What does Japan do when it's squeezed?
Two things, and both are hitting America.
First, it intervenes to defend the currency and finds that money by selling its US Treasury bonds. It spent $72 billion this year, and it didn't work.
Second, it can't withstand inflation and raises interest rates.
When interest rates rise, the thirty-year-old cheap money system begins to unravel. Funds that borrowed in yen and invested in dollars close their positions, meaning they sell US Treasury bonds.
✍1
🛢WTI, Brent Crude Oil, NGAS Trading 📊
Photo
In the last two years, Japan has raised interest rates four times. Each time, the markets were shaken.
Now let's look at the numbers.
Every 100 basis point increase in US Treasury yields adds approximately $400 billion to the annual interest burden.
So the chain of expensive oil is this: oil gets more expensive, Japan is squeezed, Japan raises interest rates and sells bonds, and America's borrowing costs rise by a full $10 trillion in a renewal year.
The chain of cheap oil is the opposite: oil gets cheaper, Japan's energy bill falls, pressure on the yen decreases, Japan doesn't have to touch interest rates, it experiences a cheap money system, bonds remain stable, and America converts its debt cheaply.
America is giving a discount on Japan's energy bill, not on gas stations.
There's also a historical irony to this.
In 1985, America forcibly strengthened Japan's currency with the Plaza Agreement. That decision cost Japan 30 lost years.
Today, the same America, fearing the weakness of the same currency, is redesigning the global oil market to alleviate its fears.
The boomerang thrown 40 years ago has returned precisely in the year of debt restructuring.
Now, step back and list this year's moves:
- The Treasury Secretary's messages of support to Japan.
- The ceasefire talks with Iran.
- OPEC's production decision.
- Trump's request for $100 billion for Venezuela.
These seem like separate news items.
They all serve the same purpose: to make debt cheaper.
Let me also mention the breaking points of the picture.
OPEC members may cut production again for their own budgets if prices fall too low. Extremely cheap oil will also harm America's own producers. And then there's the Strait of Hormuz; a single crisis in the strait could reverse all the links in this chain in a single day.
So, the plan is perfect on paper, but vulnerable to a single spark.
Watch these three things in the coming weeks:
The price of oil, Japan's bond yield, and demand for US Treasury auctions.
These three will show whether the chain is working.
Now let's look at the numbers.
Every 100 basis point increase in US Treasury yields adds approximately $400 billion to the annual interest burden.
So the chain of expensive oil is this: oil gets more expensive, Japan is squeezed, Japan raises interest rates and sells bonds, and America's borrowing costs rise by a full $10 trillion in a renewal year.
The chain of cheap oil is the opposite: oil gets cheaper, Japan's energy bill falls, pressure on the yen decreases, Japan doesn't have to touch interest rates, it experiences a cheap money system, bonds remain stable, and America converts its debt cheaply.
America is giving a discount on Japan's energy bill, not on gas stations.
There's also a historical irony to this.
In 1985, America forcibly strengthened Japan's currency with the Plaza Agreement. That decision cost Japan 30 lost years.
Today, the same America, fearing the weakness of the same currency, is redesigning the global oil market to alleviate its fears.
The boomerang thrown 40 years ago has returned precisely in the year of debt restructuring.
Now, step back and list this year's moves:
- The Treasury Secretary's messages of support to Japan.
- The ceasefire talks with Iran.
- OPEC's production decision.
- Trump's request for $100 billion for Venezuela.
These seem like separate news items.
They all serve the same purpose: to make debt cheaper.
Let me also mention the breaking points of the picture.
OPEC members may cut production again for their own budgets if prices fall too low. Extremely cheap oil will also harm America's own producers. And then there's the Strait of Hormuz; a single crisis in the strait could reverse all the links in this chain in a single day.
So, the plan is perfect on paper, but vulnerable to a single spark.
Watch these three things in the coming weeks:
The price of oil, Japan's bond yield, and demand for US Treasury auctions.
These three will show whether the chain is working.
✍1
Why are companies failing in Japan? Everyone is looking at the exchange rate. The real answer is in America.
Something strange is happening this year, and nobody is paying attention.
In the first half of this year, 45 companies in Japan went bankrupt due to exchange rate fluctuations. That's a 30% increase compared to last year.
Up to this point, it's just ordinary crisis news.
The strange part is this: most of the failing companies had exchange rate protection.
In other words, insured homes burned down.
If insured homes are burning down one after another in a country, the problem isn't the fire, but the insurance itself.
And when you pull the string on that insurance, the chain starts in Japan and goes all the way to America.
Let's start from the beginning.
First, sit down at the table of the failing company.
Imagine a small food wholesaler. They buy goods from abroad with dollars and sell them domestically with yen.
The yen is at 162 against the dollar, its weakest level since 1986. Every time the exchange rate rises, their costs increase, but they can't raise prices because the supermarket chains they deal with don't accept price increases.
The snow is melting away a little more each month.
Now let's talk about that insurance.
Full-scale currency protection is very expensive. Small companies can't afford it.
That's why banks sold them a cheaper product: barrier protection.
Let me explain how it works with an example.
Let's say a company gets a guarantee to buy dollars at $150. The product's barrier is $165.
The exchange rate can be $155 or $160, no problem. The company always buys dollars at $150. It's protected.
But if the exchange rate ever exceeds $165, the rule changes.
The protection doesn't decrease or weaken. It's completely canceled.
From that moment on, the company is obliged to buy dollars at the market price.
Like a fire insurance policy that becomes invalid the moment the house starts burning.
So why is this so important?
Because most of the barriers in the market are concentrated between $162 and $170.
The exchange rate is currently at $162. So, right at the gate of the first barrier.
Now look at how the chain works.
The exchange rate exceeds 162. A group of companies loses their protection.
The unprotected companies rush to buy dollars from the market.
This buying weakens the yen even further.
The weakened yen breaks through the next barrier. New companies become unprotected, and they also buy dollars.
Something strange is happening this year, and nobody is paying attention.
In the first half of this year, 45 companies in Japan went bankrupt due to exchange rate fluctuations. That's a 30% increase compared to last year.
Up to this point, it's just ordinary crisis news.
The strange part is this: most of the failing companies had exchange rate protection.
In other words, insured homes burned down.
If insured homes are burning down one after another in a country, the problem isn't the fire, but the insurance itself.
And when you pull the string on that insurance, the chain starts in Japan and goes all the way to America.
Let's start from the beginning.
First, sit down at the table of the failing company.
Imagine a small food wholesaler. They buy goods from abroad with dollars and sell them domestically with yen.
The yen is at 162 against the dollar, its weakest level since 1986. Every time the exchange rate rises, their costs increase, but they can't raise prices because the supermarket chains they deal with don't accept price increases.
The snow is melting away a little more each month.
Now let's talk about that insurance.
Full-scale currency protection is very expensive. Small companies can't afford it.
That's why banks sold them a cheaper product: barrier protection.
Let me explain how it works with an example.
Let's say a company gets a guarantee to buy dollars at $150. The product's barrier is $165.
The exchange rate can be $155 or $160, no problem. The company always buys dollars at $150. It's protected.
But if the exchange rate ever exceeds $165, the rule changes.
The protection doesn't decrease or weaken. It's completely canceled.
From that moment on, the company is obliged to buy dollars at the market price.
Like a fire insurance policy that becomes invalid the moment the house starts burning.
So why is this so important?
Because most of the barriers in the market are concentrated between $162 and $170.
The exchange rate is currently at $162. So, right at the gate of the first barrier.
Now look at how the chain works.
The exchange rate exceeds 162. A group of companies loses their protection.
The unprotected companies rush to buy dollars from the market.
This buying weakens the yen even further.
The weakened yen breaks through the next barrier. New companies become unprotected, and they also buy dollars.
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🇨🇭 Global One SI - Prompt
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The cycle is self-reinforcing, and no one knows where it will stop.
Now, let's get to the question everyone is asking.
If the Bank of Japan raises interest rates and strengthens the yen, wouldn't this cycle stop?
The apparent answer is: raising interest rates will kill companies that the exchange rate couldn't kill, this time through the cost of debt. That's a correct but incomplete answer.
The real wall is in America.
Why is the yen at 162? Because interest rates in America are above 3.5%, while in Japan they are 0.75%.
Money is like water; it flows to where it yields the most. For years, borrowing has been done with cheap yen, that money is converted to dollars and invested in high-yielding assets.
At the forefront of those assets are US Treasury bonds.
Japan is the world's largest holder of foreign US Treasury bonds, with an official stock exceeding $1.1 trillion. When indirect channels are added, the figure is much larger.
Now consider the Bank of Japan's hand.
If it significantly increases interest rates, this money flow will reverse. Those who borrowed in yen and invested in dollars will close their positions, meaning they will sell US bonds.
So what kind of year will 2026 be for America?
It's the year when approximately $10 trillion of old debt will be renewed.
A wave of bond sales originating from Japan in that year will
push America's borrowing costs up.
This is exactly what America wants least.
There's another link in the chain.
Japan has committed to investing over $500 billion in America under the tariff agreement.
This commitment has two consequences.
First, on the monetary side.
That money will be converted to dollars and flow into America, meaning that with the yen at its historical low, additional dollar demand is created by the state.
Second, on the negotiating side.
The country that signed this agreement cannot forcefully confront America about the interest rate differential.
Put the numbers side by side.
Japan spent $72 billion to defend its currency, and it didn't work.
That same Japan has committed to moving more than $500 billion out of the country.
One hand is trying to push the exchange rate up, the other is pushing it down.
Japan has three doors.
The first door is raising interest rates.
This would shake the American bond market.
The second door is intervention.
It was tried, $72 billion lasted a few days.
The third door is waiting.
The barrier cycle continues to operate.
The key to all three doors is not in Japan.
That's why I say these companies aren't going bankrupt because of the exchange rate.
They're going bankrupt because Japan doesn't have real control over its own exchange rate.
Is there no way out?
There is. But pay attention to where it is.
If inflation falls and the Fed starts cutting interest rates, the interest rate differential between the two countries will narrow on its own.
Money flows slow down, the yen breathes, and the cycle stops on its own without the barriers collapsing.
The button for this exit is also not in Japan.
For Japan, all roads lead to America.
In the coming weeks, watch these three things:
The exchange rate's movement within the 162-170 range, the Bank of Japan's meeting decisions, and changes in the tone of Federal Reserve members' speeches.
Now, let's get to the question everyone is asking.
If the Bank of Japan raises interest rates and strengthens the yen, wouldn't this cycle stop?
The apparent answer is: raising interest rates will kill companies that the exchange rate couldn't kill, this time through the cost of debt. That's a correct but incomplete answer.
The real wall is in America.
Why is the yen at 162? Because interest rates in America are above 3.5%, while in Japan they are 0.75%.
Money is like water; it flows to where it yields the most. For years, borrowing has been done with cheap yen, that money is converted to dollars and invested in high-yielding assets.
At the forefront of those assets are US Treasury bonds.
Japan is the world's largest holder of foreign US Treasury bonds, with an official stock exceeding $1.1 trillion. When indirect channels are added, the figure is much larger.
Now consider the Bank of Japan's hand.
If it significantly increases interest rates, this money flow will reverse. Those who borrowed in yen and invested in dollars will close their positions, meaning they will sell US bonds.
So what kind of year will 2026 be for America?
It's the year when approximately $10 trillion of old debt will be renewed.
A wave of bond sales originating from Japan in that year will
push America's borrowing costs up.
This is exactly what America wants least.
There's another link in the chain.
Japan has committed to investing over $500 billion in America under the tariff agreement.
This commitment has two consequences.
First, on the monetary side.
That money will be converted to dollars and flow into America, meaning that with the yen at its historical low, additional dollar demand is created by the state.
Second, on the negotiating side.
The country that signed this agreement cannot forcefully confront America about the interest rate differential.
Put the numbers side by side.
Japan spent $72 billion to defend its currency, and it didn't work.
That same Japan has committed to moving more than $500 billion out of the country.
One hand is trying to push the exchange rate up, the other is pushing it down.
Japan has three doors.
The first door is raising interest rates.
This would shake the American bond market.
The second door is intervention.
It was tried, $72 billion lasted a few days.
The third door is waiting.
The barrier cycle continues to operate.
The key to all three doors is not in Japan.
That's why I say these companies aren't going bankrupt because of the exchange rate.
They're going bankrupt because Japan doesn't have real control over its own exchange rate.
Is there no way out?
There is. But pay attention to where it is.
If inflation falls and the Fed starts cutting interest rates, the interest rate differential between the two countries will narrow on its own.
Money flows slow down, the yen breathes, and the cycle stops on its own without the barriers collapsing.
The button for this exit is also not in Japan.
For Japan, all roads lead to America.
In the coming weeks, watch these three things:
The exchange rate's movement within the 162-170 range, the Bank of Japan's meeting decisions, and changes in the tone of Federal Reserve members' speeches.
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