This is a transcribed excerpt of the “Bitcoin Magazine Podcast” hosted by P and Q. In this episode, James Lavish joins them to talk about gross domestic product, the bond market, and how money is measured.
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James Lavish: GDP (gross domestic product) is very important to see how much debt your country has relative to how much you are producing, and that is becoming a real and serious problem in Europe. Europe. It’s become a very serious problem in Europe and they know it. That’s why the European Central Bank just raised interest rates for the first time in 11 years.
They were negative the whole time. So now they’re at zero. They’re at zero interest and they have this problem. What do you think will happen? The union had to break up. Writing on the wall. Clear. You are seeing a whole capital flight from Europe to US dollars because of both returns – US Treasuries give you much higher returns than you get in European Treasuries and German Treasuries , even). Have a flight to safety. You want your money in dollars. You don’t want your money in euros if you’re a big investor. So for those investors and institutions that have the time to own a certain amount of foreign-based securities and debt, they will do as much as they can because it’s the flight to safety and security. flight to gain profit.
You are seeing the same thing happen in Japan. We’ve talked about it before, where Japan is doing the same thing, undeterred. They are buying their 10-year Treasury bill and keeping that yield at 25 basis points. They are keeping that level of productivity low to continue to power the economy. The thing is, when you keep that yield artificially low, you’ll have investors looking at yields elsewhere, like the US, and saying, “Okay, I can get a good yield.” than there. And so why am I here, owning these treasuries, when the Bank of Japan will buy them back, keep their yields low, and I can get 3% in the Treasury instead 10 years in America? “
That forces you to sell the bond in yen. Take your yen, sell them for dollars and buy US Treasuries. So it puts a lot of pressure on the yen.
You’ve seen the yen jump, which means it’s an inverse quote. So when you see it go from 120 or 115 to 137, productivity is weakening. It is the yen that is weakening; that’s the number of yen per dollar. One of the problems with currencies – I’ve written something about this as well – is that they are quoted in all sorts of different ways. You have inverse quotes in some of them, like GDP and yen.