Former CEO of BitMEX Arthur Hayes has suggested some strategic means to help keep the Yen from falling and to stand firm against the USD.
In his most recent publication, Arthur Hayes, former CEO and co-founder of BitMEX, discusses the ongoing struggle for influence among global powers, focusing on the United States, Japan, and China. While these superpowers exert the most effort to safeguard their currencies and influence, they do so at the detriment of the long-term welfare of other countries. He discussed the ramifications of the ongoing geopolitical and economic crises involving the dollar and yen on the international financial system.
Hayes disclosed that policymakers prioritize short-term resolutions that safeguard their authority, personal gain, and established system, notwithstanding the long-term harm they cause to the general populace. Although labeling these actions as “easy button” solutions, he proposed a more practical alternative that may contribute to the dollar’s depreciation.
Methods to Increase the Value of the Japanese Yen with Minimal Impact on the USD
Hayes remarked that the dollar-yen exchange rate is a fundamental component of the power conflict and the most significant global economic variable. He refers to the current circumstance as a “cryptovalhalla.”
The former CEO of BitMEX described a hypothetical situation in which the Federal Reserve, acting on directives from the Treasury, could legally exchange an indefinite quantity of U.S. dollars for yen with the Bank of Japan. By providing yen to the BOJ, the Fed augments the market supply of Japanese currency, which has the potential to invigorate the yen in relation to the dollar.
He claimed that Japan would assist the United States Treasury in continuing to finance the government at negative interest rates if it did not become a coerced seller. Hayes asserts:
“If Japan Inc., the largest holder of USTs, does not become a forced seller, it helps the US Treasury continue to fund the free-spending federal government at negative real interest rates. Otherwise, the Treasury would have to initiate yield curve control (YCC). This is the ultimate destination, but it must be forestalled as long as possible because of the apparent inflationary and possibly hyperinflationary effects.”
The Perspective and Concerns of China
This policy, however, will not sit well with China, which is Japan’s direct export competitor. China’s primary concern is the weakening of the Japanese yen, which will impact its export competitiveness. Hayes noted that the collapse of China’s real estate market has also precipitated a deflationary downturn and that inflation must be generated to sustain a debt-based economy.
In light of this, the Asian nation is likewise opposed to devaluing its currency, the yuan, because doing so would increase import expenses. Hayes argued that a yuan depreciation could diminish American manufacturers’ motivations to resume production, influencing President Biden’s political trajectory. What he stated was:
“If China devalues the yuan, jobs will continue to flee. If Biden doesn’t carry these states, he will lose the election.”
The co-founder of BitMEX suggested a nuclear or immediate monetary alternative: China could sell U.S. treasuries in exchange for gold and peg the yuan to gold, causing the yuan to depreciate against the dollar. The potential consequences of this system for the Western Bank are manifold, as it may expose the bank’s fraudulent bullion sales.
According to Hayes, the U.S. dollar can be weakened through the dollar-yen currency exchange between the Fed and the BOJ to reflate China’s economy and strengthen the yen without the BOJ increasing interest rate BOJ. Nevertheless, he cautioned against the possibility of a severe dollar-yen exchange, stating that it might cause the dollar to depreciate excessively and ultimately result in the dissolution of the USD reserve system.