The Japan BOJ has controlled three specific bond issues (keeping them at 48bp) while the 9-year and 11-year are breaking higher, and the swap market (not subject to yield curve control) is trading 85bp on the 10-year, indicating market strain against BOJ controls.

Japan's situation is like a person jumping from an 80-story building saying 'so far, so good' at 70 stories down—they've been able to sustain unsustainable policy for so long that the eventual crash will be severe.

40% of the American public owns no assets (no home, no portfolio) and depends solely on paychecks; they face negative real wage growth and are buying less each month/year than previously, lacking any financial cushion (house price gains, portfolio gains) that higher-income households have.

Japan is running a deficit (recently started), creating a different dynamic from past surpluses; this makes Japan's fiscal position more precarious and adds urgency to the yield curve control trap.

Powell enabled the current bad-news-is-good-news market dynamic by his emergency policies in 2020-21, and now he is trying to undo his own damage by proving the Fed will stay tight even as the economy falters.

Inflation will settle at a structurally higher level (closer to 4% than 2%) over the medium-to-long term due to three secular shifts: the end of cheap goods (peak globalization), the end of cheap labor (quiet quitting, hybrid work, worker power), and the end of cheap energy (Russia cut off European energy supply).

There's a broad disagreement within the Fed: Lael Brainard (Vice Chair) is positioned near the most dovish end while Powell is positioned near the most hawkish end, at 'wide ends' of the spectrum; historically they would be closer to the middle, indicating extraordinary tension.

The assumption that Chinese reopening will lead to massive commodity demand and goods inflation relief is flawed; the real risk is that Chinese demand doesn't materialize and commodity prices fall further, which would amplify goods deflation in the West.

The Fed's balance sheet has shrunk from extremely high levels, but not long ago people thought it 'structurally impossible' for the balance sheet to fall to current levels ($2-3 trillion); this suggests the Fed has more ammunition than consensus believes.

Janet Yellen invented the 'labor market conditions index' in the past, another made-up Fed statistic that gave her answers she didn't like 2 years later, so she discontinued it and found another one—the Fed's pattern is to create new metrics until they find one that justifies their preferred policy.