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UNFTR Weekly Roundup |
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Max NotesVenezuela, the Cayman Islands and cockroaches. I’m unpacking them each in separate episodes over the next week but these are major stories that are all related. Our monetary chickens and mindless mismanagement are about to come home to roost in a significant way. In fact, they might already be here.
Everything comes back to the dollar.
On the most recent JPMorgan Chase investor call, Jamie Dimon alluded to the recent bankruptcies in the private credit sector as cockroaches; meaning where there’s one, there are usually many. He said this in response to a question of whether the unraveling of Tricolor and First Brands Group were isolated events or indicative of a greater liquidity issue in the shadow banking industry. We’re beginning to learn that it might be more than a family of cockroaches, we might have an infestation.
So how does this relate to Venezuela and the Cayman Islands? And how does it all come back to the dollar?
I’ll save Venezuela for last because the Cayman Islands issue is more recent. And it’s a fucking blockbuster. For months I have been warning of weird signals in the Treasury International Capital (TIC) releases from the U.S. Treasury. This is where we measure total inflows versus outflows of capital. Aside from the Liberation Day fiasco in April that spooked the bond market and sent investors fleeing from U.S. Treasury bonds, there is always an appreciable flow of money into the United States. It manifests in the stock market, the corporate bond market, government agency and municipal bond markets and through purchases of U.S. treasury notes and bonds.
The weird signal that we’ve been calling out is the uptick in inflows from “unofficial” sources, meaning private sources rather than foreign central banks. Since Trump’s election, foreign central banks have been moving away from U.S. treasuries and into hard assets such as gold and silver, as well as foreign exchanges and currencies as well as Bitcoin. The movement is a hedge against the U.S. dollar and a sign that central banks are losing confidence in the United States.
But the administration and the financial pundit class has been vocal about the strength of inflows into the United States. After every treasury auction, financial analysts, business news hosts and treasury officials would sign from the same hymnal that everything is healthy and people are gobbling up treasuries as they always have. All is well! Move along. Nothing to see here.
Sensing there was more than meets the eye, a couple of months ago I started putting notifications in my calendar to remind me of these TIC releases. Something just didn’t seem right. And, of course, the government shutdown has delayed most information from the U.S. Treasury so this one is late and there’s no telling when it will come out. (So is the budget that updates every month for that matter.) Very frustrating.
But there’s one agency that is running at 100% because it’s self funded and therefore unaffected by the shutdown: The Federal Reserve. And they just released what can only be considered a fucking bombshell report on the 15th of October.
Here’s the last line of the report:
“The puzzling disconnect between the TIC and Form PF data on Cayman Islands’ holdings of U.S. Treasuries is under active investigation.”
Again, more to come this week but here’s the upshot. It was previously thought that investors and institutions registered to the Cayman Islands held around $400 billion in U.S Treasuries. The actual figure according to the Federal Reserve?
$1.8 trillion.
I’ll explain more about this in the days to come but suffice it to say, we have a huge problem on our hands. Under normal circumstances this is entirely manageable, though the concentration risk in an opaque market isn’t great no matter how you slice it. The bigger problem is that a significant (albeit unknown) portion of these holdings is on leverage. In some cases up to 100 times. So when we enter an abnormal circumstance like COVID or…RIGHT NOW…there is actually risk inherent in these markets.
That’s because these shadowy companies aren’t buying U.S. treasuries because they’re patriotic; they’re buying them because there’s profit to be made on holding them and selling them down the line. Basic arbitrage. And like every trade involving arbitrage, there’s risk in the timing. So if the value of the holdings suddenly decreases, the market can go upside down pretty quickly and all those payments come due—it’s a bad scene. Especially if you owe 50 to 100 times more than the loss due to leverage.
Okay, and Venezuela?
So, it’s way more complicated than this and I promise to break it down further, but this article from Naked Capitalism is a good base. Essentially, when the world buys oil (most of it at least) they do it in dollars. (Dollars used to purchase oil are called petrodollars.) Therefore, yet another one of our superpowers is the fact that no matter where the transaction occurs, the oil itself is purchased in dollars. So if Japan buys oil from Saudi Arabia, it’s paid for in U.S. dollars. Pretty neat, huh? Thus, one of the reasons the global market purchases dollars is so countries can buy oil.
But countries like Venezuela and Iran, and more recently Russia, have been sanctioned by the United States. Part of this means a prohibition on using U.S. dollars to buy oil from these countries. In order to find ways around this, sanctioned nations will sell in other currencies or, more recently, in crypto currencies.
Now here’s the crazy part. Our foreign policy is so upside down and backwards that we will sanction these countries and then bomb them even though they pose no imminent threat to us. Basically, our goal is to take control of their oil production by forcing regime change, then “negotiating” with the new leadership to work with our oil companies and re-enter the global trade market with U.S. dollars.
If you’re wondering why we wouldn’t just lift the sanctions and let them trade on the open market since it’s a hell of a lot easier and more beneficial for everyone then you’re smarter than everyone who has ever worked in the U.S. State Department.
Again, more to come on all but suffice to say it’s going to be a wild few months ahead. |
Other things I’m obsessing over…
-Max |
Killer Left Take of the Week |
KLTW goes to Mehdi Hasan by a landslide. Oh my. As only Mehdi can do. At the No Kings rally in DC he gave a rousing speech with the vigor we’ve come to expect and some barbs that will get under Mr. Thin Skin to be sure. The best one was when he pointed out that two of Trump’s wives were immigrants, proving that immigrants will do the work native born Americans won’t. Priceless.
Watch: ‘We Are The Majority’: Watch Mehdi’s Rousing Speech at the No Kings Protest in DC |
This Week on the UNFTR Podcast |
There has been a slow moving tsunami building in the private credit markets. What some refer to as the “shadow” banking sector is referred to in policy circles as the Nonbank Financial Intermediation (NBFI) market. Essentially, this is the market outside of banking that includes money markets, hedge funds, venture capital firms and sovereign wealth funds. Right now, the tsunami is picking up momentum and cracks are showing up in all corners of the NBFI. The treasury might be thrilled that it doesn’t have to release data during the government shutdown, but there are plenty of other sources that show just how big this calamity is becoming.
Here’s a snippet from the pod: Max: The markets never need money after tax days and quarter-end. The only times this has happened in recent memory is COVID. We can’t even look to the Global Financial Crisis for guidance because many of these backstops were created in the wake of and because of it. So this is new. And it’s unsettling because it means that the private credit market might be running out of money.
This episode will be released tomorrow, 10/21/25. |
Chart of the Week |
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Source: OilPrice.com
We covered this in a recent video, the oil market is in contango. Essentially, price forecasts for crude oil are higher in the future than the current spot price. The glut of oil will lead to more refining and storage to deal with the supply glut. On Friday WTI closed at $57.54. As you can see from the production chart above, U.S. oil producers are cranking at the highest level ever, which is contributing to the oversupply. The upshot here is that all signs point to a massive slowdown in economic activity around the world, and here at home it means that oil and gas producers are going to reverse many of the historic gains they’ve enjoyed in recent years. |
Headlines |
Mamdani: Sizzle AND SteakThis Baffler piece opens up a discussion about the campaigns popping up around the country in an effort to tap into some Mamdani magic. But it’s going to take a lot more than a social media manager and slick videos to meet the moment. People are hungering for policy measures that demonstrate a level of empathy and knowledge about what people are going through.
From the article: “Mamdani’s message resonated not just because it was meme-ready, but because it spoke directly to the lived experience of New Yorkers: rent that keeps climbing, childcare that few can afford, and spiraling grocery prices. These policies don’t come from data-addled triangulation but from his experience organizing in what remains of New York’s associational life. As Waleed Shahid notes, Mamdani’s ‘campaign grew from years of organizing, frustration, and grief, especially among young progressives, immigrants, and Arab and Muslim communities who had long been pushed to the party’s margins. He didn’t just run against Cuomo. He ran against the political amnesia that forgot the people who showed up when it mattered.’”
The Baffler: The Substance: A “new generation” of Democrats doesn’t have it
SCOTUS and Voting: Brace for ImpactThere was hope among lovers of democracy that the Supreme Court would allow crucial parts of the Voting Rights Act to stand. But when many observers listened to the line of questioning from the Supreme Court Justices, hope began to quickly fade. The consequences of gutting this Act will be immediate and widespread. Once again, generational consequences are on the line and we have to rely on the Trump court to do the right thing.
From the article: “Questions from the bench suggest the Court’s far-right majority may be ready to strike again, dealing another blow to a law that was meant to protect the very Americans whose voices they now risk silencing. The Supreme Court hearing came as Republicans, under pressure from Donald Trump, push to redraw congressional maps in states like Texas and Missouri – attempting to weaken Americans’s votes and shield themselves from accountability in the 2026 midterm elections.”
Zeteo: The Supreme Court Case That Could End Free and Fair Elections
Mamdani’s Biggest Hurdle?Donald Trump. New York State. Billionaires. The Democratic Party. Landlords. Seismic forces are lining up already to prevent Zohran Mamdani from achieving success should he prevail in the upcoming election. But perhaps no force wields as much power as the tiny corner of buildings at the bottom of Manhattan.
From the article: “New York was caught in this neoliberal slurry. With a declining economy, it couldn’t pay its bills. And with the municipal bond market in free fall, it couldn’t get access to credit to help it bridge the down years. This is where Wall Street’s punch came in. The punch was a ‘capital strike’ in which major banks refused to issue New York City bonds until the municipal government cut social programs to the satisfaction of financiers. Welfare programs, public schools, drug treatment centers, senior centers, and even police and fire stations all got the axe. The City University of New York (CUNY) imposed tuition for the first time in its 130-year history. Sydenham hospital in Harlem was shuttered. By some estimates, as many as 60,000 municipal workers lost their jobs.”
Truthout: The Biggest Threat to Mamdani’s Agenda Isn’t Hochul or Trump — It’s Wall Street |
UNFTR’s Latest Article |
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Zohran Mamdani gave a masterclass in how to handle Fox News from the left. He stayed laser-focused on his affordability message, deflected bad faith questions with a smile, and even spoke directly to Trump about lowering costs for working families. This is how you bring progressive ideas to a hostile audience without compromising your principles.
Read: The Art of Crushing a Fox News Interview (From the Left) |
Resources |
Pod Love“Live from Christchurch, literally tomorrow, we bring on Andrew Maxwell, fresh off stage in Riyadh, to ground-truth the social shift you won’t see in think-tank PDFs: 8k-seat comedy arenas, mixed audiences, and a culture moving at startup speed. With approximately 17% of the world’s proven crude reserves, a sovereign fund near $900bn, and a population that’s 65% under 35, Riyadh can bankroll outcomes, including a Gaza deal. Female labour-force participation has doubled since 2016, internet use is near-universal, and Vision 2030 is pointing trillions in capex at tourism, sport, and tech. We dig into how a Saudi–Egypt–Pakistan triangle (money, manpower, nukes) changes the bargaining set, why normalisation with Israel would be a geopolitical earthquake, and what a ‘phase two’ looks like. We also hit the shelved India–Gulf–Med trade corridor, Qatar’s broker role with Hamas, and why Europe’s mostly a spectator in a multipolar game.”
The David McWilliams Podcast: Saudi the Kingmaker: Gaza, Trump & a New Middle East with Andrew Maxwell
Book Love“A Short History of U.S. Interventions in Latin America and the Caribbean presents a concise account of the full sweep of U.S. military invasions and interventions in Central America, South America, and the Caribbean from 1800 up to the present day.”
A Short History of U.S. Interventions in Latin America and the Caribbean by Alan McPherson
Unf*cker Comment of the WeekFrom @ronkirk5099: “If you think the government did a poor job of helping workers during the transition from a manufacturing economy to a service economy, just wait till you see the disaster coming in the transition to an AI powered economy.” |
Progressive Corner |
Progressive Spotlight: Krystal Ball.Krystal Ball went from getting fired by MSNBC for daring to critique Hillary Clinton to becoming one of the most effective progressive voices in independent media. Her “Puerto Rico is part of the U.S., dear” moment broke through to apolitical audiences, and her viral takedowns of corporate Democrats like Cory Booker show why she’s one of the left’s most important commentators.
Progressive Organization of the Week: URGE: Unite for Reproductive & Gender Equity.
“Unite for Reproductive & Gender Equity (URGE) is a reproductive justice organization driven by young people, for young people, envisioning a liberated world where we can all live with justice, love freely, express our gender and sexuality, and define and create families of our choosing. To achieve its vision of liberation, URGE builds power and sustains a young people’s movement for reproductive justice by centering the leadership of young people of color who are women, queer, trans, nonbinary, and people of low income. As a state-driven national organization, it organizes communities, provides a political home for young people, advocates for meaningful policy change, and shifts culture, working in states where the challenges and opportunities are greatest.”
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