Saturday, November 30, 2024

A Tale of Two Cities

The week ended on November 30, 2024, interesting news items to look at this week are:

A Tale of Two Cities: Now and then I have been asked the same question by family and friends alike as to “how long can the debt laden US economy sustain on its present trajectory”. The simple answer is January 20, 2025 because the US voters collectively have declared they want the establishment elites and  Deep State out. The 2024 US election was not a contest of Republicans vs Democrats nor Trump vs Harris/Biden but a revolution against the establishment as designed under the Round Table concept. The next question is can the New Administration succeed with its election promises of reducing government deficits and largess to cronies, streamline and revitalize US productivity and take down its arch rival China at the same time. Let’s spend the next few minutes to understand what and how it is to be done, literally and metaphorically speaking  “ To root out and to pull down, To destroy and to throw down, To build and to plant” (Fig. 1)


 (i) US Economy as Explained by a Bond Vigilante : I have previously reported that US GDP growth in 2024 of 2.8% was on the back of a Federal Deficit of 6.7% to GDP. The simple arithmetic is the US private sector has been forced to contract by 3.9% as a result fiscal dominance. With the Federal Reserve still on Quantitative Tapering, a lack of Foreign Buyers and flat Social Security Net Receipts, only the US public remained as the last Treasuries Buyers. (Fig. 2).


By mid November 2024, size of US Money Market Funds (parking lot for US Treasuries) have topped US$7 trillion and continued to significantly crowd out commercial bank deposits.(Fig. 3)

In 2021 US Money Market Funds (“MMF”) accounted only 4.7% of the combined Bank Deposits +MMF, but by November 2024, MMF grew to 28.2% of the combined total, a 7 fold increase within 3 years. Regional banks which have been plagued by their below water Treasury Portfolio and troubled Commercial Real Estate Loans are on the brink of wholesale collapse. (Fig. 4).

Instead of sitting on their low yield Treasury Portfolio of about 2.8% yield on book cost basis, many bank treasurers are selling them to realize a one-off accounting loss but double down to buy duration Treasury Bonds in the hope of a lowering of interest rates by the Fed would uplift their portfolio valuation and also a positive carry against short term interest rates. Sadly anyone who actually trusted the Fed’s Open Mouth Policy on Fighting Inflation would have been disappointed as Duration Treasuries rebelled against the Fed’s Rate Cut Reasoning and Decision. (Fig. 5).

Instead of a lowering of Bond Yield in line with a cut in Fed Funds rate, Duration Treasuries yields actually rose. In fact the latest 30YR Treasury Bond Auction of $25 billion saw a weaning of buyer’s appetite and Primary Dealers were stuffed with one quarter of the unsubscribed issue.  The lack of demand for Treasuries had been a lingering worry for Janet Yellen and practically the US Treasury were forced to finance the US Government on a very short term basis. In 2025 it is expected one third of all outstanding US Federal Debt would mature. (Fig. 6)

with a peak just around Trump’s Presidential inauguration on January 20, 2025 (Fig. 7).

Now you know why PRC USD Bond issuance in Saudi Arabia was oversubscribed by 20X. and the timing significance thereof (Fig. 8).

(ii) US Economy in Numbers: (Fig. 9)


gives a graphic picture of the constituents of the US Economy. Government, Healthcare, Real Estates and Hospitality is 71.4% of the economy. Can the remaining 28.6% of the “Productive” side of the economy carry the rest. Let’s examine how Trump’s election propaganda of tax cuts, spending tax, removal of illegal immigrants, high tariffs to replace income tax and defeating China can be effected.

(a) Trump Tax Cuts (Fig. 10):


In the campaign, Trump vowed to cut taxes for seemingly every group that caught his fancy. According to the Committee for a Responsible Federal Budget’s central estimate, Trump’s tax proposals imply $10 trillion in foregone revenue over the next ten years. Add to that an extra $1 trillion in interest accrued on the national debt, and the losses far exceed the $3 trillion in added revenue that would come from the sky-high tariffs that Trump has pledged to introduce. This will require the federal government to sell a lot of bonds – a practice that will keep their price low and interest rates high.

(b) Elon Musk $2 Trillion Cut in Government Spending: Whilst Musk may have been credited with firing 80% of staff in Twitter with Twitter’s core operations remained functional (Fig. 11),


Musk did not have to bear the social costs of generating huge unemployment. As government, however, the cost to carry the unemployed is not shifted elsewhere whether those got laid off directly or indirectly through the consequential economic impact. There is also the added internal security costs on possible chaos and civil unrest. Will Musk have the last laugh if after making 80% of Twitter’s staff redundant, he still have to foot the bill for their sustenance and healthcare payments?  It would have been a job well done if $100 billion can be cut in the first two years of Trump 2.0 before public dissatisfaction derail the midterm election in 2026. I will just take the whole Trump/Musk efficiency saga as a pretext to purge Trump’s opposition in the Deep State.

(c)  US Federal Tax Receipts and Tariff Receipts: The US annual goods import bill is approximately $3.8 trillion whilst Federal Tax Receipts is $4.9 trillion. (Fig. 12)


I found it strange that some academics would argue a high enough tariff could totally replace income tax, implying a 130% import duty on every good imported into US. Forget about consumer wishing to buy better products at cheaper prices. Forget about critical minerals, ingredients and components that are essential to domestic US manufacturing. Whereas in Trump 1.0, Chief Trade Representative Lighthizer, though a firm proponent to weaponize Tariff, Lighthizer’s real aim was using Tariff to push exporters to establish a manufacturing presence in the US. The new Secretary of Commerce, Howard Lutnick, however, views tariff as a revenue substitute for tax cuts. Let’s just see how cronies and allies of US would react to a universal tariff.

(d)  Trade War with China: Six years have come and gone since the first Trade War salvo against China fired by Trump 1.0. China is now ready and a tool box of counter measures will be show cased with proportional restraint. Export restriction of germanium, gallium and the latest antimony though not high in export value are all precision sorties targeting the US defence and high tech sectors. These materials would all create a snowball effect on US most valuable supply chain with no possible remedies in the medium term. Like EU tariff on China’s EV, an appropriate response would certainly draw both sides to the negotiation table very quickly. (Fig. 13).


With respect to onshoring and friendshoring, the experiment with the Chips Act onshoring ($8 billion funding to Intel curtailed Fig. 14)

and Apple’s friendshoring to India are expensive lessons on politically driven investments. (Fig. 15).

(iii) Make in China 2025: In May 2015, China announced her strategic plan of “Make in China 2025” which sets goals for advancement in key technological development and levels of self sufficiency. The goals in new energy, EV, semiconductors, AI and 5G are by and large achieved by the end of 2024. As Tim Cook, CEO of Apple said China has not been a low labour producer for a long time and China’s attraction is in its skill set. It is projected China’s trade surpluses would reach $1 trillion in 2024. (Fig. 16).


China is a world leader in renewable energy generation capacity, including solar power. The International Energy Agency (IEA) reported that China commissioned as much PV (Photovoltaics) capacity in 2022 as the rest of the world combined. In China, a Solar Energy Farm is much more than just hundreds of kilometers of solar panels. In the Talatan Solar PV Park in Qinghai China, the arid area is totally transformed into pastoral land for contract sheep grazing in support for the poor rural folks in the region. The presence of the solar panels had prevented desertification, improved rain retention and totally transformed the environment to productive use. (Fig. 17 & 18).


A good example of top down but down to earth approach to governance. For anyone who cares to study, perhaps one may just find the answer as to the rise and fall of a once mighty empire.

I named the title of this week’s Blog as “A Tale of Two Cities”. Washington and Beijing is certainly very different. In the end, there is no place for an apex predator within a human society because all men are created equal that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.

John 1:1  In the beginning was the Word, and the Word was with God, and the Word was God. 2  He was in the beginning with God. 3  All things were made through Him, and without Him nothing was made that was made. 4  In Him was life, and the life was the light of men. 5  And the light shines in the darkness, and the darkness did not comprehend it. 

Saturday, November 23, 2024

A Kaleidoscope of Extraordinary Events

The week ended on November 23, 2024, interesting news items to look at this week are:

1. A Kaleidoscope of Extraordinary Events: I felt a bit overwhelmed this week by the many news items that were both significant and with serious long term implications. From the Anglo American Empire, the sorties were crude and overt in contrast to the counter punches from the Global South which were subtle but more lethal. Let’s get right down and take a look as well as toconnect the dots:

(i)  US sole vote to veto a cease fire Resolution of the UN Security Council in Gaza (Fig. 1):


Israel is a small country with a dense population, time and again, it has been proven Israel’s air defense system could not effectively block a sustained concentrated drones, rockets and missile attack. (Fig. 2).

Israel’s economy is in tatters and is totally reliant on US militarily and economically, so why wont US want a ceasefire? With US alienating all the Islamic Oil Producing Nations in the Middle East at a time when the Petrol Dollar is under serious challenge, what is the story behind the story?

(ii) US Directly Attacked Russia (Fig. 3):


Under International Law, when US Military Personnel launched a missile attack against the Russian mainland from Ukraine is a US direct attack against Russia. The same goes for UK’s Storm Shadow Missiles attack. Germany and France are also implicated as accessories by their approval of use under the Technology Transfer Agreements. With 5 of the 6 ATACMs intercepted by the Russian air defense system and a total ATACMs inventory of only 50, such brazen acts would hardly change the course of the Ukraine conflict. Sorties from Russia totaled 10,000 rounds per day. (Fig. 4)

In response, Russia fired an inter-medium range  hyper-sonic missile at Ukraine with a televised message from Putin that Russia has the right to use weapons against military facilities of the countries that allow to use their weapons against our facilities. (Fig. 5).

The chosen range of the new “Oreshnik” missile is sufficient to hit NATO European HQ at Brussels, Belgium and all military bases including those in UK. Oreshnik in Russian is Орешник, which is Hazel wood and in Russia it can be fashioned into a stick to beat animals into submission. Oreshnik travels at a speed of MACH 12 and can be nuclear armed with 6 warheads each with 3 splinter devices capable of hitting 18 targets independently, all at guided hyper-sonic speed and within 20 minutes. NATO has immediately called a meeting for November 26 to discuss its implications.

(iii) Biden became irrelevant at the G20 meeting in Rio (Fig. 6):


Not only did the joint communicate of G20 not include any of the lobby points of Biden, Lula would not even wait for Biden to take the traditional family photo when Biden, Trudeau and Meloni all turned up late for the shoot. G20 was instigated ass a global cooperation to bail out the West from the 2008 Subprime fiasco, but is now totally undone by an overreach of  “the rule based international order” against a multi-polar world.

(iv) Xi officiate the Chankay Port in Peru (Fig 7):


With the opening of the Chankay Port, the whole of South America would become much less reliant on LA and Long Beach Ports for Trans-pacific container traffic.

(v) Biden placed in back corner row at APEC Meeting in Peru (Fig. 8): A picture paints a thousand words as how the world looks at Biden and US.


(vi) Nicaragua and China sign agreement on Bluefields deepwater port (Fig. 9):


The port together with a 445Km Interoceanic canal when built will seriously challenge the US controlled Panama canal. With China’s economic and trade flows in Latin America outpacing US by multiples in the region, color revolutions  and regime change by the CIA has proved ineffective to draw Latin America away from the China embrace.

(vii) A Shocker at the China International Aviation & Aerospace Exhibition in Zhuhai: Some 600,000 people attended the Zhuhai Airshow drawing Defense Departments from every country. Amongst the shocking exhibits were (a) Jiutian UAV (Aerial Drone Swam Carrier Fig. 10)


The UAV is capable of carrying 48 independent operated fighter drones and to annihilate a distant military base in a single unmanned operation. (b) Robotic Beasts  - whilst the US military robotic dog is still in testing stage, China is now mass producing the robotic dog for reconnaissance, the robotic wolf equipped with a Gatling Gun for combat and the robotic tiger with further enhanced fire power. (Fig. 11).

(c) Even before Pentagon could develop her hyper-sonic missiles, China is now show casing her anti hyper-sonic air defense system, the Red Flag 19 (Fig. 12),


capable of intercepting missiles at hyper-sonic speed at the inner and outer atmosphere. The week long show bagged US$40 billion deals involving 1,195 aircraft of various types. (Fig. 13)
(viii) Covid-19 confirmed as a Bio-weapon: Readers of my weekend muse would have been alerted as early as May 2021 that the Covid-19 virus was a bio-weapon using a patented PRRA (Proline-Arginine-Arginine-Alanine) chimeric viral insertion technology developed by Dr. Ralph Baric. The whole insidious setup and family tree was presented at the time as (Fig. 14).

More than 3 years after my piece, Dr Robert Redfield, a former Director at the US Center for Disease Control finally stood up and disclosed the same story as I did. (Fig. 15). A bit late but nonetheless helpful for a closure of the whole sad saga.
(ix) 
Mystery of US Commerce Secretary candidate Howard Lutnick, Cantor Fitzgerald, Tether Stable Coin and Bitcoin: In his Presidential Campaign, Donald Trump at various times has made suggestions that the US Federal Debt can be paid off by Bitcoin. (Fig. 16).
This is not a mad man talking but a con man at his prime judging by his cabinet appointment and the runaway price of Bitcoin. My best effort to decipher this cryptography is summarized in the following paragraphs:

(a) The largest pair trade in Crypto trading is Tether/Bitcoin meaning most of the bitcoins bought and sold were not for cash but for a stable coin called Tether. Tether has a 70% market share in the stable coin crypto universe. (Fig. 17)


(b) What is a Stable Coin: A stable coin is a type of cryptocurrency that aims to maintain a stable value by pegging its value to a reference asset, such as a fiat currency, commodity, or another cryptocurrency. The goal is to provide a stable alternative to the volatile prices of other cryptocurrencies, like Bitcoin. For Tether US, the value is pegged to its reserve and is stable at US$1 per coin. (Fig. 18)


(c) Investors felt more secure to hold trading liquidity in a stable coin like Tether than in a Crypto Exchange Wallet because of past fraud and theft at Crypto Exchanges.

(d) The value of US Tether is currently US$132 billion comprised as to 84% in US Treasuries, 4% in Precious Metals, 4% in Bitcoin and 8% in Secured Loans and other assets. (Fig. 19).


(e) Tether Limited is owned by iFinex, a company based in the British Virgin Islands which also operates the Bitfinex cryptocurrency exchange. The reserves assets of the stable coin Tether are held by a custodian called Cantor Fitzgerlad. Cantor Fitzgerald is one of the 25 Primary Dealers in US Treasuries and the largest Treasury broker in the world. The CEO of Cantor Fitzgerald is Howard Lutnick who was a contender for Secretary of Treasury but has now been settled as Commerce Secretary and also oversees US Trade Representatives Offices.

(f) 


Fig. 20 is a little complicated but potentially in a circular setup, Tether, Bitcoin and Cantor Fitzgerald has all the functions of the Federal Reserve and a Tether stable coin can be a substitute for the dollar.  Both are backed by nothing except irredeemable IOUs from Uncle Sam. This derivative on a derivative has absolutely no value nor meaning. Like the Federal Reserve, the Reserve Asset of Tether is never audited for obvious reasons. Bitcoin’s value is now totally bound into a corrupt environment and is just a repeat of the Livre in the Mississippi Scandal of 1719.  (Fig. 21).

I suggest readers who are not familiar with the Mississippi Bubble to read the write up in Wikipedia using the link provided   
https://en.wikipedia.org/wiki/Mississippi_Company

(g) Oh, one more data point, a survey by Forbes on 157 Crypto Exchanges found 51% of bitcoin daily trading volume are bogus. (Fig. 22)


Rom 1:18  For the wrath of God is revealed from heaven against all ungodliness and unrighteousness of men, who suppress the truth in unrighteousness, 19  because what may be known of God is manifest in them, for God has shown it to them. 20  For since the creation of the world His invisible attributes are clearly seen, being understood by the things that are made, even His eternal power and Godhead, so that they are without excuse, 21  because, although they knew God, they did not glorify Him as God, nor were thankful, but became futile in their thoughts, and their foolish hearts were darkened. 22  Professing to be wise, they became fools, 23  and changed the glory of the incorruptible God into an image made like corruptible man—and birds and four-footed animals and creeping things. 24  Therefore God also gave them up to uncleanness, in the lusts of their hearts, to dishonor their bodies among themselves, 25  who exchanged the truth of God for the lie, and worshiped and served the creature rather than the Creator, who is blessed forever. Amen. 26  For this reason God gave them up to vile passions. For even their women exchanged the natural use for what is against nature. 27  Likewise also the men, leaving the natural use of the woman, burned in their lust for one another, men with men committing what is shameful, and receiving in themselves the penalty of their error which was due.