Out of Credit and at Wits End

 

The week ended on April 25, 2025, interesting news items to look at this week are:

1. Out of Credit and at Wits End: For the past 24 days, most of the chat groups on social media I am involved in have concentrated singularly on the US Tariff War. Media attention on the Ukraine war where a “once united Western front” gangs up on a nuclear superpower, the war on Palestein where tens of thousands unarmed defenseless civilians were mowed down in cold blood were all put on the back burner. Yet, as some of us fixed our eyes on the tragicomedy reality US circus and pondered what Trump may pull next. (Fig. 1)

Let’s not forget, however, all three wars are symptoms of the same deep seated problem. All reflected desperate men without solutions tried to turn the tide on a declining empire by laying blames on anyone and anything but themselves. Destitute men out of credit and at wits end. Allow me to restate below the known facts and the less obvious ones:

(i) US GDP on a Downward Spiral and sustained only by borrowings: US GDP growth in 2025 was 1.4% with a Federal Budget Deficit of 6.4% to GDP. In other words, the non government civilian economy contracted 5% in that period. Over the past 15 years (Fig. 2)

, from 2001 onward, all US GDP growth was sustained by Federal Budget Deficits and after 2008, the US economy would have shown a contraction without fiscal deficits. Thanks to DeepSeek, the data for this graph only takes one minute to gather instead of hours had I need to scan original published data. We need to prepare for an economic depression either because of the Tariff War or even if the Tariff War were cancelled by a failure to obtain fresh credit by US consumers and government alike.

(ii) $9 trillion Federal Debt due in 2025 with $6.5 trillion due in June 2025: (Fig. 3)

In 2020, Trump increased Federal Debt by $4.5 T to counter the pandemic locked down contraction. There were no storehouse within the US Treasury and every penny to counter the pandemic was borrowed. (Fig. 4).

This will now come home to haunt Trump’s second term.  Take a look at the UST Yield Curve in 2020 as compared with the Yield Curve as at April 25 2025 (Fig. 5).

The average interest rate in 2020 was 43.9 basis points and as at April 25 2025, the average interest rate is 422.1 basis points, an increase of 9.6 times. The Peter G. Peterson Foundation (funded by Peterson, a former US Secretary of Commerce in the Nixon Administration and co-founder of the Blackstone Group) projected in May 2022 US Government interest expenses will continue to climb very rapidly and will eclapse everything the US Govt wants to do. (Fig. 6).

This of course was not in anticipation of the Tariff mayhem besetting the whole world within the current period. One projection puts the US Federal Debt will be increasing at a compound rate of 8% annually ($32.6T as at April 24 2025) as against GDP Growth of below 2% ($27.7T). The Titanic will knowingly hit the iceberg and sink. The question is will you jump ship before it happens. Most Central Banks and the Global South have.

(iii) Happy Talk about Federal Reserve lowering interest rate: It is really a Hobson’s Choice (Fig. 7).

Drop Fed Funds Rate and see an acceleration of capital flight out of US and the exchange value of USD sinks or face a liquidity dry up of US Financial Market and a sever economic contracions. Either course of action would result in a USD default, the former defaults through hyperinflation and the latter via a liquidity crunch and failure to pay. Can the Fed embark on another QE like before ? Well, as at April 2 2025, the Federal Reserve already has a negative net-worth of $177.5 billion with a liability of $6,894.9 billion. (Fig. 8)

This came about because of QE as the Fed had to incur liabilities to pay above market prices to suppress Treasury yield. What is the point of repeating the same operation because a promissory note from the Fed as at today is already not worth the paper it is written on. Besides of the $6,723.4 billion of assets carried on the Balance Sheet of the Fed, $3,592.5 billion (53%) are duration Treasuries with a market value of 30% below book and any liquidation to repay withdrawals would mean another $1,500 billion loss. (Fig. 9)

The Fed’s assets falls way short of covering its liabilities and if really forced to liquidate, there would be any buyers around. On balance, political expediency calls for the old routine of kicking the can further down the road and hyperinflation through money printing is guaranteed.

(iv) How About the Full Faith and Credit of the US Government: As at end of fiscal year 2024, the US Federal Government has assets of $5.6 trillion and liabilities of $45.5 trillion (Fig. 10).

Even if US Government’s gold holdings of 8,133.5 tons is fully revalued to current market value, it would add less than $1T to total asset value, a drop in the ocean against $45.5 trillion in liabilities.

(v) US Gold Reserve: Scott Bessent in a speech at the IMF this week critized the World Bank and IMF of  “falling short,” and the USD centric global monetary system should be reinforced just like Bretton Woods. (Fig. 11).

Well, after WWII, US had 75% of the Global Gold Reserve and over 20,000 tons of the precious metal. But by 1965, some 20 years later, US had squandered its fortune down to just 8,000 tons by waging endless wars and that was the time when Charles de Gaulle thrown back every US$ in France’s possession and took back France’s gold. So in 1971, US defaulted with the Bretton’s Wood Agreement. I doubt if anyone in the world like a fresh game in which “Heads - US wins and tails - everyone lose”. As explained in previous Blogs, I never believe US still has the 8,133.4 tons of physical gold she claims because of the gold leasing and gold carry trade to prop the USD. (Fig. 12).

Hence, no audit of US gold reserves for more than 50 years.

So my friends, tighten your seat belt, put on your crash helmet and prepare for a hard landing in a brace position. I am sure for the pest few years, we witnessed civil unrest, Covid pandemic, market correction and inflation has already heightened your senses.

Joh 14:27  Peace I leave with you, My peace I give to you; not as the world gives do I give to you. Let not your heart be troubled, neither let it be afraid. 28  You have heard Me say to you, 'I am going away and coming back to you.' If you loved Me, you would rejoice because I said, 'I am going to the Father,' for My Father is greater than I. 29  "And now I have told you before it comes, that when it does come to pass, you may believe. 30  I will no longer talk much with you, for the ruler of this world is coming, and he has nothing in Me. 31  But that the world may know that I love the Father, and as the Father gave Me commandment, so I do. Arise, let us go from here. 

 

 

 

 

 

 

An American Saw Cut Double Barrel Shotgun and a Chinese Sniper Rifle with Silencer

The week ended on April 18, 2025, it is Easter Week, may all of us remember the sacrifice of one for the salvation of all. How ironic the world is at the brink of war  because all is  being asked to sacrifice for the supremacy of one.

1. An American Saw Cut Double Barrel Shotgun and a Chinese Sniper Rifle with Silencer: If you ask 100 people on their opinion of the likely outcome of the Trump trade war, you will likely get 150 different opinions because half will have a definitive view based upon their political filters and another half are tossed between mood swings of pessimism and confusion. Trump’s trade war is a composite war and its aim and objectives, despite the loud theatrics, are quite clearly explained by two of Trump’s lieutenants, Stephen Miran, Chairman of the Council of Economic Advisers and Scot Bessent, Secretary of US Treasury. Surprisingly in Miran’s and Bessent’s expositions, even the methods and tactics are spelled out publicly in advance versus a silent and unanticipated roll out of Chinese counter measures that are deadly in accuracy. My mental picture of the weaponry used by the opposing sides are the American Saw Cut Double Barrel Shotgun and a Chinese Sniper Rifle with Silencer. (Fig. 1)

The outcome of the conflict is quite predictable as soon as one grasp the characteristics of the weapons employed.

(i) Miran’s Demand on the World: One day after the  “Liberation Day” announcement that shocked the world, Miran made 5 demands on the world at large (Fig. 2),

(a) Pay the tariff to share US burden and don’t retaliate, (b) Stop unfair practices against US, (c) Buy US weapons systems, (d) Move their manufacturing to US and (e) simply give money to US Treasury. For all these US would continue to shoulder the burden of providing the universal good of USD as the only global Reserve Currency (already an exorbitant privilege) and maintaining Global Peace (actually endless wars).

(ii) Bessent’s Grand Strategy (Fig. 3

): 5 days after Liberation Day, two back flips and 3 escalations of tariffs against China later, Scott Bessent explained US Grand Encirclement Plan against China. The idea is to apply pressure on China’s trade partners and neighbors,  namely  Japan, South Korea, Vietnam and India to encircle and isolate China. Of the four targets, US might think Japan should be the easiest to deal with, as a defeated and occupied state of US since WWII, Japan has always executed US bidding. Yet any Japanese who read Miran’s demand and have some appreciation of the 1985 Plaza Accord, the creation and burst of the Japan Bubble Economy, the pain of the last decade and the despair of the lost generation would reject a perpetual subjugation of Japan to US Treasury. Reading between the lines, it is obvious that Japan is fighting back in her own ways. The subtle approach of sending lone Akzawa Ryosei, Minister of Economic Revitalization as envoy to US on Tariff Negotiations. Akazawa all be himself sat across the US Administration in full force with Trump, Bessent, Lutnick (US Commerce Secretary) and Greer (US Trade Representative). (Fig. 4).

Now anyone who have dealt commercially with Japanese knows, if the Japanese wants to deal, their consensus management style requires a big Japanese peers team and usually outnumber an opposing contingent of repetitiveness across a negotiation table. An absence of MITI, MOFA, MOF, MOD and JCB only means Prime Minister Ishiba is in defiance by dragging his feet, so to speak, trading time for space. Time which Trump does not have and it looks like Japan is waiting for the table to turn. Across the Pacific, Xi personally visited Vietnam amidst the tariff tensions and sequestered Vietnam to US. (Fig. 5).

Vietnam is famous for her Bamboo Diplomacy, was the first to visit Washington, offered an olive branch but of course cannot afford to give in to Miran’s bucket list. Vietnam then closed ranks with China before Bessent could penciled in a visit to Vietnam for further negotiations.

(iii) Why my Saw Cut Double Barrel Shotgun Analogy for America: Allow me here to state the obvious - a Saw Cut Double Barrel Shotgun is loud, empty two buck-shots simultaneously and then need to reload, useful only  at short range and indiscriminately hurt everyone in its vicinity (one at US Consumers and the other -  US Businesses in manufacturing, wholesale, distribution and retail.) Hopefully when all foreign countries see the blood and gore inflicted upon all US citizens without mercies, they will be scared and kowtow to King Trump.

(iv) China’s Sniper Rifle with Silencer - Whilst the Western MSM are obsessed with the ferocity of tariff increases lobbed by Trump onto China, China has quietly fired multiple rounds of lethal precision sniper bullets against the US without the US Administration and Congress even be alerted as to being hit.

(a) Bi-lateral Trade Deals with EU, Canada, Australia and Spain - Within a fortnight since Liberation Day, China has displaced oil imports from US to Canada (a 700% increase), displaced LPG imports from US to Australia (a $1.5 billion deal), displaced Pork imports from US to Spain and shook hands with EU on zero tariff EV exports into EU.

(b) Circumvent USPS sanctions on small parcels from China and Hong Kong by making Dubai her bulkbreak drop shipment hub. Even before any US Administration began to erect barriers against China e-merchants, a Mongolean horde of Yiwu merchants (Yiwu is the supply hub of all Chinese small product value merchandise for domestic and international trade) has already been established in the Dubai Traders Market with 1,600 showrooms and 324 warehouses. (Fig. 6).

Since UAE is indispensable to US in terms of Military, Energy and Financial, US has to carefully weigh sanctioning UAE on all small parcels below $800 or to be cutoff from the three pillars which US relies on for her global hegemony. The amazing thing about this magician trapdoor in Dubai is the platform is most useful to Alibaba, Ali Express, Shein and Temu (China’s e-commerce platforms) but inappropriate for Amazon and Walmart which operate their own consolidation and logistics channels for direct imports from China. The coming season’s shipment of Christmas decorations and artificial Christmas trees to US would all be through Muslim countries in the Middle East.  

(c) Kill Shot on Boeing: China has 67 different airlines and at the Peak China constitutes 20 to 25% of Boeing’s civil aviation sales. When China cuts off deliveries of 130 jets from Boeing, each Chinese airline on average would only need to adjust one or two aircraft but for Boeing a freeze on delivery is a kill shot. (Fig. 7)

(d) Rare Earth Embargo: China has a near monopoly on rare earth and by an embargo against US, China is hitting 5 strategically important manufacture segments, motor vehicles, aerospace and aviation, semiconductors, defense and new energy. China has withheld playing this card until the fullness of time. This checkmate move is designed to trump Trump. (Fig. 8)

(e) Gordian Knot - Re-designation of Country of Origin of Semi-conductors: The manufacture process of electronic chips can be broken up into design in one country, wafer foundry in another, advanced semiconductor packaging in a third (Advanced semiconductor packaging involves integrating multiple chips using high-density interconnects to improve power efficiency, speed, and miniaturization. It goes beyond basic 2D packaging to include 2.5D and 3D packaging techniques) and testing in a fourth. As part of the Trade War with US, China stipulate the Country of Origin means where the original wafer is formed. This move effectively captures American foundries like Intel and Global that they must pay Chinese tariffs if they are embedded in US products and components on their eventual exports back to US. Just try to disentangle that within Trump’s remaining term.

(f) Open Source Code - DeepSeek and Unitree Robotics: We have shared this before so no further comments required.

The essence of war is not just to inflict pain but pain beyond a threshold which your opponent could bear.  I am saddened that the quest for a continued World domination would result in hurting so many people in so wide a geographical area and over a very long period of time. My prayers is may the Spirit of Resurrection lift all of us out of this tragedy as Christ’s crucifixion is salvation for all those who look up to Him.

Matthew 5:3  "Blessed are the poor in spirit, For theirs is the kingdom of heaven. 4  Blessed are those who mourn, For they shall be comforted. 5  Blessed are the meek, For they shall inherit the earth. 6  Blessed are those who hunger and thirst for righteousness, For they shall be filled. 7  Blessed are the merciful, For they shall obtain mercy. 8  Blessed are the pure in heart, For they shall see God. 9  Blessed are the peacemakers, For they shall be called sons of God. 10  Blessed are those who are persecuted for righteousness' sake, For theirs is the kingdom of heaven. 11  "Blessed are you when they revile and persecute you, and say all kinds of evil against you falsely for My sake.12  Rejoice and be exceedingly glad, for great is your reward in heaven, for so they persecuted the prophets who were before you.