Arthur Hayes' Latest Podcast: Rates Will Stay Put, AI Capital Misallocation and Yen Repatriation Will Ignite Bitcoin

Original Title: Arthur Hayes: The Next Bull Market Will Be The Biggest One You've Ever Seen (The Full Picture)

Original Source: The Rollup

Original Compilation: Wu Blockchain

On September 8, 2026, Arthur Hayes, Chief Investment Officer of Maelstrom, was interviewed on The Rollup podcast, discussing the global macro environment and crypto market outlook. He believes that Japan's gradual unwinding of the massive yen carry trade, combined with rising risks in the French bond market, could force the Federal Reserve to accelerate the creation of dollar liquidity, and that the EUR/JPY exchange rate is an important leading indicator for observing this shift. Hayes also discussed the unit economics of the AI industry, potential government bailouts and their impact on the fiat debasement trade, and introduced Maelstrom's current market positioning, explaining why Ethereum is its larger position for riding this liquidity cycle.

Editor's Note: Arthur Hayes has long been known for his sharp views and bold predictions, but his market forecasts frequently change, and he himself has repeatedly acknowledged a high failure rate in his predictions. Therefore, readers should not treat his specific price targets, timelines, or trading actions as investment advice. Rather than the predictions themselves, what is more noteworthy about Hayes' writing is his analytical framework and thought process regarding the relationships between global liquidity, monetary policy, fiscal systems, and crypto markets. Wu Blockchain republishes his articles primarily to offer readers a reference perspective for observing macro and crypto markets. Below is the original content:

Japanese Capital Repatriation Could Become a Catalyst for a New Round of Crypto Market Gains

Host: Arthur, great to have you back. Welcome to the bull market. On-chain markets are heating up, major coins are rising, but institutions and people in the AI space still seem to be on the sidelines. I went to Jackson Hole last week for the Fed meeting. Kevin Warsh opened his speech by talking about two hikes he had done at Jackson Hole, one very difficult and one very easy; the market reacted very strongly this week. What state is the macro environment in right now? Scott Bessent and Warsh are both taking action—what's your take?

Arthur Hayes: First of all, Warsh doesn't matter. Whatever he says is irrelevant. He gave that speech about two weeks ago, but I think what really matters happened more recently. I wrote an entire article about it, and this is the theme I'm most focused on right now.

In modern global financial markets, Japan is usually connected to various important changes. Starting around mid-to-late July, Japanese Finance Minister Katayama Satsuki said that domestic institutions need to reassess their asset allocation standards, reduce holdings of foreign assets, and increase investment in Japanese domestic assets. She was effectively referring to the Government Pension Investment Fund (GPIF). GPIF is Japan's largest pension fund and a quasi-governmental institution. At the time, USD/JPY was around 160 to 163.

Everyone might agree with this direction, but the question is whether the government will take measures to make it actually happen. GPIF's last major asset allocation adjustment was after 2012, and individuals and corporations followed suit. At the time, Shinzo Abe was pursuing Abenomics, stimulating the economy through money printing, and wanted GPIF to increase its allocation to foreign securities and reduce domestic securities. It took him two years to get GPIF to formally agree, including replacing opponents and appointing people who supported this direction. After that, GPIF published an allocation framework increasing foreign assets and reducing domestic assets, and the market took off—USD/JPY rose, the yen weakened, Japanese investors began investing overseas, and others followed.

So initially, I thought GPIF might not start selling US Treasuries and buying JGBs for another two or three years—this wasn't something to focus on immediately. But then came the first yen intervention: Bessent sold euros and bought yen, and proposed eliminating the single-counterparty limit on the Fed's Foreign and International Monetary Authorities Repo Facility (FIMA Repo Facility). He was effectively pressuring Warsh to do his job and remove this cap. This means institutions like GPIF don't have to sell US Treasuries, but can instead use US Treasuries as collateral to get dollar loans from the Fed, then sell dollars and buy yen in the forex market, and finally bring the funds back to Japan.

This is only one piece of the puzzle, because it still requires Warsh to convene the relevant financial subcommittee and get the committee to agree. After that, the US Treasury proposed increasing Treasury buybacks by $20 billion, but relative to the roughly $40 trillion bond market, that's not much. Bessent said last week or earlier this week that the Bank of Japan needs to raise rates faster. Similar things have been said before—the key remains what action he is prepared to take.

There was also the G20 meeting this week. I think some kind of agreement may have been reached on the sidelines during the meeting, and the Japanese side finally received the message. Bloomberg reported that GPIF held an unscheduled meeting in August. August is a holiday month in Japan, so convening an unscheduled meeting at this time is very unusual. We don't know what was discussed, but previously the Japanese government asked it to increase Japanese asset allocation, and Bessent also asked Japan to increase domestic assets and sell US assets. After that, USD/JPY dropped from 160 to 155 in a single trading day, and EUR/JPY also fell about 3 yen during Asian trading hours—that's a very large move.

I think an announcement may come soon: either the FIMA repo facility cap will be raised, or GPIF has already begun adjusting the weighting between domestic and foreign assets. Crypto markets and other markets reacted to this overnight. Meanwhile, Waller said inflation doesn't seem that severe and the Fed perhaps shouldn't raise rates. Putting these things together, the goal is to weaken the dollar and strengthen the yen. This has been one of the Trump administration's top priorities—they want to reshape the global trade architecture.

To do this, the yen must appreciate. The yen may be the most undervalued currency globally besides the Chinese yuan. It's difficult for the US to take the same action against China, but it can influence Japan, because Japan depends on the US for security guarantees. I think this is why the crypto market is rising. The market had been pricing in various information, and now substantive change has finally occurred. Without any clear news, USD/JPY dropping from 160 to 155 shows that something has changed.

Therefore, I believe the rally has already begun. Crypto assets and other assets rose overnight, while the S&P was roughly flat or down, and tech stocks and AI trades didn't rise significantly—this suggests it's a liquidity-driven move. In the coming days or weeks, more information may be disclosed confirming that an agreement was indeed reached during the G20 and that corresponding arrangements will be introduced to push the dollar down and the yen up by creating dollar liquidity.

Japan Inc. Is Reversing the World's Largest Yen Carry Trade

Host: Pushing the dollar down means pushing our assets up. You didn't discuss the yen carry trade in detail in your latest article. When many people think of Japan and the yen, they think of the carry trade or basis trade. Is this related to the logic you just described? If so, what impact would it have?

Arthur Hayes: I call Japanese society "Japan Inc." It runs the world's largest yen carry trade. If you look at Japan's consolidated balance sheet, including private sector assets, you'll find that Japan has essentially been printing yen and buying foreign assets.

As the yen depreciated and Japanese-held assets like US tech stocks rose, Japan as a whole performed very well. Some people focus only on single metrics like debt-to-GDP ratios, but you should view Japan as a whole. Although Japan calls itself a capitalist society, it has strong communal and socialist characteristics—capitalism is more of an external form. Ultimately, there is a "Japan Inc." and the yen carry trade is a nationwide trade—Japan is also the largest participant in this trade.

When GPIF is directed to shift, "Japan Inc." will follow: selling foreign bonds and stocks, selling foreign currency and buying yen, bringing funds back home to invest in JGBs, local companies, and real estate. This is exactly the directive issued by the government. It will take time to get started, but once it begins, you should not stand on the opposite side of this trend.

The problem the US faces is that Japan has held these assets for the past 30 years, driving US markets higher. When the entire US system depends on financial gains from rising stock markets and continued debt issuance, how should this trade be exited? The US response can only be to print money and take over the trades Japan used to do.

Japan's past strategy was that even if USD/JPY rose to 200, it didn't matter, as long as it could reflate the domestic economy and escape the problems left by the 1980s real estate bubble through inflation. The US is currently adopting a similar strategy: even if the dollar index falls to 50, as long as it can become an industrial power again and bring the debt-to-GDP ratio from about 100% back to about 30% as after the last time it adopted a similar strategy, that's acceptable. The two are essentially the same trade. It takes a long time to form, but once started, it's very difficult to go against.

US Monetary Policy Has Long Ceased to Be Truly Restrictive

Host: Warsh talked about AI's disinflationary effects and innovative technologies at Jackson Hole, and at the end of his speech expressed concern about inflation. The changes you're describing seem to be the beginning of a broader rotation. After the pandemic, US financial policy was extremely loose; the past four years have been a higher interest rate environment, quantitative tightening only ended about six months ago, and the Fed's balance sheet has since flattened and begun to rise. Do you think US financial policy is moving from a restrictive environment into a looser, more supportive phase?

Arthur Hayes: The period when US monetary conditions were truly restrictive was only from December 2021 to October 2023. After that, Janet Yellen began issuing more short-term Treasuries and bonds, and drained $2.5 trillion from the reverse repo facility. For holders of crypto assets and other assets, the market re-entered a rising phase from that point.

As you said, the AI trade is their "get out of jail free" card. Over the past fifty or sixty years, the US has printed a lot of money. By normal mathematical logic, interest costs and debt scales grow exponentially and are nearly impossible to solve through economic growth alone. But now something new called AI has emerged. The narrative is that as long as you develop AI and win the AI competition with China, the debt problem will disappear and productivity will rise dramatically.

This is why Warsh, Trump, Bessent, and everyone else are talking about AI. Only this way can they explain to voters: don't worry about how much the government is spending, and don't worry that government spending as a share of GDP is higher than at any time outside of war or pandemic periods, because the US has AI and will win the AI competition. But these people may not even know what AI specifically means—they've just accepted the narrative that Dario, Sam, and Elon sold them.

AI also fits into the same trade. If AI is the only reason the government uses to explain how it will solve the deficit problem and why no one should worry about spending, then what will the government do once major AI labs come under pressure because their unit economics don't work? It will bail them out, and the way to bail them out is to put in more money.

Therefore, the Japan-related trade architecture and Europe's problems will both push the US to create more money; AI gives the government a face-saving reason. The government has already wasted trillions of dollars on these hallucinating chatbots, and this will also become a reason for it to continue injecting massive amounts of money into the market. These two aspects combined will help crypto assets reach new highs.

AI Capital Misallocation Will Ultimately Benefit Bitcoin and Gold

Host: Over the past 6 to 18 months, Bitcoin's fiat debasement trade logic seems to have failed—Bitcoin has underperformed, but gold has risen, and tech stocks have significantly outperformed the market, with strong performance in AI capex, storage, and other sectors. Will the shift you're describing cause gold, Bitcoin, and other fiat debasement trade assets to benefit more than pure tech assets?

Arthur Hayes: Yes, I think this change is beginning now. A friend just sent me the latest cover of The Economist, which portrays Nvidia CEO Jensen Huang as a magical wizard, as if Nvidia has no cash flow problems, no circular financing, vendor financing, or similar "Enron 2.0" accounting tricks—as if adding an AI chatbot makes it the greatest company in history. I think this is a signal of a market top. When The Economist tells you one thing, you should do the opposite, because their judgment is incredibly stupid.

The current situation is very favorable for Bitcoin and gold, because politicians can no longer stop spending. Otherwise, they would have to admit they made enormous mistakes, including around data centers, social media, and tech companies' use of user data. If the government admits there are problems with the AI direction and changes policy, it would have to withdraw support for the industry, let Elon and others bear their own cost of capital, stop providing special regulatory arrangements, and stop using the nationalist narrative of US-China competition to attract more investment for loss-making companies.

At that point, companies would either make money or not. Companies like Anthropic should also disclose real profits, not just revenue figures; if they keep burning cash, they should explain the unit economics of their inference business. Potential IPO or secondary market investors need to see this information.

But this clearly won't happen, because politics doesn't work that way. This is exactly why Bitcoin, gold, and other similar assets will perform well: we have entered the capital waste phase. The government will come up with massive amounts of newly created money to roll over these loans and cover up previous mistakes, because it cannot admit it wasted enormous sums.

Host: In the past, the government spent money on AI, M2 rose, but the funds didn't flow into crypto assets. You're saying that the capital allocation to AI is capital misallocation, and the money used to deal with this misallocation will ultimately flow into digital assets?

Arthur Hayes: Yes.

Host: Will the same group of investors buy crypto assets at that point, or will it be broader macro investors, companies, and funds? With the CLARITY Act advancing, regulators signaling support, and tokenization and other sectors heating up, could it be venture capital firms buying Bitcoin after exiting Anthropic? Or is this just a broader trend shift?

Arthur Hayes: This is essentially just central banks expanding their balance sheets. I can't point to any specific person who will definitely buy Bitcoin. I think many venture capital firms will actually suffer severe losses. They told investors they achieved extremely high paper returns from investing in these AI labs. Maybe Anthropic can go public, but it needs to do so quickly, because more and more people are raising questions now.

OpenAI's situation is more difficult—it needs a government bailout or some form of merger. Sam Altman must design impressive financial engineering to get a deal done. As for Anthropic, it depends on whether Dario Amodei can pull it off.

But many venture capital firms' funds are effectively locked up. If these companies' stock prices fall 50% to 60% after going public and liquidity disappears, without a government bailout, I don't know how these firms can deliver the DPI they promised investors. So it's not that "people in the AI space will invest in crypto assets." People in the AI space don't have cash—they only have paper assets.

If central banks continue to push these assets higher, they might be able to exit and get cash, then buy crypto assets. But a more appropriate way to understand it is broad balance sheet expansion by central banks to cover up capital misallocation. Bitcoin was born for exactly this. What happened in 2009? Policymakers expanded their balance sheets to cover up capital misallocation in housing. This time it's essentially the same, just larger in scale, and the target has become AI debt.

Who Is Controlling the Market Narrative?

Host: There are many factors involved here. AI founders like Sam, Dario, and Elon were once valued by the government; Trump advocates capital repatriation and nationalist policies, and Japan has also begun pushing for capital repatriation; Bessent is trying to figure out how to finance the whole system. Who is controlling the narrative now? It looks like Bessent is coordinating everything: getting Japan to unwind the carry trade and sell bonds, while getting Warsh to cooperate in financing US Treasuries. Is that right?

Arthur Hayes: Bessent is a firefighter. What really sets the narrative is the market: the 10-year US Treasury yield rising to 4.8% sets the narrative, and USD/JPY rising to 160 also sets the narrative. Bessent is just the only competent person in charge. He faces many spinning plates and needs to keep them from falling, so he can only cut a deal here and another deal there.

Policymakers are completely at the mercy of the market, doing their best under all the imbalances accumulated over past decades. Ultimately, these problems trace back to the post-WWII system—the result of nearly a century of events interacting with each other, ultimately forming today's situation.

So individual politicians matter, but not that much, because ultimately they cannot overcome math and compound interest.

The Fed Chair Will Ultimately Cooperate with Government Spending

Host: If the market controls the narrative, who controls the money printer? Is it the same person who controls the narrative and the money printer?

Arthur Hayes: In terms of actual operations, Warsh is the Fed Chair—he controls the balance sheet and can also create money. But ultimately, you can refer to former Fed Chair Arthur Burns' speech "The Anguish of Central Banking." He gave this speech in 1979, I don't remember the exact location. Burns