Bessent's yen bet, cold Argentine data centers set, and the summer box office net

Wailin Wong (0:01)

NPR. This is The Indicator from Planet Money. I'm Wayland Wong.

Ricky Mulvey (0:09)

I'm Ricky Mulvey.

Cooper Katz-McKim (0:10)

And I'm just excited to be here. My name is also Cooper Katz-McKim, sometimes host, often producer.

Wailin Wong (0:16)

We are excited to have you too, Cooper, because it is time for Indicators of the Week, our weekly look at the numbers from the news that made us curious about the economy. This week, we have the US. Treasury Department mucking around in financial markets again.

Cooper Katz-McKim (0:33)

I'll tell you about one of the prettiest places in the world to potentially build some data centers.

Ricky Mulvey (0:38)

And we break down the box office take for summer movies.

Wailin Wong (0:41)

Awesome. Another excuse for me to talk about The Odyssey, which I'm seeing for a third time this month, after the break.

Ricky Mulvey (0:52)

This is Indicators of the Week. First up, Waylon Wong.

Wailin Wong (0:56)

Hello.

My indicator is one US dollar to 153.63 yen. That is the current exchange rate between the dollar and the Japanese yen as of this recording.

Cooper Katz-McKim (1:08)

Okay. You make it a plan? You go on a vacation?

Wailin Wong (1:10)

No, but I am here to talk about international currency markets. Just as exciting. The US government has been buying up a lot of Japanese yen. And this week, Treasury Secretary Scott Bessent gave some remarks where he basically challenged the market to stop him.

Ricky Mulvey (1:25)

I am the house now, so...

Wailin Wong (1:28)

Bessent was speaking at Southern Methodist University in Texas.

Ricky Mulvey (1:32)

You can bet against me if you want. Bessent got Bessent known for making some big moves in foreign currency when he was in his hedge fund era.

Wailin Wong (1:40)

Yeah, he helped pull off this $10 billion bet against the British pound in the 90s.

Cooper Katz-McKim (1:45)

So why does he care so much about the Japanese yen?

Wailin Wong (1:48)

Well, the yen has been pretty weak vis-a-vis the dollar for years now. Japanese authorities have spent record amounts to support their currency by purchasing yen in foreign exchange markets. And this is a source of worry for the US. Treasury and Scott Bessent because Japan's Finance Ministry may sell some of its US. Treasury bonds to fund these purchases.

Ricky Mulvey (2:08)

Ooh, and Bessent doesn't want this.

Wailin Wong (2:10)

No, because Japan is a major foreign holder of these US government bonds. And if the Japanese Finance Ministry sold off a big chunk of treasuries, that would make prices on treasuries go down.

That, in turn, would make yields on US treasuries go up. And that means borrowing costs for the US go up.

Cooper Katz-McKim (2:28)

Yeah, we just did an episode on how Bessent is buying back Treasury bonds to try to make yields come down. So this seems related.

Wailin Wong (2:35)

Yeah, Bessent's keeping a very close eye on the Treasury market, and he's shown a willingness to step into financial markets. The US. Treasury and the Japanese Finance Ministry carried out a joint intervention to buy yen over the summer, and they hadn't done that kind of coordinated action since 2011

And now Bessent is all but daring financial markets to defy him.

Ricky Mulvey (2:55)

Stay tuned. Thank you so much, Waylon. Next up, Cooper Katz McKim.

Cooper Katz-McKim (2:59)

My indicator is $25 billion.

That's how much an open AI data center could cost to be located in Argentina. The company signed a letter of intent to explore the project last year. Their partner says they're looking for a site within Patagonia.

Wailin Wong (3:16)

There is a ton of land down there. There's mountains, there's penguins, glaciers.

Cooper Katz-McKim (3:21)

I know. Grasslands. It's so pretty.

So Patagonia is the furthest south you can get in Argentina. A billion-dollar data center projects from around the world are already taking shape there. A Polish company already leased 500 square miles. But the question remains, why Patagonia? Argentina is a big country. Well, yes, as Waylon said, it's got a ton of land, it's got a ton of energy, and the most attractive part, it is really freaking cold.

Ricky Mulvey (3:48)

Okay, I wondered about that, because when I imagine Patagonia, I see glaciers.

Wailin Wong (3:52)

Yeah, people come from all over to see this region of the world. It's very, very beautiful.

Cooper Katz-McKim (3:56)

So when you're running a bazillion computers, the room gets hot, as you can imagine. So you need some kind of cooling, and it is a particularly expensive part of running a data center.

Cooling systems can account for like 40 percent of its electricity consumption to run. So operating in a cold climate can reduce those costs.