Setting the Stage for the End Game

The fortnight ended on October 10, 2025, interesting news items to look at from the past two weeks are:

1. Setting the Stage for the End Game: One of the most commonly used concept in framing the clash between Western Hegemony and the rise of the Global South is the Thucydides’s Trap. In the 16 cases cited by author Professor Graham T. Allison at the John F. Kennedy School of Government at Harvard University, 12 ended in war. (a nominal 75% chance of a kinetic war - Fig. 1).

While I give credit to Allison’s insight and work, Allison falls short in only focusing on a short 500 years of history with a Western orientation but missed 90% of the rich record of human civilization and its tragedy and hope found in the changing tides of ancient cultures and empires. Back in the days of my early Blog writing, on February 15 2019, I used the “Chu Han Contention” in BC 207 (楚漢之爭) to describe the end game between the conflict of US and China. (Fig. 2)

Why? Because what we are witnessing today is much more than a two nation contest, typical in a Thucydides narration, but a rivalry between 30-40 nations in the Western Hegemony, 130-140 nations in the Global South and 50-60 Swing States. I depict US as the mighty noble warriors of Chu and China as the grass-root friendly neighbour Han.  In building up my model and a calling out the end game, I believe US will try to encircle China but China will initially show extreme restrain and weather the jabs on a long war of attrition. This calls for China to anticipate, parry and roll along as the opponent dance around with air punches. At a certain point of exhaustion of US, China will use momentum, torque and leverage to throw off the adversary for a knockout. My thesis is simple, since Chairman Mao Tse Tung, the war philosophy of Chinese leadership can be summed up by a couplet hung outside the memorial of the famous Chinese strategist Zhuge Kongming (諸葛孔明) . (Fig. 3)

The supreme art of war is to subdue the enemy without fighting through a conquering of minds (不戰而屈人之兵). After a long 7 years of restraint and judging the times, China has now moved on the offensive.

(i) Technology - On Thursday China announced a further restriction on exports of rare earth and specialist technological equipment used to refine rare-earth metals. The announcement means that foreign companies will need to obtain special approvals from Beijing if they wish to export rare-earth magnets and certain semiconductor materials that have at least 0.1 percent heavy rare-earth metals from China. (Fig. 4).

This move will totally decimate the high end semiconductor lead of the West as the regulation applies to 14 nanometer nodes and below and not just in manufacturing but also related equipment, materials, and even research and development for these advanced semiconductors. In one fell swoop the design in US, the equipment from Europe and the foundries in Taiwan and South Korea are all caught and frozen. China has carefully cultivated this kill shot for decades because it was Deng Xiaoping in 1992 that fleshed the potency of this tool. (Fig. 5).

In retaliation Trump blasted over social media that US will slap 100% tariff on China and impose Export Controls on any and all critical software. (Fig. 6).

The US Stock market reacted with a drop of $1.2 trillion in value within minutes. (Fig. 7).

What goes around comes around, US was merciless to take down Toshiba with regards to its threat on the US semiconductors in 1986 and France’s Alstom in 2013 because of rivalry with General Electric and 2018 with Huawei, China finally pull this card and US will be totally defenseless. What can the administration do but a tweet on social media to tax her own citizens some more. No stealth, no fighter jets and bombers , no missiles, no rockets, no drones no radars, no advanced ammos and no mobile communications.

(ii) Military - China’s 93 Military Parade was a show stopper. Not only was the latest weapon systems on displayed, the embedded message was clear. China would not first employ nuclear weapons but no nation on earth could have a second chance of a nuclear strike against China either. This completely shattered a US delusion that the larger number of US nuclear warheads would deter China from a counter strike against a US preemptive nuclear strike. Pentagon has since revise its pacific doctrine to pivot towards homeland security against the Administration’s namesake change from Department of Defense to Department of War. Behind the recent all Generals and Admirals meeting, is a military retrenchment program to free up resources for weapons upgrade and catch-ups to China. Open source intelligence indicates that out of the 39 active Four Stars Generals, 11 will be retrenched. However the big bucks will be in the withdrawal of military bases. Out of 11 unified combatant commands based on geography and functions,  Africom will likely to the the first on the chopping block. Funding for Eucom will be stuffed down the throat of Europeans among NATO members and as things go in the Middle East, the future of Centcom is anybody’s guess. This is the exhaustion signal that China is waiting for. To rub salt to the wound, China this week show cased yet another black dual use drone tech.  In a single container with 12 automated racks, the system can simultaneously launch all 12 racks each equipped with 54 quadcopters making a total of 648 drones under a single command controller capable of directing a maximum swam of 11,198 drones. Can Ukraine, NATO, Pentagon, IDF, Mossad, MI6 and CIA match that without chips and Chinese drone components. (Fig. 9).

Below is the video on the subject. (Video).

(iii) Alternate International Trade Settlement System: The Shanghai Gold Exchange (SGE) is establishing strategic offshore gold vaults in key global financial centers, including Hong Kong, Singapore, Zurich, and Dubai. This system supports China’s trading settlement system using local currencies and period end net balance settlement using gold as a country’s reserve asset. The Hong Kong facility will be opened in 2025 and its design capacity is 2,000 tons of gold with today’s market value of US$233 billion, quite capable to handle many country’s trade balance with China. (Fig. 10).

(iv) Large Scale Commodity Trade Settlement in CNY: BHP agreed to settle 30% of iron ore shipment to China to be priced and settled in CNY after China suspended all US$ denominated shipment from BHP. (Fig. 11).

The consolidation of purchasing power of Chinese Steel Mills took a decade to accomplish and finally Xi has overcome factional interests and gain an upper hand against the divide and conquer tactic so perfected by the Brits. This is an important move against the derivatives driven pricing power of commodities of the Anglo American Empire. Gold has fallen, then oil, grains and now base metal. We are going to see an accelerated de-dollarization as a result. (Fig. 11)

China has accomplished most of its objectives in the Made in China 2025 plan. This called for China to be near self-sufficiency in medium to high tech manufacturing. The next 10 Years objective will be China Standards 2035 and envisions China to take a leading role in establishing standards for scientific and technological research. We have entered a multi-polar world with or without acquiesce from the existing Western Hegemon. My prayers is that this fourth turning would be smooth and without bloodshed. Only God can determine the fate of mankind in this crossroad. Will you join me in this prayer.

2. First 10 days in October financial market performance as follows (Fig. 12)

Silver (+7.48%), Gold (+4.18%), Ruble (+1.56%), DXY (+1.05%), Bitcoin (+0.03%), Rmb (-0.21%), Copper (-0.46%), GBP (-0.57%), Euro (-0.97%), Shenzhen Composite Index (-1.89%), JPY (-2.15%) S&P 500 (-2.47%) and  Oil (-6.30%).

All signs of a global economic slow down have appeared with major problems in France, UK and Japan as all 3 markets entered a debt death spiral. Gold broke $4000 per ounce and Silver broke $50 in a rapid ascend. This canary in the coal mine is a clear omen of market panic. SOFR Volume broke $3 trillion at the end of September and the first few days in October as the US Federal Government continued to suck liquidity from the private sector through fiscal deficits. The latest Fed minutes released indicates Fed is very troubled by sticky inflation and maintain a more restrictive outlook. All the tariff tantrum and arbitrary supply interruptions would mean no one is optimistic concerning the economy. I maintain my outlook for hyperinflation towards the end of 2026. Trump talked about peace, peace when there was no peace. Venezuelan opposition leader María Corina Machado is the laureate of the Nobel Peace Prize for 2025 in Oslo, Norway. A graduate of Yale University and possibly a stooge for another color revolution in Venezuela.

Jeremiah 6:13  "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. 

 

Choke Points, Stranglehold, and Self-Asphyxiation

The week ended on September 26, 2025, interesting news items to look at this week are:

1. Choke Points, Stranglehold, and Self-Asphyxiation: Since WWII, control of energy production and energy transit choke points has been the most important US Foreign Policy. Hence, the US Energy Information Agency (EIA) has meticulously tracked where and how oil and gas are produced and moved. (Fig. 1).

With the default of the Bretton Woods Agreement and the creation of the Petrol Dollar to maintain the Dollar Hegemony, US has doubled down to ensure she stays as the apex predator. Non-submissive regimes are changed (Iraq, Libya, Venezuela and Iran), war is waged (NATO proxy war with Russia) without cost considerations so that America could feel safe that she remains as numero uno. Eighty years has come and gone since WWII and finally the punch bowl party for America has come to and end and even the White House realized her days are numbered. The following are some of the more recent event markers.

(i) Saudi Arabia/Pakistan Strategic Mutual Defence Agreement: From the Brookings Institute - Even those accustomed to dramatic developments in the Middle East and South Asia were caught off guard by the announcement last week by Saudi Arabia and Pakistan of a new “Strategic Mutual Defense Agreement.” The pact, formalized with considerable pageantry in Riyadh on September 17 during Prime Minister Shehbaz Sharif’s visit, went far beyond the platitudes that typically characterize cooperative security announcements. It included a sweeping commitment to mutual defense, and although the text was not released, some officials on both sides—including Pakistan’s own minister of defense—intimated that the deal involved the provision of extended nuclear deterrence. (Fig. 2).

The link to the Brookings’ analysis is given here https://www.brookings.edu/articles/the-signal-and-substance-of-the-new-saudi-pakistan-defense-pact/ . I just want to highlight, as China has given her full backing to Pakistan and recently agreed to arm Iran with Air Defense Systems, the Saudi Arabia/Pakistan Pact will have a domino effect on power play in the region because by association China in effect is backstopping Pakistan in the deal and is seen as the stabilizing force.

(ii)  Poland reopens its border ports with Belarus: At the behest of UK, Poland applied a stranglehold on the China-Europe railway through her border checkpoint with Belarus. On September 12, the Polish government suddenly announced that it would " indefinitely close" all border crossings with Belarus thus poses a serious threat to the China Europe Rail Link. (Fig. 3)

The China Europe railway links 128 Chinese cities with 26 European Countries and 229 European cities is the most important overland trade route between China and Europe. Since its inception the rail link carried $450 billion worth of merchandise between the two regions. The rail cut short 40% of time it takes for container ships (from 40 days through Cape of Good Hope to 25 days) and cost is 5 times lower than air freight. Poland and her UK backers thought this stranglehold would force China to withdraw her trade with Russia. The choke hold only lasted for 12 days because China had plans B,C & D already lined up to guard against such possibilities. On the afternoon of September 22, a giant container ship called "Istanbul Bridge" completed the loading operation at the port of Zhoushan in Ningbo, and its destination was Europe. But it is not a traditional route, but a new, game-changing channel - Central Europe "Arctic Express". (Fig. 4).

The Arctic Sea Corridor has been in planning for quite sometimes and all the details worked out at the September 2025 Shanghai Cooperation Summit between Russia and China in Tianjin. The Arctic Sea Route further shorten the time for a container to reach Europe than by rail by almost one third. This re-routing together with other rail diversions would put 50,000 Polish jobs at risk and loss of economic value annually of $50 billion to Poland. (Poland 2024 GDP is $914.7 billion). Face with a possible permanent redundancy by the Chinese move, Poland immediately backed down and reopens her border.  Just how many attempts by incompetent politicians to sanction and embargo the Global South before they realized weaponizing trade is a double edged sword and very dangerous to weld. Whilst on the subject of the Arctic Route and the Arctic Region, the attached map shows why the obsession of Trump to make Canada its 51^st State and a takeover of Greenland. (Fig. 5).

With an anticipated growth in merchant fleet through the Arctic, so lies an increased risk of undetected submarine penetration to the Atlantic nations.

(iii) US Confrontation with Venezuela: The Trump administration has declared the start of a military campaign against Venezuelan drug cartels, claiming cocaine smuggling by the “narco-terrorists” poses an imminent threat to the United States. On September 2, Trump announced that U.S. forces struck what he claimed was a Tren de Aragua boat trafficking cocaine to the United States, killing eleven people. To every political and military analyst, the US attack was under a false pretext because (a) a 12 meters long boat with a 200 -horsepower outboard motors cannot travel 3,000 Km from Venezuela to US. (b) Venezuela was never classified as a major narcotics producing country. (c) The boat and passengers posed no threat to the US Naval Vessel. This is political provocation and murder under broad daylight and another example of American Exceptionalism with impunity.  (Fig. 6)

Venezuela has the world’s largest proven oil reserve (303 billion barrels) and has suffered relentless attacks from US spanning decades.

(iv) US War Secretary summons military leaders to Virginia mystery meeting: We conclude this week with news of US summoning all top military generals world wide to a sudden meeting in Virginia without an agenda to the invitees. (Fig. 7).

Whilst US Media downplay the unusual meeting as an opportunity to rally the troops (Fig. 8).

 Independent military analysts argued that such a meeting would most likely be a prelude to military budget cuts, closure of outlying military stations and summary dismissals of generals. Last week we reported on a strategic change of direction of Pentagon to pivot to Homeland security and downplay the “China Threats” as there is no money for Washington to build the Golden Dome Defense, renew its aging Naval Fleet and to meet the aerospace military techno challenge of China. Trump’s reluctance and inability to continue as the Global Police is already plain for all to see. With DOGE a failure, a recalcitrant Federal Reserve and a Western duration Bond rout, the axe has finally come to Pentagon. We will know by next week if the knives will be out.

2. Gold is for War and Bitcoin is for Flight: Gold and “Digital Gold (Bitcoin) has begun to diverge. Understand the different user of these two instruments and one may even prosper at times of adversity. The week financial market performance as follows (Fig. 9):

Silver (+7.19%), Oil (+3.49%) , Copper (+2.84%), Gold (+2.09%), Shenzhen Composite Index (+0.87%), DXY (+0.55%), Ruble (+0.15%), S&P 500 (-0.24%), Rmb (-0.25%), Euro (-0.42%), GBP (-0.51%), JPY (-1.05%) and Bitcoin (-5.08%). 

This week saw a weakening of the US Credit market as the subprime auto loan originator Tricolor dressed up as AAA failed in eerie similarity to the fiasco in 2008. JPMorgan Chase and Barclays were also potentially exposed. (Fig. 10).

The entire US Treasury Curve shifted upwards despite the Administration’s desire to have another 150 basis point rate cut before year end. (Fig. 11)

After this week, the frequency of this Blog will be reduced from weekly to fortnightly because I felt I am getting too old to keep pace with everything happening so fast and so unexpectedly. My friends, you should take at easy as well.

Psalms 128:1  Blessed is every one who fears the LORD, Who walks in His ways. 2  When you eat the labor of your hands, You shall be happy, and it shall be well with you. 3  Your wife shall be like a fruitful vine In the very heart of your house, Your children like olive plants All around your table. 4  Behold, thus shall the man be blessed Who fears the LORD. 5  The LORD bless you out of Zion, And may you see the good of Jerusalem All the days of your life. 6  Yes, may you see your children's children. Peace be upon Israel! 

 

 

The Fall of MICIMATT (The Military-Industrial-Congressional-Intelligence-Media-Academia-Think-Tank Complex):

The week ended on September 19, 2025, interesting news items to look at this week are:

1. The Fall of MICIMATT (The Military-Industrial-Congressional-Intelligence-Media-Academia-Think-Tank Complex): In a speech of less than 10 minutes, on January 17, 1961, President Dwight Eisenhower delivered his political farewell to the American people on national television from the Oval Office of the White House. Those who expected the military leader and hero of World War II to depart his Presidency with a nostalgic, "old soldier" speech like Gen. Douglas MacArthur's, were surprised at his strong warnings about the dangers of the "military-industrial complex." (Fig. 1).

It took a long 65 years to see the US Military-Industrial Complex finally collapse under its own weight in September 2025. A long 65 years because the beast in the intervening period has morphed to encompass a vast conglomerate of elite vested interests that has sucked the entire economies of the west dry and began auto-cannibalization. I am sure historians will devote reams of studies on the rise and fall of MICIMATT but here at this Blog I am primarily interested to identify directional changing markers and actionable positioning as a matter for self preservation.

John Connolly, the 61^st United States secretary of the treasury once said “The US Dollar is our currency but your problem” has candidly pointed out the absurdity of the present world system lies with American Exceptionalism. (Fig. 2).

American exceptionalism is the belief that the United States is either distinctive, unique, or exemplary compared to other nations. I have enunciated many times in this Blog, US could get away with a lot of bad behaviour only because of TINA (“There is No Alternative”). Now one by one, the facade of TINA is torn apart and the emperor is found naked.

(i) The Military-Industrial Complex (“MIC”): The May 7 2025 Pakistan-India air combat was a rude awakening to both buyers and sellers of advanced weapon systems. Pakistan was forbidden by US to use the F-16 she bought for self defense and the integrated Chinese J-10C, PL-15E, HQ-9 and ZDK-03 scored a perfect 6-0 against Europe’s best Rafale and other fighters. The final straw was when Israel struck Qatar last week and Qatar's air defense systems all went silent. (Fig. 3).

The overt ban and covert sabotage has done irreparable damage to the US-MIC. No country from this point, except may be US vassal states, would dare to put their trust to align with the US-MIC. The new realignment would naturally fall with the Global South and principally with China and Russia. The implication is more than just weapons trade and money flows because with weapon system purchases it will come with maintenance, training, cooperation and alliances.

(ii) Intelligence - Coming back to the attempted assassination of HAMAS negotiators in Doha, the fact that all HAMAS leaders escaped indicated there was a serious Mossad-CIA-Pentagon intelligence leak. (Fig. 4).

What was not commonly reported in Western MSM was all the HAMAS negotiators vacated the bomb site to another building but left their cell phones in situ.  (Fig. 5).

(iii) Media - We all know Tik Tok has threatened US Social Media giants like Facebook, Instagram and Youtube because Tik Tok does not politically censor its contents. Well after the Trump Xi phone call on Friday, Trump claimed there is a deal to Americanize Tik Tok, REALLY? Well the establishment mouth piece Politico does not think so. (Fig. 6).

(iv) Big Tech - This week Intel may be bailed out financially after US Government and Nvidia pumped billions into the company. (Fig. 7).

However it is no closer to be able to make high end chips in the same league as TSMC, Samsung or SMIC. In twisting Nvidia’s arms to invest in Intel, White House inadvertently slam shut a door for Nvidia against the world’s biggest semiconductor market - China. China has been user friendly to American Corporations but has been extremely cautious against fascist corporations. Previously China has declined Nvidia’s watered down H20 AI chips and this week Huawei just announced plans to roll out the world’s most powerful AI chip clusters. (Fig. 8).

All this is on the back of Huawei and SMIC will shortly mass produce 3nm chips without Western monopolistic controlled EUV Lithographic machines. (Fig. 9).

Unquestionably, TINA no more.

On another front, the jury is still out on AI modelling between various US and Chinese contenders. Herewith one of the newest technical analysis from the pros. (Fig. 10)

(v) The Simplistic View of the End Game: One of my favourite Fund Manager, Luke Gromen asks (my paraphrase) Who backs the Dollar Hegemony? The US Military. Who backs the US Military? The US Military-Industrial Complex. Who controls the supply chain to the Military-Industrial Complex? China with its rare earth, parts and components. Just three critical minerals which China has a near monopoly would mean (a) Germanium (90%+ controlled by China) - Pentagon’s estimate is 12,277 parts and components have to be sourced from China (b) Gallium (98%+)  - 11,351 parts and components are China dependent and (c ) Antimony (50%) - 6,335 parts and components are China dependent. Without rare earth and components and parts from China, US will not be able to produce, maintain and definitely not in scale, rockets, missiles, radars, stealth coating and her most advanced weapon systems. And US wants to target China as its number one adversary?

Last week a National Defense Strategy was tabled by Pentagon to deprioritise 'China threats,'  to focuses on Western Hemisphere. (Fig. 11).

It was Winston Churchill who said “America will always do the right thing - after exhausting all the alternatives”. (Fig. 12).

This time I am afraid it will be too late.

2. Follow The Money: May things have happened in less than 3 weeks in September. Let’s see how events have played out in the financial markets. (Fig. 13)

Silver (+8.61%), Gold (+6.87%), Bitcoin (+5.82%), S&P 500 (+2.97%), Shenzhen Composite Index (+2.76%), Copper (+1.48%), Euro (+0.44%), Rmb (+0.27%), DXY (-0.20%), GBP (-0.24%), JPY (-0.62%), Oil (-1.81%) and Ruble (-4.35%).

On the week after the long awaited Federal Reserve cut in Fed Funds rate of 25 basis points (with expectation of two more cuts within 2025), there was no jubilation in the US stock indexes but an acceleration into hard assets. The US Dollar Index witnessed further weakness but was salvaged by even worse performance in the British Pound and Japanese Yen.

Superficially, the Treasury Yield Curve behaved as is expected with a lowering of yield across the entire spectrum of maturities after the Fed rate cut. (Fig. 14).

What is hidden is US Treasury is still enjoying low rate notes and bonds issued in the period of QE and ZIRP. The average interest rate paid as of September 30, 2024 was a low of 3.32%. according to US Treasury Fiscal Data. As these low rate paper matures, interest rates to be paid will at least be 30% higher on a much bigger debt base. (Fig. 15).

In FY 2024/2025 interest expense plus mandatory payments like social entitlement programs, Medicare and Medicaid ran at about 80% of Federal Tax Receipts. With a continued $2 trillion budget, stock market AI valuation hyped into stratosphere and business disruptions by Trump tariff tantrums, I have previously stated and am maintaining my forecast that by end 2026 at the latest US will default or print to hyperinflation.

Every night the US money market is playing musical chairs on a scale of $2.9 trillion to square off banks and hedge funds that are short in funds - the SOFR inter-bank arrangement (Fig. 16).

Allow me to repeat the danger zone will be when SOFR to M1 approaches 30%. (Fig. 17).

There is also no redemption of the system using Stable Coins. The Genius Act and Stable Coins is a con game to benefit crony coin issuers. No substantial investor in their sane mind will part with their collaterizable assets in favour of a non-bankable token. Jim Richards said Stable Coin is just an unregulated money market fund. In the 2008 GFC, when the MM Funds broke the buck, the entire financial market seized up because assets in the MM Funds were corrupted by subprime papers fictitiously marked as investment grade. Stable Coins will be worst because there is no audit, no regulations and no prudential supervision whatsoever.

Let me conclude on a more optimistic note, tension between US and China should ease. After all  no nation is to be trusted farther than it is bound by its interests. (Fig. 18).

Matthew 5:25  Agree with your adversary quickly, while you are on the way with him, lest your adversary deliver you to the judge, the judge hand you over to the officer, and you be thrown into prison. 26  Assuredly, I say to you, you will by no means get out of there till you have paid the last penny.