Crypto veteran Arthur Hayes says the Democrats could stealthily print dollars to trigger stock market rallies before the presidential election.
In a new essay, the BitMEX founder says Kamala Harris’ presidential campaign will likely see a big boost if the stock market is booming.
But the unwinding of the yen carry trade has triggered a $6.4 trillion global stock market wipeout last week with the S&P 500 witnessing its worst trading day since 2022.
In Japan, droves of investors borrowed cheap yen and invested the funds in risk assets that have the potential for high growth such as stocks to generate profits. But when Japan’s central bank raised its interest rate late last month, the yen appreciated, driving investors to sell risk assets, buy yen and pay back what they borrowed.
The increased demand for the yen drove the currency higher, forcing more investors to unwind positions as the appreciating yen threatened to eat into their gains. The dynamic led to more selling pressure as people sold their assets in panic.
Hayes says that Harris can stop the stock market rout by instructing Treasury Secretary Janet Yellen to bail out Japanese investors in a stealth operation that involves the Fed lending US dollars to the Bank of Japan (BOJ) using the yen as collateral.
According to Hayes, the operation will allow the BOJ to keep the value of the yen in check by printing more currency to borrow US dollars. For the US, Hayes believes the newly printed dollars will induce rallies in the stock and bond markets, putting Harris in a better position to win the election.
“Most importantly, US stocks and bonds [rise] in price due to the Fed printing dollars. An additional bonus is that Japanese banks can issue an infinite amount of yen-denominated loans with their newfound JGB collateral. This trade reflates the system in both the US and Japan.”
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