Insanity

The week ended on September 25, 2026, interesting news items to look at for the past fortnight are:

Insanity: On August 21, 2026 I sounded an alarm that a clear sign would be visible that the USD hegemony will crack by October this year. Having explained both the technical and fundamental aspects in the last two blogs, this week I like to take stock of recent data points that reinforce my conviction. This hopefully would allow readers to judge whether my forecast is still on track or whether insanity has set in on my thinking. As is typical, any bold forecast would receive its fair share of cynicism and ridicule. (Fig. 1)

1. Interest rate movements - One of the mistakes made by a casual observer of the financial market is that the US Federal Reserve always has the power to control key global interest rates. This is because the controlled MSM has spent years educating the public that it is. Quite the contrary, the Fed is just another follower of market interest rate movements and has recently been a slow follower. The truth is the Fed can only change the Fed Funds Rate, and typically the Fed follows the market rate of YR2 rate of Treasury notes. (Fig. 2).  

Remember the Fed chant of “transitory inflation” in 2021, the market determined that inflation was out of control and sold off low-yielding Treasuries from mid-September 2021, it was only 163 days later that the Fed finally accepted her error in judgment and began a series of interest rate hikes.

The Fed had recently, on September 17, raised interest rates by 25 basis points. (Fig. 3).

This would have no impact on the Trump Administration to reduce spending, but such an increase in interest payments on the humongous $40 trillion of federal debt means that the interest payment will be similar to any other increase in government deficits and will fuel inflationary pressures. (Fig. 4)

showed after an initial knee-jerk reaction of narrowing the FFR spread, the gap between FFR and Treasury Yield resumed its upward momentum.   

2. US Out of Cash - The technical driver of my foreca-st was that by October 2026, the US economy will be out of cash (Fig. 5).

This week, there were two clear signals toward that forecast. (i) SoftBank offered a $10 billion USD bond priced at around 9–10% when the average non-investment-grade bonds was trading at 7.4%. (Fig. 6).

Both Softbank and the lead bookrunner (Citigroup) knew they would be scrapping at the bottom of the barrel for cash, as both the U.S. Treasury and corporations are crowding out each other for the interests of investors, and (ii) Wall Street analysts have reported that US banks have tightened credit to consumers and corporations to the tune of $1 trillion.

3. AI Problems Surfaced - Oracle ( one of the key hyperscalers) issued a force majeure notice to Blue Owl Capital regarding "Project Jupiter," a massive 2.45-gigawatt AI data center campus in Doña Ana County, New Mexico.  (Fig. 7).

 4. The West is trapped in both the Ukraine War and the Iran War and needs China’s Help - In an op-ed, the Wall Street Journal Editorial Board outlined five key points and warnings Donald Trump should present to Chinese President Xi Jinping, including halting military and targeting assistance to Iran, protecting U.S. artificial intelligence models, defending Taiwan's peaceful status quo, ending rare-earth mineral economic coercion, and using tariff powers to stop support for Russia. Read the full editorial at Wall Street Journal (Fig. 8).

Would China cut off its major energy supplies to let US aggression triumph?

5. Crack Spread - Anyone who had simply focused on the spot crude price increase this year from US$60 to the current price of US$97.47 (+67%), would have severely underestimated the impact of the inflationary pressure brought on by the current geo-political conflict. (Fig. 9).

A crack spread is the price difference between a barrel of crude oil and the refined petroleum products made from it. At the end of January 2026, the crack spread was $25 per barrel, but it has now expanded to over $70 (+210%). The crack spread has widened because refinery capacity in the Middle East and Russia has diminished due to war damage, which prompted operating refineries elsewhere to increase their margins. What is rarely reported in the MSM is the cost of oil transportation and insurance due to severe disruptions and risks. Very Large Crude Carrier (VLCC) daily spot and charter rates have skyrocketed over the past year, with benchmark spot earnings surging from historical averages of $20,000–$50,000 per day up to historic peaks exceeding $1 million to $1.2 million per day on key routes like the Middle East to China, representing roughly a 20-fold to 24-fold increase driven by geopolitical conflict, longer routing around the Cape of Good Hope, and severe vessel supply constraints. So far, the price at the pump has gone up by approximately 70%, but due to a delivery time lag and the depletion of most countries’ strategic petroleum reserves, I am afraid we have not seen the worst-case scenario at the moment.  

6. Runaway Food Cost - In my previous blog post, I reported that for every calorie of food on our plate, on average, a man needs to put in 15 calories of energy. A major portion of that energy input (up to 40%) is fertilizers and pesticides. With the closure of the Strait of Hormuz, there is a supply squeeze for nitrogen and sulfuric fertilizers. (Fig. 10).

As sulfuric acid is essential to convert potash into potassium chloride, the supply of potassium fertilizers will also face shortages. (Fig. 11).

Year to date wheat  and barley prices have increased by 38% and 26% respectively. There are reports that some farmers in Australia has ceased planting and sold the fertilizer stockpile to raise cash.

I will continue to keep a watching brief on global inflation and the factors that may have a serious impact thereon.

Revelation 6:5  When He opened the third seal, I heard the third living creature say, "Come and see." So I looked, and behold, a black horse, and he who sat on it had a pair of scales in his hand. 6  And I heard a voice in the midst of the four living creatures saying, "A quart of wheat for a denarius, and three quarts of barley for a denarius; and do not harm the oil and the wine." 

Nothing Stops This Train

The week ended on September 11, 2026, interesting news items to look at for the past fortnight are:

Nothing Stops This Train: In my previous blog, I provided a technical indicator as to why I boldly forecast that an unwinding of the dollar hegemony will occur in October this year. In this blog, I will try to flag the fundamentals involved.  (Fig. 1)  

1. The Triffin Dilemma - The Triffin dilemma is an economic conflict that occurs when a national currency also serves as the global reserve currency. The dilemma comes in two parts: (a) To supply global liquidity: The world needs a steady, abundant supply of the reserve currency to fund international trade and foreign exchange reserves. This forces the issuer to run persistent trade deficits (buying more from other countries than it sells) and (b) To maintain currency confidence: Flooding the global market with its currency and running high trade deficits weakens the perceived value and stability of the currency, eventually eroding the confidence required for it to remain the world's reserve standard. (Fig. 2).

To the credit of Henry Kissinger, his design of the petrodollar has extended the shelf life of the USD as a global reserve currency by 40 years (1974 to 2014). Witness blow graphically, how the Triffin Dilemma worked out in U.S. current account deficits from 1971. (Fig. 3)

2014 was a pivotal year when China stopped adding her current account surpluses in USD to her national reserves. 

2. Ponzi Accounting - Once China stopped recycling annual trade surpluses into US Treasuries, alarming gaps began to develop in US sovereign funds flow. First, U.S. domestic purchases of treasuries need to step up to compensate for foreigners dragging their feet to recycle their trade surpluses. (Fig. 4).

Then there was the endless wars and COVID which has to be funded. The sad truth is that US citizens as a whole have very little savings. (Fig. 5)

To maintain confidence in the USD, the U.S. Treasury and the Federal Reserve began Ponzi accounting to whitewash the funding gaps. All the accounting tricks that caused the collapse of Enron in 2001 were brought in to make the U.S. National Accounts do not look as sick as they should. Where there were insufficient foreign buyers, hedge funds were brought in to warehouse bonds in offshore financial centres (London, Tokyo, BLICS and Liechtenstein) using leverage, swaps, and derivatives. (Fig. 6).

Where US domestic demand was insufficient, the same hedge funds were brought in to do domestic basis trade. (Fig. 7).

The sums involved in these synthetic demands are humongous and are estimated by Wall Street analysts to be around US$8 trillion. Every night, these positions are funded by the Fed in collaboration with crony central banks using swap lines of up to $5T with the rest via interbank SOFR of up to $3T. The top five hedge funds—Citadel, Millennium, Capula, ExodusPoint and Balyasny—accounted for  $3.5 trillion of these synthetic demands, and their combined equity is only $200 billion. A 5% swing in bond prices would trigger an immediate $7 trillion in liquidation. To put this in context, the so-called risk-free US10YR Notes already had a YTD price drop of 6.26%. Just pause and think about why Bessent is screaming at the top of his lungs. “I am the House”. (Fig. 8).

3. False AI Narrative - The frontier US AI models will go the way of the first movers in railways, dot-coms and optical-fiber telecoms. By that, I mean, despite being a disruptive technology, the first movers will likely go bankrupt, but those who came later will reap the reward.  ChatGPT is running out of free web data to train (Reddit, X and free web sites). They are taking advantage of a change in US law to buy thousands of second books outside the U.S. to scan and train. Proprietary data farms like Thomson Reuters or People's would use open-source platforms to develop their data into income streams. 1% of customers of OpenAI and Anthropic provide 80% of their revenue. These customers are only in the hundreds.

So the reverse pyramid of US AI is like a few hundred customers ( a lot are AI startups with no revenue but funded by Venture Capitalist) spending altogether $23 billion (actual 2025). With that, OpenAI and Anthropic are running losses at least twice that amount. This, in turn, has to support a computing commitment of $1.2 trillion to the hyperscalers (Amazon, Google, Microsoft, Meta, and Oracle), which in turn commit $750 billion to buy NVIDIA chips. NVidia in turn provide circular vendor financing. The hyperscalers are borrowing billions at rates of 6% to 7% in the capital market, and this squeezes Bessent in the bond market. Bessent in turn, squeezes Takaichi.  All the US big tech cash flows have or about to turned negative shortly. Banks that have lent big bucks to Private Credit to on lend to the special purpose vehicles of Hyperscalers to build data centers are getting nervous. In reaction, banks are buying CDS (credit default swaps) against the big techs to protect their lending exposure. So share price of Mag 7 naturally lag the general market for a change. Guess who is writing the CDS and are also foundational lenders to Private Credit which provided financing to data centers. If you have learned your lesson at the sub-prime fiasco in 2008, you would know the answer—the insurance companies. Just pause and think about why Jensen Huang is screaming at the top of his lungs. “AGI has arrived” and congratulates OpenAI’s latest model, Astra. (Fig. 9).

 

The following is an excerpt from a technology analyst of Astra - The model can draft complex 3D models (such as turbofan engines), but it omits crucial engineering parts (bypass ducts, fuel injectors, bearings) because it mimics visual form without understanding physical principles, mechanics, or causality. Despite the marketing buzz around GPT-6 / Astra operating CAD/KeyCAD, models still fail on fundamental physical-world tests (e.g., scoring ~31.7%–32.3% on the CreatePT physics benchmark). 

When one truly understands the human neural network, one should be totally humbled that no machine in our lifetime could come close to the potency of the human mind. Yes, there are narrow aspects of computing that would excel any human being but in the total context and comparing apple to apple only a fool or deceiver will make a claim of AGI or Super AGI.

4. Depletion of Strategic Petroleum Reserves and Munitions — If one comes right down to basics, one can relate the physical economy or warfare is an exercise in energy transformation. Military analysts estimate that for every barrel of oil used at the front line of battle, 5 barrels of oil directly and indirectly another 35 are needed for logistical support and munition manufacturing. (Fig. 10).

For every calorie of food on our plate, on average, man needs to put in 15 calories of energy. (Fig. 11).

How sad the last superpower nation is run by a bunch of amateurs, and the world is coming fast to a day of reckoning. There will be grave consequences for allowing fools to run amok the global supply chain of energy and fertilizers. The U.S. Strategic Petroleum Reserve will run dry in October 2026, and the price of oil will spike. Equally, there will also be a fertilizer shortage and by extension food.

Be warned and be prepared, my friends.

Isaiah 26:20  Come, my people, enter your chambers, And shut your doors behind you; Hide yourself, as it were, for a little moment, Until the indignation is past. 21  For behold, the LORD comes out of His place To punish the inhabitants of the earth for their iniquity; The earth will also disclose her blood, And will no more cover her slain.  

Breaking Point

The week ended on August 28, 2026 interesting news items to look at for the past fortnight are:

Breaking Point: Last week, I sent out an alert, predicting that the financial market would break by October 2026. (Fig. 1).

The purpose of this week’s blog is to explain the timing and the plumbing involved. 

1. Supply of USD Debt Beyond Demand - On September 16 and 17, 2019, the US overnight funding rate suddenly spiked massively, which indicated insufficient liquidity within the dollar system. The Federal Reserve intervened by injecting reserves into the banking system, and the incident was later called the 2019 Repo Crisis. In the following month, the Fed begins large-scale, ongoing Treasury purchases to permanently increase reserves in the banking system. (Fig. 2)

Why I brought up this history was I expect there will be another Repo crisis in October 2026, to be followed by a permanent QE with hyperinflation as a consequence.

The precursor to the 2019 Repo Crisis was Quantitative Tightening (the sale of Treasuries reduced banking reserves) by Janet Yellen in October 2017 to reduce excessive banking reserves in the system. This was initiated after three rounds of Quantitative Easing (money printing) by Ben Bernanke to prevent a near collapse of the U.S. the monetary system, as a result of the subprime fiasco in 2008. (Fig. 3).

At hindsight, Janet Yellen’s QT was overdone, which drained too much cash and reserves from US banks and left insufficient liquidity, choking normal interbank funding. In fact, none of the Fed chairpersons were good at their job, and the US financial system alternated between undercooked or charred for healthy consumption. (Fig. 4).

My criticism of the Fed was not so much against their individual competence because no one could master a system of global reserve currency that has passed its used-by date. A system that was not designed to properly oil the functioning of trade settlement and wealth preservation, but instead was designed to be exploited by the sitting apex predator.  

As the patriarch asset allocator of my family members’ investment portfolio, I have to crawl deep into the plumbing and drainage of the reserve currency system because there is no single textbook or data set that would tell you what is truly happening. Readers of this blog will find that some of the diagrams and charts are original research, e.g. (Fig. 5)

is an aggregation of data from six different sources plus the author’s own algorithms. However, even with such effort, the information is not realtime and there is lag of one and a half months. Nonetheless, it is a useful set of data for modeling and prediction. With that said, I like readers to focus on (Fig. 5), the red line—M1 and the blue line—US Private Purchases of Treasuries, and the corresponding area in red and green.

The red line—M1 is all the cash, money in the checking account, and savings account that can be withdrawn on demand and are deposited with banks, savings institutions, and credit unions, plus the bank’s reserve account balances with the Federal Reserve. Notice before the massive increase in M1 in April 2020, the red line is below the blue line. That means there was insufficient M1 to buy the U.S. Treasuries that were to be issued but would not be absorbed by Social Security, the Fed, and foreign countries. So, under the cover of COVID, the Fed, in one go, printed enough cash to satisfy Treasury issuance for the next 44 months. The issuance was far in excess of actual fiscal demand, including the required stimulus for COVID. This excess liquidity in the system drove the U.S. stock market and crypto currency valuations to stratospheric levels. The next question is, why?  

My take on all these US money machinations was not that they tried to stabilize a COVID-infected economy, but that they were to build a war chest for the endless war that we have witnessed for the past five years since the first COVID bio-war. The genesis of these endless wars was the dying petrodollar hegemony.

Allow me to take you back in time to the year 2017. Professor John Mearsheimer of the University of Chicago identified the year as the time when the uni-polar world order ended. Mearsheimer reasoned that China and Russia had grown sufficiently strong not to bend the knee to U.S. dictates. In my observation, the more compelling reason was a fundamental change in oil economics. I know some readers of this blog have experience and skills in the energy market, and may I invite their comments here?

2. Shift in the Energy Market - 2017 was the year when China surpassed the US as the world’s largest oil importer and gained the power to influence pricing and settlement currency. From 2017 onward, the days are numbered for the petrol dollar. (Fig. 6).

The following is a chart of China’s oil imports by source in 2025. There are few export countries that would not accept CNY as a settlement currency. (Fig. 7).

Another underlying factor was the advancement of shale oil, and with it the US became a competitor to Saudi Arabia. (Fig. 8).

Having the Gulf Council members sell oil exclusively in USD only makes sense, so long as the US is the largest buyer; but once the US competes in the same market, using USD as the settlement currency becomes aiding and abetting an arch rival.

Now, take a look at the timeline of wars and conflicts since the Republicans took office in the White House: (a) Under a false peace, the Minsk II Agreement, the U.S. secretly armed Ukrainian Nazis as a battering ram against Russia in December 2017, (b) Cancel the JCPOA in May 2018 to eliminate competition from Iran. (d) Began a trade and tech war with China in July 2018, (e) Mobilized cells in Hong Kong for a color revolution in March 2019, Xinjiang Uighur as a narrative to destabilize China and install officials of Japanese lineage in Taiwan as an anti-China strategy, (f) Funded chimeric virus research and staged the COVID outbreak in Wuhan in December 2019. (g) Between February and June 2020, the Federal Reserve expanded the money supply by $12 trillion to build a war chest, (h) Forced Russia to start a SMO in February 2022. (a separate paragraph below will show a link to the underlying logic to the petrodollar.) (i) Major sweeping semiconductor restrictions against China began on October 7, 2022. (j) Launched ChatGPT and pumped up tech stocks to lay a new foundation to replace the petrodollar with semiconductors, AI, and a crypto dollar (under an aspiration that the US has a tech monopoly) in December 2022. (k) Attack Canada to be folded as the 51st US state, military coercion of Venezuela, and war with Iran to arrest control of major oil supplies and oil transit choke points.

3. The Foolhardy Europeans - I only need to present a table to show the effect of oil supplies on Europe to make a point that the US had everything to gain and Europe has all to lose. (Fig. 9) with a Russian/Ukraine conflict.

4. The War Chest Is Now Empty - The $12 trillion war chest raised in early 2020 was completely exhausted by Dec 2025; please read Fig. 5 again, as unenthusiastic foreign buyers left US banks and private investors holding the bag on Treasury issuance. The Federal Reserve has no other option but to start printing again at $60 billion per month. Behind the smoke screen, foreign interests were much lower than what was officially reported, because approximately $3 trillion of US Treasury, disguised as demand from the Cayman Islands, were actually US hedge funds and Wall Street banks using SOFR (Secured Overnight Funding) in collusion with the US Treasury Department, shuffling unwanted Treasury Notes across each other’s dealing desks. (Fig. 10).

I have reported this previously on February 14, 2026, in a blog titled “Painted into a Corner”. The fact behind the fudged numbers is diabolical, as most central banks are distancing themselves from US papers. (Fig. 11).

The displayed demand from the foreign private sector is mainly related-party dealings using swaps and derivatives for window dressing.  Scott Bessent is on a huge margin call and has no tools but cheap bucket-shop tricks to prop up the collateral value (like FIMA Repo with Japan and UAE and Riding the Yield Curve Buy Backs). As far as the new Fed Chair Warsh is concerned, he is a nothing burger, as with all previous Fed Chairs. the script has been written long before the actor comes on stage. (Fig. 12)

I foresee that between now and October 2026, the Scott Bessent band-aid will hold, provided there are no more black swans coming onto the stage.  

5. October 2026 Breaking Point -  Looking at the existing trajectory, projected Treasury Issuance wll overrun M1 decisively by October 2026. (Fig. 13)

Just like the 2019 Repo Crisis, the Federal Reserve will need to engage the printing machine on a unprecedented scale; USD and other fiat currencies will be junked with an onset of hyperinflation not dissimilar to the Wiemar Republic.

Book of Revelation 6:5  When He opened the third seal, I heard the third living creature say, "Come and see." So I looked, and behold, a black horse, and he who sat on it had a pair of scales in his hand. 6  And I heard a voice in the midst of the four living creatures saying, "A quart of wheat for a denarius, and three quarts of barley for a denarius; and do not harm the oil and the wine."