Breitbart
Carry trades involve borrowing at low cost in one currency to achieve higher returns from investments in another currency. One of the most recent examples has been to borrow Japanese yen, expecting the currency to remain cheap against the U.S. dollar and for Japanese interest rates to remain low. The borrowed funds would then be invested in U.S. stocks and Treasury bonds in anticipation of a higher return.
Why have traders been unwinding their carry trades?
The key factor behind a carry trade is a difference in interest rates. The Bank of Japan has kept interest rates at or near zero for years, trying to encourage more spending and spur economic growth. Last week, it raised its main interest rate from nearly zero. Higher interest rates tend to boost the value of a nation’s currency, and the Japanese yen surged against the U.S. dollar. Traders scrambled to sell higher risk, dollar-denominated assets to cover suddenly higher borrowing costs, plus losses from foreign exchange rate changes and losses in asset values as share prices plunged. Also, hedge funds that conduct carry trades use computer models to help maximize their returns versus their risks. They needed to sell shares to maintain acceptable risk profiles. More
From what I’m understanding, most if not all of these trades are done by those “too big to fail”, at the expense of The Little Guys (you and I).
So………..
FOR BEHOLD MY FIELD OF F**KS, FOR IT IS BARREN AND EMPTY, AND I HAVE NONE TO GIVE.
Some people trade paper (which really isn’t even paper anymore) to buy other paper (which also really isn’t paper anymore) in order to make some sort of profit which enables them to buy a house in the Hamptons (the only asset that isn’t paper). So when the price of the first pieces of paper rises, the income potential of the later pieces of paper becomes less and that house in the Hamptons becomes less affordable. And when a lot of people realize that trading non-paper paper for other non-paper paper in order to generate some digital profit – all without actually producing any useful or even non-useful tangible products – the whole thing collapses.
waiting for the crypto propaganda. “trust us, cannot cheat”. remember 2020 election, still crickets. really should address the valid concerns of the last election before moving onto the next. this activity just re-enforces a compromised election. if we allow another month long election result and overnight counting of ballots, its over.
The trick is to borrow in a currency with low interest rates, like in a nation that isn’t inflating its money, then invest in a nation where interest rates are higher and currency losing value (plus the currency you’re using to buy in isn’t inflating so it buys more of the weaker money).
It all comes undone when the buy and selling of currency forces the money’s value out of the range the nation wants to maintain and forces a change in interest rates. Once those come back into line relative to the currency the profit making dries.
Where pirates like Soros made his money was knowing the nations wanting to participate on the EU common currency had to keep their money within a narrow ban and realizing Germany, which was rebuilding the East at the time was borrowing like crazy. Those nations that tried to keep their money propped up against the pressure to lend to Germany nearly bankrupted themselves. Pretty neat trick that made Soros billions betting against the UK pound and other nations who couldn’t keep their money stable while he and other currency traders sold borrowed then sold their money for Marks and lent them to the Germans.
That ain’t workin’, that’s the way you do it
Money for nothin’ and chicks for free
I’m old enough to remember:
Long Term Capitol Management.