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.  

The Best Cure for Low Prices is Low Prices

The week ended on August 1, 2025, interesting news items to look at this week are:

The Best Cure for Low Prices is Low Prices: For the past month, Youtube’s algorithm, according to my profile, has thrown out a lot of videos concerning cut-throat pricing on real estates in China, about shop closures and big shopping malls devoid of shoppers. There were extensions of such real estates slumps to ghost villages, towns and even certain pockets in urban areas. Well, I suppose I did take an interests in the Greater Bay Area as a while ago I was very tempted to buy a property there for my retirement/vacation living.  From the perspective of the video producers, they were horrified by the steep decline in prices and completely lost hope in how the slump would end. On the other hand, Australia where I live right now is having a property crisis of another kind, sky rocketing rent and home prices is shattering the great Australian dream of every family owning their own home. In Perth 76% of homes were sold within 8-13 days and for Brisbane the medium selling period is only 21 days. (Fig. 1).

Now we all know China is the largest trading partner of Australia and accounts for 25.7% of Australia’s total goods and services trade and is larger than Australia’s next 3 trading partners combined (US-11%, Japan-9% and South Korea-5.6%). Being so close to both property markets, the dichotomy compels me to devote at least a weekend to understand what happened and to form a framework as to when the respective predicaments in both markets should end.

(i) Text Book Property Cycles: Historically in many markets property prices and construction activities go through a 7 year cycle because it typically takes 7 years to deliver the final product to consumers from planning, land acquisition, approval, construction and certification for safe occupation. Speculative land acquisition were made when prices were buoyant and by the time of completion, a glut would appear and prices would decline. (Fig. 2).

With my prior experience working with the two largest property developers in Hong Kong and also in the materials industry across Asia including China, Japan, South Korea and Indonesia I can attest few developers and government officials make non-linear forecast as to supply and demand and none takes long cycles into consideration. It is the long cycles superimposed on text book short property cycles that has become lethal in many markets without exception.

(ii) The 50 Year Long Interest Cycle: We have just witnessed the end of a near 50 Year interest rate down cycle from a peak in September 1971 to March 2020. (Fig. 3).

Within this period the text book standard risk free asset (USGG10YR) has an interest rate decline from 15.84% to 0.54%.  When the price of money had such a significant decline over such a long period of time, demand of money will increase and correspondingly price of goods and services will rise as a function of the decline in purchasing power of currencies. From March 2020, everything changed. By May 2021, the 10YR Treasury Note hit a peak of 5.43%. This whiplash of interest from March 2020 of 0.54% to 5.43% in the short 15 months period meant even for this risk free asset, US Bond and Note Prices has had a cascading waterfall decline of a minimum of 35% in Bond Prices. As globally all other asset class are priced off the US 10 Year Treasury, local real estate price decline should be within a striking distance of 35%, give or take adjustments due to unique local circumstances in scale and in timing only.

(iii) The 50 Year Property Bull Run in China: On top of a 50 Year Interest Rate Decline Cycle, China’s property sector has also benefited from an urbanization momentum unparalleled anywhere else in the world. (Fig. 4).

One of the key drivers for China development and urbanization was the 21 year US led embargo against China from 1960 to 1971. When a hard working, studious people with a frugal savings habit are locked out from interaction with the developed industrial world, the energy released at liberation is something miraculous. Compared China urbanization rate with countries of similar per capita GDP, e.g. Mexico and Thailand, one will see how China’s industrialization has driven her urbanization and real estate demand. (Fig. 5).

(iv) Importance of the Construction related Sector: Globally construction-industry-related spending constitute about 13% of GDP. However in China, due to the momentum in urbanization, property-construction-services (including finance and related) contributed a whooping 30% of GDP. Even for a very matured market like US, every job lost or gained in real estate and construction would have a multiplier effect of supplier and induced job lost or gain by a factor of 9~10. (Fig. 6).

This means every 100 job lost in real estates would eventually lead to a total of 900 jobs lost in the economy and vice versa. It was reported that the real estate sector in China would impact over 50 industries and business sectors and I am not a bit surprised. As an illustration, the US Real Estate Sub-Prime fiasco which started the GFC caused a blow-up of US Money Supply M1 by $19 trillion and everyone is still paying today in terms of cost of living pressures and will continue to pay for the US fiscal/economic/monetary mismanagement due to the reserve currency transmission mechanism. (Fig. 7).

We will not be spared with the effect of China’s mega property bust. Unlike the US, the adverse rescue effect to other countries was through the payment chain , currency loosing its purchasing power and cost of living pressures. For China it will be through the supply chain causing unemployment and lost of pricing power. In 2008, China helped the US and almost single-handedly picked up the slack in global demand from the GFC but this time round US wants to bury China when she is down. This bad karma will guarantee an adverse impact on the Anglo American Empire as all the scheming and maneuvering are still fresh in the memories of world leaders.

(v) Reverse Urbanization and Mass Internal Migration: In 2021 population of China peaked and thereafter annual deaths exceeded births. Before China property bust, people from rural area flocked to the cities seeking employment and a more prosperous life. The demand for accommodation in urban areas  had a positive multiplier job effect and consumption expanded. With the property bust and job losses, migration is reverse thus exacerbated vacancies and loss of employment. In speculative overbuilt area, it is not strange to have real estate price decline as much as 70% when forced liquidation becomes an everyday event in every neighborhood. The 2024 population survey in China shows only 8 of the 31 Provinces and Administrative Regions in China had a year on year population growth. The growth regions are recognized as areas of better than average employment prospects. Of interests there were also remote pockets of speculative overbuilt with property prices crashed to pennies in the dollarn yet there were population growth. The reason: costs of living became so cheap that even without full time employment young people reckon they could wait it out until conditions improves. In these pockets young people were willing to both rent and buy at the much lower prices. In one sense, a young person’s aspiration of home ownership became a reality simply by market forces. It is ironic that the largest socialist country in the world is practicing true capitalism because there is no such thing as “too big to fail” in China. The best cure for low prices is low prices.

Having presented the foregoing data points, my conclusion is that urbanization in China will continue but at a slower pace. (Fig. 8).

I estimate the Chinese real estate froth is a US$3 trillion problem and China will not follow US footsteps to inflate away the property slump but risks a bigger crisis later on. On pure economics, China’s property market is likely to stabilize only in 2027 with a steady recovery to peak again in 2034. For what is worth a Goldman Sachs report in June also reckoned the current slump in China property prices will last until 2027. (Fig. 9).

Taking geopolitical factors into consideration, I reported in my July 4^th Blog titled “Point of Exhaustion” that the breaking point for the Federal Reserve to start forever money printing latest by January 2027. So my friends, this winter will have another 18 months to run and the economy is not going anywhere fast. So be well fed and keep warm and may the peace of Christ rule in your heart.

Colossians 3:15  And let the peace of God rule in your hearts, to which also you were called in one body; and be thankful. 16  Let the word of Christ dwell in you richly in all wisdom, teaching and admonishing one another in psalms and hymns and spiritual songs, singing with grace in your hearts to the Lord. 17  And whatever you do in word or deed, do all in the name of the Lord Jesus, giving thanks to God the Father through Him. 

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.