Transcript of Justin Wolfers on Trump’s Plan in Japan New

When discussing the economic damage that the Trump regime is doing to the United States, it's important that we also highlight how this Trump regime is treating other countries and other central banks in ways that are deeply unprecedented. Of course, you know, the tariffs against the world, 50% tariffs on Canada for hockey sticks and all these other things, 25% tariffs against Brazil, tariffs against this country, 60 countries saying that they engage in forced labor support. And, you know, the tariffs are, are one tool that's very much publicized, but there's a lot of financial maneuvering that's happening behind the scenes that just has everybody living in uncertainty. Predictability, stability, it's critical when you're talking about what made the United States the economic powerhouse and engine of the world, and watching that erode at the same time we watch the U.S. security umbrella internationally erode, as we see in the Middle East, in Asia, and elsewhere. I mean, you look at this erratic move that was made by the United States, and at least appeared erratic, where the US needed to prop up the Japanese yen. The Japanese yen was collapsing. There's a lot of reasons for that, oil prices, the war, just long-term financial policy.

They've got a right-wing kind of MAGA government there led by Takeishi. It's close to the Trump regime. And the US was putting billions of dollars to prop up the yen. 2 weeks ago in Camp David, Treasury Secretary Bessant wrote and scribbled on a note $5 to $10 billion to prop up the yen, but the US wanted to do it in a way that wouldn't really screw with the dollar's value. And so, they came up and Bessant's background was kind of currency swaps and that's actually what he did for a long time before starting his own fund. So, what he did was unloaded the euro, uh, the certain euro, euro that the United States held rather, um, and kind of dumped the euro holdings by the Treasury without telling the euro central bankers, without coordinating at all, in order to prop up the yen, you know, and kind of a robbing Peter to pay Paul scenario with kind of currency swaps. This is the Financial Times headline: US euro sale to prop up yen blindsided the European Central Bank. There's no discussion with them that this was going to happen. So the US sold euros to buy yen without telling the European Central Bank until after the trade was done.

Senior European Central Bank officials called it an unprecedented breach of longstanding conventions. This has never happened before in history. Selling dollars to defend the yen would've contradicted Bessen's strong dollar policy. Selling euros avoided that problem, but selling a European asset to defend an Asian currency to protect an American bond market without consulting the institution whose asset was sold. It's more than just currency intervention. It is reserve architecture consuming the alliance architecture. So one of the big fears in Japan is that for them to prop up the yen, they were going to have to unload US Treasuries. The US Treasury market right now is already in a very kind of dire condition. You've got the 30-year at 5.2%. You had the 10-year rising to 5%. It was like 4.8 something, which basically means all of these borrowing costs by our government are higher. It push-ups— it even pushes up a lot of the borrowing costs that consumers, you know, have to, have to pay. It's at a time already where the US Treasury raised its third quarter government borrowing estimate to $739 billion, pushing the national debt over $40 trillion very soon, $68 billion more than it projected in May 2026.

These are the people who call themselves fiscal conservatives engaging in these shenanigans. You know, the yen intervention, by the way, um, looks like it's struggling. I mean, as well, I mean, seems like pretty transparent idea to prop it up when people have some of those same concerns remain. You'll see that it propped it up originally, but we're seeing some downward trajectory regarding the yen as well right over there. And I want to share with you, um, uh, what, uh, Bessant said, uh, when he was interviewed by a Japanese media company over explaining how serious the situation is, but he views it as, "Well, we're allied with Japan and this is a government we believe in, the Takaishi government," 'cause they're like a MAGA government. So that's why we did this. But I guess at the expense of the European Central Bank and others who the US was allied with without even giving them a heads up. Here, just play a short clip of this.

The reason we did the joint intervention was as a symbol. The US wanted to join with our great Japanese allies to show that we think that the Takahashi government has the right policies that will lead to long-term yen strengthening. And we believe that excess volatility and undue yen strength could hurt indeed the Asia region and the entire global economy.

So, you don't tell the European Central Bank. And then when he was on CNBC, I'll show you how they framed it. That when he put that note on the cabinet meeting 2 weeks ago that he was going to do this intervention. This is how they called him, a sly dog. They said, you're a sly dog for doing this. Here, play this clip. Just got to ask you, you're a sly dog. When you wrote that down, buy $5 to $10 billion, and the printing looks so big. You've done this before, haven't you, where you know people are looking over your shoulder? Uh, you know, did you need to be reminded Oh, things to do. Buy ¥10 billion, ¥5 to ¥10 billion in yen. Tell me what was really going on there in a second.

Well, I just wanted to make sure that all the reporters looking on over my shoulder also knew the symbol JPY for the Japanese yen.

So, okay, instead of shorthand to yourself.

Yeah, you know, I was going to finish the list. You know, the rest of the list was, you know, like, go and have lunch with the Supreme Leader, play tennis with Putin, you know. But I thought I would just leave it at the buy 5 to 10 billion of Japanese yen.

I want to bring in Justin Wolfers right now, founder of Platypus Economics, chief economist here at the Midas Touch Network. What a slide, Doc. I mean, the good news is that most Americans understand the way currency swaps work and clearly took advantage of it. And so the horrible economy worked. People figured it out as well. I'm being sarcastic, of course. You know, setting aside that CNBC clip right here, just talk about the damage that this is doing generally when you are trying to prop someone up but not telling another central bank. All this kind of, you know, lack of respect and bulldozing down to do these— it just looks like schemes that are obviously wrong. How is it impacting us here at home?

I'm just going to start with who's writing the jokes at the Treasury Department. They were a couple of amazing zingers, weren't they? Those good old chuckles really, really got it going.

Good work.

Good work, Treasury Secretary. Look, one part of this is actually pretty boring. There are swap lines between the US Fed and other central banks that are there for moments when basically our financial plumbing looks like it's going wrong. What we do is we sort of send over some financial duct tape. That's what That's what swap lines are about. And 9 days out of 10, if you told me that the US government was involved in buying or selling a particular currency, I'd sort of shrug my shoulders and say this all— because the problem is it involves these dramatic words like billions. And then people are like, "Did we just give the Japanese billions?" No, we just changed whether we had euros in our bank account versus dollars versus yen. So really not a big deal at some fairly profound level about what's actually going on. It's business as usual.. But there's two problems that stand in the way of everything the Trump administration does. They both begin with the letter C. The first is competence and the second is corruption. So I suspect without being sure that what this was was competence, a competence problem, which is the US Treasury.

Normally this is really wonky stuff. You have your foreign exchange nerds talk to you, you get on the phone with your counterparts around the world and you say, we feel like things are a little bit wonky in foreign exchange markets. Going to get in and help. The competence problem here is you're meant to get on the phone first. You're literally meant to just give people a heads up. They've got a phone for it. They all have direct lines to each other, the central bank governors. You would worry about this leaking, which is why you don't want it going down through junior staff as a back across and back up through senior staffers, because if you got early word of this, you could make a lot of money. So they didn't make that call. I suspect there's one of two things going on here. One is perhaps it's a competence problem. The secretary's joke writers might also be the same people who help him with communications. They really— there's a real Keystone Cops air to all of this. The other possibility, which again, I really wouldn't say in a normal White House at a normal moment, and I hate saying so, is it could also just be a contagious lack of grace.

Um, that when you're working with others, when you're dealing across countries, we always try to be a little bit too gracious. And if I looked at the current White House, it doesn't feel like it's a place that's given to manners, that's given to grace, that is about treating other people or other institutions well. So that's the competence side of this. I suspect this is just being bad at their job. The other problem that's often raised, I don't think it's an issue here, but when the this administration does stuff where normally I'd sort of say, let presidents president. That's why we elect them. And it's because normally presidents from both the left and the right are trying to do the best thing by the American people. I don't have that confidence about this president. I think very few people do. And I think if I did, I would be a fool. In this case, there's not an obvious corrupt side to this. But Ben, you and I have talked so many times about various other economic interventions where it might make regular sense under a regular administration, but under this administration, you're left thinking maybe they're doing it for their own benefit.

I don't think that's what's going on here, but I can't help but think— thinking they've made it so that we always have to be asking that question.

Because if you look at it, the euro weakened sharply against the yen immediately after that announcement, about a 4% decline. It's recovered a little bit, Um, I think the idea of kind of a mechanical swap, as you said, could be mechanical and could be done, and you would say, uh, just a boring—

it could be boring, right? And it's when one of my students comes into class and they say, what's a swap? And I'm like, oh, do I have to explain it?

But, you know, but the corruption story, now you have to ask everything, which is, okay, that Friday Bessant writes on his pad $5 to $10 billion. You think maybe that's— is that a dollar to yen or what's going to happen? But then they go euro, which even the euro didn't realize that was going to happen. And the— a broader question is now with everything that happens though too, did insiders know that? Did somebody know to, to short it? Was that 4% take You and I don't know those answers, but in this very unusual transaction that took place, knowing that it's going to be an unprecedented use of the euro to achieve a monetary goal by the Treasury, that now creates a dynamic that if insiders were aware that that was the plan versus a traditional swap plan, you can prepare differently. And we don't know, but we know the corruption story is a story that exists.. And you then have to go, Bessant made a lot of his money on current debt. That's his whole thing. He's—

this is his—

this is his lane. Who made money off of this? And that's a— that's a— it's a trust issue that's broken long term. I'll let you give me the final one.

Yeah, look, there's two sets of trust issues there. There's trust between our government and the general public. Look, again, as I said the last 58,000 times that they issued a swap line, I didn't talk about it. I didn't care. I thought it was probably small, probably technical, probably uninteresting. So the trust is broken because every time we ask hard questions, we keep learning uncomfortable truths. You know, the president is, is literally selling direct access to early word of his major policy decisions when he's selling access to the Truth Social API. There's— that's a degree of theft and a degree of corruption that is literally unimaginable. This is someone who's— to be clear, what the president's selling in that case This is work product in his job as our employee. As the president, we employ him, we're his boss. What he's doing is he's taking information about what the company he works for is going to do. That company is called the US government, and he's selling it through his own company. Like, it's corrupt on its face, and that colors things everywhere. I think that's breaking the faith with the US public. Breaking the faith with our trading partners is something deeper.

Basically what he did, what Bessant did— and I'll leave it to folks at home to judge how how important this is. You know, when you go to a dinner party, it's good form to bring a bottle of wine with you. We've stopped bringing wine, and sometimes we also fart in the middle of the dinner party. That might mean we're less likely to be invited next time. Or the truth is, if the guy you invite is someone you really need because he's big and has a lot of money, and you'll put up with the farts at the dinner table, but it doesn't really help anything. I really think that's all that's happened here. But also, so you might say, well, the cost is small. Well, the flip side is, yes, but it's pointless. It's utterly pointless. Pick up the phone. Stop farting at the dinner table. Show some grace. Bring a bottle of wine.

Yeah, or going to the dinner party, getting drunk, vomiting, punching people, getting into fights, stealing their silverware, leaving.

That's what happened when Ben came over to my house last time, and that's why it's not happening again, Ben.

Defamation. He forgot. You know, I pretend to be an economics guy, but deep down, you know, I'm an old school defamation lawyer.

So I take it back. I never did that.

Yeah, you meet the New York Times Sullivan. I may have done it. You know, it was— it wasn't done with recklessness or malice. Appreciate Justin for joining everybody. Importantly, search Platypus Economics on YouTube and make sure you subscribe to Justin Wolfers YouTube channel Platypus Economics. When you watch his videos, which do very detailed economic analysis. Um, and he does it in, of course, the Justin interesting and fun way. Leave a comment and say Ben says hello. Um, Justin also is the chief economist at the Midas Touch Network. Very important, subscribe to his YouTube channel. Let's get that channel a million subscribers. Thanks, Justin. Thank you. Before you go, our book WTF America is available for pre-order now. It's the story of how we got here and how we fight our way back. To pre-order, scan the QR code or click the link in the description. Let's do this.