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." 

 

Preparation Precedes Blessings

The week ended on August 14, 2026. interesting news items to look at for the past fortnight are:

Preparation Precedes Blessings: One of the concerns I have is how our younger generation can cope with the rapid changes taking place in our society. Generational theorist Neil Howe describes the current period as the “Fourth Turning,” The Fourth Turning is a 20-year period of deep societal crisis that recurs roughly every 80 to 100 years. During this “winter” season of history, old institutional orders collapse and are violently rebuilt before a new cycle begins. So the big question is how does one move into the spring season, or does one get stuck forever in winter. (Fig. 1)

Based on Howe’s observation of (please note that the observation is restricted to 500 years of Anglo-American history), I like to set out certain markers that may be useful in our journey through this turbulent landscape.

1. Identification of the Seasons:  (a) Spring (1946–1963), post-WWII economic expansion, and massive infrastructure building. American hegemony began. (b) Summer (1964-1983), Vietnam war and cold war began to drain US economic vitality. Bretton Woods’ default and the beginning of the patrol dollar began, but they also signaled the decay of the financialized Anglo-American Empire. (c )  Autumn (1984–2007) Western societies began prioritizing the rise of a techno-elitist class over collective community. Trust in established international institutions decayed, culture wars intensified, and governance became more polarized. Winter (2008-2030). Triggered by accumulated institutional and financial decay (pegged to the 2008 financial crisis), this "winter" represents an era of systemic stress, deep political polarization, and institutional rebuilding designed to forge a brand-new civic order. (Fig. 2)

While Howe’s model above is useful for pigeonholing Western economies, China’s generational season is on a totally different time scale. China has gone through a particularly long winter of approximately 178 years, from the decay of the Qing Dynasty around 1800 to the final unification of CCP under Deng Xiaoping in 1978. For China, spring began in 1979 with accelerated rebuilding through 2012. China’s summer awakening began in 2013 and recognized that it needs to diversify away from reliance on exports to the West and to check its accumulation of surpluses in US Treasuries. The Spring season for China’s nation building will only be concluded by “China Standards 2035” after a successful implementation of “Made in China 2025”.  

As the Anglo-American Empire reached its inflection point in 2026 with the onset of exponential decay, China is neither ready nor prepared to assume the mantle of the sole superpower and global enforcer. My humble opinion is that we should expect a period of regional uprisings and power plays that will see new alliances and security structures formed, e.g. the Mecca Joint Defense Agreement signed on August 7, 2026, a tripartite security pact between Saudi Arabia, Turkey, and Pakistan. Often labeled the "Islamic NATO" or "Sunni NATO" in media commentary, the pact includes a collective-defense clause stating that an armed attack on one member will be treated as an attack on all.  (Fig. 3)  

Another recent incident to note is the mass crossing of Moroccan migrants into the Spanish North African enclave of Ceuta in late July 2026. Where a power vacuum develops, chaos is certain. (Fig. 4)

   

2. Identification of the Alpha in the Change Over: This is actually more tricky than a simple assumption that the Alpha will move from West to East.

Historically, the rise and fall of empires takes decades to unfold. So, by the yardstick of history, WWI and WWII were relatively short wars. WWI lasted only 1,574 days, and WWII lasted 2,193 days. The Ukraine war has already been going on for 1,634 days and is continuing. The U.S. Afghan war lasted 7,293 days, and the Vietnam War lasted 6,395 days. In my last blog, I commented that “the surprise was not that the U.S. achieved superpower status; the surprise was how the U.S. achieved it with so little cost and effort to itself.” Regional peers’ wars for dominance are measured in centuries. Until unification under the EU banner, various European powers had 5 centuries of conflict. (Fig. 5).

In China, it took two and a half centuries to bring the seven states under a unified Qin Dynasty. (Fig. 6).

In the 35 years since the disintegration of the USSR in 1991, there have been 10 major conflicts in former USSR states. (Fig. 7).

Since the 1990s, the U.S. has dismantled all of its military surge capacity based on a belief that no one could challenge her military supremacy and is now found wanting. As a superpower’s force projection wanes, allies’ previous dependence or an adversary’s apprehension will cause insecurity or boldness, as the case may be, for new security arrangements that will be destabilizing.  Europe, Japan, and the Middle East are on the move, and Russia, China, North Korea, and India have taken corresponding countermeasures. In the meantime, the show must go on in Wall Street, and the narrative is “everything is under control and there is nothing to see, folks.”  Few political or corporate leaders are actually aware and have prepared for an economic cardiac arrest and a prolonged winter. If the war with Iran goes the way of the Afghan war, the Strait of Hormuz would be blocked until Feb. 16, 2046. What if the endgame is twenty years of skirmishes and stagnation until the emergence of 10 nodes of regional power blocs?  How would one deploy one’s time, energy, and resources in such a scenario?

3. Identification of Bottle Necks, Choke Points, and Irrational Exuberance: Risks is not having prepared for the unexpected to happen. Foolishness is seeing the unexpected happen and not revising one’s actions accordingly.

(a) Military - The Ukraine War and the Iranian Wars have proven that mass-produced, commoditized communication devices on cheap drones and rockets are equalizers to sophisticated weapons of a superpower.

(b) Technological Advantage - What it took a first mover decades to achieve does not guarantee that a challenger will require an equal time lag to catch up.  

(c) Supply Chain Control — A sovereign nation does not have true sovereignty when critical resources are controlled by a competitor or an adversary. Commercial contracts will not be honored by “civilized” nations that trumpet governance by a “rule of law” when a nation is about to lose its competitive advantage. The world’s commerce is moving away from globalization toward high tariffs and trade barriers. But then, as traditional markets are closing, new opportunities also open up for those who are willing to take up the challenge.  

(d)  Artificial Intelligence — We are still very far from realizing AGI (“Artificial General Intelligence”) and are still at a stage of machine learning. Winner of the current AI race will be (i) open-source, open-weight models, (ii) local inferencing on desktop/laptops rather than data centers, and  (iii) consumer hardware using Unified Memory Architectures (UMA) that hosts AI models locally will outperform expensive VRAM in data centers. The threat and narrative of  inevitability and artificial superintelligence is pure financial hype to justify bubble valuation on Wall Street. For those who move on to embrace AI will find it is more helpful in jobs than an exterminator of jobs.

(e) Reserve Currency — Currencies will continue to be useful for trade settlement, but it has proven that it has lost its function as a store of value and therefore is no longer useful as a reserve,

(f) Transit Choke Points - Geo-logistical choke points are more powerful than nuclear weapons. (Fig. 8)

We are in the fourth turning, and therefore we are compelled by external circumstances to move out of our comfort zone or traditional orthodox thinking. A comfort zone may be a place, a lifestyle, or a familiar routine. I would like to close here with a story you are all familiar with: Two friends walk in the woods and see a huge bear. One friend quickly sits down to put on his running shoes. The other friend says, "You cannot outrun that bear!" The smart friend smiles and says, "I do not need to outrun the bear. I only need to outrun you." (Fig. 9)

Matthew 7:7  "Ask, and it will be given to you; seek, and you will find; knock, and it will be opened to you. 8  For everyone who asks receives, and he who seeks finds, and to him who knocks it will be opened. 9  Or what man is there among you who, if his son asks for bread, will give him a stone? 10  Or if he asks for a fish, will he give him a serpent? 11  If you then, being evil, know how to give good gifts to your children, how much more will your Father who is in heaven give good things to those who ask Him!