Full Spectrum Competition

The week ended on July 31, 2026, interesting news items to look at for the past fortnight are:

Full Spectrum Competition: I borrow the title of the current Blog from “full spectrum dominance.” Full-spectrum dominance is a military strategic concept created in the United States during the 1990s (prominently featured in US military publications like Joint Vision 2010 and 2020). It is used to describe the achievement of absolute control over all dimensions of a battlespace—including land, air, sea, space, cyberspace, and the electromagnetic spectrum—so that an opposing force has total constraint and cannot effectively resist. (Fig. 1).

Now, if the US population, which constitutes 4.2% of the global population, wants to sit on top of the other 95.8% in perpetuity, they are either delusional or living in a man-made Matrix. The race for multipolarity has been on since 2010 and it looks like that after one and a half decades, we are at the finishing line in 2026.  

It has been said that there are 3 pillars that support the US Empire, viz: the US economy, the USD as the Global Reserve Currency, and the US military. It was not brilliance in design or execution that gave the US its superpower status; it all fell into her lap after Europe and Asia tore themselves to pieces as a result of WWII. The surprise was not the U.S. achieved superpower; the surprise was how the U.S. achieved it with so little cost and effort to itself. Contrary, if there was any single factor that caused U.S hegemony to lose its potency, I would ascribe that single factor to the fallacy of the doctrine of “Full Spectrum Dominance” and it was all self-inflicted. My thesis is based on three decades of observation of how, every time a particular aspect of US dominance faces competition, the entire US system is re-calibrated to eliminate a particular competitor, but in the process it weakens the empire as a whole.

Our thesis began with post-WWII competition between NATO and the Warsaw Pact. The US and the Soviet Union were shoulder to shoulder in terms of technology and military sophistication, and the Cold War lasted 45 years. To maintain the cohesion of the respective bloc, Russia directly subsidized the Warsaw Pact members, but the US had the advantage of the USD and indirectly subsidized Europe through trade deficits and shouldered NATO defenses single-handedly. In the end, the Soviet Union collapsed in 1990 but before that, the US defaulted on the Bretton Woods Agreement in 1971 and built USD hegemony on an unstable foundation in the Middle East in terms of the petrodollar.

The petrodollar, while it worked as an important anchor for dollar hegemony, comes with a huge cost in the sense that the US had to widely distribute dollars internationally through trade deficits (Fig. 2)

and pay record-high interests to stabilize the initial default volatility. (Fig. 3).

As a result, claims by foreigners against the US economy are a whopping $35 trillion, comprising $15 trillion in bank credits and $20 trillion in financial assets of treasuries, bonds, and equity. This compares with the US M2 of $22 trillion, and 40% of bank-created US dollars are outside the United States. Hence, dollar hegemony is both a strength and a deadly vulnerability. Sadly, successive US administrations only see the dollar as a weapon of threat and coercion, but were blinded by hubris to see the dollar as a double-edged sword that, when wielded, cuts both ways.

US is a country endowed with rich resources and naturally protected by the vast Atlantic and Pacific Oceans. In terms of oil and gas, US was the predominant supplier to both sides of the WWII conflict in the 1940s. (Fig. 4).

In fact, the primary cause of the Pearl Harbour attack was a U.S. oil embargo against Japan. However, by 1949, having exhausted its endowed good fortune of oil and gas and greatly profited from the vast WWII demand, the US became a net importer and eventually the biggest buyer of Middle East oil, and hence was able to seal the petrodollar deal in 1971. Few people knew that the petrodollar deal was not so simple as an exchange of oil pricing in USD against US security protection of the House of Saud.  Embedded in the deal was the Saudis would receive partial payment in gold and a scheme to maintain the international gold price at around US$400/oz for the Sauds to convert USD to gold as they received the dollar payments. To back up the scheme, the U.S. Treasury leased out its gold reserves to bullion banks and dumped them in open markets to depress the gold price (a mirror reflection to strengthen the dollar) for cash. The lease rates to bullion banks were around 25 to 50 basis points, and the bullion banks would lend to gold miners at preferential interest rates at 500 to 700 basis points. but repayable by gold miners in gold. This was the genesis of the gold carry trade. Naturally, Wall Street bullion banks would market the gold carry trade and borrow substantial quantities from the European Central Banks. (Fig. 5).  

You can see from the chart between the early 1980s and the mid 1990s, the gold price stayed depressed for 15 years, irrespective of volatility in inflation and interest rates. One also notes that, since 1974, the U.S. gold reserves have not been formally audited for over 50 years. This is despite US domestic political cries for a formal audit and a request by client central banks for inspection.

Whilst the exchange value of USD is being artificially propped up by the gold carry trade, Japanese exports to the US went on a tear. In 1985, US, the United Kingdom, France, and Germany united against Japan and,, in the Plaza Accord and forced Japan to revalue the yen FX rate from 240 to 150 within 12 months. In 1986 and 1987 US also took major trade and legislative action against Toshiba and robbed the crown of semiconductor manufacturing. It was at that time that South Korea, Taiwan, Hong Kong, and Singapore (the four Asian Tigers) were raised to weaken Japan for coming too close as a rivary to US.

1986 was also the year when Western financial markets threw away their prudential rule book. First began with the London financial market “Big Bang”, exotic trading practices like computerized algo trading, portfolio insurance, index and derivative trading have all significantly enhanced stock market liquidity but increased volatility. Back in Japan, your average Mr Watanabe is unaware of the undercurrents in the global financial markets and only saw a robust Japanese economy, new-found purchasing power in the Yen and low returns on cash savings. He could hardly resist the Nikkei 225 index, which rose from 10,824 in 1986 to a high of 38,915 towards the end of 1989 being window-dressed by a secret army of state-sponsored economic hitmen. After all, the Western caimans have honed their skills since Black Friday, October 19, 1987 and have sharpened their stealthy daggers in cloaks against the naive Japanese. MOF officials with inflated egos have also scant knowledge of this new financial weapon of mass destruction. So, for an exuberant party of three years, Japan woke up and found itself shackled as a financial serf of the US for the next 30 years. The Gold Carry Trade was officially replaced by the Yen Carry Trade. Here I need to digress and mention that today Samsung and SK hynix of South Korea, and possibly TSMC of Taiwan, will meet the same fate as Toshiba of Japan; history is repeating itself right before our eyes.

In 1991, the Soviet Union finally collapsed. The coffers of US hegemony were filled to the brim after shorting the ruble and harvesting $1 trillion in blood money. Japan also bent the knee and opened her vault and backed US with a platinum credit card of virtually unlimited credit. US, the last superpower, remained standing and self-crowned itself Master of the Universe. Yes, the financial weapon of mass destruction has outgunned even the Soviet’s huge arsenal of nuclear bombs. It is only fitting that the United States should be honored with full-spectrum dominance and a US rule-based international order.  With such victories, US turned its attention to the Middle East and Europe. How dare Saddam Hussein claim the promised reward for waging an eight-year war with Iran by actually invading Kuwait. What about the ambition of the Europeans in forming an economic bloc to rival the United States? And so the cycle of perpetual wars began with Operation Desert Shield, Operation Desert Storm (Iraq), Operation El Dorado Canyon (Libya), Operation Deliberate Force, Operation Noble Anvill (Yugoslavia), Operation Enduring Freedom (Afghanistan), Operation Iraqi Freedom, and Operation Inherent Resolve (ISIS).

So after two decades of war and $6 trillion of military expenditure, the Treasury coffers are drained; the Shiite majority in Iraq became close friends with Iran, and the US had to evacuate in haste from Afghanistan. Libya and Syria degenerated into failed states. In the meantime, without specific state-sponsored national targets such as the Soviet Union and Japan, the cohorts of economic hit men turned their weapons to Asia and Russia again. In Hong Kong 1998, Soros had his Waterloo moment. Soro’s Quantum Fund was forced to cover its naked short position because the Hong Kong Government bought every sell order thrown at it. (Fig. 6).

In Europe, LTCM blew up and needed a bailout coordinated by the Fed with successive Fed rate cuts. But the curse of wielding this financial weapon was brought ashore to the USA and caused havoc in the 2000 dot-com bubble and the 2008 sub-prime tsunami.

2008 was a pivotal moment and a wake-up call for foreign holders of USD and Treasuries. Fast forward to today, every attempt by the US Administration to dictate exclusive USD settlement, whether the end product is petroleum, minerals, semiconductors, or artificial intelligence tokens, is challenged by BRICS with viable alternatives. No longer is USD the currency of the United States, but another country’s problem. The spendthrift behavior of the US Administration will only be shouldered by US citizenry. The Federal Reserve printing press would guarantee domestic US inflation and the erosion of USD purchasing power. Full Spectrum Dominance is now Full Spectrum Competition. The table has turned, and the borrower now rightfully stands subservient to the lender. (Fig. 7)

Proverbs 22:7  The rich rules over the poor, And the borrower is servant to the lender. 8  He who sows iniquity will reap sorrow, And the rod of his anger will fail.

 

Words Matters

The week ended on July 17, 2026, interesting news items to look at for the past fortnight are:

Words Matters: There is a saying by Confucius “一言兴邦,一言喪邦” which can be translated as, “A single remark can revitalize a state; a single remark can ruin a state.” (Fig. 1).

"A wise leader speaks with humility and welcomes honest counsel—then the nation prospers. An arrogant leader who shuts out dissent when wrong leads the nation toward ruin."

Trump and his team, of course, do not necessarily know the words of Confucius, but as a collective group that tried to appeal to US evangelical Christians, they are certainly far from the wisdom of the Bible. (Fig. 2).

For readers of this Blog, I have been quite upfront about my personal worldview and convictions. And the foregoing words of wisdom will be a well-oiled lamp that guides our path in the coming period of darkness and instability. To know what lies ahead, we need to examine what was said.

1. Strait of Hormuz Conflict - On April 20^th 2026 Trump stated: “We're going to hit them extremely hard over the next two to three weeks. We're going to bring them back to the Stone Age, where they belong." (Fig. 3). 

These words totally decimated whatever residual pro-American interests remained in Iran and hardened the resolve of Iranians to prevail over all and every Zionists’ threat.

On July 13, Trump posted on his Truth Social about a 20% American protection extortion levy on Hormuz traffic. (Fig. 4).

This was retracted the following day. How do you think the international community would react? (Fig. 5).

World opinion has already been formed by two memes, with the center of power shifted to BRICS. (Fig. 6).

I guess you all know the answer to yet another Trump threat to destroy all Iranian civilian infrastructure (Fig. 7).

The reality is that Iran’s tit for tat would be to enforce a blockade against the Red Sea by the Houthis at Bab el-Mandab, and the world will make Trump answerable for an all-critical 19% of ME oil lifeline that did not go through Hormuz. (Fig. 8).

I am therefore not concerned and will be relaxing this weekend with Mexican delights of TACO and NACHO.

2. Artificial Intelligence - I guess I am out by two weeks regarding the stock performance of Space X IPO. I gave SPCX two weeks, and it would fall below the IPO price. SPCX did that with 23 trading days. (Fig. 9).

As a one year old grandpa, I am fascinated by infant brain development and derive tremendous pleasure watching my granddaughter grow.  Inadvertently, I also became extremely skeptical of the Wall Street and Silicon Valley hype of LLMs. Input through GPU, LLMs are essentially high-speed probability pattern recognition guesswork rather than intelligence in the true human linguistic sense. The American narrative is that it got some exclusive claims on a portion of high-density chip technology, printable money to buy HBM (Ultra-High Bandwidth Memory), and therefore should dominate the AI ecosystem to the exclusion of everyone.  To my utter amazement, there is also this cult-like belief among the Mag 7 that an AI singularity will occur imminently. When that occurs, the first innovator will go through a cycles of runaway recursive self-improvement upgrades, achieve omnipotence, and then can dictate all humanity. With this obsession, immensely profitable tech titans are all spending money without caution on GPU, HBM and related R&D infrastructure to be the first achievers. I will give more details on their finances later, but first let us deal with a few known facts about human brain development, as after all, AI is fashioned after a human neural network.

(i) The Neural Network - Artificial Neural Networks (ANNs) were inspired by human brains. While human brains are complex, energy-efficient biological organs capable of continuous learning, ANNs are rigid mathematical models designed to process vast amounts of digital data to perform highly specific, singular tasks. (Fig. 10).

GPT-4 was trained simultaneously on approximately 25,000 NVIDIA A100 GPUs, while frontier models currently employ clusters of 100k+ NVIDIA Hopper or Blackwell GPUs. By comparison, the human brain has an estimated 86 billion biological neurons connected by trillions of synapses that communicate using both electrical and chemical signals. ANNs consist of a much smaller number of artificial neurons—mathematical nodes—arranged in strict layers (input, hidden, and output). The interconnections between GPU and HBM in AI language are called “parameters” and apparently the larger the number of parameters, the more powerful the “brain power” of AI. Now let’s take a look at the top of the-line LLms and compare them to a newborn baby. (Fig. 11).

A newborn baby has 5X the current top AI. Yet, despite the large number of synapses in the baby’s brain, the baby cannot tell the difference between a banana and a banana-shaped animal wastee unless the baby is trained. Bear in mind, the lessons a baby will learn is much more than visuals through a GPU but also through smell, touch, and other senses. It also depends on the human trainer, and so does AI.

(ii) Human Brain Development - From the 50 trillion synapses, a baby neural connections will grow to 1000 trillion by 3 years old before natural pruning sets in to stabilize the number of neural connections to 100 trillion. (Fig. 12).  

Synaptic pruning is the brain's way of refining itself to become more efficient. By eliminating excess or unused connections while strengthening frequently used ones, it optimizes cognitive function, reduces energy consumption, and improves the brain's ability to adapt and learn. AI although it mimics the human neural network, has no knowledge, provisions, or plans for pruning, and my expectation is that cyber weeds will grow and the drainage will clutter before humility sets in for the elites to appreciate they cannot build God in a box.

(iii) The Hard Numbers: Since 2024, the term Mag 7 has been sarcastically changed to Lag 7 because of their under performance relative to the general stock market. I have compiled a combined free cashflow chart of the hyperscalers (Microsoft, Google, Amazon, Meta and Oracle) plus Open AI, Anthropic and Space X. (AI Generated - Fig. 13).

If we just concentrate on the thick black line, the combined free cash flow (Operating cash flow minus Capex) has decidedly turned negative in 2026 and will further deteriorate in 2027. There are two separate danger signals in the horizon: -

(a) US AI service providers have found that their revenue growth is much slower than their Capex. Adoption numbers are impressive when AI is free or at a highly subsidized rate. This is a different story once the AI service providers begin to charge on a token usage basis. Enterprise users like Coinbase, DoorDash, Airbnb and Seimens immediately switched to China-based AI service providers when Chinese AI are open-sourced and charges were at a tiny fraction of what US providers charged. (Fig. 14 shows a global ranking by their most recent token usage).

(Fig. 15 shows this ranking by the cost per million token usage). A survey concluded in July 2026 showed that 80% of US AI Startups switched to Chinese Models. (Fig. 15).

(b) The second risks factor on US AI sector is their circular financing arrangement. OpenAI’s revenue grew from $2 billion in 2023 to $20 billion in 2025. Anthropic’s annualized revenue run rate surged from $87 million in January 2024 to $30 billion by April 2026, a trajectory that Salesforce took 20 years to achieve. NVIDIA’s revenue grew eightfold from $27 billion to over $216 billion between 2023 and 2026, achieving that growth in just one-third of the time it took Apple to do so during its heyday between 2007 and 2015. By nearly every reported metric, the AI market is delivering growth at a scale and speed that defies historical comparison. Yet a narrative has emerged about how much of that growth reflects genuine market demand and how much reflects the circular financing structures that have become a defining feature of AI infrastructure investment. Circular financing in AI describes investment structures where the same capital flows simultaneously as vendor payment and equity stake. A company funds its own customer’s revenue while also supplying that customer’s core infrastructure. The result is reported revenue growth that is real but not cleanly separable from investment activity. The answer matters enormously, not just for investors in AI infrastructure companies, but for every enterprise software vendor and technology buyer trying to make sense of what’s actually happening in the market. The telltale sign shows up when profit growth of these AI-related companies is derived not from operating income but other income, meaning valuation gains from their investment activities. (Fig. 16).

Their books are not clean, and Open AI has already delayed its IPO and Anthropic is planned to cash out in Oct 2026. The AI bubble when it burst will be worse than the subprime fiasco in 2008 because the excess valuation in this caper is a whopping $10 trillion. AI related stocks currently account for nearly 50% of S&P. The contagion will be ugly.(Fig. 17)

Genesis 11:1  Now the whole earth had one language and one speech.2  And it came to pass, as they journeyed from the east, that they found a plain in the land of Shinar, and they dwelt there. 3  Then they said to one another, "Come, let us make bricks and bake them thoroughly." They had brick for stone, and they had asphalt for mortar. 4  And they said, "Come, let us build ourselves a city, and a tower whose top is in the heavens; let us make a name for ourselves, lest we be scattered abroad over the face of the whole earth." 5  But the LORD came down to see the city and the tower which the sons of men had built. 6  And the LORD said, "Indeed the people are one and they all have one language, and this is what they begin to do; now nothing that they propose to do will be withheld from them. 7  Come, let Us go down and there confuse their language, that they may not understand one another's speech."8  So the LORD scattered them abroad from there over the face of all the earth, and they ceased building the city. 9  Therefore its name is called Babel, because there the LORD confused the language of all the earth; and from there the LORD scattered them abroad over the face of all the earth. 

Peace, peace!' When there is No Peace

The week ended on July 3, 2026, interesting news items to look at for the past fortnight are:

1. Peace, peace!' When there is No Peace: There is a Chinese proverb that says “聽其言,觀其行”which means caution dictates that one should “listen to his utterance but observe his actions.” To this I further remind myself of what Jesus says in Matthew 12:34 “For out of the abundance of the heart the mouth speaks.” It was less than two weeks before the US spilled her beans in public about her true intentions for signing an “MOU” with Iran. (Fig. 1).

A strategic pause, an opportunity to replenish her oil reserves, stabilize the markets, and time for military regrouping and preparation.  

(i) US Strategic Oil Reserves at Historic Low - The US Strategic Petroleum Reserve (SPR) has fallen to roughly 325 million barrels, its lowest level since May 1983. (Fig. 2).

So shortly after signing the MOU, US behaved as if Iran had given up control of traffic in the Strait of Hormuz and moved oil tankers without further reference. Iran, however, is not deceived after having been bitten twice before in negotiations with US and Israel under their cloak and daggers. .(Fig. 3).

Skirmishes flared just 10 days after the MOU.

(ii)  Post-MOU skirmishes - There were 4 separate military confrontations after the MOU, namely

(a) Strait of Hormuz Retaliatory Strikes: The US military launched a series of airstrikes on Iranian missile storage, coastal radar, and minelayer capabilities in the Strait of Hormuz. The US Central Command (CENTCOM) described these actions as direct responses to Iranian drone attacks on Panama-flagged and other commercial tankers traversing the strait.

(b) Persian Gulf Skirmishes: Iranian military units retaliated to US strikes by deploying drones and missiles that targeted US-aligned interests in Kuwait and Bahrain.

(c) Escalations in Lebanon: The US-Iran MoU specifically declared an immediate termination of hostilities on all fronts, including Lebanon. However, both sides traded reciprocal strikes after Iran accused the US of permitting Israel to continue occupying Lebanese territory in violation of the treaty. 

(d) Continued Southern Lebanon Engagements: The Israeli military continued its military presence in southern Lebanon and launched airstrikes against Hezbollah targets.

(iii) IRGC declared the Strait of Hormuz closed again - Iran declared the Strait of Hormuz closed again on June 20, 2026. The military stated the move was in retaliation for Israeli strikes in southern Lebanon, which Tehran claimed was a violation of a recently signed ceasefire memorandum of understanding with the United States.

(iv) Trump Declared National Emergency and Food Crisis - President Donald Trump on Monday declared a national emergency aimed at protecting the U.S. food supply and temporarily suspended import duties on certain Moroccan fertilizer products. Under the presidential emergency declaration, phosphate fertilizer imported from Morocco will no longer face tariffs for up to eight months or until the emergency declaration is terminated. (Fig. 4)

The potential fertilizer/fod crisis for US is a self-inflicted wound as we can see through war, embargoes, sanctions, and through transit choke points that US  had painted itself into a corner. (Fig. 5) 

For Phosphorus - Russia, Saudi Arabia, and China combined account for 52% global share in exports. Potassium - Belarus, Russia and Canada combined account for 77%. Nitrogenous fertilizers - Russia, China, Oman, Qatar, Saudi Arabia, and Egypt a combined 46.5% global share.

By extension, through insurmountable supply-chain squeezes in rare earth and critical minerals, oil and gas, and finally fertilizers, the only way for the entire Western economy to go is down. Let us not fool ourselves. The MOU with Iran, the IPO of SPCX, the recent strength of US Treasuries and DXY and the take-down of precious metals is a kabuki theater and a short-lived respite performance of a dying empire. (Fig. 6).  

2. What’s Your Business: “The business of America is war, the business of China is business” is a signature critique coined by geopolitical trend forecaster Gerald Celente regarding the opposing global strategies of the two superpowers. (Fig. 7)

Look at the different solutions used in China and Europe to counter the current heat wave. (Fig. 8).

Look at the Chinese products flying off the shelves to Europe and draw your own conclusion as to who will have the last laugh:Western political elites who are ignoramuses except for lying and electioneering, or down to earth Chinese who provide solutions to anticipated needs. (Fig. 9)  

The advancement of AI certainly impacted our society; readers may have spotted that my writing has shortened, as I too have begun to adopt AI to provide more data in graphical form. That means the images has a much richer information content than before and may require more of your attention. Please let me know if this has become a distraction rather than an enhancement. Thanks again for investing your time in this blog.

Jeremiah 6:8  Be instructed, O Jerusalem, Lest My soul depart from you; Lest I make you desolate, A land not inhabited." 9  Thus says the LORD of hosts: "They shall thoroughly glean as a vine the remnant of Israel; As a grape-gatherer, put your hand back into the branches." 10  To whom shall I speak and give warning, That they may hear? Indeed their ear is uncircumcised, And they cannot give heed. Behold, the word of the LORD is a reproach to them; They have no delight in it.  11  Therefore I am full of the fury of the LORD. I am weary of holding it in. "I will pour it out on the children outside, And on the assembly of young men together; For even the husband shall be taken with the wife, The aged with him who is full of days. 12  And their houses shall be turned over to others, Fields and wives together; For I will stretch out My hand Against the inhabitants of the land," says the LORD. 13  "Because from the least of them even to the greatest of them, Everyone is given to covetousness; And from the prophet even to the priest, Everyone deals falsely. 14  They have also healed the hurt of My people slightly, Saying, 'Peace, peace!' When there is no peace.15  Were they ashamed when they had committed abomination? No! They were not at all ashamed; Nor did they know how to blush. Therefore they shall fall among those who fall; At the time I punish them, They shall be cast down," says the LORD.16  Thus says the LORD: "Stand in the ways and see, And ask for the old paths, where the good way is, And walk in it; Then you will find rest for your souls. But they said, 'We will not walk in it.' 17  Also, I set watchmen over you, saying, 'Listen to the sound of the trumpet!' But they said, 'We will not listen.' 18  Therefore hear, you nations, And know, O congregation, what is among them.:19  Hear, O earth! Behold, I will certainly bring calamity on this people—The fruit of their thoughts, Because they have not heeded My words Nor My law, but rejected it.