Ep. 61: Hegseth Passes the Buck
Dear FRs,
On last week's show, Seena and Travis opened their history books to look at the Peleus Affair– which provides a clear and simple illustration of how what constitutes a war crime at sea became enshrined. Against such damning evidence, Hegseth simply channeled Shaggy.
As unsurprising, and honestly comical, as it is that Hegseth would rely on an early 2000s earworm as a defense, it's undeniably monstrous what is happening under his leadership. Other monstrosities covered on the show: Netanyahu's ridiculous preemptive pardon request, Trump's casual and potentially disastrous interference in the Honduran election, the closing of schools across northern Nigeria in response to kidnappings, and the possibility of a showdown between JD and Ted Cruz for MAGA-world's affections in 2028.
Despite all this, it was a pretty fun and very informative show. Give it a listen if you haven't already.
In less ugh news, we have our first live show this Friday!! Subscribe to our channel for updates: https://www.youtube.com/@TheForeignReport
Seena's Corner
Interest Rates Are Interesting, I Promise
A lot has been happening with interest rates recently. The US just lowered their interest rates, but the yield on the 10-yr Treasury went up… usually if we lower interest rates, the yield for the 10-yr would go down. What the bond market is saying is “Ok so you lowered interest rates… great, but we still don’t have long term confidence in the US. So if you want us to buy a 10-yr treasury bond, then you need to pay us more…” In short, the market looks at the same Twitter/Instagram/TikTok feed as we do, and they are like “oh you guys are cooked.”
But is the market spooked just because of the US’s Chaos First economic policy? No. I present you the “yen carry trade”. DO NOT SWIPE AWAY. I’M GRABBING YOUR DIGITAL COLLAR TO TELL YOU ABOUT CURRENCY ARBITRAGE, THIS IS WHAT YOU SIGNED UP FOR.
THE YEN CARRY TRADE THAT HAS TRILLIONS WRAPPED UP IN IT
Yes, trillions. Japan has essentially offered the world's cheapest credit for 30 years, near 0% interest rates. Global investors borrowed trillions in yen, converted it to dollars, and invested in everything from Nvidia and US tech stocks to Bitcoin. All those things were going up for awhile, so it was easy… borrow money for nearly zero, and buy things that are going up. This strategy was called the yen carry trade, and it became one of the largest leveraged bets in the global economy.
Here's Why It Matters
- When Japan raises interest rates, they're signaling confidence in their economic outlook. It's their way of telling the world, "We’re coming for your overpriced ramen shops."
- While Japan's confidence is positive, the rest of the world looks at this and realizes, “Oh wait, these companies and cryptos are not going up AND it costs me more money, I might have to sell a yacht.” A lot of dice rolling investors are sweating.
- A decision made in Tokyo ripples through Wall Street, Washington, and markets worldwide. If it's happening in those places, it will eventually affect you too.
Japan is expected to raise their rates again in mid-December, which means that this whole casino arbitrage that’s been inflating the global economy is slowly unwinding. And with the US economy flashing red (at least I think it is) it’ll be interesting to see what happens. Who knows, maybe we’ll go into another country (possibly in South America) and start a war to pillage their natural resources?
Meanwhile in Ohio: What Travis is Reading ––
Sabrina Eaton
Last week on TFR we talked about how JD Vance couldn't remember more than 2 out of the 8 Ohio Presidents, something that Travis (who knows ALL of the U.S. Presidents in order, including the 8 from Ohio!) feels should disqualify JD from EVER being President of The United States in the future (in addition to many other things!). But could there actually be a scientific explanation as to why so many U.S. Presidents are forgettable, especially the Ohio ones? Cutting JD some slack, the folks at cleveland.com asked several experts as to why that may be –– although Travis still thinks JD should never be President!)
On the Next TFR...
We're digging into whatever shitshow gets thrown our way before Wednesday morning. So many options, how will we choose?!
And, don't leave us hanging! We're compiling questions for the upcoming mailbag episode, so send us a question or topic you want us to cover! Theforeignreportlpn@gmail.com.