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August 22, 2024 |
Japan’s Carry Trade: The Crisis That Could Still Topple the Economy
The event that will finally prick and burst the global asset bubble can come from just about anywhere. The unwinding of Japan’s precarious carry trade situation might just be the thing to push us over the edge.
For decades, Japan’s Central Bank has been funding itself by leveraging lower interest rates and paying money at short-term floating rates.
The problem is, Japan has now been forced to raise some of their investments to a higher credit risk and a much higher probability of default. The fix could be more damaging than the original problem.
We saw the market react to this and the jobs report in July. Wall Street wants you to think that the problem has already rectified itself but those were the rumblings of what’s to come. Japan’s carry trade situation is far from over, and it will impact the entire economy. Add to that, the US election, the threat of a massive internet disruption and a new pandemic, and you’ve got a recipe for major upheaval.
Why is Japan’s carry trade issue a huge warning sign to the whole world? Why should we brace ourselves for some volatility leading up to the US election? In this episode, I give a market update and share what to expect as we get closer to the 2024 Presidential election.
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