" The U.S. Dollar is no longer the collateral to be held as reserve in the oil trade" BY MIKECRISTO, 11 MAY

MIKECRISTO

 ALERT ALERT ALERT

The U.S. Dollar is no longer the collateral to be held as reserve in the oil trade. When the JPY was at negative real rates, the BoJ could print yen and buy dollars when the Fed funds rate was 1.2% And investors could make the spread on behalf of Japanese tax payers, because Japan had real negative rates. The Fed funds rate is now 5.5% And the JPY is out from negative real rates, Which means Japan can’t fund the their Dollar bond market on the backs of the Japanese tax payers. Because the dollar is no longer the collateral in the oil trade, the liability that trades the debt. The BoJ prints yen to buy dollars to service their Dollar collateral (interest payment) to the U.S. Treasury. Because the Dollar is no longer the collateral in the oil trade, the BoJ needs to sell their dollar bonds back to the U.S. Treasury and buy back the yen the U.S. Treasury holds. Then the BoJ can retire those yen in the carry trade unwind. Because the U.S. Dollar is no longer the collateral that trades the debt via oil, The world is dumping dollars. All those dollars the U.S. Treasury exported was used to fund the U.S. stock market. When the USD carry trade gets unwound, So does the unwinding of the stock market. Gold is now the liability that settles the oil trade to service the debt via RMB internationalization. Japan is one of many central banks that must sell their dollar collateral back to the U.S. Treasury. This is why Janet Yellen is freaking out!

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