Amid US economic crisis, will the Fed also prop up the Japanese Yen?

Photo above - Deleted scene from "Godzilla 1954" where Japan asks the US Federal Reserve to rescue the falling Yen . . .

No! Famed economist John Maynard Keynes did NOT recommend that nations run perpetual budget deficits in order to buy stuff for their people. (He said possibly in war, or in times of economic collapse.). And Keynes certainly NEVER said anything about the US government buying Japanese bonds in order to prop up the Yen.

Yet here we are (see link below).

None of this would be happening if it weren’t for two things:

First – unprecedented tariffs, and tariff rate uncertainty. How much is the tariff on a new Toyota right now? Guess, I dare you. 20%? 50%? Mess around and find out? We’re also putting huge tariffs on Canada, which supplies America with the lumber and oil we need to build houses and drive to work. In response to new US tariffs, Canada just made China their Facebook friend. Which brings us to . . .

Second – what's in it for us? If America is propping up the Yen (buying Tokyo’s version of Treasury Bills) this clearly has some ulterior motive. It can’t be guilt over those auto tariffs. Possibly due to geopolitical blackmail? Something like “If you want us to keep backing America against China, geopolitically, let's discuss what happens next, Treasury Secretary Bessent . . . ”

This sort of chicanery could drive ordinary Americans wild, of course. “Wait . . . what? We have to increase our trillions and trillions in government debt to save the Japanese economy? AND pay huge tariffs on the cars they sell us, in order reduce how many we buy?”

It’s not just the USA and Japan which are up to our eyeballs in debt. The entire world is finding out how deep the rabbit hole of budget deficits goes. Many European nations are also borrowing like crazy to maintain living standards. This is how debt works – you buy stuff which you would ordinarily leave on the store shelf because you can't afford it.

All this is happening at a time when America is also (allegedly) scared of inflation. America has too much consumption. And now we’re buying other nations' debt so they can consume more and more, too.

There’s some yada-yada in the second link below about how this debt is to beef up our AI. Software which presumably will save our asses in the long run. Debt to build data centers, and the power plants to keep them humming. I hope eventually we'll get some payoff other than reading who’s the winner of the ChatGPT-Claude-Gemini essay contest. (Spoiler alert – this week’s prize goes to Claude, again)

As I write this, Copilot is interrupting me continually. Begging me to turn it on. Not doing it, Microsoft. You’re part of the reason we’re now propping up the Yen and destroying the US dollar.

I’m just sayin’ . . .



The week ahead: The Fed props up the Yen, as silencing of Burnham may boost gilt market

The world economy is hooked on government debt


https://www.fxstreet.com/analysis/the-week-ahead-the-fed-props-up-the-yen-as-silencing-of-burnham-may-boost-gilt-market-202601260709

https://www.msn.com/en-us/money/markets/the-world-economy-is-hooked-on-government-debt/ar-AA1UXpWC?ocid=msedgntp&pc=HCTS&cvid=69774b987d5d4b47b315ad5e12219fd8&ei=34