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EndGame Macro
Japan Is Bracing for a Hard Transition
Japan isn’t rolling out a ¥17 trillion plus package because it suddenly rediscovered big government spending. It’s doing it because the country is in the middle of a very delicate shift, moving from a deflationary, low rate world that lasted 30 years into a higher price, higher rate environment that Japanese households simply aren’t built for.
Finance Minister Satsuki Katayama told reporters recently that the package will exceed ¥17 trillion, not just meet it. the intention is to relieve the blow of rising living costs and pour money into future growth sectors like AI and semiconductors, areas Japan can’t afford to lag in as the global economy fractures and supply chains get rewired.
In other words, this isn’t pure stimulus. It’s stabilization. Japan is trying to help households absorb higher prices without forcing the central bank to slam on the brakes, and at the same time fund the industries that must anchor its next decade.
Why This Matters Far Beyond Japan
The U.S. will be watching this closely, not out of curiosity, but because Japan is effectively running a dress rehearsal for challenges the U.S. will face in a few years.
The first thing markets will watch is the bond market. If a package this large pushes JGB yields higher, even modestly, that shifts the global flow of money. Japan is still one of the world’s biggest foreign holders of Treasuries. If returns at home start to look a little better, capital quietly migrates back and that puts pressure on the long end of the U.S. curve at a time when Washington is issuing record amounts of debt.
The second layer is the yen. For decades it’s been the world’s preferred funding currency. If Japan’s mix of fiscal spending and BOJ normalization makes the yen firmer or more volatile, the carry trade unwinds. And when that unwinds, it doesn’t just hit Japan, it tightens financial conditions everywhere. Equities feel it. Credit feels it. Anything that relies on cheap global liquidity feels it.
And then there’s the deeper, slower second order effect. If Japan pulls this off, if it can run a stimulus package greater than $110 billion, keep households afloat, and prevent its bond market from convulsing, it gives every other advanced economy with aging demographics and heavy debt a green light to push fiscal harder. It broadens the perceived safe zone for deficit spending in a world where monetary policy is no longer the main stabilizer.
That’s the real reason this matters. Japan isn’t just trying to manage its own economic transition. It’s showing the rest of the developed world what the next era of economic policy might look like and whether the global system can actually handle it.
Japan is the test case. The U.S. is the audience. And the spillover effects will tell us more about the next decade than the headline number ever will.
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Japan Is Bracing for a Hard Transition
Japan isn’t rolling out a ¥17 trillion plus package because it suddenly rediscovered big government spending. It’s doing it because the country is in the middle of a very delicate shift, moving from a deflationary, low rate world that lasted 30 years into a higher price, higher rate environment that Japanese households simply aren’t built for.
Finance Minister Satsuki Katayama told reporters recently that the package will exceed ¥17 trillion, not just meet it. the intention is to relieve the blow of rising living costs and pour money into future growth sectors like AI and semiconductors, areas Japan can’t afford to lag in as the global economy fractures and supply chains get rewired.
In other words, this isn’t pure stimulus. It’s stabilization. Japan is trying to help households absorb higher prices without forcing the central bank to slam on the brakes, and at the same time fund the industries that must anchor its next decade.
Why This Matters Far Beyond Japan
The U.S. will be watching this closely, not out of curiosity, but because Japan is effectively running a dress rehearsal for challenges the U.S. will face in a few years.
The first thing markets will watch is the bond market. If a package this large pushes JGB yields higher, even modestly, that shifts the global flow of money. Japan is still one of the world’s biggest foreign holders of Treasuries. If returns at home start to look a little better, capital quietly migrates back and that puts pressure on the long end of the U.S. curve at a time when Washington is issuing record amounts of debt.
The second layer is the yen. For decades it’s been the world’s preferred funding currency. If Japan’s mix of fiscal spending and BOJ normalization makes the yen firmer or more volatile, the carry trade unwinds. And when that unwinds, it doesn’t just hit Japan, it tightens financial conditions everywhere. Equities feel it. Credit feels it. Anything that relies on cheap global liquidity feels it.
And then there’s the deeper, slower second order effect. If Japan pulls this off, if it can run a stimulus package greater than $110 billion, keep households afloat, and prevent its bond market from convulsing, it gives every other advanced economy with aging demographics and heavy debt a green light to push fiscal harder. It broadens the perceived safe zone for deficit spending in a world where monetary policy is no longer the main stabilizer.
That’s the real reason this matters. Japan isn’t just trying to manage its own economic transition. It’s showing the rest of the developed world what the next era of economic policy might look like and whether the global system can actually handle it.
Japan is the test case. The U.S. is the audience. And the spillover effects will tell us more about the next decade than the headline number ever will.
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Fiscal.ai
This is the dream chart for any freemium business model.
Duolingo has consistently improved its subscriber conversion rate (Paying Subs/MAUs) over the last 5 years.
3.3% → 8.5%
$DUOL https://t.co/cMCD7n5RkD
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This is the dream chart for any freemium business model.
Duolingo has consistently improved its subscriber conversion rate (Paying Subs/MAUs) over the last 5 years.
3.3% → 8.5%
$DUOL https://t.co/cMCD7n5RkD
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AkhenOsiris
Applies to ChatGPT, Gemini, and shitty Perplexity.
https://t.co/Y1tnrzUlzl
The India Problem: Manufacturing Metrics
In July 2025, Perplexity announced a partnership with Bharti Airtel to offer free Perplexity Pro subscriptions to all 360 million Airtel customers for one year. The Pro subscription, normally ₹17,000 annually, would be free through the Airtel Thanks app. On paper, this seemed like a distribution masterstroke.
The reality? It’s a textbook case of vanity metrics disguising fundamental problems.
India is one of the world’s most price sensitive markets. Netflix slashed its basic plan by 60% from ₹499 to ₹149 just to compete. Amazon Prime raised its fee from ₹179 to ₹299 and faced significant pushback. Even global giants struggle with conversions at these price points.
Now imagine Perplexity’s challenge: converting free users who got the service bundled with their telecom plan into paying subscribers at ₹17,000 per year. Even if 10% of Airtel customers claim the offer, 36 million users, the numbers look great in pitch decks. But when those free trials expire in 2026, how many will renew?
The harsh reality: when the free year ends, most users won’t convert. They’ll go back to ChatGPT (free), or Google (free). Perplexity will be left with vanity metrics that evaporate the moment payment is required.
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Applies to ChatGPT, Gemini, and shitty Perplexity.
https://t.co/Y1tnrzUlzl
The India Problem: Manufacturing Metrics
In July 2025, Perplexity announced a partnership with Bharti Airtel to offer free Perplexity Pro subscriptions to all 360 million Airtel customers for one year. The Pro subscription, normally ₹17,000 annually, would be free through the Airtel Thanks app. On paper, this seemed like a distribution masterstroke.
The reality? It’s a textbook case of vanity metrics disguising fundamental problems.
India is one of the world’s most price sensitive markets. Netflix slashed its basic plan by 60% from ₹499 to ₹149 just to compete. Amazon Prime raised its fee from ₹179 to ₹299 and faced significant pushback. Even global giants struggle with conversions at these price points.
Now imagine Perplexity’s challenge: converting free users who got the service bundled with their telecom plan into paying subscribers at ₹17,000 per year. Even if 10% of Airtel customers claim the offer, 36 million users, the numbers look great in pitch decks. But when those free trials expire in 2026, how many will renew?
The harsh reality: when the free year ends, most users won’t convert. They’ll go back to ChatGPT (free), or Google (free). Perplexity will be left with vanity metrics that evaporate the moment payment is required.
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EndGame Macro
RT @DiMartinoBooth: Chart is the “what”
This is the “how”
Construction jobs don’t fall the moment the cycle turns. Builders work through existing contracts, shift crews toward repairs/maintenance & hope they can ride things out w/o losing skilled labor…once backlog thins, adjustment comes quickly
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RT @DiMartinoBooth: Chart is the “what”
This is the “how”
Construction jobs don’t fall the moment the cycle turns. Builders work through existing contracts, shift crews toward repairs/maintenance & hope they can ride things out w/o losing skilled labor…once backlog thins, adjustment comes quickly
Construction Just Blinked And the Cycle Usually Follows
Construction employment rolling over doesn’t make headlines the way payrolls or CPI do, but it’s one of those signals that tends to matter more than people realize. You can see the line bending down, and when you match that with what Home Depot and Lowe’s are saying, the story fits: big, financed projects are getting pushed out, and both pros and DIY customers are shifting to smaller, cheaper jobs. That’s what it looks like when higher rates finally seep into the real economy.
Backlogs Disguise Weakness… Until They Don’t
Construction jobs don’t fall the moment the cycle turns. Builders work through existing contracts, shift crews toward repairs or maintenance, and hope they can ride things out without losing skilled labor. Employment holds on longer than new starts, permits, or order books but once the backlog thins out, the adjustment comes quickly. The rollover you’re seeing here is usually the moment where optimism gives way to caution.
Is It a Leading or Lagging Indicator?
Housing activity (starts, permits, new home sales) is traditionally a leading piece of the cycle. Construction employment sits just behind that, not quite a first warning, but definitely not late. If you look at the chart over the past few decades, drops like this almost always show up before or right as recessions hit. What you don’t see in the historical record is construction employment turning down and the economy suddenly reaccelerating. It’s just not how this part of the system behaves.
Put simply this is one of those indicators that whispers before the rest of the data starts shouting. And right now, the whisper is getting louder. tweet
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EndGame Macro (@onechancefreedm) on X
Construction Just Blinked And the Cycle Usually Follows
Construction employment rolling over doesn’t make headlines the way payrolls or CPI do, but it’s one of those signals that tends to matter more than people realize. You can see the line bending down…
Construction employment rolling over doesn’t make headlines the way payrolls or CPI do, but it’s one of those signals that tends to matter more than people realize. You can see the line bending down…
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EndGame Macro
RT @DiMartinoBooth: If you don’t follow @bondstrategist and @onechancefreedm you’re doing yourself a disservice.
When Reserves Lie: The Chart Everyone Misreads
Before 2008, we had a classic scarce reserve system. Banks ran on a small pool of reserves to clear payments and meet requirements. The Fed nudged that pool up or down to steer the overnight rate. Banks didn’t need reserves to make a loan, they created deposits when they lent but once those deposits moved through the system, they needed reserves to settle with other banks and stay solvent.
The real action, though, was always in credit risk and the yield curve. The 2 year, 10 year, mortgage rates reflected the market’s view on future growth, inflation, and Treasury supply, not the level of reserves. M2 could climb for decades because banks were willing to lend and balance sheets weren’t suffocated by post crisis regulation. Reserves were the small amount of real money keeping the plumbing clearing in the background, not the driver of broad money.
The Post GFC regime shift
After 2008, the architecture flipped. QE and the floor system turned reserves into a ring fenced asset for a narrow club of big banks. Trillions now sit on G-SIB balance sheets, earning interest at the Fed, helping them meet LCR/SLR/HQLA requirements, and cycling through the RRP/TGA machinery. They’re not there to be multiplied into new loans like the textbook money multiplier suggests.
Meanwhile, more credit intermediation migrated to non banks and global shadow systems that don’t have reserve access at all. You can 75x reserves and only see M2 roughly 3x if the real constraints are balance sheet capacity, capital rules, and risk appetite not “is another dollar of base money available?”
Collateral, the curve, and who really sets rates
In this world, Treasuries do more of the money work than reserves. They can be pledged, rehypothecated, and used by almost every balance sheet. Reserves can’t. The real scarcity isn’t a Fed liability, it’s clean collateral and the ability to warehouse it.
The Fed truly controls one thing: the overnight rate. Everything beyond that like the 2 year, the 10 year, mortgages…trades on expectations for future short rates, inflation, and heavy issuance. QE lets the Fed lean on term premia by taking duration out of the market, but it doesn’t give them lasting control of the long end. The market still gets a vote, and when deficits explode or inflation surprises, the curve can move sharply against the Fed.
QE is just an asset swap is right on narrow accounting…swapping a bond for a reserve doesn’t create new net claims. But once you add fiscal into the picture, the Treasury is issuing new net assets, and QE is changing who holds that duration and at what yield. That matters for how the curve is priced and how financial conditions evolve.
Why it feels like liquidity everywhere and nowhere
Put it together and you get a strange picture where FRED shows trillions in reserves, yet we still see repo spikes, SOFR scares, and collateral shortages. Funding can feel tight even when base money looks huge because the plumbing is misaligned. Reserves are concentrated at a few big banks, encumbered by capital rules and politics. Non banks do much of the lending and liquidity transformation but must work through bills, repo, and derivatives instead of tapping the Fed.
The system oscillates between too much and too little at the same time. You can have a glut of reserves sitting inert while dealers and non banks scramble for balance sheet room and collateral. The Fed can cut overnight rates, but if the market doesn’t buy the growth or inflation story or if issuance overwhelms dealers..the long end can tighten conditions right back up.
So just add more reserves misses the point. The real question is how reserves and Treasuries move through the system, under which constraints, and how that shapes the curve the market sets. Change those channels…capital treatment of sovereign deb[...]
RT @DiMartinoBooth: If you don’t follow @bondstrategist and @onechancefreedm you’re doing yourself a disservice.
When Reserves Lie: The Chart Everyone Misreads
Before 2008, we had a classic scarce reserve system. Banks ran on a small pool of reserves to clear payments and meet requirements. The Fed nudged that pool up or down to steer the overnight rate. Banks didn’t need reserves to make a loan, they created deposits when they lent but once those deposits moved through the system, they needed reserves to settle with other banks and stay solvent.
The real action, though, was always in credit risk and the yield curve. The 2 year, 10 year, mortgage rates reflected the market’s view on future growth, inflation, and Treasury supply, not the level of reserves. M2 could climb for decades because banks were willing to lend and balance sheets weren’t suffocated by post crisis regulation. Reserves were the small amount of real money keeping the plumbing clearing in the background, not the driver of broad money.
The Post GFC regime shift
After 2008, the architecture flipped. QE and the floor system turned reserves into a ring fenced asset for a narrow club of big banks. Trillions now sit on G-SIB balance sheets, earning interest at the Fed, helping them meet LCR/SLR/HQLA requirements, and cycling through the RRP/TGA machinery. They’re not there to be multiplied into new loans like the textbook money multiplier suggests.
Meanwhile, more credit intermediation migrated to non banks and global shadow systems that don’t have reserve access at all. You can 75x reserves and only see M2 roughly 3x if the real constraints are balance sheet capacity, capital rules, and risk appetite not “is another dollar of base money available?”
Collateral, the curve, and who really sets rates
In this world, Treasuries do more of the money work than reserves. They can be pledged, rehypothecated, and used by almost every balance sheet. Reserves can’t. The real scarcity isn’t a Fed liability, it’s clean collateral and the ability to warehouse it.
The Fed truly controls one thing: the overnight rate. Everything beyond that like the 2 year, the 10 year, mortgages…trades on expectations for future short rates, inflation, and heavy issuance. QE lets the Fed lean on term premia by taking duration out of the market, but it doesn’t give them lasting control of the long end. The market still gets a vote, and when deficits explode or inflation surprises, the curve can move sharply against the Fed.
QE is just an asset swap is right on narrow accounting…swapping a bond for a reserve doesn’t create new net claims. But once you add fiscal into the picture, the Treasury is issuing new net assets, and QE is changing who holds that duration and at what yield. That matters for how the curve is priced and how financial conditions evolve.
Why it feels like liquidity everywhere and nowhere
Put it together and you get a strange picture where FRED shows trillions in reserves, yet we still see repo spikes, SOFR scares, and collateral shortages. Funding can feel tight even when base money looks huge because the plumbing is misaligned. Reserves are concentrated at a few big banks, encumbered by capital rules and politics. Non banks do much of the lending and liquidity transformation but must work through bills, repo, and derivatives instead of tapping the Fed.
The system oscillates between too much and too little at the same time. You can have a glut of reserves sitting inert while dealers and non banks scramble for balance sheet room and collateral. The Fed can cut overnight rates, but if the market doesn’t buy the growth or inflation story or if issuance overwhelms dealers..the long end can tighten conditions right back up.
So just add more reserves misses the point. The real question is how reserves and Treasuries move through the system, under which constraints, and how that shapes the curve the market sets. Change those channels…capital treatment of sovereign deb[...]
Offshore
EndGame Macro RT @DiMartinoBooth: If you don’t follow @bondstrategist and @onechancefreedm you’re doing yourself a disservice. When Reserves Lie: The Chart Everyone Misreads Before 2008, we had a classic scarce reserve system. Banks ran on a small pool of…
t, non bank access, floor system design and the whole machine behaves differently without adding a single new dollar. - EndGame Macro tweet
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Quiver Quantitative
Check this out.
A new Polymarket account has placed a massive bet on Google, $GOOGL, releasing Gemini 3.0 in November.
They'll win $91,000 if correct. https://t.co/3G0RCYc0pB
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Check this out.
A new Polymarket account has placed a massive bet on Google, $GOOGL, releasing Gemini 3.0 in November.
They'll win $91,000 if correct. https://t.co/3G0RCYc0pB
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Quiver Quantitative
A PAC called "MAGA KY" has now spent over $1M running ads against Thomas Massie.
Here are the largest donors: https://t.co/YhGmIf73TW
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A PAC called "MAGA KY" has now spent over $1M running ads against Thomas Massie.
Here are the largest donors: https://t.co/YhGmIf73TW
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EndGame Macro
What this really shows is how sentiment toward long term Treasuries has swung over the past few years. In 2021, money was pouring in because bonds still played their old role, a steady hedge with respectable returns. Then 2022 happened. The fastest Fed hiking cycle in decades crushed duration, and investors bailed. That dip in the middle is basically everyone saying that they were done with long bonds.
But once you get past that washout, you can see the mood shift. As inflation cooled and yields stayed high, the math started to look too good to ignore. 4% to 5% on safe assets is hard to beat, especially when the equity market feels top heavy and growth looks less certain. Pension funds, insurers, and even retail started coming back because locking in those yields feels like buying time.
There’s also a supply story under the hood. Treasury has leaned more on bills this year, which quietly took some pressure off the long end. Less long duration issuance plus better valuations is enough to pull people back in, even with the political noise and deficit headlines.
So the chart isn’t just about inflows. It’s about a market that spent a year swearing off duration, only to realize it needed it again. And once that realization sets in, the buying tends to build on itself…slowly at first, and then all at once.
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What this really shows is how sentiment toward long term Treasuries has swung over the past few years. In 2021, money was pouring in because bonds still played their old role, a steady hedge with respectable returns. Then 2022 happened. The fastest Fed hiking cycle in decades crushed duration, and investors bailed. That dip in the middle is basically everyone saying that they were done with long bonds.
But once you get past that washout, you can see the mood shift. As inflation cooled and yields stayed high, the math started to look too good to ignore. 4% to 5% on safe assets is hard to beat, especially when the equity market feels top heavy and growth looks less certain. Pension funds, insurers, and even retail started coming back because locking in those yields feels like buying time.
There’s also a supply story under the hood. Treasury has leaned more on bills this year, which quietly took some pressure off the long end. Less long duration issuance plus better valuations is enough to pull people back in, even with the political noise and deficit headlines.
So the chart isn’t just about inflows. It’s about a market that spent a year swearing off duration, only to realize it needed it again. And once that realization sets in, the buying tends to build on itself…slowly at first, and then all at once.
Treasury market is a top performing DM market despite big deficits, political uncertainty, and threats to Fed independence. This post reviews the sources of investor demand and shifts by Treasury that supported the market. It looks like it can continue.
https://t.co/NqPBikHdFB tweet