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.