# Is the Market Misreading Warsh, and a New Dollar Bid Emerges - The Dollar Brief - Week of August 11, 2026

> The Dollar Brief for the week of August 11, 2026. Across the podcast tape the fresh fight is whether the market is reading new Fed chair Kevin Warsh backwards, quietly hawkish with a September hike now live, alongside the first rigorous autopsy of the US-Japan yen rescue and a genuinely new dollar bid: stablecoins as a law-mandated buyer of Treasury bills.

## The Dollar Brief

### Week of August 11, 2026: Is the Market Misreading Warsh, and a New Dollar Bid Emerges

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For a week the dollar was everyone's punching bag, the Fed frozen, the yen being rescued, gold quietly stealing headlines. Over the weekend the conversation on the podcasts shifted. People stopped arguing about where the dollar is *going* and started arguing about the referee: the new Fed chair, Kevin Warsh. A growing chorus now says Wall Street has him backwards, that he is quietly hawkish, not dovish, and may actually raise rates next month.

Two other things happened while everyone stared at Warsh. The US-Japan yen rescue finally got its first serious autopsy from someone who used to run this kind of operation for the US Treasury. And a brand-new source of demand for the dollar, one nobody was talking about a month ago, got a real number attached to it: stablecoins.

Here's the week, in plain English.

## TL;DR

* *The fresh debate isn't "where's the dollar", it's "is the market reading Warsh completely wrong?"* On [CNBC's Fast Money](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjec-2Bzvhx5J5C-2FBxs3vGSMabLmhUC45tsMqFgC-2B7Ri74PyWHhpOg3qDenynvtvMwc3d121tmJVyNFM-2BEFfhsnTE0-2FYVgVQ6njbGqRbjGTk2Fw-3D-3DPDma_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSyj2rdCh8LULK6FNBfjZLeuyUqhEiPYdANjEhdR2Z1BrXFx6UWixdOWs7CtSUdweAbnL142DCEeDR6wQnQuc8WKd8BB8YwYI-2FPKM5gClEWT-2FAa3U9XfP2ZQ7d9QmnaASDYA-3D-3D) (Aug 10), the argument was that the market is "applying things to Warsh that he hasn't really said." He has one inflation target, "2 percent, period. There's not a shadow target", and skipping a hike in July doesn't make him dovish. "The market said no move last month… Therefore, somehow it's dovish. I think that's backward."
* *Some longtime "one hike, maybe" voices flipped to calling a September hike.* On [One Rental At A Time](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOihGvdNcCksULVbpaG4v0H5-2BwiKITFwJrUVBNH8MgmUq4-2BYdjidcRQegl6H3nMyEOAedsSAnth74Z3Qt5jaPmJrYQuBS7E2QOXmvUF-2BXA8-2Bzg-3D-3D36pS_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSylcXtQlcrbwMabtdMuvR1ZFQPFitIWu6vsHkmZXNch6-2BmIZUY0aOYR0zvOTV5u5p81YYT6KstXfCtvWci7-2FjLp7LYo-2FK1l12x-2FH84VCIiZpCykNsfU7vKAz486M8c3Tblw-3D-3D) (Aug 10), a host said out loud for the first time, "September is probably a hike," walking through why a quirk in the inflation math will make prices *look* like they're reheating just before the meeting.
* *The bar for that call is this week's inflation report.* Nearly every desk pointed at the midweek CPI number as the trigger. [The Exchange](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOh1MSmvq57ZhNm42SXixQvsecrNC1765TREcVer-2FzaU7bEB9-2BtdzrOLrutC7wpHeFL2Lu3qi-2FXVWEGl-2Bpz15kqoh5OECyyee-2FSJq74l5zhHeQ-3D-3D1GRn_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSylzwUhgDT-2Fv1ZdLgxe5m8XBtCjA0ZA5WvmyDhIyXZyC4ZGSaJO-2FClkmbv7n0sNAZJiX30tBWOp0MGIDaA3EQuyY06-2Fcs4DDqphXKA5DWVxaMG35LIoIGOuW1EMGuU-2BndIQ-3D-3D) (Aug 10) argued the honest way to read inflation, the year-over-year rate, is "very, very far from target right now."
* *The yen rescue got its most rigorous defense yet, from a former US Treasury official.* On [Odd Lots](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOizGLDD0q-2BsBEz4NKZvU77FFC3HXsw8iopoDxvYnB0HV2CA4-2B9LQxIbGP7WQOZzPmZboQShjKdhoeoRwlwgGgM0CFrHWC1npSlo5xDsBVr3Jw-3D-3Dql_j_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSystLxIljEEiA7BEfM6fvEktuIGwMyClGWDIRyKloQ0ruYpL1U1Ydk5x1FS7I1Yt61fz9gDvOgfnWVEsccloRwLhBG2fEanCrjYXNzz9cfOP9hebNdUWAO9qkiBfHmwpvOQ-3D-3D) (Aug 6), Brad Setser called 160 yen "insanely weak… below in inflation adjusted terms where it was in the 1970s," said the yen has overshot, and judged the operation "enough if the Bank of Japan is going to raise rates", but a clear failure if Tokyo doesn't hike in September.
* *The skeptics got louder and more specific.* On [Eurodollar University](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgCpyAIOu8SzTOk8rFFq4UdPlx3IFApsfG7-2BAg0AnfGYj6fBUfTZAi3XGegRKI16CQLbomPgp-2FKiK-2Bweix-2F2uGvzaOO5o8oinBYEJvEVInaMQ-3D-3DYxVx_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSypQ1rtPNFXozWPY4vt7ZZzVKsoZeB7D7qlLzoCTQWsgMO9bKV56V1dZxdHjONs-2B4xZ4sTYqT2jN3-2BcZWQic2CtB6g5O39F8-2BE7ymM4lmuO7E5-2FenFlonuT6grn7A-2BlsqjA-3D-3D) (Aug 6), Jeff Snider and Steve Van Metre called the roughly "$53 billion in reserves" spent money "thrown down the toilet," and on [The David Lin Report](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjdfkvuroXYlf51Ec-2BvX84LefHl-2BGXjIfkwEVL-2BNTDMB2vgPNVmNqCcCfDoFexdmpyS-2F31LfsiqfNGjk0XoVOLYVPs-2B4AklxUCeng-2ByBA2UVg-3D-3DaEXm_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSytQFedzuJwReiiGmT6JjWsrq5nuvFehcJ5ijgiBL7YgzuyNdpTLPUPN68q-2B6MD0XFmPOiSbc8yuoVOjWr9X4EaurZMFKA5Tw9z5g8DHtijGjgoVlgnEeqM-2FkQ6GYOOcUZQ-3D-3D) (Aug 10), Michael Gayed warned "the short squeeze has not started" and expects the yen to "undo that move" into "a real, real panic."
* *A quieter voice cut against the doom:* on [RenMac Off-Script](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjTdb5kSZ0e0T4wEsujDB1DqGvrd6obJlCoI6Pfql-2F8FJX9PPCEl4p131NsawWgQW3iuydLY9QEz-2BYK0L-2Fa2CKiuxYxEYC5TX9wjaP-2BGkxBrw-3D-3DNeQ-_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSytVbqsivAME-2BllVKugZbRT6FkdRqCaRfChprMx44InbSLtXyJw0zB-2BRGZIXQP3NDosZBOm08FJArPFTpIu9a85RWgePDEBqRaiaENG6v9uUU2sVXNxnQQIaa3iYKwXBsLw-3D-3D) (Aug 6), the read was that traders are "not really over [their] skis on dollar yen carry" the way they were two years ago, so any unwind "wouldn't really give you the type of fireworks" of the last blow-up.
* *The genuinely new dollar story: stablecoins may become a giant, price-blind buyer of US government debt.* On [Macro Musings](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiiiZs7JYgC0mRodW15zOPoRW77m7rXemz8Ou2JCtm66Hp05zPVmIfSdaagnuaX8hWGhEhaawo69sxG8zB5GReD9Xe12sxsrVX7R9ExaOSsWw-3D-3Dv-Cv_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSyoB1HD0AGQXZyT-2FNEM4GaM9-2B-2BfLc9-2F4M2pRG0q-2FkSqyS-2BuhZd8-2BGWB-2BIv0bQhVs5ZD2-2FQOCsfuM3WP6fu3RpqpjgagzzKGTZ2Rjz2SxsQehqGpbkv7HkxfV7JiMZ50HAOw-3D-3D) (Aug 10), researcher Gianluca Benigno explained that the new US stablecoin law forces issuers to hold short-term Treasury bills, and if the market grows from "$300 billion now" toward "$3 to $4 trillion… within a decade," that creates a "stablecoin compression premium" that pushes those yields down.
* *The counter-frame to all of it, "financial repression."* On [The Julia La Roche Show](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjxIqYoxUqFdGpaAhVZB5Qo6ogFoAD2qNkzYdLAGatNUo5jT3UOmVNzoKgotfxx5KRAWpJIvPdUlHj2esEkRVQVVRWKSsA34ew-2B6Ej4r5NQcw-3D-3D06sd_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSymCEGXraPVUC-2B9fHSmEH70-2F3-2FUyT8j4GTgCN-2Bdrq4HZsVdXuUihTb9QxO8YLoqSdJ0tVVVyQNVYEkWEMxDnJu5IjBER-2FI1DaOk78ust-2FmVQ-2BRMybTH2x8ZdJYxWd9XXNZA-3D-3D) (Aug 8), analyst Chris Whalen argued the whole game is the government quietly holding yields down to carry a debt heading for $40 trillion: "You can't have central bank independence when you have $40 trillion in debt."
* *On the politics, the fresh reporting was blunt:* Trump has been phoning Warsh on an "irregular" basis since May, per [Bloomberg Businessweek](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOj0yfvcKcgu45zTXmjjiMO7W1Yw-2BEcNARHajPj4PDd1u1gE2CJsZ5U-2F3Vqqe9BGoQ0Vr6gY-2FohZzbhMRJ1XOArOj2akr9aKtSiPtkrsQmep0A-3D-3D-M9G_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSyvI27ccXhOYMZfJ7S3HWUJ3XKJ7NtRb0TZ53uw5nXbV7bJGvXIiznvAvWzRq3efwULU9Gw1jyyWgc1s4BRif9Z5jLQYZmjYFQauz4t0USIS255UAmWAdatotVNW-2Fx9AdVg-3D-3D) (Aug 6), and told Punchbowl "the United States should pay the lowest interest rate in the entire world," per [Squawk on the Street](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOilN9z1MbbJ4aQeriS-2B42ym-2FQ82ZN9CKl-2FzfFB57CnTIzXdgmGRRHXo5PTax50f7zN-2FFkiO3pfbSaKkjdQtsGtMl1I9Gxqek6hSha0XTelJvw-3D-3DP0It_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSyh35w-2FEpeVue-2BUwFr8f7rDOkHtypmPUTHfqAxpEJLJsI5uhy883annV6MQyRtA1ffomccnraAZC2ApcDh6qD6JmI5nmt5m1lj5iPBjJ8yEzEqQWochZY4KTBYiSQ5PNZOg-3D-3D) (Aug 7).

## What's new

### The real fight this week: is the market reading Warsh backwards?

Last week's story was "the Fed is frozen." This week the smart-money conversation flipped it on its head: maybe the Fed isn't dovish at all, and the market simply misheard a rookie chair who barely says anything.

The clearest version came on [CNBC's Fast Money](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjec-2Bzvhx5J5C-2FBxs3vGSMabLmhUC45tsMqFgC-2B7Ri74PyWHhpOg3qDenynvtvMwc3d121tmJVyNFM-2BEFfhsnTE0-2FYVgVQ6njbGqRbjGTk2Fw-3D-3DE66i_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSytiruQClCAJHm5EL-2FGtnKMFxubl0pEbwZ54VFoWSFH2R0g0p7GjkTSDWcDQziIYsdzYhM6TVg2ziDZGWNOV-2FMg7N4XPWmJ4Iy8Mk1lqgpZDlO3gMni-2Fk1go7lYc6Jsyayw-3D-3D) (Aug 10). The panelist making the case, call it the "you've got him wrong" argument, put it simply: "the markets are actually applying things to Warsh that he hasn't really said. He hasn't said a heck of a lot in terms of his own views, next to nothing." What Warsh *has* said is that there's one inflation target and it's firm: "It's 2 percent, period. There's not a shadow target. There's not a fake target. We don't have a pizza and talk about 2.5 percent." To this panel, that sounds like a hawk who just isn't ready to pull the trigger yet, and the market drew the opposite conclusion. "The market said no move last month in July. Therefore, somehow it's dovish. I think that's backward."

If that reading is right, the same panel argued, the bond market is badly under-pricing rate hikes. Markets have penciled in only "40-odd basis points" of increases through the middle of next year; one panelist said "it probably should be 75 plus or minus," and that the 10-year Treasury yield (the number behind mortgage rates) "should be north of 5% pretty quickly." (One honest caveat they flagged themselves: Warsh has admitted the Fed doesn't have "a good way of trading off" its two tools, the interest rate and the size of its bond holdings, so even he can't tell you how a balance-sheet move converts into rate-hike equivalents.)

This wasn't one lone contrarian. On [Squawk on the Street](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOilN9z1MbbJ4aQeriS-2B42ym-2FQ82ZN9CKl-2FzfFB57CnTIzXdgmGRRHXo5PTax50f7zN-2FFkiO3pfbSaKkjdQtsGtMl1I9Gxqek6hSha0XTelJvw-3D-3DseQr_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSytTQuA2Np9IO9YjkEakw-2BNkdY6QlFAPOEtSyyAN2ipFLuZFb79I9I-2FWtfm2hiiN-2FLVSlRL9WFgy7sE9G9o0ClBPjmO53TAgopUfhbDsNGiaP54EYCJ0Bb2Nq1a6pbIAMWQ-3D-3D) (Aug 7), the hosts flagged a Financial Times op-ed by economist Mohamed El-Erian arguing the chair "is being misread" on both "credibility and… commitment." And on [The Exchange](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOh1MSmvq57ZhNm42SXixQvsecrNC1765TREcVer-2FzaU7bEB9-2BtdzrOLrutC7wpHeFL2Lu3qi-2FXVWEGl-2Bpz15kqoh5OECyyee-2FSJq74l5zhHeQ-3D-3D5BN1_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSyjawZHDc2YW21iZ-2B20Hc1Qdj4CQ80WE28xY7cKtgTSGt92LOw9pm86b7KNps82E-2BGPC0Cy8hihWjRgPVM7GMetgieSbCs6twApGOR0YLEBIZoHvHgbmmKZ5muFx8EI-2B2fA-3D-3D) (Aug 10), CNBC's Steve Leisman made the technical version of the point: the soft-looking recent inflation numbers lean on three- and six-month averages that are seasonally flattered this time of year, a wrinkle economists call "residual seasonality." Strip it out and "the year-over-year rate is very, very far from target right now."

Even the mechanics of the July meeting point the same way. On [Marketplace](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOj2UV5D194W-2FVrV071aS5g8Bs5KevyAAvxW4kh6EeUy2Il6UM6Q7E2p0CetpCty2I5Kh8PpIKrO1UHntRbt8utn2s4xti3Fp3wC5P2eoIqBYQ-3D-3Dq4qJ_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSyrPTNTxC16Wgi-2FO5Zjgh7LyvHpLFC-2B4N8e2ZCgooMUzWlkxHog9a4ZHk52A43HTtcAzYkEeV0Aj9I817g05OrgLMIDOQJAxw2YG5MTzEfVZllRZ9TC5sr7VFfZYQkY97hg-3D-3D) (Aug 6), Berkeley economist Martha Olney walked through how Warsh has stripped the Fed's statement down to a single declarative line, "the committee will deliver price stability", which she called "declarative and vague at the same time… perhaps for an audience of one." More telling than the words was the vote count: June was a unanimous 12-0 hold; July was 9-3. Six committee members have since said they were ready to hike. Her conclusion: "we're probably gonna have an increase in rates pretty soon."

### Some minds actually changed, toward a September hike

The most striking single moment of the week was a forecaster changing his call live. On [One Rental At A Time](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOihGvdNcCksULVbpaG4v0H5-2BwiKITFwJrUVBNH8MgmUq4-2BYdjidcRQegl6H3nMyEOAedsSAnth74Z3Qt5jaPmJrYQuBS7E2QOXmvUF-2BXA8-2Bzg-3D-3DSeMU_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSykZT5hlQhKZbrALI6Vz-2Fv7gPDBtr8Fa17PAazWJVGviuqenYjSazGmyTPB3zXHWp8YPJKb629gm9ja3-2FnsgzWR2Gn55dWfZCo71CrCNzkpAIQvRoPGkl9luqqTdm4fYh4w-3D-3D) (Aug 10), one host, who by his own account had spent months calling for at most one hike all year, said it plainly: "For the first time, you think September is likely." "September is probably a hike. I'm not sure that it should be a hike, but I think it will be a hike."

His reasoning is worth understanding, because it's a trap hiding in the math. Inflation is measured over twelve months, so each month a very old reading "drops off" the back. This September, the reading dropping off is an unusually *low* one, which mechanically makes the fresh twelve-month number tick *up*, right before the meeting, even if nothing new is going wrong. "This one right here is going to make it look like inflation is coming back… That just guarantees a September rate increase." His slightly cynical kicker: because the drop-off was entirely predictable, Warsh already knew it was coming, so by waiting, "he's going to look like he's chasing" the data rather than leading it.

There's genuine disagreement about whether he'll do it at all. On [The Exchange](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOh1MSmvq57ZhNm42SXixQvsecrNC1765TREcVer-2FzaU7bEB9-2BtdzrOLrutC7wpHeFL2Lu3qi-2FXVWEGl-2Bpz15kqoh5OECyyee-2FSJq74l5zhHeQ-3D-3D44HP_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSyjQtywxhGaH4ERe96djxEGJnrzp9xVZUpmAWA6OebBY6ErEnUHe8G-2FbQHbCaopvrSHpCVU0mkTx3Tx4toLj0sRF01mGPu9QnDKdukT-2BMCq9CcOvAThsha-2BV3p5z-2FCPL-2F-2Fg-3D-3D) (Aug 10), one guest laid out the committee arithmetic, roughly "three hawks and roughly three doves," with the swing votes likely to follow Governor Chris Waller, so "listen very carefully to Governor Waller." Morgan Stanley's Katerina Simonetti, on the same show, held the other line entirely: "our call is no rate hikes for the remainder of this year. But we are expecting rate hikes, at least a couple of them, in [20]27." And the outer edge of the hawkish camp, a Bank of America scenario the hosts kept returning to, is fully three hikes, 75 basis points of tightening, before this is over.

The counterweight came from an insider-adjacent voice. On [Squawk on the Street](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOilN9z1MbbJ4aQeriS-2B42ym-2FQ82ZN9CKl-2FzfFB57CnTIzXdgmGRRHXo5PTax50f7zN-2FFkiO3pfbSaKkjdQtsGtMl1I9Gxqek6hSha0XTelJvw-3D-3DXib-_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSyjZJAsf-2FX4qq73sDVoSurIEM5FWdYM1twpfoqbqA7lUU0UweHwdy3oB04JwBfAj2y-2F-2BYa-2FC091nlJLxnYDfY6EQe6jpbdW1w7jVaQvCqJ8X7WF29DVUhZM3JCn2j-2F4fa7g-3D-3D) (Aug 7), J.P. Morgan Asset Management's David Kelly argued the Fed is "absolutely right not to raise rates right now," because the ingredient you need for a real inflation spiral, accelerating wages, just isn't there. "American business can't find workers and American workers can't find a raise," he said; the labor force has shrunk by "1.3 million people over the last year," yet workers are too "dispirited" to demand raises. He called it "Teflon inflation", high-ish, but not feeding on itself.

So the whole thing funnels into one number: this week's CPI report. If it prints hot, and several of these voices expect it to, partly for that mechanical reason, the "misreading Warsh" crowd gets validated and a September hike moves onto the table. That, not the reserve-currency debate, is the live question for the dollar right now.

### The politics got more pointed (and more petty)

Underneath the analysis, the pressure on the Fed is real and out in the open. [Bloomberg Businessweek](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOj0yfvcKcgu45zTXmjjiMO7W1Yw-2BEcNARHajPj4PDd1u1gE2CJsZ5U-2F3Vqqe9BGoQ0Vr6gY-2FohZzbhMRJ1XOArOj2akr9aKtSiPtkrsQmep0A-3D-3DUVma_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSys9bWWt-2FqSF8qcgsa3huoCndED42Iqv4ZzvaJZbxeV2nXsJAvtMHeF3k4srmphTLJ2eDrMlAFzegEwBIkH6-2BuNy5kCJDtz0Y0jYAoeE1ZkD-2Ft6GLDkXHvs-2FMR19i-2FIdnAg-3D-3D) (Aug 6) confirmed reporting that President Trump has been calling Warsh directly on an "irregular" basis since Warsh took the job in May, "inquiring about forecasts and opinions", though, the reporters stressed, "we don't know if they have discussed monetary policy." The context is what makes it sting: this is a Fed chair the president hand-picked, and the market is watching for any sign the Fed's independence is slipping. Trump has publicly said he wants Warsh "to be totally independent," and the Bloomberg team noted the bar is low, it "wouldn't be hard for things to be at least somewhat better" than the "rock-bottom" relations Trump had with predecessor Jerome Powell.

Trump himself was, for him, restrained. Asked by Punchbowl whether Warsh should avoid a hike before November's elections, he said, per [Squawk on the Street](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOilN9z1MbbJ4aQeriS-2B42ym-2FQ82ZN9CKl-2FzfFB57CnTIzXdgmGRRHXo5PTax50f7zN-2FFkiO3pfbSaKkjdQtsGtMl1I9Gxqek6hSha0XTelJvw-3D-3D0Plx_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSyvJZQLR0NQet7AnS9kqCvyXLUfI7x8-2F1ZmPnGAbaa0WZnZ38mfqw2lk12FNUMfYAKLGKIzYrz5Cls2kU3a6o-2F6kJzSLZpP4fmKP-2BYsHDP5NM4DN4n25zvE9qunTLVAHdrA-3D-3D) (Aug 7): "it's up to him a little bit, but not completely. He's got a board that's very political… The United States should pay the lowest interest rate in the entire world… I think he's great. I won't be criticizing him." The running gag on the trading desks captured the awkward dynamic, that "Waller's in charge of policy and Walsh is in charge of task forces." Warsh is one vote of twelve, and at least five of the others have publicly said they'd rather hike.

### The yen rescue, finally examined by someone who's run one

Last week the yen intervention was raw news. This week it got its first rigorous breakdown, and it came from Brad Setser, a former US Treasury official, on [Odd Lots](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOizGLDD0q-2BsBEz4NKZvU77FFC3HXsw8iopoDxvYnB0HV2CA4-2B9LQxIbGP7WQOZzPmZboQShjKdhoeoRwlwgGgM0CFrHWC1npSlo5xDsBVr3Jw-3D-3Drs6B_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSyp5nuvzZ5yEI1ca5t7H2csdx5ilgE-2FHwUdA8rAqzlPt8QsLHti3Tc1-2Fao-2BQPmydcW532R71j-2BHW4Tej76-2FaqVh-2Fn2HBsWNDdK0cu3sNfXuyDwnNSngNJP3VGti7YpVyGcw-3D-3D) (Aug 6). His starting point: the yen isn't just weak, it's absurdly weak. "160 is an insanely weak yen on any big Mac index. It pushes the yen below in inflation adjusted terms where it was in the 1970s. We're back to the 1960s." (The "Big Mac index" is a rough, tongue-in-cheek way to compare currencies by what a burger costs in each country.)

His most important, and least intuitive, point: the usual reason a currency is weak (you can earn much more parking money in the US than in Japan) no longer really applies at the long end. Japanese and US long-term interest rates have converged, so "the long-run interest rate differential is now actually at odds with the yen… given this rate differential, the yen should be stronger." In other words, the yen has overshot to the downside, which is exactly the condition under which intervention *can* work.

Setser also explained the two pieces of plumbing that made this operation unusual. First, why the US sold *euros* rather than dollars to buy yen, a move that baffled traders. His read: Treasury Secretary Scott Bessent, a former currency trader, was "wanting to have presumably a bit of fun," and to send a message that "this isn't a view about the dollar… this is just a view about the yen." Second, a Fed facility (nicknamed FIMA) that lets a foreign central bank hand its US Treasuries to the Fed as collateral, get dollars in return, and intervene, *without* dumping those bonds on the open market. "They can just repo them at the Fed, get dollars, and then intervene that way," he said, a tool he pushed for while at Treasury.

His verdict is the one that matters, and it's conditional: "I think it will be enough if the Bank of Japan is going to raise rates… if the Bank of Japan doesn't raise rates in September, this will be tested clearly." He added a deeper, structural reason to be hopeful: Japan's *government*, its finance ministry and giant pension fund, holds the country's enormous pile of foreign assets and earns well over a percentage point of GDP in interest on it every year, but almost never brings that money home. Get some of those "winnings" repatriated, alongside Bank of Japan hikes, and you can put a floor under the yen. For the record, he pegged the gap plainly: the Fed's rate sits around 3.25-3.5%, the Bank of Japan's is still just 1%.

The financial-journalist's version came from the FT's Katie Martin on [Prof G Markets](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgMIOEI5-2BZ7vgSnIMnp33hGiFf9Xp0bB5b-2BGmGSDp696nBBO6ZQojWePhJsdh47Q-2FZ5SYSSFiWpgSlRie9g1tK1QNcwCHGOQwktymzdCPH9Gg-3D-3DFcD7_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSypaSEItOV3ZhzV0mnXtQRe8C4-2F1o2eE65J4M9PRSM9Z9X9t6C606LGK6hU-2BH8tDwgadxgcSLoDVqY2-2BzcaNk7TdoX3N0UbdY1ROeeAAg3-2Bmo8DVw9SrAuyPJbZ-2B3B1dNew-3D-3D) (Aug 4). She put hard numbers on it: Japan sold as much as "$59 billion to buy back its own currency" when it hit nearly 164, and the US joining in was "something it hasn't done since 2011", and as a one-on-one operation, "you have to go back best part of 30 years." The self-interest, she argued, is obvious: when Japan defends the yen it sells dollars, which means selling US Treasuries, and "the last thing the U.S. wants is for Japan to dump a load of new treasuries onto the market" when American borrowing costs are already high. Japan "officially holds in excess of $1 trillion worth of U.S. Treasury securities. It's the biggest buyer of treasuries on the planet." On the euro curveball, she was blunt: "I have never heard of any country intervening in anyone else's market using a third-party currency before." And she landed the punchline that ties back to the top of this issue, the reason US bonds are wobbling "is nothing to do with Japan. It's… Kevin Walsh."

### The skeptics: a bridge to nowhere, or a cliff

Not everyone buys that the rescue can hold. On [Eurodollar University](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgCpyAIOu8SzTOk8rFFq4UdPlx3IFApsfG7-2BAg0AnfGYj6fBUfTZAi3XGegRKI16CQLbomPgp-2FKiK-2Bweix-2F2uGvzaOO5o8oinBYEJvEVInaMQ-3D-3DnzbT_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSyjMqUXTOSRmXBMlCg-2BQ4z0d-2Ba-2BfkJ1HjGQp7qrR2D6SFsnWC3vhDpfVoeWKDLaTxvekI9CJKsSqsngUJYP0vPd9YKy8ba-2FXfJ4CeugBe0zeX9msKsDrRRMWidUQ1ZM69zg-3D-3D) (Aug 6), Jeff Snider and Steve Van Metre were scathing about the roughly "$53 billion in reserves" spent, money, in their telling, "wasted and thrown down the toilet and set on fire", even though it did jolt the yen from about 163 to 159. Their core claim: "these interventions don't work outside of the short run," and the shift from occasional one-offs to promised "constant coordination" is a sign the old playbook has failed. Van Metre, to be fair, actually thinks the yen is "very undervalued" and will strengthen on fundamentals eventually. Snider's warning is darker and worth hearing: the yen is "hanging by a thread," and if it slips much further, "it gets to a point where it just kind of falls and falls rapidly", a risk not just to Japan but, as one domino, to everyone. (Both are longtime skeptics of central-bank firepower, so weigh the lean.)

The most vivid bear was Michael Gayed on [The David Lin Report](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjdfkvuroXYlf51Ec-2BvX84LefHl-2BGXjIfkwEVL-2BNTDMB2vgPNVmNqCcCfDoFexdmpyS-2F31LfsiqfNGjk0XoVOLYVPs-2B4AklxUCeng-2ByBA2UVg-3D-3D4_JO_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSyrASsCiV2XfFI73W7mv-2B3U79TtL-2B68e2pms1nD5os9XCB0diEvEq8ai9l0-2FriaubzBvcbinnTuWG5ioXfw24-2BUzzi8LyhXqxeIYlDYXG0bZgCBVn148cJR7xJ1wmpvMw0A-3D-3D) (Aug 10), an analyst who has warned about a Japan-triggered blow-up for years. His framing: "I was wrong. Japan's not going to panic. The U.S. will." The very fact that the US did "something unprecedented," he argued, "should give everyone at least pause." His key observation is one the bulls have to answer: the bet against the yen is *still profitable* even after the rescue, because the interest-rate gap with Japan hasn't closed at the short end, so why would anyone stop making it? He noted the yen has actually drifted weaker again in recent days: "the short squeeze has not started." His prediction, the intervention fails, the yen "undo[es] that move," and then comes "a real, real panic," because "every single equity crisis… is preceded by a currency crisis." (Gayed is a perennial crash-warner; treat it as the vivid bear case, not the base case.)

Cutting against all the drama, [RenMac Off-Script](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjTdb5kSZ0e0T4wEsujDB1DqGvrd6obJlCoI6Pfql-2F8FJX9PPCEl4p131NsawWgQW3iuydLY9QEz-2BYK0L-2Fa2CKiuxYxEYC5TX9wjaP-2BGkxBrw-3D-3DCenL_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSysmGvcHur2Ys37UofVXsVxZ0IhuKis7Wb0hI6YKc7lXUVcNjiA8QqDCk2FGKoORbDvZ-2FUJb1fluRuNaa5IdpiYXRE6BTlWzhGkufyxOclKgoCIShWCfGQMFquQHnglM2hQ-3D-3D) (Aug 6) offered the calmest and, for markets, most reassuring read. Looking at actual positioning data, the strategist said the market is "not really over its skis on dollar yen carry in the way that maybe it did a couple of years ago", so any unwind "wouldn't really give you the type of fireworks" of the August-2024 mini-crash. That, he argued, is precisely why *now* was a smart time to intervene: you test the tool when the side effects are mild. He also thinks the operation "boosts the odds" the Bank of Japan actually tightens, because letting the yen sag again would waste the effort, and gave Bessent credit for "a brilliant sense for these types of things."

That last point, pressure on Japan to hike, is now explicit policy, per [The Trade Guys](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiI5Pb14mrA9fWi3RodBYKTTXTQ07aNBXAo6523Qiva3cjwtTi9sFRUW2scDqvEOFhCQ4PBNsmnDX4usOh2EL1TbARD2EquDtl9G4XIQB3r5g-3D-3D-55q_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSyqysS8PNTLru8N97jF7Hq467yCabbfgTx5e9aKRz5JgA5msINDiI7CDRQLdGU-2FZSNm9rWtEGHPr0KFsggrUwH1fVBpRU8OR-2F6lJPKFPxs0sUlGPum5fxjSdtwvn6T6SIiQ-3D-3D) (Aug 10): Bessent has been "encouraging the Japanese to raise their interest rates," which have crept from near zero to "one or maybe a little bit more than 1%." The show also served a useful history lesson against currency-level obsession: the economist Fred Bergsten spent decades insisting that once the yen hit 150, then 100, then 80, America's trade deficit with Japan would vanish. It hit all three. The deficit "didn't change very much."

### The genuinely new thread: stablecoins as a Treasury buyer

Here's the part of the week that had nothing to do with the yen or Warsh, and may matter more over the long run. On [Macro Musings](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiiiZs7JYgC0mRodW15zOPoRW77m7rXemz8Ou2JCtm66Hp05zPVmIfSdaagnuaX8hWGhEhaawo69sxG8zB5GReD9Xe12sxsrVX7R9ExaOSsWw-3D-3Dv-vm_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSytyEagizhGSAGIPrr2G7bTj0AlOVZwbyqFTe6x5iR3p-2Bt2ljiteeoSlMEKTr7VawmrWi-2FswodnppgxlxVjEstyzfBpb-2FVf5-2BSU4CQbi7kY0F7UZcv7a6efl7JjaZfAEYZg-3D-3D) (Aug 10), researcher Gianluca Benigno walked through what America's new stablecoin law (the GENIUS Act) actually does to the plumbing of the dollar.

Start with the basics. A stablecoin is a digital token designed to be worth exactly one dollar. The new US law says that if you issue one, you must back it with safe, short-term US government IOUs, Treasury bills. Benigno's first, counterintuitive point: this "does not expand money supply." A dollar moving into a stablecoin is a dollar leaving somewhere else, most often a bank deposit. What changes is *who earns the interest*. The token pays its holder nothing, but the T-bills behind it pay the issuer. That gap is a transfer of profit, "seigniorage," in the jargon, away from banks and toward the coin issuers.

The number that matters for the dollar comes next. The market is "about $300 billion now," Benigno noted, but there are serious forecasts of "$3 to $4 trillion… within a decade." If that happens, issuers would need to hold up to $4 trillion in Treasury bills as backing, and, crucially, they'd buy them no matter the price, because they *have* to hold them by law. "They just need to have T-bills as backing for regulatory reasons," he said, so as demand swells it "will… create pressure in terms of return, compressing returns", an effect he and his co-author call the "stablecoin compression premium." Translated: a huge new, price-insensitive buyer of short-term US debt, which tends to push those yields down (unless the Treasury simply issues more bills to feed it).

The subtle catch he flagged: stablecoins mostly "relocate rather than create" safe assets, they "shift existing safe assets from yield-sensitive investors to yield-insensitive stablecoin issuers." So it's less a flood of brand-new demand for the dollar than a change in *who* holds the safe stuff and how twitchy they are. Either way, it's a new structural support for the dollar-Treasury complex that simply didn't exist in the last cycle, and a reason the "dollar is dying" story is more complicated than it looks.

### The counter-frame: "financial repression"

If stablecoins are one new prop under the dollar, Chris Whalen offered the cynic's frame for the whole system on [The Julia La Roche Show](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjxIqYoxUqFdGpaAhVZB5Qo6ogFoAD2qNkzYdLAGatNUo5jT3UOmVNzoKgotfxx5KRAWpJIvPdUlHj2esEkRVQVVRWKSsA34ew-2B6Ej4r5NQcw-3D-3DZCQD_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSyjslQ3Nr2vcsisrl6qQIoL-2Fdly4Y2vv-2FtRJdVt2gmZQSXkqaOcS-2BTJugeUKqfjgGRnggHALowiegVoxAK8kXPN-2B9wIadT4ujqjsHVT-2F6yH26RWcZRXZRwR5S67T5nPjJGw-3D-3D) (Aug 8): the government is quietly holding interest rates down to make an enormous debt bearable. With US debt heading toward $40 trillion, he argued, "financial repression", deliberately suppressing the yield on government debt, is back. It's why the Treasury keeps funding itself with short-term bills rather than locking in 30-year bonds at 5%.

His most quotable line was aimed at the whole Fed-independence debate: "The Treasury is the doggy. The Fed is the tail… You can't have central bank independence when you have $40 trillion in debt." He pointed to the yen rescue's plumbing as evidence the Fed is "increasingly in a defensive position", asking why Japan borrowed dollars from the Fed rather than from a big private bank like Nomura. And he tied it back to the reserve-shift theme: as "more and more governments decide to hold gold… instead of investing in Treasury bonds, you're going to have more and more… upward pressure" on US rates. (Whalen is gold-friendly, so read the lean, but the mechanics are sound and worth sitting with.)

## The debate

*Is the market misreading Warsh?* This is the freshest and cleanest fight of the week.

* *The "you've got him wrong, he's hawkish" case:* [Fast Money](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjec-2Bzvhx5J5C-2FBxs3vGSMabLmhUC45tsMqFgC-2B7Ri74PyWHhpOg3qDenynvtvMwc3d121tmJVyNFM-2BEFfhsnTE0-2FYVgVQ6njbGqRbjGTk2Fw-3D-3DFQUA_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSym3jYgmN3-2FgLX1AzdZ6lHii9puZwBdfxMUskmoOG-2B4cUSoA5CNIjM7nE99XudfYc3-2FE1qAbZVB7mRl70fm3pv1rkxzh0t0SCjpje-2FgODZyrplZdHf9e8bU7KAmpqijpY-2FA-3D-3D) (Aug 10) says the market is projecting dovishness onto a chair who's said almost nothing, and that a firm "2 percent, period" target plus a hot CPI means far more tightening than the ~40 basis points priced in. El-Erian's FT op-ed and Leisman's year-over-year point ([The Exchange](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOh1MSmvq57ZhNm42SXixQvsecrNC1765TREcVer-2FzaU7bEB9-2BtdzrOLrutC7wpHeFL2Lu3qi-2FXVWEGl-2Bpz15kqoh5OECyyee-2FSJq74l5zhHeQ-3D-3D5Cmq_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSyrox1Dxblxk4o9-2FNZyxK9GCLInn5pdxOZFB-2ByI-2BdE07MQjJ7PMMUKcBmDI3X9bxBhk2T9gJjLSs7c6aY5VJRUR-2BdAR2t-2BWoScAZuUJNSUvVxqcPKEHjq6qcsHF2trMwA0A-3D-3D), Aug 10) reinforce it, and one veteran forecaster on [One Rental At A Time](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOihGvdNcCksULVbpaG4v0H5-2BwiKITFwJrUVBNH8MgmUq4-2BYdjidcRQegl6H3nMyEOAedsSAnth74Z3Qt5jaPmJrYQuBS7E2QOXmvUF-2BXA8-2Bzg-3D-3D_Gtf_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSygRteeK0-2B06Xb9hzXbpGYDbS32OFnEP7Jsrq5HUMybtELkjZ-2FN-2F7zC2RvMPcMZUp9nhGSJjev-2ByqxbyRvzvMe2IOK-2Bt8hWgZ6YGTEef0LDyI1A2mp7BNvSYlpd8RVdbnvw-3D-3D) (Aug 10) flipped to "September is probably a hike."
* *The "no, the Fed is right to wait" case:* J.P. Morgan's David Kelly ([Squawk on the Street](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOilN9z1MbbJ4aQeriS-2B42ym-2FQ82ZN9CKl-2FzfFB57CnTIzXdgmGRRHXo5PTax50f7zN-2FFkiO3pfbSaKkjdQtsGtMl1I9Gxqek6hSha0XTelJvw-3D-3DSZr0_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSyljdI-2FttTXY8XvtSiByiphu-2B-2BSe8nq5ZMwDJ4SISeAJzjLlVUdOMXdOoriVpKJWA2DXwa68F-2B5y41aE5fyGiuoyXUtq9yLTZPZET3A7Z3YcWqwlckmBLR7-2FEdlk-2BcdHQQw-3D-3D), Aug 7) says there's no wage spiral to fight, "Teflon inflation", so holding is correct; Morgan Stanley's Katerina Simonetti ([The Exchange](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOh1MSmvq57ZhNm42SXixQvsecrNC1765TREcVer-2FzaU7bEB9-2BtdzrOLrutC7wpHeFL2Lu3qi-2FXVWEGl-2Bpz15kqoh5OECyyee-2FSJq74l5zhHeQ-3D-3DTXrk_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSymmG81wz3Sichr62-2Fr5Foe-2BpltAF5kk7AN6TXeanxfMiXwvP-2F8t7WiWe4ZP-2FtfFR-2BODsoOu5-2FMFPYckp1g2mm-2FE-2BagtJodUtl-2BSe-2BrtYT9Lp0kFsfu3l4U0zZTyPtlq06Q-3D-3D), Aug 10) sees no hikes until 2027.
* *The tell:* this week's CPI. A hot print hands it to the hawks and puts a September hike, and a firmer dollar, in play.

*Can the yen rescue actually work?* Now a real bull-bear, not just a news recap.

* *Bull:* Brad Setser ([Odd Lots](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOizGLDD0q-2BsBEz4NKZvU77FFC3HXsw8iopoDxvYnB0HV2CA4-2B9LQxIbGP7WQOZzPmZboQShjKdhoeoRwlwgGgM0CFrHWC1npSlo5xDsBVr3Jw-3D-3DBzC7_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSypgJLpMFO5kEIZweLHQyJ1rsym5qyUhPu8Oxbca0fks3MKTglUq736dYjThgE0E7-2FX3H8BXSDXzZgStUz5g7uhLjNyXp9X3dE1WENXWA2QKIDuzaUa71Kk6KZyHYAtIelA-3D-3D), Aug 6), the yen has overshot, rate differentials now favor it, and the operation works *if* the Bank of Japan hikes. RenMac ([Aug 6](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjTdb5kSZ0e0T4wEsujDB1DqGvrd6obJlCoI6Pfql-2F8FJX9PPCEl4p131NsawWgQW3iuydLY9QEz-2BYK0L-2Fa2CKiuxYxEYC5TX9wjaP-2BGkxBrw-3D-3DKgbC_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSyg-2FWgXNEf1Z5RUPgHwXnL0DAxEEE9jhc-2B9iVMUxbATeQlwuSJfZz6hFPC-2BeIWKDPLLUXOqdI51kTNyY6s0p8Uv009hmP1lWsk2PxMhbXwrdqAx4-2Fu8iKjjvWjcKqiKm7mw-3D-3D)) adds that positioning is not crowded, so downside is limited.
* *Bear:* Snider/Van Metre ([Eurodollar University](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgCpyAIOu8SzTOk8rFFq4UdPlx3IFApsfG7-2BAg0AnfGYj6fBUfTZAi3XGegRKI16CQLbomPgp-2FKiK-2Bweix-2F2uGvzaOO5o8oinBYEJvEVInaMQ-3D-3D9cVo_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSyjU-2BGHYUlhjo2401vz4oDW-2FLOjh88Cm0xcnNX9jhh13Q6jJk-2F2QR0lTQWxhCkgJKercRQJCgXQ8eEAWSaMrPatHnvjMzKeEN4xpHoxgEux1o4pQqHwOCN4NHlMwO20OQTA-3D-3D), Aug 6) and Michael Gayed ([The David Lin Report](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjdfkvuroXYlf51Ec-2BvX84LefHl-2BGXjIfkwEVL-2BNTDMB2vgPNVmNqCcCfDoFexdmpyS-2F31LfsiqfNGjk0XoVOLYVPs-2B4AklxUCeng-2ByBA2UVg-3D-3DQs_9_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSyv1arIzN4GGEDCrO8MAuPSQlKfDfPsW-2F8wEFVw-2F8PxsuvYgCLELt0AlV-2BxdW-2FqcEQZPa-2FHmtFYOSDlRM9BpNWUN9HVX6ZDqmDvdcyVtc1ajW7Iq3YRQ7kXPyjTf7E2v1uw-3D-3D), Aug 10), interventions never hold, the carry trade is still profitable, and the yen slips again into a possible "cliff."
* *The swing factor everyone agrees on:* whether the Bank of Japan hikes at its September 17-18 meeting. Setser himself said if it doesn't, "this will be tested clearly."

*Is the world moving off the dollar, or building new props under it?* The reserve-decline story (record central-bank gold buying, gold overtaking the dollar in some reserves) is real and slow. But this week added two forces pulling the *other* way that rarely make the "de-dollarization" headlines: the stablecoin law creating a mandatory new buyer of Treasury bills ([Macro Musings](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiiiZs7JYgC0mRodW15zOPoRW77m7rXemz8Ou2JCtm66Hp05zPVmIfSdaagnuaX8hWGhEhaawo69sxG8zB5GReD9Xe12sxsrVX7R9ExaOSsWw-3D-3DGv2J_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSynx-2BACM14LHDOVMuGCgIyAXbVbCGCxKElrclHikRKbCzSg01Wg26yv-2FRuUHBfs6SRXBHTtX-2B2LIXknipMWNcV6RgHwvEMQ6y1cdwwbMcRTGdVq-2Bbv0Re7NChvbfGbFZEDw-3D-3D), Aug 10), and outright "financial repression" keeping US yields down ([The Julia La Roche Show](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjxIqYoxUqFdGpaAhVZB5Qo6ogFoAD2qNkzYdLAGatNUo5jT3UOmVNzoKgotfxx5KRAWpJIvPdUlHj2esEkRVQVVRWKSsA34ew-2B6Ej4r5NQcw-3D-3Db2-q_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSyhiu1o2TFPUYLhw2L9vfattfviD54eWUvxKd1ybCpXsnD9u0Cdlns9sLr8DwJsPqW-2B1yLs5-2BtJ-2FQ6kipYm8mcQ6vuOmU-2FvDI0l-2FICVrV6EIQHI21-2BoO-2Bc8X9-2FnOlnZD2NQ-3D-3D), Aug 8). The dollar's story is less "collapse" and more "managed, with new plumbing."

## The trades in play

Only where a podcast named an actual expression:

* *A hawkish CPI surprise → higher front-end yields and a firmer dollar.* [Fast Money](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjec-2Bzvhx5J5C-2FBxs3vGSMabLmhUC45tsMqFgC-2B7Ri74PyWHhpOg3qDenynvtvMwc3d121tmJVyNFM-2BEFfhsnTE0-2FYVgVQ6njbGqRbjGTk2Fw-3D-3DZE3j_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSyjHU4i6rI2uTNNaghgOo-2BcvBs888maS0zU1bXKs57ggDZOqBbg6T6vGyPRc-2BYr2TzpKPA02BylUyCIvY4ekqHnwMYQf-2Bx4bk5HOlFnDQJLTFJSgkBYHbIBpSPorTJAfy0Q-3D-3D) (Aug 10) argued the market under-prices hikes (should be "75 plus or minus" through mid-2027, vs ~40 priced) and that the 10-year "should be north of 5% pretty quickly." The catalyst is the midweek inflation print.
* *Long yen, but only if Japan hikes.* The bull case (Setser, [Odd Lots](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOizGLDD0q-2BsBEz4NKZvU77FFC3HXsw8iopoDxvYnB0HV2CA4-2B9LQxIbGP7WQOZzPmZboQShjKdhoeoRwlwgGgM0CFrHWC1npSlo5xDsBVr3Jw-3D-3D2tUG_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSyjSUOYekdn1JvFOlkSFwXTOKGFaz-2BfH6HklIy4zR52T0i0uenXCYu1lYqBp1B5OwPNzBIA21Vtzt2hauC6pob9FOtcsN9YV1ZaJn3uW2asURWDV1vpt-2BE-2FKoODuZdHvBIQ-3D-3D), Aug 6) rests entirely on the Bank of Japan's September move; the bears (Gayed, [David Lin](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjdfkvuroXYlf51Ec-2BvX84LefHl-2BGXjIfkwEVL-2BNTDMB2vgPNVmNqCcCfDoFexdmpyS-2F31LfsiqfNGjk0XoVOLYVPs-2B4AklxUCeng-2ByBA2UVg-3D-3DXcP5_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSyniIay-2FTdj-2FyLRm3PHyKxkdHPnHRU6pWGhd3Yg078YP-2F1VNhJ6db9d2GCJCOQx01lTwtTXuehHNmB4dLqDIJjQf-2Breun9EeI5dSmCjGGGVqZw8wSSa9fus-2BdO1i2Z5TtXg-3D-3D), Aug 10) note the carry trade still pays, so betting against the yen isn't dead. RenMac's ([Aug 6](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjTdb5kSZ0e0T4wEsujDB1DqGvrd6obJlCoI6Pfql-2F8FJX9PPCEl4p131NsawWgQW3iuydLY9QEz-2BYK0L-2Fa2CKiuxYxEYC5TX9wjaP-2BGkxBrw-3D-3DHCTB_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSyqMW1KDdHDK31Kno7oCI6hy9f-2FKNhF-2BuKkn2gpGopy9M6D7EgxDkBtF1At4l7kaGVYQqBAVCSrP2jhNL3gbeiC5WkRlx-2FPnFTzo7JZhhrjxgwcSvKnUEMKt3lsDORZVjtw-3D-3D)) "positioning isn't crowded" read argues against expecting a violent squeeze either way.
* *Own gold as the reserve-shift and financial-repression hedge.* Chris Whalen ([The Julia La Roche Show](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjxIqYoxUqFdGpaAhVZB5Qo6ogFoAD2qNkzYdLAGatNUo5jT3UOmVNzoKgotfxx5KRAWpJIvPdUlHj2esEkRVQVVRWKSsA34ew-2B6Ej4r5NQcw-3D-3DFuBy_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSyg67eKcEILBPDxTfC16lAk3-2BX2BSma1YvqUuZwl9E51K-2BK8U02Q2K2Qtxc9-2B8cpIGuJeifZ-2FK-2F4p4x7yHkIAAMnjuR5Dc4LZu6SE-2FOo5HXRKHXoPmppw0tlDwh-2FXudIr8Q-3D-3D), Aug 8) frames gold's breakout as the market pricing rising concern about US debt and yields being held down artificially (Whalen is gold-friendly, so weigh accordingly).

## Read-throughs

* *The midweek CPI report is now the whole ballgame for the dollar.* It decides whether the "misreading Warsh" camp is right and whether a September hike, and a stronger dollar, comes into view. Watch the year-over-year figure, not just the monthly one, per [The Exchange](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOh1MSmvq57ZhNm42SXixQvsecrNC1765TREcVer-2FzaU7bEB9-2BtdzrOLrutC7wpHeFL2Lu3qi-2FXVWEGl-2Bpz15kqoh5OECyyee-2FSJq74l5zhHeQ-3D-3DRbPH_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSyl-2B9mInxViO91mQc5vIHhSV5xV2pNR8p02ibFz6CK8HLporMDTGfrXf6fgYAQWzXZsI3dFmiHcQRo4hr6CxcvWWsC-2B8-2FuKrnVNOcCjJ7KxKBsy-2FyqWm88iZ7sbjNXlKU2A-3D-3D) (Aug 10), and be ready for a mechanically higher number for September's report because of how the math rolls off, per [One Rental At A Time](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOihGvdNcCksULVbpaG4v0H5-2BwiKITFwJrUVBNH8MgmUq4-2BYdjidcRQegl6H3nMyEOAedsSAnth74Z3Qt5jaPmJrYQuBS7E2QOXmvUF-2BXA8-2Bzg-3D-3DdZT-_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSynU29c58NXUEozjMAM0PwVVMjHhansH15vAR4bDgPOeJFR7k3mB4BIib7qaD-2BSlKmz64s3hxuuLHEoI4dlHp-2FYECwSmyC0OtL4yi8H7HsJZACk14wT2uF9jJlgbfQQpemA-3D-3D) (Aug 10).
* *Circle September 17-18 in Tokyo again.* Bull and bear agree the yen rescue is only a bridge to a Bank of Japan hike; a prediction market cited on [Peter St Onge](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgDFY2rnkLBBd1KyvOucjlDNJ1oT-2BUgD8dEURKtOXhLFxYUWJtq4GvwT77YWKqFL6dMYkuMTB5uSNgpjAWqqzz3N8cvMmZHT-2F3qb-2BrDn6SGJg-3D-3DrEsx_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSykjt5XZB2giD-2Fgc1b15YGM0hT7YCTb-2BzpZlcRUZKIxIAMqRrTk2Sh-2Bq5ssw1W4ekdStRP-2FtbkwVmpGSwMEUpzTpCU0N7TsRTI5ZQPaAlqXGs0uvk14CMkxVDKQrPz7sorA-3D-3D) (Aug 10) puts those odds at 55%. If Japan hikes, Setser's floor-under-the-yen path opens up; if it blinks, the skeptics' "cliff" gets tested.
* *Jackson Hole (late August) is the next Warsh set-piece.* Multiple guests expect the chair to finally spell out his thinking there, J.P. Morgan's David Kelly said "he'll pivot" toward more communication, because otherwise "other people are going to fill in the narrative for you" ([Squawk on the Street](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOilN9z1MbbJ4aQeriS-2B42ym-2FQ82ZN9CKl-2FzfFB57CnTIzXdgmGRRHXo5PTax50f7zN-2FFkiO3pfbSaKkjdQtsGtMl1I9Gxqek6hSha0XTelJvw-3D-3Dqrf7_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSynMxwz-2FAi-2BqDIb5n4ahh-2FlwAVpcigMTukhsbUFtze9STT3nKHa5K6OKfWm2rk5ZoeWSiQG9QRtLyfVFW8qLAdOdKAuRXmO-2BnpZkc-2FVw0V3-2BpuO85uzBrFyLSbFfZglPHiQ-3D-3D), Aug 7).
* *Keep an eye on the stablecoin build-out as a slow, structural dollar tailwind.* It won't move markets this week, but a $300 billion market growing toward trillions is a new, law-mandated buyer of US Treasury bills, a genuinely new feature of the dollar system, per [Macro Musings](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiiiZs7JYgC0mRodW15zOPoRW77m7rXemz8Ou2JCtm66Hp05zPVmIfSdaagnuaX8hWGhEhaawo69sxG8zB5GReD9Xe12sxsrVX7R9ExaOSsWw-3D-3Dinta_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSytWRF2iSFlNhQl1wh54flIiavyZ60PdrK8PI9k8SpwXkzmRIIwCaeUrkAiKlW19wQ7UqBE5cZ-2FMqR4age1x60WLQ-2BnA6HM0gNn9akIqq2vwLNAQmeXxlbN9YAOvTzt1k1g-3D-3D) (Aug 10).
* *The dollar itself is quietly resting on support.* As noted on [One Rental At A Time](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOihGvdNcCksULVbpaG4v0H5-2BwiKITFwJrUVBNH8MgmUq4-2BYdjidcRQegl6H3nMyEOAedsSAnth74Z3Qt5jaPmJrYQuBS7E2QOXmvUF-2BXA8-2Bzg-3D-3DWxFi_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV5o7-2BWY4xiyd1IRdoY1NLiEnmNJy9dO5h5fz2-2FlMoSyre0QrjvHPyi7FqpyyijFRLWjBQG7Yp2WFqZcGKuSp3xpZS2itaDr7J3mMnKqJaQ63NxlE4D7maWPfdqtAJB6asFQwTnIg8PI9LJIPrT87qqlFSGfm0gfqfCGp-2BkWw5I5g-3D-3D) (Aug 10), the dollar index had been trending higher and has now "pulled back" to its trendline, a soft CPI keeps it heavy; a hot one bounces it.

## What changed this week

* *The framing flipped from "the Fed is stuck" to "the market has Warsh wrong."* The fresh, contrarian view is that he's quietly hawkish and a September hike is live, with an FT op-ed, a CNBC panel, and at least one forecaster changing his call all pointing the same way.
* *The yen story matured from breaking news into a real bull-bear debate*, a heavyweight defense (Setser), fresh skeptics warning of a cliff (Snider, Gayed), and a positioning wrinkle (RenMac) saying the unwind risk is smaller than 2024.
* *A brand-new dollar theme entered the conversation with a number attached:* stablecoins as a mandatory, price-blind buyer of Treasury bills, and the "stablecoin compression premium."
* *The Fed-independence pressure got more concrete*, confirmed irregular Trump-Warsh phone calls since May, and Trump on the record wanting "the lowest interest rate in the entire world."

*Levels referenced are approximate, from early-August US sessions: dollar index around 100, resting on its uptrend line; dollar-yen near 157 after the rescue, from about 163-164 at the lows; Bank of Japan policy rate about 1%; Fed policy rate about 3.25-3.75%; 10-year US Treasury yield near 4.65%, the 30-year around 5.2%; July payrolls a loss of about 23,000; September Bank of Japan hike odds ~55% on prediction markets; Japan holds roughly $1.1 trillion in US Treasuries; the stablecoin market about $300 billion today, with forecasts of $3-4 trillion within a decade.*

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