---
title: "The Wrong Economic Policy? — Sami Miettinen on Kvarn X"
titleOriginal: "Väärää Talouspolitiikkaa? - Sami Miettinen"
description: "Kvarn Capital's Martin Wichmann interviews Miettinen, and the hard core of the conversation is the breaking of the Japanese yen carry trade and what it does to the US debt market. Thirty years of borrowing cheaply in yen and investing into the dollar complex are ending as Japan's own long end rises and the money is wanted at home — draining the flow that finances Treasuries precisely as 37 trillion of federal debt comes up for refinancing. Along the way: why self-inflicted uncertainty now weakens the dollar and raises rates at the same time, where there is left to run, and why a bitcoin treasury company is a carry trade without a yield."
format: "podcast"
show: "Kvarn X"
hosts: ["Martin Wichmann"]
date: 2025-06-09
duration: "55:41"
language: "fi"
original: https://www.youtube.com/watch?v=UpoamcMX6Z8
relatedEpisode: https://www.neuvottelija.com/podcast/episodes/559-kryptomyllytys-wichmann-neuvottelija-337/
canonical: https://www.neuvottelija.com/media/kvarn-x-wrong-economic-policy/
---

# The Wrong Economic Policy? — Sami Miettinen on Kvarn X

**Disclosure.** This is Kvarn Capital's own production with Miettinen as the guest, and Kvarn
Capital is a commercial partner of Neuvottelija. It was recorded as a cross-episode: Wichmann
appears on the Neuvottelija side in episode 337. Miettinen discusses his own positions,
including a roughly one per cent bitcoin allocation. Not investment advice.

## The yen carry trade is the centre of it

Miettinen starts from structure rather than from the news. Bretton Woods pegged together things
that should not have been pegged — the dollar to gold, other currencies to the dollar — and **it
holds until it does not.** The yen carry trade is a milder expression of the same phenomenon, and
it has been a classic among classics for thirty years.

It worked because three things were true at once. The **yen trades as a strong currency**, because
Japanese households hold a great deal of wealth and companies own their assets, even though the
state is more than 200 per cent indebted and the central bank complex buys the debt. **Domestic
bond demand kept Japan's yield curve the lowest and flattest in the world.** From which it followed
that it paid to borrow in yen and invest in the dollar — in enormous size and with heavy leverage.

## What changed

The wobble in confidence in the US reserve position has raised risk premia, and as a side effect
the risk premium has risen inside the carry trade itself. **Japan's long end has started to rise.**
Japan sits around three per cent, the United States closer to five, so a pickup of roughly two
per cent is still available on paper. But yen borrowing is no longer available in the same way,
because the Japanese complex now wants to finance itself.

The consequence is direct: **less loan money leaves Japan for the dollar complex** — Treasuries,
corporate paper, other US instruments.

## What it does to the US debt market

Three things simultaneously. The dollar has weakened further. The long-end rate has risen, leaving
the US yield curve **U-shaped**. And there is an exceptional amount to refinance: a federal debt
stock of **37 trillion**, rising by several trillion more under the tax bill, with tax revenues
removed at the same time.

On top comes a structural problem that is not in the news: **issuance was skewed to the short end
under Yellen-era policy.** Long-end bond financing is no longer really available from abroad or
domestically, so the long-end rate rises on both risk premium and sheer availability. The Chinese
are not enthusiastic buyers while being hit with tariffs. The long end has risen in Japan, in
Europe and more or less everywhere.

Wichmann asks whether the rate must in theory rise if there are no buyers. We are living under
quantitative tightening, Miettinen answers, and a return to QE is always possible — it is
precisely what Trump is demanding out loud. *But as long as we are playing at an independent Fed,
you are entirely right: weak demand has to be compensated with a better rate.*

## The turn that has not been seen before

This is the sharpest observation in the episode. Uncertainty of this kind has always
**strengthened the dollar and lowered rates** — the dollar was the haven. Now, for the first time,
**self-inflicted uncertainty weakens the dollar and raises US rates at the same time.** Miettinen
judges that Trump did not foresee this and is wrestling with it alongside his advisers, facing a
fairly hostile Fed that will not correct the effect the way he would prefer.

On **Jamie Dimon**'s warning that the bond market is cracking, he is calm: the man has far more
standing, and may be right, but a five per cent thirty-year yield is not strange to him. Debt
service cost is *a problem when it is a problem.* The more relevant question is where you would run.

## Where would you run

The dollar is about 60 per cent of the global currency basket and the euro 20, and the candidates
are thin. **The euro** would be the logical mini reserve currency, but the political and fiscal
system on top of the currency is missing — the EU budget is 1.4 per cent of GDP against the US
federal government's 20 — which is why he points to his own **ECU-2** twin-currency proposal as the
route out. The **yen** carries enormous leverage and a creaking long end. The **renminbi** sits on
a fairly totalitarian state with vast local property debt. **Sterling** he calls *a complete basket
case.* What remains is **gold and bitcoin**, and he has been cutting his own US weighting toward 50
per cent.

## Tariffs

Part game, part strategy, with echoes of Nixon breaking Bretton Woods with no plan whatsoever. The
frame is **Taleb's antifragile**: the United States withstands shaking better than anyone else and
may benefit from it. The practical assessment is reassuring, though — **a tariff is a value added
tax on goods**, and the federal government has no VAT. A move from a historical five per cent to
fifteen spreads across product categories and is not large next to Finland's 25.5 per cent. The
headline numbers are part of the game and the market has learned to see through them. He rejects
the deliberate-dollar-weakening reading: if that were the tactic it would not work like this,
because the risk premium rises rather than falls.

## Bitcoin treasury companies

The conversation loops back to where it started. **Michael Saylor**'s strategy is the carry trade
reinvented — borrow in the soft currency and invest it in bitcoin — and Miettinen's critique is
technical:

> They are still carry trades, and they carry the same maturity transformation problem: bitcoin is
> not a natural long-horizon yield asset but a zero-duration asset. It is a carry trade without a
> yield.

On top comes **basis risk**: if the price falls from a hundred thousand to seventy, the asset is
down thirty while the debt stays at a hundred plus interest. The premium to NAV at Strategy and
**Twenty One Capital** draws a comparison to bank leverage and to Sampo Bank being sold to Danske
at 3.4 times book — with enough leverage a price-to-book of three is possible when the underlying
already carries returns inside it, but a threefold value before the investment has even been made
cannot be justified. He still does not recommend shorting: *markets can stay irrational longer than
you can stay solvent.*

## Finland, and the closing verdict

The domestic section is blunt. He does not follow the economic reporting of the public broadcaster
or the main daily, because they ask for opinions from a **woolly-jumper economist** — an
interest-group economist looking only at Finland's internal affairs, whose information value for an
investor can be negative. The counter-example is **Argentina**, which cut a deficit worth four per
cent of GDP in a single year. The lesson for Finland is **12 billion out of the budget immediately,
preferably 20**, and a figure nobody tracks: the average Finnish adult owns about €150,000 including
their home, the average Swiss €657,000.

Asked for a verdict, he splits it. Part of Trump's antifragile shaking is theatre and the tariff
level probably settles around fifteen per cent. The open question is **whether the loss of
confidence in the American bond and reserve complex becomes permanent, and whether Japan's carry
trade breaks permanently** — if so, risk premia stay elevated and hold asset values flat. Even so
he has barely reduced risk, rebalancing into Europe and slightly into Finland, and remains in fairly
neutral spirits.

Original recording (Kvarn X): https://www.youtube.com/watch?v=UpoamcMX6Z8

From the same session: https://www.neuvottelija.com/podcast/episodes/559-kryptomyllytys-wichmann-neuvottelija-337/

---

Cite as: Sami Miettinen, guest on Kvarn X — The Wrong Economic Policy? — Sami Miettinen on Kvarn X, 2025-06-09, https://www.youtube.com/watch?v=UpoamcMX6Z8. Record: https://www.neuvottelija.com/media/kvarn-x-wrong-economic-policy/.