This issue's foundation · Issue No. 06 · June 21, 2026
The Carry Trade: Why Money Always Chases the Higher Rate.
Before we dive in, here's the one thing to know this week.
If you take only one concept from this issue, make it this one.
When one country pays a higher interest rate than another, money tends to flow toward the higher rate, because that is simply where it earns more. That flow is one of the biggest forces setting the value of a currency. More money coming in tends to strengthen a currency, more money leaving tends to weaken it.
Think of it like two savings accounts. If one bank pays you 4.45% and another down the road pays 2.64%, you do not need to be an economist to know where you would put your money. You would move it to the account paying more, and so would almost everyone else. Currencies work in much the same way, just on a global scale and with trillions of dollars at stake.
“The country paying less watches its money quietly walk out the door.”
This is exactly the trap Japan is in. Japanese interest rates are far lower than American ones, so money keeps leaving the yen for the dollar, and no single shopping spree can outspend a force that operates every hour of every day. Keep that picture in your head, two accounts paying very different rates, and the rest of this issue will come together.
When one country pays a higher interest rate than another, money tends to flow toward the higher rate, strengthening that currency and weakening the one money is leaving.