The Japanese yen has rallied approximately 5% over the past week following joint intervention by the Bank of Japan and the U.S. Treasury Department, marking the first such action in 15 years. The U.S. Treasury, via the Exchange Stabilization Fund and the New York Fed, conducted direct open market purchases of yen and allowed Japan to access dollars through the FEMA repo facility, signaling strong support and reinforcing the credibility of U.S. policy actions. This marks a shift from traditional swap lines and reflects a broader transactional approach in U.S. monetary statecraft, where monetary and trade policy are used to reward allies and exert influence. Despite repeated rate hikes by the Bank of Japan, the yen continues to weaken, raising concerns about a potential disorderly devaluation above 165, which could trigger a carry trade unwind and further depreciation. The U.S. is coordinating with friendly central banks to stabilize global financial conditions and prevent a collapse in U.S. Treasury markets, as any large-scale sell-off of U.S. debt would destabilize the entire global financial system. The current system, while flawed, has proven resilient through repeated interventions, with historical precedents in 2008, 2020, and 2026. The U.S. Treasury's high yields make U.S. debt more attractive than other sovereign bonds globally, and the interconnectedness of financial systems means that U.S. monetary policy impacts all markets. Gold and Monetary Metals are presented as alternatives, with gold being positioned as a cornerstone of portfolio resilience and a productive asset through yield-bearing structures.
The strategic petroleum reserve (SPR) was created in response to the 1973 Arab oil embargo, which triggered severe economic disruptions including inflation, unemployment, a stock market crash, gas shortages, and political fallout, leading to Nixon's resignation. It was established to prevent future economic vulnerability from oil supply shocks, not for military purposes, but to ensure economic and political stability. Over the past 50 years, the SPR has been used effectively during supply disruptions—including the Gulf War, the Iran conflict, the Yam Kapor war, Russia's invasion of Ukraine, and tensions affecting the Strait of Hormuz—helping to stabilize oil prices and prevent recessions. Despite multiple major supply shocks, oil prices have remained within a broad range, with the SPR acting as a buffer that has mitigated price spikes and allowed for profitable sales, such as the average sale at $95 despite prior lows of $50–$60. The SPR has been credited as one of the best-run government programs in history, with its effectiveness demonstrated across six emergencies and its role in generating profit from trades. The U.S. now produces more crude oil than any nation ever has, and with access to Venezuelan heavy crude refined on the Gulf Coast, the likelihood of a supply shock disproportionately harming the U.S. is lower than in the 1970s. However, the SPR remains important as a tool for managing future crises, and its current low levels are not seen as immediately concerning due to the changed energy landscape, though questions remain about whether and when it will be refilled.
The debasement trade remains valid over the long term as asset prices generally trend upward due to population growth and technological advancement, despite recent pressure from rising dollar values. The thesis is that fiat currencies lose purchasing power over time, and real assets compound above fiat, making the debasement trade a solid long-term investment. The dollar index is crucial for understanding macro, politics, geopolitics, and capital markets, and as it rises, it leads to dollarization and pressure on the rest of the world, causing defaults and debt destruction. Gold is an important reserve asset, and its price has more than doubled over the last year, with central banks purchasing it post-pandemic and following the US freezing of Russian reserves, indicating a shift in global monetary dynamics. However, the path does matter for most people, and the debasement trade doesn't happen in a straight line; it can go against you for a short period of time, with drawdowns of 15-28% causing long-term investors to change their positions.
Informational only — Brent Johnson Milkshakes Pod | Investing • Finance’s view, decoded by Plutus. Not Paid Daily’s advice or a recommendation. Levels and claims are extracted from what the creator said; verify before acting.