Old Dogs and New Tricks

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

Old Dogs and New Tricks: The phrase "you can't teach an old dog new tricks" is a common idiom that suggests older individuals are unwilling or unable to learn new things. I found this statement quite accurate in application to the present geopolitical tensions. My thesis is that sitting hegemons are not incapable but unwilling to learn new tricks. (Fig. 1).

A whole nation is decimated because destiny changing decisions are made by politicians tied to a short term election cycle.  In most circumstances the destiny of man, family, society and nations are only changed with small steps consistently taken over a long period of time.

(i) Negotiating from a “Position of Strength”: The US China 2021 Alaskan Talk was the first time China responded forcefully that United States did not have the "qualification" to speak to China from a position of strength, asserting that China would not be lectured by the US. (Fig. 2).

If one understands Chinese culture, Chinese believes in “文無第一，武無第二” [meaning “In literature, there is no clear second place; in martial arts, there is no undisputed first.”], would imply the direct rebuke signals China is ready for a full spectrum combat with US. We know in competitive spots, any challenger to a long reigning champion would have studied and practised every move that the champion would mak.e In a lethal combat between nations, a serious national leader/challenger would not show his hand without first weighing out how long and how much it would cost in a long war of attrition against a champion coalition. Xi and Putin are such leaders. By comparison Trump, Starmer, Macron, Merz, Von der Layen and Ishiba could only react because their tenure of office prevented them to preplan for any new weapons and must exhaust all the chips inherited from their predecessors.  Chips that their adversaries have for years observed and calibrated before stepping into the ring. We also took notice for the challengers, they were keenly aware of the champions self confidence of “escalation dominance” and purposely delayed their defence tactics or roll out their attack armories to psychologically frustrate the reigning regime’s sense of invincibility. Let’s take a look below various examples.

(a) NATO Proxy War against Russia: By most measures the Ukraine Russian war should end by early autumn if not late summer 2025 with a collapse of Ukraine. This is a far cry from the early MSM propaganda that the Russian economy would collapse after a most draconian Western financial and economic sanction. (Fig. 3).

On July 17^th, EU will adopt the 18^th Package of sanctions and 5 days earlier the US threatened the world with secondary sanctions against countries who trade with Russia and Iran. (Fig. 4).

On the economic score board since Feb 24 2022 to today, the Russian Ruble has not impaired against EUR, USD, GBP and had outperformed CNY, JPY, KRW and Brent (Fig. 5).

Militarily speaking the entire NATO coalition has emptied their arsenal yet failed to match Russia’s military serge capacity.  

(b) Encirclement Against China: The French “Charles de Gauile” Carrier battle group this week sailed through the South China Seas claiming freedom of navigation and a show of force to protect France’s “national interests”. No sooner had the group arrived they were greeted by 40 PLA battle ships and countered the much heavier weight Chinese Carrier “Shandong”. It was an uncomfortable Bonjour by the Chinese and the French avoided the very sensitive Taiwan Strait. (Fig. 6).

Again Chinese culture calls for “武尚文崇” (Valuing Martial Prowess, Revering Civil Culture), The etymology of the word “武”(Martial) had its root meaning in two words “止as in  Stop and 弋as in Aggression” hence China is perfectly sincere and comfortable in her NFU (No first use) of nuclear weapons since 1964. China’s military philosophy  is “圍而不打” (“Besiege Without Engaging” meaning to surround an enemy but deliberately avoid direct assault thus applying psychological pressure and avoid unnecessary casualties at the same time. Ever wonder why China has lately unveil a series of deterrent high tech weapons in all realms of combat. The Uncrewed Surface Vehicle  JARI-USV-A capable to launch drones and missiles as a deterrent against enemy surface vassals or submarines (Fig. 7),

the HQ16 array of 12 surface to air defense missile launch (double the capacity of HIMAS to neutralize saturation drone swam), this design is to counteract US MQ-9 Riper Drone which were announced to be positioned by US in South Korea for the first time. (Fig. 8) .

Directed Energy Defence System W-30 (The LW-30 laser defense weapon system can intercept unmanned aerial vehicles, guided bombs and mortars. (Fig. 9).

But what send shivers to enemies of China are Chinese Drones which have already far outdistanced all potential rivals. China holds a 90% global share in critical drone components including batteries, motors, airframes, radios, cameras and flight controllers and on top China has already launched unmanned drone mother ship surface vassals and aerial drone swam carriers.(Fig. 10 & 11)

(ii) Freeing Up Resources for War: For Westerners, few would understand why the Chinese call Trump 川建国 - Trump the builder of the Chinese Nation. In the US, war is financed by borrowing and printing of currencies. It is unsustainable as US is still paying interests on borrowings raised to finance WWII. In China, once hostility is made evident by Tech and Trade War in Trump 1.0 in 2018, China immediately took steps to prick the real estate bubble in 2018 and the speculative shadow banking system in 2020. The redirection of national resource is very clear through new bank lending in those years. (Fig. 12).

I have shown this chart in my previous Blog dated May 24, 2025. Whilst on the social platforms there are daily lamentations by citizens on how hard life came to be with asset price deflation, unemployment and slow economy. The reality is China’s GDP still grew at 5.2% in Q2 2025 and key resources like steel, power, labor and other important resources have been silently redirected into war preparations. In 2018 steel consumption for construction was 32% of China total production but by 2024 it was down to 10~12%. Despite the demand shrinkage in construction, total steel production in China actually has gone up from 928 million tons in 2018 to 1,005 million tones in 2024. Guess who took up the slack in demand for steel re-bars. If by now you guessed the pick up in demand has gone to battle ships and armory production and high end products that supports national cashflow, you guessed right. From a holistic point of view, what is wrong with taking away the punch bowl and use the bowl to carry much needed water to those on the front line of war. The latest estimate is China still has 3 billion square meters of residential properties and at an average of 40 square meters living space per person, available vacant space is still good for 75 million Chinese at a time of declining population. After all, it was in December 2016 that President Xi said “房子是用来住的，不是用来炒的” (meaning “Houses are for living, not for flipping”. ) (Fig. 13).

A second confirmation of China’s war resource redirection came from electricity generation which was 7,100 TWH in 2018 and grew to 10,000+ TWH in 2024. All these growth and economic structural change is accomplished with no inflation impact (China inflation rate is 0.1% in June 2025).

Whether it is an old dog or a young puppy, we need to be differential between its bark from its bite. The bark may be annoying but it is the bite that could give you serious damage.

Proverbs 17:27  He who has knowledge spares his words, And a man of understanding is of a calm spirit. 28  Even a fool is counted wise when he holds his peace; When he shuts his lips, he is considered perceptive. 

Quadrilateral Dissipates into Singleton

The week ended on July 18, 2025, interesting news items to look at this week are:

1. Quadrilateral Dissipates into Singleton: The Quadrilateral Security Dialogue (Quad) is a strategic partnership between Australia, India, Japan, and the United States promoted by Joe Biden in 2021. This partnership focuses on promoting a free and open Indo-Pacific region, enhancing maritime security, and addressing shared challenges like cybersecurity and economic security. In reality Quad is a US design to encircle China because no definitive investments under the partnership were ever made between September 2001 to June 2025. (Fig. 1).

Thanks to Donald Trump’s MAGA, when alpha begins to threaten and feed on the minions, soon enough, all the minions flee. (Fig. 2)

(i) Australia - Australia Prime Minister Albanese this week’s visit to China has demonstrated that Western democracies can befriend China despite ideological differences. (Fig. 3).

Importantly when US Defence Under Secretary Elbridge Colby wanted Australia and Japan to "pre-commit" to joining any US conflict over Taiwan drew a swift rejection from Albanese. Albanese was wise to invoke the “strategic ambiguity” that US deployed and shut US up, cause if Alpha is unwilling to show his hand, why would minions be forced to cause self harm.

(ii) India - Ever since India obtained independence from Britain in 1947, India has always regard herself as a more powerful nation than China. It is only after the recent defeat by Pakistan and choke hold by China on rare earth and potentially other critical ingredients and components, that India came to terms that not only has China moved on but out distanced India by leaps and bounds. This week’s India FM revisited China after 5 years of absent and pragmatism set in. (Fig. 4).

How quickly one could fall from grace as a trophy for alliance, between the East and the West, to a spent pawn in the game as India failed to impress both commercially and militarily its worth.

(iii) Japan - Like Australia, Japan refused to comment on “Hypothetical issues” regarding Taiwan when pressed by Colby. This is a far cry from the position taken when Shinzo Abe was PM of Japan. (Fig. 5).

Once again Kissinger was proven correct when he said “America has no permanent friends or enemies, only interests”. (Fig. 6).

2. The Great Job Loss due to AI Debate: This week, in a piece by Gerald Celente, the jury is still out as to whether AI would affect more junior level jobs or middle management jobs. (fig. 7).

One thing for sure, AI would show far greater productivity improvement in manufacturing than in an office environment. It was reported that China can currently roll off one J35 fighter jets every 72 hours. (Fig. 8).

This compared with a manufacturing period of 18 months for a US F35 fighter jet. For readers interested in the J35 story, please click on the video link below: https://www.youtube.com/watch?v=l2Ko6oBL3FU

The reason, China has installed more industrial robots than the rest of the world combined.  (Fig. 9)

and China’s robot manufacturers has a global 47% market share.

3. International Capital Flow: The latest US Treasury International Capital Flow showed there was an increase in Foreign Holdings of US Treasuries in May and the controlled MSM happily reported as such. (Fig. 10)

As customary, if we opened the hood and take a closer look, of the $146 billion increase in foreign holdings, foreign Central Banks and Sovereign Funds actually further lessen their hold by $23.2 billion but foreign “Private Sector” raised their stake by $169 billion of which Canada accounted for over one third of the increase.  However if Canada was genuinely buying that much of USD by converting CAD, then it did not show up in the FX rate pattern of CAD. (Fig.11).

In fact CAD/USD were virtually on par between May 1 and May 31. 

We have devoted enough print to explain how synthetic demand for US Treasuries are created and will not labor further in this week’s Blog. Instead allow us to focus below three key indicators:

(i) Buyers of US Treasuries: In broad terms, the 4 buyers of US Treasuries are foreigners, the Federal Reserve, US Social Security System and US Domestic Private Sector which include banks, insurance, pension and endowment funds, money market and mutual funds, corporate, households and a new comer Stable Coin (especially Tether USD which is 70% of Stable Coin Volume). Since 2022, the US Domestic Private Sector has been about the only net buyer US Treasuries. (Fig. 12).

As regards Stable Coin, the increased absorption of US Treasuries from Jan 1 to July 19 was $23.74 billion as compared with increase in total US Treasuries and run down of Treasury Cash of $910 billion. (bearing in mind it was only in late June 2025 that the US debt ceiling was increased by $5 trillion). The strict arithmetic is that Stable Coin absorption of Treasuries was only 2.6%  for the period under review, certainly useful but for all intent and purpose, a wetting of parched lips but not a refreshing re-hydration.  In any event, funding for Stable Coin need to derive from the Non-Government Sector and have to trespass the same capacity constraints of how much the Private Sector can buy. The argument that US Government can just stuff Stable Coins with US Treasuries is a non-starter. If one has difficulties in selling highly liquid USD instruments with a useful yield, it would not be easier to sell a USD token with no yield.

(ii)  US Inter-bank Activities: Two weeks ago we reported on the heightened activities of overnight inter bank lending and borrowing and marked an event horizon to occur around January 2027. We have updated the data this week and the trajectory has not changed. (Fig. 13)

 

We live in a chaotic period when decay and corruption has raised its ugly head. No national government has sufficient band width to solve all the issues besetting a society. Wars, rumors of wars, inflation, unemployment, wealth gap and class struggle as bad as the dark ages and feudal times. To some, they are bewildered by breaking news that come 24/7. I rather prefer the observation of President Harry Truman, “"There is nothing new in the world except the history you do not know," (Fig. 14).

After all, the origins of various security conflicts did not arose from this decade, they have been there for decades, centuries if not millennium, we just have been too busy to pay attention.

^{1 Corinthians 8:1} Knowledge puffs up, but love edifies. ²  And if anyone thinks that he knows anything, he knows nothing yet as he ought to know. 

The Way of the "Intercepting Fist"

The week ended on July 11, 2025, interesting news items to look at this week are:

The Way of the “Intercepting Fist”: Intercepting Fist (截拳道)is a core principle of Jeet Kune Do (JKD), a martial art developed by Bruce Lee. It emphasizes intercepting an opponent's attack and turning it into an offensive opportunity rather than blocking first and then striking. This approach is about being proactive and using an opponent's aggression against them (Fig. 1).

In national defense, I found China’s military philosophy to be strikingly similar to the Way of the Intercepting Fist. This I saw demonstrated by the China equipped and trained Pakistan Air Combat Force in the recent India/Pakistan conflict. To conventional strategists, there seemed to be a fixation on first mover advantage; hence, the undeclared preemptive strike by Israel/US on Iran, India sudden attack on Pakistan, Turkey/CIA/Israel invasion of Syria and possibly Russia’s SMO against Ukraine. I have some reservation on Russian SMO as a first move because the conflict really first began with the $5 billion Victoria Nuland 2014 Maidan Color Revolution. For pure scholastic interest, this week’s Blog will be devoted to my conjectural speculation on the subject, but should my prognosis of the military style of JKD be correct, West Point, Sandhurst and other Military Academies may need a complete rewrite of their battle plan training manuals.

(i) The Spear and Shield Concept: The way Chinese commentators described the military competence of Iran is one of having a strong spear but a weak shield. This conclusion was made as early as 2019. (Fig. 2).

 Though every effort was made in 2021 by China after China and Iran entered into a 25 years “Comprehensive Co-operative Agreement”, Iran had put on the back burner any deepening progress with China on energy, infrastructure and the military frontiers. Instead Iran chose to balance the easier path of appeasement with the West and India rather than back to back with the Global South. On the other hand, Israel believed it has the strongest spears with a superior air force and an impenetrable shield, the Iron Dome, David’s Sling, Patriots and Arrows that it can safely attack all neighborhood nations at will without worrying out Israel’s defense. (Fig. 3). We now know the answer. First no shield can withstand a continuous bombardment because system fatigue sets in and second a defender’s block at a speed slower than an opponent’s jab is futile.

(ii) The Elephant and Ants Analogy: When your adversaries are widely distributed but stand united, small as each individual may be, a mighty champion despite its size and strength cannot prevail, The small band of Houthis with low budget drones and rockets has totally defeated the mighty Operation Prosperity Guardian, a multinational coalition with the firepower of an Aircraft Carrier Strike Group. (Fig. 4).

(iii) The Essence of The Intercepting Fist in Full Spectrum Combat: For eighty years, G7 and NATO has dominated global Resource, Economics and Politics. What if all of a sudden, there arise an adversary with a coalition which is widely distributed yet with a longer reach, a faster speed and with an unimpeded communication that allows every element to operate in unison. What if this adversary has exercised strategic restrain and let G7 and NATO make all the first moves and exposed and exhaust all their tricks. What if this adversary has been waiting in confidence until it is ready to pull a knockout punch. A devastating and destabilizing punch to finish the fight in one round just like what Pakistan did to India. I have been counting the individual elements that make up this imaginary adversary. The team has been assembled, the hardware components ready, the software bugs are now being upgraded and the knockout punch will be ready in months if not weeks. Can you see?

Ecclesiastes 9:11  I returned and saw under the sun that—The race is not to the swift, Nor the battle to the strong, Nor bread to the wise, Nor riches to men of understanding, Nor favor to men of skill; But time and chance happen to them all. 12  For man also does not know his time: Like fish taken in a cruel net, Like birds caught in a snare, So the sons of men are snared in an evil time, When it falls suddenly upon them. 13  This wisdom I have also seen under the sun, and it seemed great to me: 14  There was a little city with few men in it; and a great king came against it, besieged it, and built great snares around it. 15  Now there was found in it a poor wise man, and he by his wisdom delivered the city. Yet no one remembered that same poor man. 16  Then I said: "Wisdom is better than strength. Nevertheless the poor man's wisdom is despised, And his words are not heard. 17  Words of the wise, spoken quietly, should be heard Rather than the shout of a ruler of fools. 18  Wisdom is better than weapons of war; But one sinner destroys much good." 

Point of Exhaustion

The week ended on July 4, 2025, interesting news items to look at this week are:

1. Point of Exhaustion: In war, a wise saying goes something like this: “Amateurs Talk Strategy, Professionals Talk Logistics”  (Fig. 1).

We witnessed first Trump 1.0 challenged China with aTech and Trade War in 2018, then Biden waged a NATO proxy war against Russia in 2022, Trump 2.0 followed up with a Tariff War against the whole world in 2025 and finally Natanyahu a preemptive attack on Iran. The outcome of all these war effort did not succeed as planned and the blow back has devastating to the instigators. A common reason for such failures was the surprise element of the attacks was insufficient to cover an underestimation of a well prepared adversary and a lack of a thorough assessment of the instigators’ own sustainability. This is a classic strategic mistake under Sun Tzu’s “Art of War”, Chapter 3 verse 6 said ”Hence the saying: If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.” (Fig. 2).  

(i)  Munition and Weapons Exhaustion: On July 2, Pentagon halted weapons shipment to Ukraine amid concerns over U.S. stockpile. (Fig. 3).

The annual production capacity of Patriot missiles was 600 missiles and even with a serge, production could only step up by another 50 missiles but not until 2027. (Fig. 4). 

Annual production of THAAD missiles is only 12 in 2025 and during the 12 days war between Israel and Iran, 80 THAAD missiles were deployed at a cost of $13 million a pop. (Fig. 5).

 

 

 

 

Another report suggests Raytheon are constrained in their missiles production because they have problems sourcing rocket motors. (Fig. 6).

When we factored in a ban by China on rare earth exports for military use (essential for most high end weapon systems), US are now forced to seek diplomatic solutions and compromises from her hegemonic maneuvers.

(ii) Credit Exhaustion: I reported on my April 25 , 2025 Blog that US is faced with a $9 trillion maturity of her Federal Debt in 2025 with $6.5 trillion due in June 2025. (Fig. 7)

June has come and gone but the financial market has not seen a rupture. What happened? First let me apologize for an inaccuracy of using media data. US Treasury does not publish month by month maturity data except sparingly after the event. What can be uncovered was that about $132 billion held by Social Security matured and principal and interests thereon was remedied by Treasury Emergency measures, meaning rolled over but not paid. The impaired financial position of US Treasury has not changed as the latest AI review shows. (Fig. 8).

Anyway, I have to keep on reminding myself that AI is only as good as the quality of the data on the internet, rubbish in rubbish out. What I can gather from financial market sources is that with the Middle East war, an immediate exit from the US financial market did not happen, however holders of US assets had put on insurance hedges that resulted in a further decline of US Exchange rates. In fact USD had its worst 1st half performance over 50 years since 1973. (Fig. 9).

Remember 1973 was the beginning of aftershock of the Bretton Woods default in 1971. Now back to today, we are also seeing every night US banks are frantically moving approximately $2.9 trillion of funds and Treasuries between themselves to ensure a default would not occur within the US banking system. (Fig. 10).

(SOF represents US inter-bank Secured Overnight Funding). In the context of the existing liquidity level of the US banking system, I would describe the current state of play as one of heightened activity but not of a level of cardiac arrest. If I may use the September 2019 REPO crisis as a marker when the Fed was forced to step in with immediate liquidity injection as US depository institutions liquidity freezes up due to a continuous cash drain through Federal Government borrowings. (Fig. 11)

In September 2019 Cash level of the US banking system went to a low of 1.5 trillion and SOF spiked up to 30% of M1. By comparison US banking system cash position is 4 trillion and SOF to M1 is 15%. (Fig. 12).

Using current SOF Trajectory, my forecast for the next US cash crunch should be around January 2027. (Fig. 13),

assuming no further stupid moves by the US Administration and Deep State.

2. Financial Market Performance for the first half of 2025 : (Fig. 14)

Russian Ruble (+39.53%), Silver (+27.57%), Gold (+27.05%),  Copper (+25.64%), Uranium (+20.83%), Hang Seng Index (+19.22%), Bitcoin (+15.67%), Swiss Fr (+14.37%), Eur(+13.73%), GBP (+9.01%), JPY ( +8.79%),  Nasdaq (+7.98%), DJI (+5.31%), Rmb (+1.88%), Oil (-9.07%) and USD Index (-10.6%).

The rise in relative value in precious metals and commodities reflect a weak economic outlook and depreciating purchasing power of major western currencies. This trend will continue as the power shifts from G7 to BRICS and Global South Nations.

Daniel 2:20  Daniel answered and said: "Blessed be the name of God forever and ever, For wisdom and might are His. 21  And He changes the times and the seasons; He removes kings and raises up kings; He gives wisdom to the wise And knowledge to those who have understanding. 22  He reveals deep and secret things; He knows what is in the darkness, And light dwells with Him.