The week ended on August 28, 2026 interesting news items to look at for the past fortnight are:
Breaking Point: Last week, I sent out an alert, predicting that the financial market would break by October 2026. (Fig. 1).
The purpose of this week’s blog is to explain the timing and the plumbing involved.
1. Supply of USD Debt Beyond Demand - On September 16 and 17, 2019, the US overnight funding rate suddenly spiked massively, which indicated insufficient liquidity within the dollar system. The Federal Reserve intervened by injecting reserves into the banking system, and the incident was later called the 2019 Repo Crisis. In the following month, the Fed begins large-scale, ongoing Treasury purchases to permanently increase reserves in the banking system. (Fig. 2)
Why I brought up this history was I expect there will be another Repo crisis in October 2026, to be followed by a permanent QE with hyperinflation as a consequence.
The precursor to the 2019 Repo Crisis was Quantitative Tightening (the sale of Treasuries reduced banking reserves) by Janet Yellen in October 2017 to reduce excessive banking reserves in the system. This was initiated after three rounds of Quantitative Easing (money printing) by Ben Bernanke to prevent a near collapse of the U.S. the monetary system, as a result of the subprime fiasco in 2008. (Fig. 3).
At hindsight, Janet Yellen’s QT was overdone, which drained too much cash and reserves from US banks and left insufficient liquidity, choking normal interbank funding. In fact, none of the Fed chairpersons were good at their job, and the US financial system alternated between undercooked or charred for healthy consumption. (Fig. 4).
My criticism of the Fed was not so much against their individual competence because no one could master a system of global reserve currency that has passed its used-by date. A system that was not designed to properly oil the functioning of trade settlement and wealth preservation, but instead was designed to be exploited by the sitting apex predator.
As the patriarch asset allocator of my family members’ investment portfolio, I have to crawl deep into the plumbing and drainage of the reserve currency system because there is no single textbook or data set that would tell you what is truly happening. Readers of this blog will find that some of the diagrams and charts are original research, e.g. (Fig. 5)
is an aggregation of data from six different sources plus the author’s own algorithms. However, even with such effort, the information is not realtime and there is lag of one and a half months. Nonetheless, it is a useful set of data for modeling and prediction. With that said, I like readers to focus on (Fig. 5), the red line—M1 and the blue line—US Private Purchases of Treasuries, and the corresponding area in red and green.
The red line—M1 is all the cash, money in the checking account, and savings account that can be withdrawn on demand and are deposited with banks, savings institutions, and credit unions, plus the bank’s reserve account balances with the Federal Reserve. Notice before the massive increase in M1 in April 2020, the red line is below the blue line. That means there was insufficient M1 to buy the U.S. Treasuries that were to be issued but would not be absorbed by Social Security, the Fed, and foreign countries. So, under the cover of COVID, the Fed, in one go, printed enough cash to satisfy Treasury issuance for the next 44 months. The issuance was far in excess of actual fiscal demand, including the required stimulus for COVID. This excess liquidity in the system drove the U.S. stock market and crypto currency valuations to stratospheric levels. The next question is, why?
My take on all these US money machinations was not that they tried to stabilize a COVID-infected economy, but that they were to build a war chest for the endless war that we have witnessed for the past five years since the first COVID bio-war. The genesis of these endless wars was the dying petrodollar hegemony.
Allow me to take you back in time to the year 2017. Professor John Mearsheimer of the University of Chicago identified the year as the time when the uni-polar world order ended. Mearsheimer reasoned that China and Russia had grown sufficiently strong not to bend the knee to U.S. dictates. In my observation, the more compelling reason was a fundamental change in oil economics. I know some readers of this blog have experience and skills in the energy market, and may I invite their comments here?
2. Shift in the Energy Market - 2017 was the year when China surpassed the US as the world’s largest oil importer and gained the power to influence pricing and settlement currency. From 2017 onward, the days are numbered for the petrol dollar. (Fig. 6).
The following is a chart of China’s oil imports by source in 2025. There are few export countries that would not accept CNY as a settlement currency. (Fig. 7).
Another underlying factor was the advancement of shale oil, and with it the US became a competitor to Saudi Arabia. (Fig. 8).
Now, take a look at the timeline of wars and conflicts since the Republicans took office in the White House: (a) Under a false peace, the Minsk II Agreement, the U.S. secretly armed Ukrainian Nazis as a battering ram against Russia in December 2017, (b) Cancel the JCPOA in May 2018 to eliminate competition from Iran. (d) Began a trade and tech war with China in July 2018, (e) Mobilized cells in Hong Kong for a color revolution in March 2019, Xinjiang Uighur as a narrative to destabilize China and install officials of Japanese lineage in Taiwan as an anti-China strategy, (f) Funded chimeric virus research and staged the COVID outbreak in Wuhan in December 2019. (g) Between February and June 2020, the Federal Reserve expanded the money supply by $12 trillion to build a war chest, (h) Forced Russia to start a SMO in February 2022. (a separate paragraph below will show a link to the underlying logic to the petrodollar.) (i) Major sweeping semiconductor restrictions against China began on October 7, 2022. (j) Launched ChatGPT and pumped up tech stocks to lay a new foundation to replace the petrodollar with semiconductors, AI, and a crypto dollar (under an aspiration that the US has a tech monopoly) in December 2022. (k) Attack Canada to be folded as the 51st US state, military coercion of Venezuela, and war with Iran to arrest control of major oil supplies and oil transit choke points.
3. The Foolhardy Europeans - I only need to present a table to show the effect of oil supplies on Europe to make a point that the US had everything to gain and Europe has all to lose. (Fig. 9) with a Russian/Ukraine conflict.
4. The War Chest Is Now Empty - The $12 trillion war chest raised in early 2020 was completely exhausted by Dec 2025; please read Fig. 5 again, as unenthusiastic foreign buyers left US banks and private investors holding the bag on Treasury issuance. The Federal Reserve has no other option but to start printing again at $60 billion per month. Behind the smoke screen, foreign interests were much lower than what was officially reported, because approximately $3 trillion of US Treasury, disguised as demand from the Cayman Islands, were actually US hedge funds and Wall Street banks using SOFR (Secured Overnight Funding) in collusion with the US Treasury Department, shuffling unwanted Treasury Notes across each other’s dealing desks. (Fig. 10).
I have reported this previously on February 14, 2026, in a blog titled “Painted into a Corner”. The fact behind the fudged numbers is diabolical, as most central banks are distancing themselves from US papers. (Fig. 11).
The displayed demand from the foreign private sector is mainly related-party dealings using swaps and derivatives for window dressing. Scott Bessent is on a huge margin call and has no tools but cheap bucket-shop tricks to prop up the collateral value (like FIMA Repo with Japan and UAE and Riding the Yield Curve Buy Backs). As far as the new Fed Chair Warsh is concerned, he is a nothing burger, as with all previous Fed Chairs. the script has been written long before the actor comes on stage. (Fig. 12)
I foresee that between now and October 2026, the Scott Bessent band-aid will hold, provided there are no more black swans coming onto the stage.
5. October 2026 Breaking Point - Looking at the existing trajectory, projected Treasury Issuance wll overrun M1 decisively by October 2026. (Fig. 13)
Just like the 2019 Repo Crisis, the Federal Reserve will need to engage the printing machine on a unprecedented scale; USD and other fiat currencies will be junked with an onset of hyperinflation not dissimilar to the Wiemar Republic.
Book of Revelation 6:5 When He opened the third seal, I heard the third living creature say, "Come and see." So I looked, and behold, a black horse, and he who sat on it had a pair of scales in his hand. 6 And I heard a voice in the midst of the four living creatures saying, "A quart of wheat for a denarius, and three quarts of barley for a denarius; and do not harm the oil and the wine."
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