Bitcoin Helps Poor Countries Survive – Bitcoin Magazine
This is a transcribed excerpt of the “Bitcoin Magazine Podcast”, hosted by P and Q. In this episode they are joined by James Lavish to talk about gross domestic product, the bond market and how currencies are measured.
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James Lavish: GDP (gross domestic product) is so important to see how much debt your country has versus how much you’re producing, and it’s becoming an obvious and really serious problem in Europe. It has become a hugely serious problem in Europe, and they know it. That is why the European Central Bank has just raised interest rates for the first time in 11 years.
They were negative all the time. So now they are at zero. They have zero interest and they have this problem. What do you think will happen? The union must break up. The writing is on the wall. It’s clear. You see both a capital flight from Europe to the US dollar because both the yield – the US Treasuries give you a lot more yield than you get in European Treasuries and German Treasuries, even). It’s a flight to safety. You want your money in dollars. You don’t want your money in euros if you are a big investor. So for those investors, and those institutions that have the leeway to own a certain amount of foreign-denominated securities and debt, they will do as much as they can because there is a flight to safety and a flight to give.
You see the same thing happening in Japan. We’ve talked about it before, where Japan does the same, shamelessly. They buy their 10-year government bonds and keep that yield at 25 basis points. They keep yields low to continue fueling the economy. The problem is that when you keep that yield artificially low, you get investors who look at yields elsewhere, like the US, and say, “Okay, I can get a better yield there. And so why should I stay here and own these Treasuries, when the Bank of Japan will buy them up, keep yields low and I can instead go and get 3% in a 10-year US Treasury?”
Well, it forces you to sell yen-denominated bonds. Take your yen, sell them for dollars and buy the US Treasuries. So that puts enormous pressure on the yen.
You have seen that the yen is only increasing, which means that it is a reverse quote. So when you see it go up from 120 or 115 up to 137, that’s the return that’s getting weaker. It is the yen that is getting weaker; it is the number of yen per dollar. One of the problems with currencies – I wrote something about this too – is that they are quoted in all different ways. You have inverted quotes in some of them, like GDP and Yen.
