If the only tool you have is a hammer, every problem has to look like a nail

The week ended on August 8, 2025, interesting news items to look at this week are:

If the only tool you have is a hammer, every problem has to look like a nail: The title of this week’s Blog was a direct quote from General Wesley Clark during an interview in March 2007. Clark served as the Supreme Allied Commander Europe of NATO from 1997 to 2000. The context was US had planned to take out 7 Mid East and North African Countries in 5 Years through military intervention. (Fig. 1).

The countries involved began with Iraq and then Syria, Lebanon, Libya, Somalia, Sudan and finishing off , Iran. 18 Years on, the Pentagon had by and large followed through with the plan, albeit with some revisions. I am sure most of the readers of this Blog are familiar with the interview, anyhow, here is the link: https://www.youtube.com/watch?v=pbvyIPrhKjQ 

However, my thesis for this week is not with General Clark but with Donald Trump and his tariff weapon. The difference between the first and second decade of the 21^th Century is that US no longer has military supremacy against the axis of resistance namely Russia, China, North Korea and Iran and therefore the hammer need to be switched from the military to tariffs. It is said Generals are always prepared to fight the last war (Fig. 2).

  The reason -  they tend to use strategies and tactics that were successful in the previous one, even if those methods are no longer relevant. In my January 17, 2025 Blog titled “Watching Body Language and Counting of Chips”, I reported on Geo-political Analyst Pepe Escobar’s observation that “US will try her best to destabilize weaker BRICS members to get to China and loots her allies, so expect uncontrolled chaos to happen.” If an independent analyst without huge organizational resources can correctly predict a superpower’s strategic move months in advance, what are the probabilities of such move’s success given its existential importance to all the nations involved. It is now 4 months into the “Liberation Day” , let’s pause to examine how Trump’s tariff policy has fared.

(i) Looting of US Allies and Supporters: The Trade Deals” with EU, Japan, South Korea, Taiwan and Gulf States all involved multi-billion investment pledges into US. If we just took Trump’s headline propaganda numbers, the amount came to $4.05 trillion, respectively EU-$600 billion, Japan-$1 trillion, South Korea=$350 billion, Taiwan-$100 billion, Saudi Arabia-$600 billion and UAE-$1.4 trillion. These numbers are huge but the big question is are these numbers realistic and enforceable. At first glance, total US Portfolio Assets (Govt Bonds, Agency Bonds, Corporate Bonds and Equities) held by Foreigners amounted to $32.2 trillion as at May 2025 of which only 24% belongs to countries not willing to bend the knee to US. (Fig 3).

With US$24.4 trillion already invested in US by “friendly hands”, many people assumed therefore that these are low hanging fruits for Trump’s easy picking. However, if we strip away all the round robin investing by subtracting money invested by US residents in the so to speak “US comrades”, net foreign portfolio investment into US by US comrades is immediately reduced to just $16.5 trillion. If we further take out the Global South and those “friendlies” who are defying US threats like Canada, Australia, NZ, Switzerland and the Gulf States (some Gulf States actually belong to BRICS or try to take a middle path), then the low hanging fruit is further reduced to 51% of $16.5 trillion, say a net $8.4 trillion. (Fig. 4)

By comparison, the “Pledged” number is a whooping 48% of all the friendlies have in their “piggy bank”.  Now from a historical perspective, the “Euro” dollars in the hands of these “friendlies” were derived from 75 yeas of trade surpluses with US then all of a sudden Trump wants a free pass to take 25 to 50% of these earned surplus over the next few years. Bearing in mind these earned surpluses are not in the majority in the hands of the respective governments but thoroughly embedded in the corporate and private hands, e.g. it is estimated up to 70% Japan’s $1.4 trillion in US Treasuries are privately owned. Once the smoke is cleared, it is easy to see extracting huge sums of money by Trump from the friendlies is darn near impossible. I draw an analogy to an initial targeted savings of $2 trillion by DOGE, the reality was by the time Elon Musk resigned, DOGE savings at best would only be a small fraction of the initial target. (Fig. 5).

But then one would ask, why all the politicians would go through with such kabuki theatrics.

(ii) Understand the US Economy: Now let’s us dissect the American economy through a few data points. (a) According to the Federal Reserve, the top 10% of Americans owns 67.2% of Household Wealth, the next 40% owns 30.3% and the bottom 50% owns just 2.5%. (Fig. 6).

(b) A survey showed nearly 50% of Americans have less than $500 in their savings account. (Fig. 7).

(c) In recent years, annual capital gains is the driving force for annual growth in personal consumption. According a respected Fund Manager Luke Gromen, on average capital gains in dollar terms is twice annual growth in consumption. I tend to agree with Luke’s opinion as just on stock market alone, capital gains has been head and shoulders above growth in personal consumption. (Fig. 8). )

(d) In other words, the Stock market makes the US Economy and not vice versa. (e) The next thing one has to understand is the trading pattern of the US stock market. Using data provided by ChatGPT until 2023, daily trading volume of US Stocks is 60% ~75% via Algorithmic (incl HFT) trading, 30%~32% via ETFs (automated execution) and residual trading via human discretion (retail/fund managers) is insignificant. In other words, it is not common sense or logic that carries the day but machines on a predetermined algorithm that makes daily stock prices. Quoting Warren Buffet “Price is what you pay, value is what you get”. (Fig. 9).

Perhaps we now appreciate more why Buffet continues to sell down his stock holdings. I reported before just 7 stocks accounts for 35% of the S&P 500 because when you can create momentum by marginal activities on just 7 stocks, it is easy to “paint the tape”. (f) Although the Federal Reserve is still officially on QT, the fact that since Janet Yellen days, US Treasury is funding principally via short term Treasury bills. Treasury bills are near cash instrument as one can borrow 98% of its value for cash. The humongous and continued deficit funding through short term bills means the financial market is well liquefied.

In summation, so long as Trump can entertain the top 10% of Americans to keep money in US, he could not be bothered with your everyday Americans. Every time when Trump suffers a set back on his foreign policies, he just slap more tariffs on the poor American importers and consumers. That is why Trump gave tax breaks to the rich is his Big and Beautiful Bill but penalize American consumers and small businesses. Every economic historian knows US had a number of near bankruptcy crisis and got bailed out through private banks such as JP Morgan (1790~1913) . The rise of US and her financial prowess really came from the two world wars. No one would keep their money in a bank when soldiers and tanks are roaming through a bank’s front door. US is a natural safe heaven buffered by the Pacific and Atlantic Oceans and have non-threatening neighbors of Canada and Mexico. Inciting wars in Europe, Asia and Mid East has been a sure way to keep money flowing into US or stop money from exiting.  

(iii)  Destabilize weaker BRICS members: Brazil and India are now under threat for a 50% tariff. However, the Economist today opined that Trump’s tariff are more bark than bite. (Fig. 10).

When Trump has to back down against China, there is little scope that individually US can crack upon the united front of Global South. From a physical economic point of view(GDP on a Purchasing Power Parity Bases), constitutes 57% of the global economy.  Such a grouping already constitutes a sustainable closed loop of resources, means of production, and technology. (Fig. 11).

Trump short term coercion tactic of pushing Europe to war with Russia and to purchase uneconomic US energy is draining Europe of her capital and accelerating the d-industrialization of Germany (Fig. 12).

His Semi-conductor policy is causing havoc in South Korea, Taiwan and the Netherlands. The overall deal with Japan is a continuous strangle against Japan’s most important auto industry. In the words of German political commentator and author Patrik Baab, politicians in Brussels signed off on the Trump deal because they simply do not know any political system other than those sponsored by Washington. Allow me to make a bold political prediction, both EU and Japan will revolt against Washington within the next 10 years. Whatever lingering doubts members of the Global South may have to appease Washington, the hard medicine fed by Trump to his friends is indeed sobering. (Fig. 13).

Vladimir Lenin said a revolutionary situation arises when two key conditions are met:  (a) The ruling class cannot continue ruling in the old way—meaning they face a crisis that undermines their authority.  

(b). The oppressed classes no longer want to live under the existing conditions—their suffering has intensified, and they are driven to revolt .  (Fig. 14)

We have now witnessed the ruling elites are desperate with no strategy and spin whatever ideas that may find traction. However, for the masses at large, the pain threshold is still not high enough that they want to abandon their existing way of life. I expect conditions will deteriorate in 2026 accumulate in a crisis in 2027, about 20 years after the GFC with a peak in a simultaneous war cycle and civil disobedience cycle sometimes in 2032. Take care my friends.

James 4:1  Where do wars and fights come from among you? Do they not come from your desires for pleasure that war in your members? 2  You lust and do not have. You murder and covet and cannot obtain. You fight and war. Yet you do not have because you do not ask. 3  You ask and do not receive, because you ask amiss, that you may spend it on your pleasures. 4  Adulterers and adulteresses! Do you not know that friendship with the world is enmity with God? Whoever therefore wants to be a friend of the world makes himself an enemy of God.