Truce

The week ended on May22, 2026, interesting news items to look at for the past fortnight are:

Truce: For the past fortnight, our focus has been on the Trump-Xi meeting, the Putin Xi meeting, and the impending confirmation of a new Fed chair, Kevin Warsh.

(i) Trump-Xi Meeting - There was no formal joint communique issued after the meeting, but the event set the tone for Constructive Strategic Stability for the next 3 years while the two countries remained fierce competitors. Except for a hot kinetic war between US and China, the two nations will likely invoke every trick in the book and off the books to prevail. If readers recall that I interpreted the subtleties of flower arrangements across the conference table in the past, and below are my latest interpretations. (Fig. 1)

The flowers at the center is Pink Azaleas. Pink symbolizes gentleness, affection, and friendship. It softens the formal atmosphere and brings people closer. In traditional Chinese culture, the azalea represents "prosperity and good luck." In a business context, it is seen as an omen of "great fortune, smooth business, and thriving success."  Azaleas also carry meanings of "joy in love," "resilience and optimism," as well as seamless integration and the joint creation of a bright future. China has been trying continuously to convey to US that the Pacific Ocean is big enough to accommodate US and China, and that there is much to gain through co-operation rather than rivalry. Now contrast this with the Crotons displayed in the May 2024 meeting between Blinken and Xi. (Fig. 2).

Subsequent to the meeting, Trump did take action to de-escalate two contentious issues with China:

(a) A warning to Taiwan against declaring independence (Fig. 3)

and (b) Trump reportedly urged Japan’s PM to avoid further escalations in dispute with China (Fig. 4)

(ii) Putin-Xi Meeting - Whilst the Trump-Xi meeting was spontaneous, the Putin-Xi meeting was the formalization of a deepening relationship. The mere fact of two military superpowers visited Xi in tight sequence meant that China has played a pivotal role in international conflict resolution. (Fig. 5).

The joint declarations issued by Xi Jinping and Vladimir Putin in 2025–2026 can be summarized as a strategic blueprint for a closer China–Russia partnership aimed at reshaping the global order away from U.S. dominance toward what they call a “multipolar world.”

(a) Strategic Alignment Against U.S. Influence: The core theme was opposition to what both leaders described as U.S. “hegemonism”- unilateral sanctions, military alliances, missile defense expansion, and “interference” in sovereign states. The declarations repeatedly criticized U.S.-led security structures and economic coercion. They portrayed China and Russia as defenders of global stability and international law.  

(b)  “Multipolar World” Vision. A major objective was to promote a new international system in which power is distributed among several major civilizations/states, Western liberal dominance is reduced. Global South countries gain more influence. Both governments framed this as creating:“a more just and democratic international order.”  

(c) Expansion of China–Russia Cooperation - The declarations deepened cooperation across multiple sectors: Economic, energy trade, local-currency settlement, infrastructure, Arctic shipping routes, and banking/payment systems bypassing the U.S. Dollar, technology, artificial intelligence, semiconductors, space cooperation, cyber coordination, nuclear energy, Military/Security, strategic military coordination, joint exercises, missile defense concerns, intelligence/security cooperation. And about 20 cooperation documents were reportedly signed.

As regards floral arrangement, the centerpiece was Pink and White Phalaenopsis Orchids. (Fig, 6).

In Chinese culture, the pink and white Phalaenopsis orchids are an expression of affection, purity, nobility, and lasting friendship.

(iii) Kevin Warsh - In the past fortnight, Wall Street has been apprehensive of what a hawkish Kevin Warsh would do in his reign on the Fed Chair. Warsh has been vocal on US spending and borrowing way too much to greese the US economy. On account of Iranian control of the Strait of Hormuz and Warsh, interes rates has been creeping up since mid-April. ( Fig. 7).

As far as my arithmetic goes, Fed’s control of the Fed Funds rate lever can no longer dictate the Treasury yield curve and must choose the lesser of two evils. Protect the US dollar and let the bond market collapse under the weight of inflation, or let US dollar run its natural course: print and buy US Treasuries to bail out the Treasury market as a buyer of last resort.  Last October, I predicted that the Fed would start QE by December 2025 when Treasury issuance exhausted M1 money supply. This same logic tells us that, if Warsh begins to shrink the Fed’s balance sheet by $40 billion per month instead of increasing it by $40 billion a month, as Powell initiated last December, everything would collapse by September 2026. Tthe pressure of Treasuries being stuffed into the Primary Dealers would exhaust even M2 by Q4 2026.  (Fig. 8).

So let us be on guard that, after Warsh’s confirmation, he will print money like a drunken sailor and hyperinflation will be rampant by the final quarter of 2026. Watch and pray that you can escape all this.

Act 3:6  Then Peter said, "Silver and gold I do not have, but what I do have I give you: In the name of Jesus Christ of Nazareth, rise up and walk." 7  And he took him by the right hand and lifted him up, and immediately his feet and ankle bones received strength. 8  So he, leaping up, stood and walked and entered the temple with them—walking, leaping, and praising God. 9  And all the people saw him walking and praising God. 10  Then they knew that it was he who sat begging alms at the Beautiful Gate of the temple; and they were filled with wonder and amazement at what had happened to him.