← Coin Stories with Natalie Brunell
Coin Stories with Natalie Brunell
News Block: Gold & Silver Jump as Shutdown Fears Return and Monetary Order Cracks, Japan's Bond Warning
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Welcome to the Coinsories news block, powered exclusively by LEDN. I'm Natalie Brunel, and in about 10 minutes or less, I'll provide you with insightful updates on bitcoin, financial markets and the global economy. Everything you need to know in one block. Let's go. Bitcoin and stocks are feeling the pressure as government shutdown fears picked back up. In Washington, D.C. gold and silver soared to new all time highs on Sunday. And the broader mood coming out of Davos last week was was clear we're in a period of heightened uncertainty. Davos is shorthand for the World Economic Forum's annual meeting in the Swiss Alps, where presidents and prime ministers, CEOs, central bankers and investors gather to discuss the global economy. One comment that grabbed headlines came from Ray Dalio, who warned in multiple interviews that the current monetary order is breaking down. His point was simple but uncomfortable. With more than $38 trillion in U.S. federal debt, policymakers are being pushed toward a terrible choice. Do you print money or do you let a debt crisis happen? This is a theme we've been coming back to many times, but it's clearly going mainstream. Historically, when governments hit a real debt constraint, they usually choose what's most politically favorable in the near term. And more often than not, that means currency debasement over default. Because when push comes to shove, policymakers will do whatever it takes to stabilize the system. Today, even if it guarantees destroying purchasing power over time, the costs don't show up all at once. They show up grad. But for savers, the long term consequences are very real. And this debate is no longer theoretical. We're starting to see it play out in real time, most clearly in Japan. Japan is the most indebted major economy in the world, with public debt around 240% of GDP. And over the past week, its bond market has come under real stress. Japanese government bond yields have pushed to their highest levels in more than a decade, even as the local currency, the yen, has remained under pressure. That combination is unusual. Normally, when yields rise, a currency strengthens. Yet in Japan, the opposite has been happening. Yields are rising, but the yen is still weakening. And that's a sign that something is breaking. It reflects growing concern that higher interest rates are becoming incompatible with Japan's debt load. And the risk is that stress there won't stay contained. If Japanese officials have to step in to support the yen, they're going to have to sell dollars. And those dollars come from Japan's reserves, which are heavily invested in US Assets, including Treasuries. And this is no small position. Japan is the largest foreign holder of U.S. treasuries with roughly $1.2 trillion on its balance sheet. So if Japan is forced to defend its currency more aggressively, it can translate into sell pressure for U.S. treasuries and push borrowing costs higher globally. That may help explain why we're already seeing a response from the US for the first time in over a decade, the New York Fed conducted what's called a rate check in the yen at the direction of the Treasury Department. In plain English, it means that officials have been calling major banks and asking if we needed to step in right now, what price could we get? It often signals that currency intervention is on the table, even if it hasn't happened yet. Markets took notice immediately. The yen jumped and the dollar fell sharply, fueling speculation that authorities may be preparing to intervene. Citadel founder Ken Griffin called the Japanese bond turmoil an explicit warning. His message was clear. If your finances are not in order, bond investors will eventually demand a higher price. And he noted that what's especially troubling is what happens when bonds stop acting as a hedge. When bonds and stocks move together, bonds lose a big part of what makes them so valuable in a portfolio. Griffin's warning is that if US Treasuries start being viewed as risky, if investors begin to question the US Creditworthiness, you can get that same dynamic here. So stocks and bonds falling together and the market demanding a much higher yield to hold Treasuries. And the data actually suggests this shift is already underway. Charts tracking global reserve composition show the dollar's share has been trending down for years, with the decline accelerating after 2020. While gold share has been rising. Institutions aren't waiting for a crisis headline. They're already repositioning. The knock on effects have major consequences. Higher mortgage rates and a higher cost to finance deficits, which is a serious problem with its own debt burden. Taken together, these signals paint a picture. The global debt based monetary system is under massive strain. Governments are facing tighter constraints and the tools they're most likely to use involve currency debasement and liquidity, not meaningful spending cuts. I sat down with Luke Grohman and Chem. Carson to talk through these exact dynamics and the potential consequences. So if you want a deeper dive, I really recommend listening to both interviews. And this is where Bitcoin reenters the conversation. I know so many people have been wondering why it's underperforming and when it's going to break out. In past cycles, periods of dollar weakness and rising global liquidity have ultimately Been a massive catalyst for Bitcoin. Even if the path there is volatile over long time horizons. Debasement tends to reward assets that are credibly scarce. Need cash but don't want to sell your Bitcoin. Leden is the global leader in Bitcoin backed loans issuing over $9 billion in LO 2018 and they were the first to offer proof of reserves. With Leaden, you get custody loans, no credit checks, no monthly payments and more. Visit Leden IO Natalie to learn more and get a quarter percentage point off your first loan. Massive debt loads increase the odds of easier monetary policy and a big print. And that tension was on full display this week in Davos during an exchange between Brian Armstrong, the CEO of Coinbase, and Francois Villaroy de Gallo, the governor of the French central bank. On a panel, Armstrong argued that Bitcoin is healthy competition for fiat currencies. Not because it replaces them overnight, but because it's a credible alternative that can act as a check on persistent deficits and currency debasement. Listen to the central bankers reaction.
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If fiat currencies can maintain trust and not have, you know, the money printer kind of debasing everybody, then they'll survive. But if they countries that you know, have bad behavior on that dimension, Bitcoin doesn't have a money printer. The supply is fixed and people will go to it in times of uncertainty, kind of like they did with gold.
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The guarantee for trust is independence on central bank side and we have a command it and we are accountable to that. But sorry to say that I trust more independent central banks with a democratic mandate than private issuers of Bitcoin which have a very useful role.
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But Bitcoin is a decentralized protocol. There's actually no issuer of it. So that's, that's in the sense that central banks have independence. Bitcoin is even more independent. There's no country or company or individual who controls it in the world. And so anyway, I think it's a healthy competition because.
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So the French central banker essentially laughed off the idea. And I think that matters because it shows how early we still are. Trust in institutions and the credibility of central banks are already under pressure globally. And as Armstrong pointed out, Bitcoin represents a different kind of institution entirely. It's decentralized. There's no committee, no issuer, no money printer. If policymakers keep eroding credibility and debasing their currencies, savers can move into alternative monetary assets like Bitcoin that don't rely on trust in any single institution. And that brings us to the next story, because the question of who controls the money printer may soon matter a lot more. We're now seeing serious reporting that BlackRock CIO Rick Reeder is emerging as a leading contender to become the next Federal Reserve Chair. His odds on poly market have surged in the last week, putting him out in front. So why does it matter? Well, in past comments, Reeder has been pretty clear that he thinks interest rates are still too high for parts of the economy, especially housing, so we can expect more rate cuts if he gets nominated. But a more important signal is what he said about the Fed's balance sheet tools. In multiple reports, Reader has suggested the Fed could be more innovative in how it uses its balance sheet. He said, quote, whoever ends up being the Fed chair, there's so many innovative things. How to use the balance sheet, how to use liquidity, where the yield curve is. What I take from Reader's comments about balance sheet innovation is that he's open to using the Fed's balance sheet aggressively to ease financial conditions and inject liquidity. In other words, more money printing. What's also notable is that Reader has been relatively supportive of Bitcoin. In past interviews, he described Bitcoin as a, quote, hard asset, calling it a reasonable expression of currency debasement. He added that a bitcoin allocation belongs in an ideal portfolio if the world is moving toward more debt, more liquidity injections, and more central bank balance sheet expansion. Then again, the case for credibly scarce assets doesn't get weaker, it gets much stronger. All right, let's wrap up this news block with a quick, rapid fire to close out the week. First, UBS is reportedly exploring crypto trading for some private banking clients. This matters because UBS is not a small fish. It has roughly 6.6 trillion in assets under management. Next up, President Trump sued banking giant JPMorgan Chase and its CEO Jamie Dimon for $5 billion over alleged debanking. This keeps political pressure on banks and the broader topic of debanking squarely in the spotlight. And lastly, digital asset infrastructure company Bitgo went public last week. It's another sign the market is maturing and that the crypto IPO window is reopening. One cool detail. Bitco reportedly gifted the New York Stock Exchange a copy of the Bitcoin white paper, which is now displayed in the exchange's lobby. That's a pretty symbolic marker of how Bitcoin is intertwining with the public markets. That's it for this week. Thank you so much for listening. If you found this helpful, please subscribe, please share it and we'll see you in the next one. Also coming soon, I will be sharing my journey of taking out my first Bitcoin backed loan with LEDN. Stay tuned. That's it for the NewsBlock, your weekly Bitcoin and economic news update powered exclusively by ledn. I'm Nadalie Brunel. Make sure you're subscribed to Coin Story so you never miss an episode. This show is for educational purposes and should not be construed as investment advice. Until next time, keep stacking.