Come upstairs

A slow motion collapse, completely made up story, and feeling sorry.

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A necessarily brief one today, I’m afraid. Some more extensive comments on recent movements can be found in our monthly update to fund investors which went out earlier this week.


From Nikkei Asia. Several things about the headline strike me. Firstly, “child friendly policies”. I would make the case that there is simply no such thing as a ‘child friendly policy’. If your country needs something like that then there is evidently a larger issue. What was Japan like before its ‘child friendly policy’? Perhaps a reasonable expectation for any country is that it is child friendly. One need look no further than locations where children are not permitted, almost as soon as the sun goes down debauchery can be near guaranteed. Introduce children into almost any situation and the adults behaviour instantly improves by an order of magnitude. I don’t know why, I just know it’s true. 

Obviously it is not just Japan. In the recent Australian budget, Treasurer Jim Chalmers urged Australians to ‘have more babies’. How many of you got home that evening and were invited upstairs on the back of the new policy settings? I’m guessing nobody because short term policy is totally irrelevant.

The problem with declining birthrates is that they are nearly impossible to turn around because they have societal momentum. Something else is wrong that is causing the decline, generally that thing is the societal settings are not optimal for children. Japan has many of those issues. 230% debt/GDP ratio for a start is an extremely large burden for the current working population and anyone that follows. It’s hard to generate financial breathing room for children in that scenario.

Australia has its own issues but will most likely be fine though because its population is at least growing. Japan on the other hand is not. A birth rate of 1.2 equates to a halving population in little over 30 years. It is a demographic disaster in slow motion that receives far less coverage than it should. We are talking about nearly 50 million people disappearing. Imagine the amount of embedded technical and cultural knowledge that will be lost. 

If the trend is your friend then Japan is worth watching. The Yen is in slow motion collapse, and will be propped up with US Dollars via swap lines. Lots and lots of US Dollars.

Plato’s Cave (US edition)

I think of Plato’s Cave when people tell me bitcoin is worth zero.

It normally comes from someone who has no idea that  fiat money is totally pretend. A completely made up story that is reinforced at school, in the workforce and in the news.

You know it’s pretend, don’t you?


However busy we may be, there is always time for Euro-Trash. This week's edition is a beauty too because Lagarde has finally been forced to break ranks with the Federal Reserve and cut the Eurozone interest rate. Laggers gave a speech one year ago about the perils of inflation and her absolute determination to get the rate back to 2%.

“Today, [2023] inflation is too high and it is set to remain so for too long. We are determined to bring it back down to our 2% medium term target in a timely manner.’

One year later, almost to the day, the inflation rate is still 2.6%, arguably significantly higher than the target but the economic pain is too great. Rates must be cut. Lagarde refused to confirm that rate cuts were actually underway, which was odd because she had just announced they had been. 

I cannot confirm that it is the dialling process that is underway. There is a strong likelihood, but it will be data-dependent.

Adding a flourish to the total confusion of words, Lagarde wore a new necklace saying “in charge”.

Speculation ensued and it is believed that the necklace is a reference to the many leaks that come from her colleagues. For example, the entire world knew rates would be cut today and I wrote most of these remarks on Monday, four days in advance. Why am I not a bond trader is the only reasonable question now. 

Anyway, If you have to wear a necklace saying “in-charge”; perhaps you aren’t. For the first time ever, I felt a bit sorry for her.

Further information

Our May 2024 report to investors can be found here.

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