Update: Mostly Economic Front

We’ve been maintaining all along that the Jewish Nationalist war on the world is a war to maintain global financialized hegemony. It’s a losing war, but by its nature it indicates the need to pay attention to the economic front as much as to the more traditional military aspects. To that purpose we have another Sean Foo transcript that sketches out China’s strategy—not for replacing the USD as the reserve currency with the RMB but for breaking the weaponized reign of King Dollar. That strategy is proceeding apace. We’ll begin, however, with a general roundup.

First, the formal ceasefire between Iran and Trump ends tomorrow, Monday the 17th.

The Hormuz Letter @HormuzLetter

Aug 15

BREAKING: Trump has just made a last-minute unexpected visit to Camp David, aboard the Marine One VH-3D helicopter, per flight tracking data.

This comes as the White House press pool has been silent for over 14 hours and multiple SAM (Special Air Mission) flights took off last night carrying Cabinet members, senior staff, and other officials.

The visit comes just 2 days before the official US-Iran ceasefire expires on Monday, August 17.

.

BREAKING: Iran’s IRGC Navy is on maximum-alert and currently “monitoring every smallest detail, even online on social media,” per an Iranian source.

.

BREAKING: Iran believes a new round of fighting with the US is unavoidable and has now decided to focus all efforts on preparing for battle instead of diplomacy, per a senior Iranian source in Tehran.

Comment: The economic pressure is clearly not going to work—certainly not before the midterms and almost certainly never. But Trump is boxed into this war that he launched against all professional intel advice, but with the collusion of the Jewish Nationalist controlled Congress. The question is: If war is to resume, with what will it be fought on the US side?

Philip Pilkington provides a series of comments on the economic - monetary situation as well as the general political disarray in the Anglo-Zionist run West. There are plenty of signs of the coming downturn—the housing market, etc.—but the bond market is the big story, overall.

Philip Pilkington @philippilk

Aug 14

The American interventions in the yen market are just juicing short-term hedge fund returns. This has not been Bessent’s smartest play. 

Quote

Christophe Barraud @C_Barraud

Aug 14

 The yen has just highlighted the limits of FX intervention: the US and Japan massively supported the currency at the end of July, yet less than two weeks later USD/JPY is already back close to 160.

Philip Pilkington @philippilk

9h

American security architecture in Asia-Pacific is starting to unravel…

You’ve heard all those Trump claims that in America’s Golden Age we’re building more factories than we can shake a stick at?

Mario Nawfal @MarioNawfal

 U.S. Taxpayers handed General Dynamics $533M for a brand-new artillery factory that was supposed to crank out shells for Ukraine.

It produced exactly zero usable shells.

Robots caught fire, machines smashed everything, workers sat around doing nothing, and the whole place was a disaster.

The Army still hasn’t clawed the money back.

And since the lines got shut down, that same General Dynamics unit has been awarded another $2.5B in contracts.

Absolute money pit with zero consequences.

Can the economy get worse—even much worse—before the midterms? My advice: Don’t bet against it.

Talk about a hard sell:

Next thing you know they’ll be telling us we need to go to war against Iran to preserve “democracy with Jewish characteristics” in the Middle East.

What does it all mean? they ask.

OK, on to Sean Foo. We won’t transcribe his latest, which is about Argentina. We’ll do the penultimate one. But the Argentina one caught my eye because the topic came up in comments. Argentina has been the darling of the Zio-Trumpist-Libertarian cabal, with its peg to the dollar and its “Isaac Accords”. But look what’s happening:

US FURIOUS as Argentina BEGS China For RMB Lifeline - Dollarization Collapses

Argentina’s dollarization experiment is starting to collapse. The Peso is still collapsing and Milei just panic renewed their swapline with China’s central bank. Here’s why the RMB lifeline is just so important for the Argentine economy.

That speaks volumes regarding the declining fortunes of Anglo-Zionist hegemony and the rise of China as a world leader. Which finally brings us to:

EU Bank Joins China RMB Payments System - Financial Blowback Begins

We all know what’s going on. US assets are now under tremendous pressure. Bonds are collapsing and the dollar’s getting destroyed by inflation. The recent inflation numbers reinforce how much value the dollar is losing. Since 2020, inflation has been rising at around 4% every single year on average. CPI is now 13% above the Fed’s stated target. The US has effectively lost control of their own monetary policy. Any normal central bank today would be hiking rates aggressively to protect their currency right now. But the Fed simply cannot do it without destroying the broader economy. It would cripple consumers and throw a massive wrench into the entire AI buildout. Hiking rates would also severely limit the US government’s ability to keep borrowing money--the bond market is already collapsing without anyone pulling the trigger yet. Scott Bessentt just tried to sell $42 billion worth of 10-year Treasuries. The market revolted against the auction almost immediately. Yields spiked and hit the highest level recorded since the 2007 financial crisis. The 10-year yield is now at almost 4.7% and still climbing. The market clearly understands where this is all heading. 5% on the 10-year is probably the new floor going forward. It’s not the ceiling.

And it makes complete sense when you look at the spending trajectory. The US simply cannot stop spending, and this goes well beyond just the war in Iran. Trump is betting absolutely everything on winning the AI race against China. And if he stopped spending now, it would be game over across the board. Nvidia would start to cede ground to Chinese chip companies rapidly. AI models from Anthropic would start losing out to Kimi K3 and Deep Seek based on price and performance. US industries would fall further behind China on every major front. But this endless spending traps the US in a different and equally serious problem. When bond yields keep rising, it means one of two things is happening. Either existing investors are actively dumping their US bonds or new investors are demanding much higher yields just to hold on to US paper. They want extra compensation because they can see the writing on the wall where this trajectory is really heading. The annualized cost of interest on US debt has now hit a record level. It is sitting at nearly $1.4 trillion annually. That’s equivalent to 4.2% of the entire US economy just to service the existing debt. That number is growing at 24% a year and shows no sign of slowing. If bond yields stay elevated and push higher from here, the US is toast. They’re going to head towards a debt crisis that becomes very hard to reverse.

And yet the messaging out of Washington remains completely disconnected from this reality. Trump keeps insisting the US economy is in a phenomenal position. He still believes the fundamentals are extremely strong despite every data point saying something is really, really wrong.

Trump: I should have, I should have 150% not 100% because we have the greatest. This is the golden age of America. What’s being built now in this country has never ever been built.

But the disconnect is causing investors around the world to actively look for alternatives to dollar assets. China understands this opening and they’re moving fast to exploit it. They’re making a serious and very public splash right now. China’s Central Bank, the PBOC, has just released a statement that the RMB will go fully international. This is their first standalone five-year plan dedicated entirely to this goal, and it confirms what we have been predicting for years. China wants the RMB to directly challenge dollar supremacy and to de-dollarize their global trade relationships. It is now officially stated policy--not just market speculation. China holds over $3.4 trillion dollars in foreign reserves, and the majority of that is denominated in US dollars. China wants to reduce those dollar holdings without triggering a currency crisis in the process. The challenge is that the world still largely runs on the dollar system. But, if China gets enough countries to trade with them using only the RMB, their need to hold dollars is going to drop significantly. There’s no risk of a dollar shortage if you’re not dependent on the dollar system in the first place. This is going to give Beijing a much cleaner pathway to eventually dump their remaining dollar assets without disrupting their own trade, without damaging their own economy. This is the end game here.

China is going around the world signing trade contracts denominated in the RMB. They are providing loans and infrastructure investments to other countries in their own currency. China is also becoming an offshore hub for RMB based investments, and that’s why Beijing is turning Hong Kong into a center for physical gold clearing and settlement. But China’s going to go even further. They’re going to create a cross-border RMB payment system that is fully functioning, and this is the most critical piece of the entire puzzle. The world needs an alternative because relying only on Swift puts countries at massive risk. If any country ends up on the wrong side of Washington, they could lose the ability to conduct international trade overnight.

Now, Bessent’s economic war on Iran just reminded the entire world of that persistent and very real threat. The freezing of Russian assets was the first major warning. The seizure of Iranian crypto and reserves just made the message even louder and harder to ignore.

Bessent: Uh you know, they’ve been very good partners. Uh we I I believe that we have seized about a billion dollars of their crypto, outright grabbed the wallets. Some of the uh some of them may be like typing in right now and real they might not have realized that their wallet had been grabbed. And you we are working with our allies all over Europe to grab, you know, villas and houses and properties.

This is exactly why Beijing is now joining forces with major EU banking institutions to dethrone global trade. And after what happened with Bessent dumping Euros to save the Yen, Europe is not very happy with Washington right now. China has authorized Deutsche Bank as the first non-Chinese lender to settle RMB transactions directly inside Europe. China’s clearing and settlement network is expanding rapidly and integrating into the EU financial system. This is a significant development for both China and Europe simultaneously. For Chinese companies it means faster and easier access to EU business--and transaction costs are going to get lower, obviously. Transactions can now be invoiced and settled directly in yuan without converting to dollars first. And these are not just financial gains, either. It strengthens trade relationships between Europe and China at the institutional level. The financial plumbing is being rebuilt to bypass the dollar wherever possible.

For Europe the advantages are even more urgent. The Euro has been slowly declining in value because of the energy crisis and US tariffs hitting the EU economy hard. Bessent dumping Euros to protect US bonds really sent a direct warning signal straight to Brussels. Washington is perfectly willing to sacrifice the second most important reserve currency in the world to protect the first, which is the dollar system. And to save the USD, the US threw the Euro under the bus without any consultation with European partners. The ECB was caught completely off guard by the move. EU policy makers described the intervention as striking, sad, and completely unprecedented. If Europe doesn’t take a decisive stand now, they will remain permanently at the mercy of Washington’s financial decisions. The Euro share in global transactions has been declining year after year. Today, it sits below 30% of global transactions, and that means the dollar share in European trade is actually rising by default.

This is an untenable situation for a continent desperately trying to establish autonomy. Europe will remain exposed to a dollar crisis or dollar shortage as long as this dependency continues. The Deutsche Bank RMB settlement deal is one concrete step towards fixing that vulnerability over time. And more deals are going to be struck. China’s dedollarization push is going to find willing takers around the world, not just in Europe. Countries already trade more with China than anyone else. So, using the Chinese currency for those transactions is a natural and logical next step. And Bessent keeps providing the push factor that accelerates this shift every time he weaponizes the dollar system. Beyond diversifying trade settlements, China wants the world to invest more in Chinese assets as well. If you hold a lot of RMB, you naturally want to start looking for Chinese stocks and bonds to put it into. And instead of petrodollar recycling into the US Treasury market, the world gets RMB recycling back into Chinese financial markets. That is the system China is trying to construct.

And China needs even more global capital flowing to fund their own ambitions. In the AI race alone, the US has raised over $1.4 trillion dollars through IPOs and bond issuance. China has raised less than $220 billion by comparison. Yes, China stretches their money further and their output per dollar is much greater than American companies. But raising more capital is still required. China still wants to stay competitive and ultimately be well ahead of the US in this race. Internationalizing the RMB directly addresses the funding gap. China just needs more money coming in. And it gives the world a surplus of Chinese currency to deploy into investments.

Now, some countries, some exporters, will use their RMB to buy gold, which ultimately still stays inside China’s financial ecosystem through Hong Kong. And some will buy into Chinese tech IPOs that are offering quite a lot of growth prospects. But what Beijing really wants is for global capital to flow into their domestic bond market at scale. Since 2022, the tables have clearly flipped on the US financial system. Thanks to runaway inflation and endless deficit spending, US bond yields have risen far above Chinese equivalents. The US 10-year yield is now pushing towards 4.7%. China’s equivalent benchmark sits at just 1.7%. And that enormous gap of 300 basis points gives Beijing a massive runway to keep borrowing money cheaply, while the US pays through the nose for every dollar they borrow. All Beijing needs now is to push the RMB out to the world through trade, loans, and all kinds of partnerships. That will allow the currency to naturally find its way back to Chinese bonds through normal investment flows.

Once that recycling mechanism becomes fully operational, it’s going to become deeply damaging for the US bond market. More money flowing to Chinese bonds pushes Beijing’s borrowing costs further down. But at the exact same time, it keeps US borrowing costs elevated and rising. Every dollar that goes into a Chinese bond, instead of a US Treasury, is one less buyer at Bessent’s auctions. The AI buildout is going to become even more expensive to finance.

China’s playing a very long game here. They are not interested in kinetic confrontation with the US military, so, they are setting the stage for fundamental bond market restructuring. This is the takeaway that’s happening. This is the strategic play happening behind all the noise. The UAE and China combining forces on RMB settlement is another own-goal for Trump. It follows what has happened over the last 3 years. It’s the same destructive pattern. The US drove Russia closer to China with all the sanctions, and the war on Iran drove global trade closer to China through inflation and energy destruction. Let’s not forget the tariff war as well.

By dumping Euros to protect the USD, Bessent is now driving EU currency arrangements closer to China as well. There is an enormous amount of trade value waiting to be dedollarized between Europe and China. Bilateral trade between the EU and China exceeds 750 billion Euros annually. That is nearly 900 billion dollars worth of transactions that could shift away from dollar settlement. Sooner or later, a meaningful chunk of that trade will be invoiced in bilateral currencies directly. Both sides have clear financial incentives to make this happen. And when it does, the boomerang effect will hit the US bond market hard. EU and Chinese demand for US treasuries is going to decline even further from today’s falling levels. And Bessent is going to find fewer buyers at every auction. Yields are going to rise further and the debt interest burden on the US national debt is going to keep compounding. But that’s obvious.

All of this reminds me of what Luke Gromen keeps saying. Ultimately, the “debasement trade” is the only choice left for the US—devaluing the dollar continually for 5-10 years so that the US can go back to making stuff, rather than being a casino running a bought country. Trump’s pipe dream of using tariffs and the US military to strong arm investment into the casino without any change in lifestyle was always a delusion.

Good listen—Trita Parsi:

“WE ARE OUT OF MISSILES”: Washington Insider EXPOSES Pentagon’s SECRET Panic