WHILE ROME BURNS…
While Washington funnels another $60 billion to the cocaine dwarf in Ukraine (in reality, most is swindled off to the deep state with a slice for the midget), the power vacuum that widens globally is being filled.
China writes off interest-free loans given to Zimbabwe
You can read the article in full if you like, but here’s the gist of it.
China has unexpectedly forgiven all of Zimbabwe’s debts. Estimates suggest the total amount could be as high as $10 billion.
It is worth noting that the Zimbos are under sanctions, and as such are in the naughty books of the IMF and the World Bank. Lucky them as both are parasites.
China has eagerly filled this niche by lending and forgiving debts.
Now, before you get all giddy about those nice Chinese being all cuddly and philanthropic, realise that in the real world they’ll have cut some deals.
Likely a 20-cents-on-the-dollar type of deal.
In other words, something like this, “You owe us $10 billion, and can’t pay? What a shame. How about we forgive it, have a beer and oh… well, maybe let us, you know, ”look after” that port of yours over there. Yes, we know it’s worth something north of $100 billion. Don’t worry, we’ll take good care of it. Promise!”
The map below indicates all of China’s investments and forgiven debts in Africa.
Here’s the point worth noting. China is actively becoming the continent’s main trade and political partner. Conquest by trade was how the Inca became dominant. Not a terrible strategy.
Considering that Africa is the only continent with a huge potential for development, these investments will likely pay off massively in the future.
If I was a betting man, I’d say China will become the net beneficiary of all this chaos. Whether or not it is helpful to Africa remains to be seen.
They’ll become subjugated — this time by China rather than the IMF, World Bank, and Western globalists. We wait to find out what it looks like before passing judgement.
Talking of a world changing at breakneck speed…
YENDGAME
We’re moving to a new stage of the endgame. The yen just blew through 155 like hot butter through a knife (just checking you’re paying attention).
Why? Let’s first ask the question about how it is that our sushi eating friends — with debt to GDP at levels that make blood shoot from my eyes (263% at last count) — have managed such batshit crazy debt levels for a loooong time? And so, if it is the debt levels that are the current problem, then why now?
Consider the US 5-year note.
Now, look at the yen.
Here’s another representation of the yen vs the greenback overlaid with the US 5-year.
They’ve been lockstep since 2020.
Globally, yields have been falling for decades now — decades where Japan managed to sustain the ultimately unsustainable. But now, yields are rising around the world, and all the problems we knew existed in Japan are revealing themselves, and the BOJ is stuck.
CARRY TRADE
Imagine you could borrow yen at the current 0.1% short-term interest rates when globally rates are moving decidedly higher. The Yanks offer 5 points, so you’ll borrow yen and invest it into US bonds. This puts downward pressure on the yen (being borrowed), and so not only do you get the yield differential, but you likely walk away with an appreciating USD against the yen. It’s a win-win. The BOJ can’t raise rates without their public interest expenses blowing out, and so they’re faced with a rather tricky situation.
The way I see it, they’ve one of two options:
- Let the yen slide and continue to experience inflation, probably hyperinflation if rate differentials remain so extreme.
- Support the yen by selling some of their massive hoard of US treasuries.
I wonder if this is why that ugly little goblin-looking wench was over there recently.
The white-haired midget understands that if Japan wanted to defend its exchange rate, they could sell some of the massive hoard of US treasuries (the world’s largest, actually) they’ve accumulated over decades of running trade surpluses.
The interest rate tool in their toolbox is broken. It can’t be used. Only the treasuries remain workable. So now it’s a political game, because, of course, Japan relies to some extent on US military support and alliances. They’re no friends of the Chinese.
This is all well and good, but what to do about it, Chris?
Well, there are some good reasons we bought the WisdomTree Japan Hedged Equity Fund (DXJ) way back when we did.
So far it’s been better than a poke in the eye with a burnt stick. We don’t think it’s done by any stretch of the imagination, so…
- Chris MacIntosh
Capitalist Exploits Insider issue #294
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