The demolition was accomplished by implementing economic reforms dictated by the World Bank and the International Monetary Fund. The same institutions dictated the economic reforms for Ukraine from its independence in 1991. From that time until 2014, Ukraine's economy was the world's very worst performer. Its real GDP declined by 35% over those 24 years: one of only five nations in the world whose GDP had shrunk in that period. For perspective, consider that in 1987, during the Soviet times, Ukraine’s GDP was 1/4th that of China. By early 2015, it was only 1/80th!

Even in terms of purchasing power per capita, Ukraine lagged far behind other newly independent Soviet republics. This could hardly be ascribed to accident, incompetence, or corruption. The trend of Ukraine’s PPP GDP looks positive at all only because Ukrainian people’s purchasing power collapsed over this period.

The ultimate goal is seizing the collateral

Again, at the end of the economic decline came war. But what of the ultimate reasons behind all this? Supposing that creating conditions for war are planned by men in smoke-filled rooms, we need to examine why this would be done at all? I believe that the trail of incentives strongly suggests that it’s all simply about colonial looting.

The most effective method of looting nations, one that keeps on giving over the long haul, is by seizing their collateral and loading them up with debt. The prerequisite for that is seizing political control of the target nation and installing a cooperative government that’ll sign off on whatever arrangement suits their foreign sponsors.

Collateral includes natural resource wealth, but also a nation’s infrastructure and valuable enterprises. In fact, it can be anything capable of generating significant cash flows. Take the example of Smederevo Iron Mill (Smederevska Železara) in Serbia. In the 1960s and 1970s, Yugoslavia raised $600 million in funding from Western financial institutions to expand and modernize the plant. In 2003, US Steel purchased it for $23 million which barely covered the price of real estate where the facilities are located. In essence, US Steel got the plant for free and could now use it as collateral and raise credit for whatever purpose.

In that arrangement, it’s important to keep in mind that every dollar of that credit instantaneously became an asset on the balance sheet of US Steel’s bankers and therein lies the most significant incentive for whatever means make this arrangement possible. In this way, enterprise by enterprise, facility by facility, the total debt of former Yugoslavia’s republics soared 14-fold, from $13.5 billion in 1988 to $191.2 billion in 2010. Servicing these debt obligations massively enhanced Western financial institutions’ assets and the cash flows required to service them.

Owning, controlling, or bribing local politicians and media is required to ensure that the colonized people don’t stray toward wrongthink as their wealth is being drained away. They must learn to appreciate that democracy and freedom is worth any price and that they shouldn’t ask the wrong questions if they know what’s good for them. The most collaborative among such local players may even become eligible for special vacations on private Caribbean islands.

Yugoslavia was only a small, but telling case of colonial subjugation. Far more significant wealth-transfer conveyor belts could be built up by taking political control over nations like Ukraine, Iran, or Russia. Wars may be messy, but they are the best, most effective means of wresting political control and placing it in the hands of friendly governments. This, I believe is the key behind most wars we have experienced over the last few centuries, and it also explains why two nations, the US and UK, have been the most eager superspreaders of freedom and democracy at gunpoint around the world.

To learn more about TrendCompass reports please check our main TrendCompass web page. We encourage you to also have a read through our TrendCompass User Manual page. For U.S. investors: an investable, fully managed portfolio based on I-System TrendFollowing is available from our partner advisory (more about it here).

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With yesterday’s closing prices we have the following changes for the Key Markets portfolio:

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There can be little doubt that European economies are being destroyed deliberately and purposefully. I’ll get to that, but let’s first tackle the proximate reason why this is being done (the ultimate reason is a different discussion). As I suggested in the 26 March 2024 TrendCompass, the demolition of a nation’s economy lays the foundation for war mobilization. Facing defeat in Ukraine,

“… the powers that be need to replenish their pool of cannon fodder, and this is difficult to do with stable, prosperous societies. It's only when you reach 50% youth unemployment, deprive young people of ways to fulfill their aspirations and raise families, that you can begin to manipulate them toward more radical political positions. This is exactly the process that unfolded in Germany during the 1930s and in Ukraine after 2014.”

It’s exactly the process that unfolded in former Yugoslavia as well, to prepare the terrain for the 1991 wars of succession.

Preparing former Yugoslavia for war

Already in the early 1980s, former Yugoslavia was specifically targeted for demolition. In the “NSSD on Yugoslavia (S) #133” memo dated 19 March 1984 and titled, “U.S. Policy Toward Yugoslavia,” the powers that be decided that “US policy will be to promote the trend toward a market oriented Yugoslav economic structure.” NSSD stands for National Security Decisions Directive.

Turning Yugoslavia toward market economy seemed harmless enough, only it wasn’t. By 1988, the National Endowment for Democracy (NED) was sending economic advisors to Yugoslavia. They started handing out help bribes to various groups and individuals in the country, including politicians, trade union representatives, media organizations and journalists. They also pressured Yugoslavia to implement IMF’s “Structural Adjustments,” which entailed radical cuts to unemployment benefits, pensions, subsidies and other social programs.

Public spending and wages all had to be slashed and worker-managed enterprises abolished. Lawfare was unleashed to push thousands of companies into bankruptcy. Canadian historian Michel Choussodowsky pointed out that this was a premeditated program of destruction:

“The World Bank described this mechanism as a trigger. … They used that term. They say, ‘we need to trigger the bankruptcy of Yugoslav industry.”

That was not a very nice thing to do to a country, but they did it anyway. Between January 1989 and September 1990, more than 1,100 industrial firms were destroyed. Many of these firms were then taken over by a small clique of LBO (leveraged buy-out) specialists and foreign investors. They took control and ownership of these companies at clearance prices and then loaded them up with debt to extract debt service payments.

Malice, not incompetence

The results of this covert privatization piracy was that from January to October 1990, unemployment soared to 20% and the standard of living in Yugoslavia collapsed by 18%. By 1991, consumer price inflation hit 200% and the people found themselves impoverished, which contributed to social and ethnic tension. At the time, Serbian Minister of Culture Branislav Lecich observed:

“When a man has nothing and he’s not aware in the existential sense, he latches onto such kinds of ideas that awake a human in him. Usually nationalistic narratives, religious narratives…”

Of course, such narratives didn’t arise spontaneously: they were deliberately flooded through society by many of those same NGOs, media organizations and journalists that were receiving funds from the NED and other foreign organizations. In this way, a climate of ethnic intolerance, particularly between the Serbs (Orthodox Christians) and Croats (Catholics) was actively fomented.

Radio stations started broadcasting war songs on both sides of the divide. In at least one instance, Serbian and Croatian news presenters were caught reading the exact same speech, word for word, except that in the Serbian version, the Croats were the aggressors and Serbs their victims, while in Croatian version, the Serbs were the aggressors and Croats the victims.

The war broke out in the summer of 1991 accompanied by the systematic, planned dismantlement of former Yugoslavia’s enterprises. By October of 1993, 90% of the domestic pharmaceutical production was destroyed. By January of 1994, over 60% of former Yugoslavia’s labor force was unemployed. Throughout this tragedy, Western audiences were being fed the fairy-tales about primitive, violent Balkan tribes and their “centuries-old ethnic hatreds.”

Extinguishing 80 nuclear power plants

Wars in the Balkans were orchestrated deliberately, and there are many reasons why I suspect that today, a major war is also being deliberately orchestrated between European nations and Russia. There is one reason, however, which raises that suspicion to near certainty, and that reason are the Nord Stream pipelines.

Nord Stream 1 and 2 were built to transport a total of around 110 billion cubic meters of Russian Natural Gas to Germany every year. That figure may seem like an abstraction, but it is equivalent to between 1,100 and 1,230 TWh (terawatt-hours) of heat. That’s about 600 TWh of electricity, corresponding to the output of some 80 nuclear plants. This calculation was posted on X by one @Mark4XX with the comment, “Europe lost an energy base the size of 80 reactors, then kept dismantling what was left.” I verified the calculation and it is correct.

The destruction of Nord Stream pipelines was an enormous blow to the German economy, which is 40% of the EU economy and its ripple effects will persist for many years. This should have been treated as an act of war - equivalent, almost, of a nuclear attack. Instead, it continues to be treated as only a political embarrassment in search of a convincing, satisfactory scapegoat: a way to engineer closure and flush the story down a memory hole.

What’s worse, we know that one of the four Nord Stream pipes is still intact and Russia’s President Putin stated numerous times that it can start delivering gas to Germany about as soon as their German clients ask for it. The four pipes were the same size, which means that Germany and Europe could quickly get about 26 million cubic meters of gas per year flowing again: the equivalent of switching 20 nuclear reactors back online. That would clearly be the most obvious thing to do - unless you preferred to demolish Europe’s economy instead, immiserate its people, create high youth unemployment and then send all the youth off to war. That part of the plan is in the works too.

To learn more about TrendCompass reports please check our main TrendCompass web page. We encourage you to also have a read through our TrendCompass User Manual page. For U.S. investors: an investable, fully managed portfolio based on I-System TrendFollowing is available from our partner advisory (more about it here).

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Iceland’s Prime Minister Kristrún Frostadóttir promised the referendum vote and said that the accession talks would not advance under her government, which remains in office until 2028. Furthermore, under her center-left government, the parliament will consider whether to formally withdraw Iceland’s membership application altogether.

Background and the significance of Iceland

Iceland is a tiny island nation: it has some 400,000 inhabitants and is situated far from the European continent. Iceland applied to join the EU in 2009 after the financial crash devastated its economy and its banking system. Negotiations began and 11 chapters were closed, but a eurosceptic coalition under Prime Minister Sigmundur Davíð Gunnlaugsson (Independence Party and Progressive Party) suspended the talks and formally halted the accession process in 2015.

The former PM spelled out what was at the table for Iceland. The prize, he said, is a seat at the table. Iceland would get at most six members in a European Parliament of 750 or more. That parliament cannot even table a bill. It only rubber-stamps what the unelected EU Commission officials send down. Gunnlaugsson asked, “why walk into a process whose price is giving up courts, laws, government and foreign policy, plus every treaty Brussels dislikes — for the hope of a temporary carve-out?”

Iceland already has significant integration with the EU through the European Economic Area (single-market access, along with Norway and Liechtenstein) as well as the Schengen Area allowing free movement of people between Iceland and EU nations. Iceland is also a NATO member nation since 1949. However, it has retained some of the most important aspects of its own sovereignty: it has its own currency, the króna, and with it, its fiscal sovereignty.

The question of fisheries

Iceland also has sovereign control of its fisheries, which has been one of the main issues of contention between Iceland and the EU. In fact, it was the nation’s main fishing districts that shut the door to the EU by voting heavily against continuing the accession talks. Their distrust was based on Ireland’s experience with the EU and its complex and incoherent regulations.

The recurring complaint from the Irish fishing industry is straightforward: Ireland has about 12% of EU waters, but gets only about 5–6% of the fishing quotas. As a result, other member states’ boats take most of the fish from Irish waters. Fishermen call themselves “the fish basket of Europe, yet the poor relation,” whose boats sit tied up for months when monthly quotas are exhausted while foreign vessels are somehow allowed to continue fishing the very same grounds. Many regard the arrangement as a betrayal, fuelling calls for Ireland to exit the EU.

No longer a prestigious club

Perhaps the most significant signal from this weekend’s referendum in Iceland is that the EU is no longer viewed as a prestigious club of the world’s wealthiest and most advanced economies but, as Gunnlaugsson called it a Union at the height of its decline. And indeed, the Icelanders got it right: the EU is a project in an accelerating stage of disintegration, crumbling under the weight of its own contradictions. While it is ostensibly committed to the ideal of democracy, it is profoundly undemocratic.

Nations wishing to become members of the club have to give up their sovereignty and implement all the EU Commission’s directives - including all the future ones - while having no say in their formulation. EU’s laws are drafted by generally secret groups of lobbyists and handed to the EU Commission to implement. The EU Parliament occasionally discusses and debates these bills, but the whole body serves two main purposes: to rubber stamp whatever the EU Commission puts in front of them, and to offer the Parliamentarians a venue to record YouTube clips and garnish their own popularity.

My own country, Croatia, has become a full member of this “prestigious” club in 2013 and most people by far are very significantly worse off than they were before 2013. The economy is stagnant, more than 2/3rds of households struggle to make ends meet, inflation is rising and corruption is rampant. Like their Irish coleagues, Croatian fishermen are also in revolt: starting this year, they will be allowed to fish only 27 days in the year for reasons that are completely unclear.

The farming community is also being systematically dismantled with frequent culling of the livestock, now because tests turn up positive for African swine flu, now bird flu, or whatever. In every case, the only remedy is the destruction of entire herds. People have had enough and if a referendum to exit the EU were held in Croatia today, they would almost certainly vote in favor of Croexit. I believe the same would happen in most EU nations.

It’s increasingly difficult to see any point of maintaining a union of unwilling members, especially as that union turns increasingly oppressive in their endeavor to hold itself intact. With each passing day, its system of governance is proving more and more similar as that of the USSR, suggesting that its future is equally promising. For investors, that has very significant implications with respect to the EU member nations’ Treasury bonds and for the Union’s currency.

To learn more about TrendCompass reports please check our main TrendCompass web page. We encourage you to also have a read through our TrendCompass User Manual page. For U.S. investors: an investable, fully managed portfolio based on I-System TrendFollowing is available from our partner advisory (more about it here).

Today’s trading signals

With Friday’s closing prices we have the following changes for the Key Markets portfolio:

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One of the most ominous developments of 2026 is the re-acceleration of the food price inflation:

These are very considerable price rises in an interval of only 8 months’ time. The trend may not reverse in the short-term (it may not reverse for a long time) and will further worsen the cost-of-living crisis which is now heating up not only in the United States but across the Western world. Judging by the broader context, this year’s increases could only be the beginning of more substantial price increases:

As the above chart shows, after strong price rises between 2020 and 2022, we’ve enjoyed more than three years of gradual declines, which roughly halved the prices of the main staple crops. Rice, which is the staple for most of the world’s population has fallen by over 75%. Unfortunately, it seems that this benevolent trend has reversed now and we’ll only know with time how far the price rises might go and how long the inflation cycle could last.

In Monday’s report we’ve already seen that the prices of red meat climbed quite significantly over the last few years, prompting the Trump administration to resort to tried-and-tested inflation-suppression measures that invariably result in short-term gain for the long-term pain:

CPI inflation will spike bigly!

CPI inflation figures won’t show these changes immediately: the typical lag from a rise in agricultural commodity futures to a visible move in CPI food-at-home is on the order of 3–6 months. Trump’s inflation suppression will probably offset the increases in grains prices, at least in part, so on paper things might still look moderate and manageable. But the prices at grocery shelves, which must be paid in real time, bite into people’s budgets in real time, as we saw earlier this week:

This isn’t going away soon..

Current food price increases are largely the result of a sustained global war of farming that has comprised a barrage of administrative and regulatory measures designed to make farming unprofitable, incentivizing farmers not to produce food and encouraging them instead to sell their farms. Often, such measures were justified as war on carbon, on nitrogen, on bird flu and other viruses, on Russian fertilizers, inheritance taxes, rewilding schemes, “get out of farming” payouts and burgeoning compliance rules and bureaucracies to police it all.

For example, if you grow wheat in Britain, with much work and considerable expense, you can earn about £160 per acre. At the same time, the government has been promoting the so-called “set-aside” or rewilding schemes, offering farmers £300-£400 per acre to let weeds grow on their land. For farmers, it’s more income, less expense and less work. Food production is also being suffocated through regulatory measures. Active farmers are buried under the burgeoning regulatory requirements, forcing them to spend long hours filing endless forms to comply with burgeoning rules and regulations.

Many of the new rules, including the “get out of farming payments scheme,” effectively punish or discourage food production while incentivizing the farmers to sell their farms. Farmland is then often bought by global investment behemoths like BlackRock and Vanguard who have no interest in producing food. Why take £160 per acre when you can collect £400 by letting weeds grow? End result is that food production has been shrinking steadily, which is now forcing food prices higher.

Similar measures are being pursued in the US, in Ireland, the EU as well as in India and many African countries with the effect that today there is 72% less food moving through global distribution chains than there was in the pre-pandemic period. Unfortunately, many of these problems will take a long time to rectify, which all but guarantees that the food crisis isn’t going away any time soon and that food prices could continue to soar higher than we can envision today.

To learn more about TrendCompass reports please check our main TrendCompass web page. We encourage you to also have a read through our TrendCompass User Manual page. For U.S. investors: an investable, fully managed portfolio based on I-System TrendFollowing is available from our partner advisory (more about it here).

Today’s trading signals

With yesterday’s closing prices we have the following changes for the Key Markets portfolio:

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Unfotunately, the video of the panel discussion has not yet been published so I cannot link it here, but I thought that the discussion was extremely interesting and illuminating. The gyst of the discussions and the conclusions which emerged are again consistent with the conflict-of-two-systems hypothesis in which energy economics play a foundational part. The changes and developments implemented in the energy sphere by China through its 14 consecutive five-year plans were clearly aimed at nullifying Western technological advantage in energy production, storage, transmission and utilization technologies.

Starting in the beginning of the 20th century, the British Empire sought to assert control over global production, transport and trade of crude oil, without which imperial hegemony would not have been possible. They were very successful in this: in 1912, Britain controlled about 12% of world oil production. By 1925, they controlled well over half of it. In a 1919 article published by the Sperling’s Journal, British banker Sir Edward Mackay Edgar triumphantly rolled out a long list of Britain’s energy trophys:

“I should say that two-thirds of the improved fields of Central and South America are in British hands. … The Alves Group (through its subsidiary, British Controlled Oilfields, or BCO) whose holdings encircle practically two-thirds of the Caribbean Sea, is wholly British, working under arrangements which ensure that perpetual control of its undertakings shall remain in British hands. …

Or take again that Greatest of all organizations, the Shell Group. It owns exclusively or controls interests in every important oilfield in the world, including the US, Russia, Mexico, the Dutch East Indies, Rumania, Egypt, Venezuela, Trinidad, India, Ceylon, the Malay states, North and South China, Siam, the Straits Settlements,… and the Philippines. … America before long will have to purchase from British companies, and to pay for in dollar currency in progressively increasing proportion the oil she cannot do without, and is no longer able to furnish from her own store.”

The same interest groups that Sir Edward so admired, subsequently transferred their seat of operations to the United States and the strategy remained unchanged: control of energy production, transmission, storage and trade. From the point of view of Middle Eastern producers, who are feeling these systems of control “on their own skin,” as laid out by Dr. Naji Abi-Aad they are beset by such dependence on Western powers that the result, again, is scarcity amidst abundance.

Dr. Abi-Aad underscored that the Middle Eastern region could produce significantly more oil and gas but their output is suffocated by artificial restrictions, sanctions and conflict. Ultimately, this translates into high prices which hold back global economic development and prosperity.

China’s role

China’s leadership clearly recognized the ulterior energy strategy of the Western empire and through sheer foresight, strategic thinking and determination, China systematically reduced its exposure to foreign sources of hydrocarbon energy. As professor Tu explained, this entailed a shift toward electricity as the main fuel of China’s economy. The rationale is simple enough and isn’t primarily driven by ecological concerns: electricity can be produced domestically, reducing China’s exposure to geopolitical risks.

Domestic electricity production has another important aspect: the cost of its generation are much more predictable relatively to foreign-sourced oil and gas. Some of these concerns have also driven Western powers’ early start in shifting away from hydrocarbon-based energy sources toward “clean and sustainable” sources as part of our “Great Reset,” or “Fourth Industrial Revolution.” However, China has not only caught up with Western nations – it leapfrogged their technological leadership in the most spectacular fashion in the space of only 20 years.

As we’ve seen in past TrendCompass reports, this is a demonstrable, empirical fact. Namely, the Australian Strategic Policy Institute (ASPI) monitors cumulative innovative and high-impact research across 64 key fields of technology, and ranks countries by tracking patents and publications by national universities, labs, private companies and state agencies According to ASPI’s comprehensive 2024 study, China is now dominating in 57 out of 64 critical technologies. As recently as 2007, China was leading in only three of those technology, lagging behind the US, which dominated in 60 of them.

China’s technological lead today encompasses new systems for producing, storing and utilizing energy that have overcome many of the shortcomings that made the adoption of these technologies only slow and partial in the West. According to professor Tu, China will “double down” on these initiatives, further nullifying Western control over energy production and trade.

All this reflects the farsighted strategic thinking of Chinese leadership, which could be deployed to the benefit of not only China and Chinese people, but humanity in general, to the ultimate detriment of that “other” system of governance, which is the Western colonialist system. China (and to an extent also Russia) has been transferring some of these technologies to many nations of the Global South, setting the foundations for their economic development. In this way, China could help lift billions out of poverty in the same way it has done so for 800 million of its own citizens.

In this sense, Chinese technologies may hold the best hope for humanity to transcend the limitations and conflicts that emanate from legacy energy production systems and Western technologies. We have some indications that these developments went far beyond mere business and commercial competition; that it was entirely strategic and that the Chinese leadership knew exactly what they were doing and why they were doing it. One astonishing indication was the famous 1971 quote from Mao Zedong, who made this prediction:

“In another 50 years, China will be very strong. America will most likely be very envious and restless, but it doesn’t dare attack China. It will research germ contamination instead. After it finishes with this unconscionable deed, it will self-destruct.“

That quote is genuine and its translation is accurate, offering us a glimpse into the strategic thinking at the very top of Chinese political leadership. I believe, however, that it will be the Western neocolonial system that will self-destruct, not “America.” Even this prospect is now looking increasingly more credible. In fact, once this system self-destructs, the US and the rest of the world will be able to emancipate their creative and productive potential and transcend the current state of artificial scarcity, zero-sum economic policies and never ending military strife.

To learn more about TrendCompass reports please check our main TrendCompass web page. We encourage you to also have a read through our TrendCompass User Manual page. For U.S. investors: an investable, fully managed portfolio based on I-System TrendFollowing is available from our partner advisory (more about it here).

Today’s trading signals

With yesterday’s closing prices we have the following changes for the Key Markets portfolio:

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According to the Wall Street Journal (WSJ), Ratcliffe arrived in Moscow after the US gathered intelligence indicating mobilization preparations and plans to test NATO's resolve. The U.S. has apparently collected intelligence showing Russia’s early preparations for a possible military mobilization in Ukraine and plans to test the North Atlantic Treaty Organization’s strength and resolve.

Former Deputy Director of US National Intelligence Beth Sanner told WSJ that Ratcliffe may have met with Putin to deliver a warning along the lines of: "We know what you are going to do, and you'd better not do it." Russian sources had a somewhat different take.

Political analyst Henry Sardaryan, dean of the Faculty of Governance and Politics at MGIMO in Moscow, claimed that Ratcliffe’s visit was probably an attempt to establish whether a broader US-Russia deal is possible. Sardaryan, who’s a part of Russia’s foreign-policy establishment, wrote that Ratcliffe’s role is unlike that of Steve Witkoff’s, and that the purpose of his visit was to determine whether Kremlin was inclined to make a major deal with Washington and what their asking price would be.

Ukraine for Iran?

I believe that Sardaryan’s take is more credible; telling Putin that “we know what you are doing, etc.” could just as easily be done over the phone or by sending General Keith Kellogg. It would not have required the very visible entry with military aircraft and a large motorcade. Given that Ratcliffe’s visit came only a day after Treasury Secretary Scott Bessent announced the Operation Economic Outcast against Iran, it’s more than plausible that the proposed deal was related: perhaps Ratcliffe asked Moscow to end their support for Iran in exchange for the US ending their support for Ukraine. According to Iranian officials who were briefed about the meeting, Ratcliffe also asked for help opening the Strait of Hormuz.

This would not be the first time Russia’s Western partners offered a compelling deal and made tempting promises. Not long ago, they asked Russia not to intervene in Ukraine in exchange for Western partners guaranteeing the implementation of the Minsk I and Minsk II accords. The accords were duly signed, but Western powers never had any intention of honoring their commitments. Russia was also asked in 1989 to withdraw its troops from Eastern Europe against the promise that NATO would not move one inch eastward. The Russians withdrew, and then NATO moved all the way to Russia’s borders wherever it was able to.

Russia - China - Iran alliance is existential

Such experiences make it very unlikely that Russia will be tempted by whatever Ratcliffe offered and that it would end their support for Iran. By now, Russia sees their strategic partnership with Iran and China as existential, as do Iran and China themselves. Their foreign policy establishments appreciate that making it easier for the West to pick off one of them would later empower it to turn on the others.

Iran is the critical node of China’s belt and road initiative as well as Russia’s International North-South Transport corridor. If these trade routes were cut, or fell under adversarial control, both Russia and China could be vulnerable to US-controlled chokepoints. If Iran pivoted to the West, that would include the Strait of Hormuz as well as the Bab-el-Mandeb Strait.

Furthermore, Western powers have proven very cunning and effective in orchestrating proxy wars against their adversaries: in the same way that Ukraine was successfully weaponized against Russia, Russia could in time be weaponized against China if a Russian version of Volodymyr Zelensky were ever installed in the Kremlin. For all these reasons and more, it would be folly for either one of those three powers to cut a treacherous deal with the US at the expense of their strategic partners.

Was it always all about divide-and-rule?

Ratcliffe’s visit to Moscow furthermore raises the suspicion that President Trump’s outreach to Vladimir Putin wasn’t so much about improving US relationship with Russia for any right reason, but a calculated ploy to push a wedge between Moscow and Beijing and between Moscow and Tehran. Ukraine could in that case be sacrificed as a bargaining chip to buy Russia’s goodwill and collaboration.

Unfortunately for the Trump administration, in spite of the fact that Vladimir Putin always sought to improve relations with the US, he is not likely to jeopardize Russia’s long-term security by betraying and alienating her partners and allies. Besides, the bargaining chip of Ukraine is by now so thoroughly beat up, it could hardly sweeten any deal Ratcliffe might have proposed. In fact, Ukraine could be close to collapsing and Vladimir Putin seems ready to deliver it a coup de grace.

Only a few days ago, he warned that Russia has reached its limit with Ukraine’s attacks deep inside Russia:

"Kiev opened Pandora's box when it launched strikes on civilian targets. … They themselves let the genie out of the bottle - they began to hit our civilian enterprises. Opponents have long dreamed and constantly talk about the goal of bringing Russia to collapse. Therefore, the attempt to ‘defeat her in 40 days’ was another adventure of Kyiv and Western curators.”

By “Western curators,” Mr. Putin meant the US, UK and NATO. All that suggests that whatever concessions, or help that President Trump and John Ratcliffe hoped they might obtain from Moscow will come up short of their hopes. That, in turn could lead us back to the US and Russia overtly being adversaries which, exacerbating the risk of a very serious military escalation at some point in the near future, which is a very bleak prospect.

As if that all wasn’t ominous enough, yesterday brought more bad news. Just as John Ratcliffe was visiting at the Kremlin, the Amur Gas Chemical Complex, the $10 billion joint venture between Russia’s SIBUR (60%) and China’s Sinopec (40%) went up in flames, killing at least 3 workers and injuring some 150. The site is located about 6,000 kilometers from Ukraine and was was only weeks away from starting production. Whether this incident was yet another Ukraine attack or just an accident, the Russians have every reason to suspect that it was the former, further wearing down Russia’s patience.

Things are also escalating ominously in the Middle East. This morning’s reports suggest that Kurdish forces have launched a ground invasion into Iran, which is a huge development. Tensions are also rising between Ankara and Tel Aviv: Turkey sent a large contingent of 450,000 troops to Syria - a development that we should keep on the radar as it could draw Israel into yet another military conflict, this time against a NATO ally. To say that this puts the United States in an impossibly awkward position would be an understatement. An open conflict could also draw in Greece on the side of Israel and precipitate the final collapse of the NATO alliance. The year ahead looks like it will be extremely busy and extremely unpredictable.

To learn more about TrendCompass reports please check our main TrendCompass web page. We encourage you to also have a read through our TrendCompass User Manual page. For U.S. investors: an investable, fully managed portfolio based on I-System TrendFollowing is available from our partner advisory (more about it here).

Today’s trading signals

With yesterday’s closing prices we have the following changes for the Key Markets portfolio:

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"At dawn begins an economic D-Day, the single greatest financial offensive ever marshalled against an adversary. Our objective is to sever every economic lifeline that sustains the tyrannical regime until Tehran stands alone."

The new initiative was named “Operation Economic Outcast,” after some alternative names were eliminated. According to three sources familiar with the matter, other proposed names included “Operation Sheer Desperation,” and “Operation Kitchen Sink.”

Jest aside, something about this latest gambit seems so radical, reckless, and fraught with potential for unintended consequences, it reeks of desperation.

The dumb “little excursion”

President Trump launched his war of choice against Iran on 28 February and conveyed his expectation that it would be a “four- to five-week” affair. He even characterized it as a “little excursion” to dismantle the military threat posed by the radical Islamic regime in Iran.

However, the “little excursion” turned into a quagmire and 178 days later, the hailstorm of consequences is still battering the administration: interest rates are soaring, as are the oil prices; US military’s access to the region has been severely restricted, at least 16 military bases have been substantially destroyed, morale of US troops is in the toilet and Tehran seized control over the Strait of Hormuz, one of the most important maritime trade choke points.

Since bombing Iran “like nobody’s ever seen before” didn’t achieve the desired objectives, various other measures were tried or war gamed, but they either failed, or were aborted before any serious attempts were made (like the land invasion). Allegedly, using nuclear weapons against Iran was seriously considered, but thankfully, it was ultimately shelved. Thus, Operation Economic Outcast comes after six months of failure.

You are with us, or you are against us (again)…

The operation’s stated objective is to fully isolate Iran and make it an economic outcast by severing “every economic lifeline” that sustains it, forcing Tehran into a choice between complete global isolation or a path back to normalcy and reintegration into the global economy - on U.S. terms. It marks a shift from “managing” the Iranian threat to “ending” it, as some officials have characterized it.

Among the announced measures, the US will target entities from third countries, including companies, banks, and governments that continue any economic engagement with Iran. That includes buyers of Iranian oil, shipping companies, financial intermediaries, and others. Apparently, many nations have already been given timelines to shut down their business dealings with Iran.

Non-compliance entails unilateral U.S. action and exclusion from the U.S. dollar system. In his FT writeup, Bessent said that, “… any nation that serves as a financial artery of a withering regime should expect to share in its isolation…” All countries must choose between the US or Iran, said Bessent, and poverty will be the punishment for those who fail to choose Washington. The fate of “those who tether themselves to Tehran is the foreclosure of any path to lasting prosperity…” Wow.

The nations “tethering themselves to Tehran,” are those that have a trade relationship with Iran, which includes over half of all nations in the world - some 100 of them! The Trump administration is now forcing them all to choose: cease all trade with Iran, or become an economic outcast yourself. That’s a shocking level of heavy-handed coercion, which comes with a significant risk of back-firing.

Iran’s top trading partner is China, which accounts for 30% of Iran’s imports and 13% of its exports. China has been buying up to 1.8 million barrels of Iranian crude oil exports per day and forcing China to give up on this trade (or else…) is simply dismaying. Furthermore, many of Iran’s major trade partners are US allies, including Turkey, Pakistan, Iraq, Japan and India. As a result the effectiveness of this Operation Kitchen Sink will depend on their compliance, which is not a given.

President Trump has already been contacting world leaders and other officials from the US Treasury Department and US State Department have been engaging their counterparts around the world in an effort for the new sanctions to pack as much punch as quickly as possible. However, imposing hardship on other nations and many allies will certainly elicit resistance and resentment. With time, Operation Economic Outcast will almost certainly include so many exemptions and workarounds that it could soon become only a marginal nuisance for the Iranians.

The unintended consequences

In the end, Trump administration’s heavy-handedness will accelerate de-dollarization of global trade and a growing adoption of alternative means of trade settlement. Ultimately, this will weaken US trade relations and discourage nations from holding significant reserves in US dollars, ultimately suffocating global demand for US Treasury instruments. This may force the administration into financial repression at home (forcing US investment funds to buy government debt) and the monetary authorities into ever greater monetization of government debt, leading potentially to hyperinflation and economic collapse.

The fact that the Trump Administration is risking all these consequences to win the war that they already won many times over in the last 178 days is simply stunning. It’s telling the world that actually defeating the government in Tehran requires the whole world coming together and closing ranks behind the ruthless hegemon. It’s an admission that Iran won the kinetic aspect of the war

It is also a demonstration of just how far the hegemon is prepared to go to bludgeon an independent nation into submission. Any forward thinking leader or government will understand that whatever they’re prepared to do to Iran, they could do to them in turn. It’s not a good way to build alliances.

One would think that nobody in that position of power could possibly be as reckless as that, but it seems that one would be wrong.

To learn more about TrendCompass reports please check our main TrendCompass web page. We encourage you to also have a read through our TrendCompass User Manual page. For U.S. investors: an investable, fully managed portfolio based on I-System TrendFollowing is available from our partner advisory (more about it here).

Today’s trading signals

With yesterday’s closing prices we have the following changes for the Key Markets portfolio:

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On Friday, 21 August President Trump announced a plan to allow 300,000 metric tons of imported ground beef into the US, completely tariff-free, in an effort to slash beef prices by 25%. Supposedly, this should be a win for the American consumer, bringing down the food price inflation and relieving some cost of living pressures.

But Trump’s “deal” is only temporary: it’ll span 90 days. That’s not really a solution to the cost of living crisis, and the way Trump formulated the measure is yet another inversion of reality (see “Deflation is inflationary…” below). At the same time, the deal could help Trump influence the coming mid-term elections, which will be held on Tuesday, 3 November (71 days from today).

The haters will say that the sudden concern with the Americans’ cost burdens is just a cynical ploy to appease voters and polish-up some “winning” ahead of the mid-terms. They might have a point: back in June, Trump wasn’t concerned about inflation at all. To the contrary, when asked explicitly about the soaring prices he said, “No, I love it. I love the inflation…” Well, that was then and for some reason Trump no longer loves inflation. The reason could be related to his approval ratings, specifically with respect to price inflation:

Squeezing the cattle ranchers

While Trump’s beef deal might provide a partial and temporary respite for Americans struggling with the costs of food, it will also directly harm the cattle ranchers. Reacting to the Friday announcement, the “Good Ranchers” responded with some common sense:

“… flooding the market with 300,000 metric tons of imported ground beef with no tariff for 90 days is not a solution for American ranchers. It’s a short-term price fix that puts more downward pressure on the cattle producers who are already struggling to stay viable.

Trump has not said which countries this beef is coming from or who committed to the 25% price reduction he’s promising. American cattle ranchers have been dealing with years of drought, high feed costs, and a shrinking herd. The answer to that is not more cheap imported beef with lower standards competing against them on shelves with no country of origin label…”

Deflation is inflationary (and vice versa)

Trump’s 90-day food inflation patch will most likely backfire, both oh cattle ranchers and on the consumers. If left to itself, price inflation has a deflationary effect over time: price of beef goes up → ranchers raise more cattle → beef becomes plentiful → beef prices go down. By contrast, price deflation tends to have an inflationary effect: government intervenes to lower prices → ranchers lose incentive to raise cattle → beef becomes scarce → beef prices go up.

At any rate, that should have been the effect of the last few years’ of soaring beef prices:

The reason why cattle herds diminished in spite of the soaring beef prices had to do with other kinds of helpful government measures: particularly since the pandemic, the governments of Western developed nations deliberately attacked farmers and obstructed food production. Instead of importing cheap beef from whoknowswhere,

Trump administration should have simply reversed such policies and incentivized farmers to produce more abundant beef and other crops. That required some foreward strategic thinking, but it could have been a win-win solution both for producers and for consumers. With short-term, knee-jerk action we usually get unintended consequences.

The unintended consequences and opposite outcomes…

As I discussed it in previous TrendCompass reports, government attempts to keep inflation down by forcing market prices lower almost invariably causes more harm than good. Back in 1846, the British Parliament repealed the so-called “Corn Laws,” which had protected British farmers from foreign imports. After the repeal, British and Irish farmers had to compete for the market of British consumers with African or Hindu farmers, who were working for slave-level wages.

The result was that the prices of produce, wage levels and living standards in Britain began to collapse and the society started to rot from within. A contemporary writer, one Joseph Kay, observed these developments and in the early 1850s and described Britain as the place,

“Where the aristocracy is richer and more powerful than [in] any other country in the world, the poor are more oppressed, more pauperized, more numerous in comparison to the other classes, more irreligious and very much worse educated than the poor of any other European nation…”

This case illustrates what can happen to a society when their governments formulate economic policies around short-term hot-button political concerns while neglecting long-term strategic thinking that could free up the economy’s enormous productive potential toward producing an abundance of goods and services to everyone’s advantage. Waging kinetic wars abroad and economic wars at home against their own farmers and workers won’t create abundance. Instead, it could create what Joseph Kay described above.

To learn more about TrendCompass reports please check our main TrendCompass web page. We encourage you to also have a read through our TrendCompass User Manual page. For U.S. investors: an investable, fully managed portfolio based on I-System TrendFollowing is available from our partner advisory (more about it here).

Today’s trading signals

With Friday’s closing prices we have the following changes for the Key Markets portfolio:

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Positive thinking optimists will immediately notice that the price of white bread is down nearly 6%. Ramen is not on the list, but it can’t be too far off.

To be fair, nice infographics like this are usually put together for partisan politics, and this one frames the price increases as though they’re all Trump’s fault, which is only partly true. Trump’s needless escalation in the Middle East will probably catalyze an acceleration of price inflation, but the conditions that brought us to this point were set in motion a long time ago and they’re systemic. They’re baked into the monetary system and there’s no voting out of it. Who happens to occupy the White House when inflation hits the fan won’t significantly affect the forces that fuel inflation.

It’s not as bad as it looks - it’s much worse

We normally think of inflation as rising consumer prices because that’s what we experience in daily life. We don’t really experience the causes of inflation. It is thus understandable that we tend to define inflation in terms of its ultimate results and overlook its underlying causes.

Through history, runaway inflation episodes ensued when governments spent far in excess of their tax revenues. The pattern of events leading to out-of-control inflations begins with the breakdown of fiscal discipline and ballooning government spending, usually in pursuit of economic recovery or wars (or both). We are now deep in this territory as we discussed in last Friday’s TrendCompass (“Why governments can NEVER give up deficit spending.”)

To varying degrees, governments of all developed nations have followed the same fiscal path and by now, after years of binging on easy credit, they generated a mountain of unpayable debts. To cover the fiscal gap and start paying down the debts the old fashioned way, governments would have to increase taxes and drastically reduce spending. According to the IMF, closing the US fiscal gap would require an immediate and permanent doubling of all US federal taxes.

Austerity is a non-starter

Such severe austerity is a political issue, which pretty much cements the outcome: the political classes of sovereign nations always prefer profligate spending to fiscal discipline under the scientific/ideological cover of Keynesian economics. For one thing, austerity would further reduce economic activity and the government tax revenues with it. Soaring interest rates are worsening the already unsustainable debt burden. In addition, austerity might lead to social upheaval and push large segments of the economy onto black markets.

In short, austerity is tedious and depressing. By contrast, spending money is so much more fun, especially when you pursue fantasy projects like world domination, space technology and AI. Who knows, if we can level China, Russia and Iran, we might get a whole great virtuous cycle out if it, but by now it all looks like a long shot because all these nations are ganging up to defend themselves. Outcompeting them for market share will be difficult at this stage, especially China, so a stagflationary unravelling now looks like certainty.

Does deficit spending create an economic stimulus?

Deficit spending is usually justified as a “stimulus” for the economy, but that depends on how that deficit spending is spent. If it leads to increases in the system’s productivity and competitivenes, it could provide a meaningful stimulus to the economy. But if it’s squandered on military misadventures and insane vanity projects like a global AI monopoly, it could be as stimulating as digging up holes and covering them up again.

However, there’s another, systemic obstacle to stimulating the economy out of its hole and that’s the marginal productivity of debt. Marginal productivity of debt (MPD or MPoD) measures how much additional economic output (typically GDP) is generated by each new unit of debt or borrowing. Over time, for each new dollar of debt in the system you get less and less GDP. This has been the reality for all developed economies for many decades, as the following chart illustrates:

As Japan has demonstrated, even if you stimulate in unlimited amounts, the economy might not respond, leaving it in an inflationary recession, otherwise known as stagflation.

Money printing is the only trick left

As hopes of salvation through economic growth fizzle out and sovereign governments are unwilling to effect sufficiently stringent austerity, they have no recourse but to debase their currencies through inflation, the one form of taxation – as Milton Friedman put it – that can be imposed without legislation.

Gradual, controlled inflation is a normal part of the modern monetary systems, and we are used to currency losing 2% – 3% of its purchasing power each year. Things get problematic when central banks start monetizing government debt to sustain runaway spending. We have now passed that threshold as well, so the outcome is now all but guaranteed. Of course, central bankers and politicians will give us every reassurance, but the worse things get, the less reassuring their rhetoric will be.

Secretary Scott Bessent’s statements have already become head-scratchers, and I believe we’ll soon come face to face with radical measures (as discussed yesterday) and market ambushes. In this environment it would be very important to reduce risk, take certain strategic investments (ehm - silver and gold) in physical form, and explore share farming with your local farmers.

To learn more about TrendCompass reports please check our main TrendCompass web page. We encourage you to also have a read through our TrendCompass User Manual page. For U.S. investors: an investable, fully managed portfolio based on I-System TrendFollowing is available from our partner advisory (more about it here).

Today’s trading signals

With yesterday’s closing prices we have the following changes for the Key Markets portfolio:

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Trump framed the Act as part of his administration’s broader crypto and digital-asset agenda (ending what he called the “war on crypto,” launching “Project Crypto,” establishing a U.S. Strategic Bitcoin Reserve, and creating a Digital Asset Stockpile):

“One year ago this summer, I signed landmark legislation known as the GENIUS Act. … paving the way for widespread adoption of dollar-backed stablecoins, and that’s worked out very well.”

Indeed, the Act was already passed last summer and Trump signed it into law on 18 July 2025, so why all the commotion about it now, more than a year later?

Could be earth-shattering…

Treasury Secretary Scott Bessent tweeted that, the GENIUS Act established a landmark framework and clear rules of the road for payment stablecoins, and that the Treasury is moving quickly to implement that framework asking for “input from stakeholders” in order to “cement the role of the U.S. dollar as the world’s reserve currency, and keep America the crypto capital of the world.”

The Act defines new US federal laws creating a comprehensive regulatory framework for payment stablecoins redeemable for a fixed monetary value (typically $1) and intended to maintain a stable value relative to the “legal tender” currency. It also restricts the issuance of stablecoins to “permitted payment stablecoin issuers,” and this is where the GENIUS Act gets extremely interesting.

What GENIUS is all about…

Speaking at the SALT Confrence at Jackson Hole, Wyoming, the former Wall Street executive and prominent advocate for monetary reform Caitlin Long pointed out that the GENIUS Act enables the Treasury Department to define “what is allowed to be a so-called euro-dollar, euro-yen, euro-euro. Or Yuan, right?” She continued:

“… the term ‘euro’ doesn’t mean European. It means a dollar issued offshore outside of the United States … These are tokenized fiat currencies issued outside of their home country, and the U.S. Treasury is taking charge of the recognition of the validity of these. That is massive.

The fact that there are institutions outside of the United States that can issue US currency, should be regarded as an illegal aberration. Effectively, they’re counterfeiting US dollars, but in spite of that, for some reason, it has been taken as normal for decades now. That’s in spite of the fact that counterfeiting US dollars abroad effectively robs the purchasing power American taxpayers to fund any manner of nefarious activities. Most likely, that’s why this system was allowed to grow to such massive proportions. Caitlin Long again:

… If you’re a student of the financial markets, you know that the eurodollar market is as large as the domestic financial market. That’s the offshore dollar market. When the U.S. Treasury is taking control of what is recognized as valid, that is taken from the Fed. … The Treasury is taking power back over the U.S. dollar, over the eurodollar markets, and, frankly, over the U.S. role in the financial system globally from the Fed.”

Long made these comments after discussing the GENIUS Act with “someone who just walked out” of a Treasury department meeting, and if she is right (I believe she certainly is), the implications could be truly earth-shattering. To begin with, disenfranchising the Fed and taking control over the currency from them is the stuff of civil wars.

To put that into context, when we were talking earlier about how antiquated the traditional system is and that the Fed’s systems are themselves behind… If you’ve been watching, all of the other agencies have issued rules [in accordance to GENIUS Act]. One glaring exception: the Fed has not issued its rules yet, and according to the GENIUS Act, all of the agency’s rules were supposed to be final a couple of weeks ago. The Fed hasn’t even issued theirs yet, so there’s this dynamic going on between the Treasury Department and the Fed.

“The dynamic” going on between the Treasury Department and the Fed is a political collision course where the Treasury is trying to wrest the control over the monetary system from the unelected private bankers to the democratically elected government and its legitimate institutions.

I know, I know… The idea that the Trump administration is doing anything “legitimate” may defy imagination by now, but the current arrangement is anything but legitimate. It is also patently unconstitutional: the Constitution of the U.S. explicitly authorizes the Congress with the power “To coin Money, regulate the Value thereof…” (Art. 1, Section 8, Clause 5). The Constitution also gives Congress the power “to provide for the punishment of counterfeiting the Securities and current Coin of the United States.”

Eurodollar, Fed and the shadow governments

The counterfeit US dollars circulating abroad are the glue that holds the global “rules-base” order together: they enable the funding needed to bribe foreign officials, pay for and arm the sundry jihadi terror groups and separatist militias, the colossal network of NGOs, charitable organizations and other groups and activities of shadow governments around the world can’t be fully funded through legitimate legal means. These activities often require illegal activities and trillions in embezzled funds.

For example, according to recent reports, billions of dollars have been offered to Iranian officials to sell out and turn Iran over to a government more friendly to the Trump team. In the past, we know that hundreds of millions in US bank notes are routinely smuggled from the Federal Reserve Bank of New York, past the US Comptroller of the Currency, to provide funding for coups, assassinations, regime change operations and similar “special assignments” by the shadow government.

That is why it should be essential for the US Government to regain control of the dollars circulating abroad (or to render those dollars illegitimate and worthless), defunding the “rules-based global order” and reasserting US economic and financial sovereignty. While it would be too optimistic to expect that the Trump administration have pushed the GENIUS Act to achieve any such elevated goals, we should hope that they might leave behind the means needed for the American democracy to reassert its economic and financial sovereignty and turn its currency into a tool to recover its prosperity and economic edge.

In the meantime, tremors

Given that half or more of all US dollars in circulation around the world are outside the United States, the administration’s intended actions (there’ll be ambushes, we’ll find out) will cause major tremors in world markets, driving demand for “legitimate” dollars and rendering the “illegitimate” ones worthless. This will enable Trump and his team to exert pressure on governments around the word and dictate terms at which their dollar balances may be converted into new stablecoins needed for trade settlement and reserve requirements.

I expect that Great Britain, EU and Canada won’t be among the “most favored nations” in the near future, which will further worsen their fiscal positions, make it difficult for them to access global markets and procure commodities like oil, natural gas, wheat and others. This will lead to shortages and exacerbate inflationary pressures at home.

To learn more about TrendCompass reports please check our main TrendCompass web page. We encourage you to also have a read through our TrendCompass User Manual page. For U.S. investors: an investable, fully managed portfolio based on I-System TrendFollowing is available from our partner advisory (more about it here).

Today’s trading signals

With yesterday’s closing prices we have the following changes for the Key Markets portfolio:

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The existence of such a body could explain many seemingly incoherent, or inconsistent aspects about the way the United States is governed, among other things the fact that the American people consistently vote for anti-war candidates, but consistently get more forever wars.

In spite of this, the very existence of the shadow government (also referred to as the “secret government,” or the deep state) is usually dismissed as a silly conspiracy theory. But we knew - or should have know - of its existence for many decades now.

The Iran contras affair

The research that I conducted for my twice banned book, “Grand Deception,” strongly suggested that there were two parallel structures of power in charge of policy in the United States and I suggested that understanding US role in the Russian tragedy of the 1990s, it was important to “distinguish between the legitimate US government and an illegal, parallel structure of power operating within it.”

The existence of this illegal, secret government came into view in the fall of 1986 when an American supply plane got shot down over Nicaragua, blowing open the Reagan administration’s illegal arms sales to Iran. This became the “Iran-Contra” affair.

A full congressional investigation was launched and its proceedings revealed for the first time the existence of a parallel structure of power operating within legitimate government structures. This network, also referred to as shadow government, deep state or the Enterprise, came out on record and could no longer be dismissed as mere conspiracy theory. In his special report titled “Secret Government,” journalist Bill Moyers described the organization as follows:

“An interlocking network of official functionaries, spies, mercenaries, ex-generals, profiteers and super-patriots who for a variety of motives operate outside of the legitimate institutions of government. Presidents have turned to them when they can’t win the support of the Congress or the people, creating that unsupervised power so feared by the framers of our constitution.”

Above the law

Late Senator Daniel Inouye characterized it as “a shadowy government with its own air force, its own navy, its own fundraising mechanisms and the ability to pursue its own ideas of national interest, free from all checks and balances, and free from the law itself.”

At the time, it was clear that William Casey, Reagan’s election campaign manager and Director of Central Intelligence (DCI) since 1981 was the highest Reagan administration official directly associated with the parallel, shadow government. Casey was no ordinary government apparatchik. He was widely believed to be one of the most powerful men in Washington DC, with very close ties in the political, financial and intelligence circles. According to former US Government official Barbara Honegger, Casey was also the author of a famous quote that, “We’ll know our disinformation program is complete when everything the American public believes is false.”

During the Reagan administration, Casey was charged with the mandate “to build up C.I.A.’s ability to make military and political action outside the United States.” He was also the person who put forward as the Vice President the former CIA director and key Iran-Contras co-conspirator George H. W. Bush. Recall, our Mossad assassin Yuval Aviv explicitly named Bush as a senior member of the shadow government, which makes his that much more credible.

The fact that the Bushes were a prominent banking family and that George H. W. Bush’s father Prescott Bush funded Hitler and his Nazi war machine isn’t coincidental to history. As historian Ramsay MacMullen suggested, in order for us to interpret history correctly, we must understand the motivations of groups and individuals who shaped history. Once we establish who shaped history, we are a giant step closer to understanding their motivations and incentives, otherwise we might think it’s all somehow emanating from democracies along with sheer incompetence with no ulterior agenda.

All roads lead to London

But how did William Casey get into the shadow government? Who was he, and how did he get to be so powerful? Those questions are relevant as they might indicate the real source of power in the World. During World War II, Casey served with the Army Intelligence and the Office of Strategic Services (OSS, the predecessor of the CIA). The OSS was the US counterpart of the British Special Operations Executive (SOE), directed during World War II by Sir Charles Jocelyn Hambro.

In addition to being the head of Britain’s foreign intelligence, Hambro was also a prominent banker who sat as a director of the Bank of England from 1928 until his death in 1963. William Casey was Hambro’s protege and trainee along with others like Charles Kindelberger, Walt Rostow, and Robert Roosa. Like Hambro, Casey’s career also straddled government, intelligence and banking appointments.

Under President Ford, he served on the Foreign Intelligence Advisory Board, an executive committee of the U.S. intelligence community. During Nixon administration, he headed the Securities and Exchange Commission. After that post he took charge of the Export-Import Bank, and from 1976 to 1981 he was associated with the Rogers & Wells law firm which operated in New York and Washington.

Why oligarchs love democracy

The existence of a shadow government also explains why our oligarch class feel as passionately about “democracy.” Democracy gives us elected officials who, to paraphrase Yuval Aviv, entertain the people, attract media attention and put up an “entertaining” show while the serious players meet once or twice a month and decide to do what needs to be done. They know what’s best for the country and they’ve ways and means to get it done. Yuval Aviv was one of those means. That is, if he was telling the truth.

But the greatest enabler of the shadow government also deserves an honorable mention here: it’s the credulous, entertained public or, the “normies.” They prefer not to notice, readily embrace reassuring narratives and heap scorn on the loopy conspiracy theorists who - LOL - think that men meet in smoke-filled rooms and make decisions about launching pandemics, getting “rid of the poor people,” blowing up pipelines, starting wars or running “surprise, kill, vanish” operations.

Thomas Jefferson pointed out that the price of liberty is eternal vigilance. Hopefully that’s a lesson we can revisit and learn to actually be vigilant. The shadow government, not just in the United States but in many nations, is real. The Epstein conspiracy is also real, as are the many wars of choice fought around the world today, especially in resource rich regions that bankers prefer.

To learn more about TrendCompass reports please check our main TrendCompass web page. We encourage you to also have a read through our TrendCompass User Manual page. For U.S. investors: an investable, fully managed portfolio based on I-System TrendFollowing is available from our partner advisory (more about it here).

Today’s trading signals

With yesterday’s closing prices we have the following changes for the Key Markets portfolio:

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Yuval Aviv is a “former” Mossad agent and an assassin; his own self-promotion took up much of the three hours’ podcast, but even in that, it was quite revealing. Aviv is not a household name, but he might as well be: the Hollywood director and fellow friend of Epstein, Steven Spielberg purchased the rights to Aviv’s life story and turned it onto the film “Munich,” which was nominated for seven Oscar awards, back in the days when people still cared about that sort of thing.

The shadow government…

Aviv spent the first 30 min. on his life’s story (and how he transitioned from a trusted Mossad assassin to a loyal US citizen) and worked it up to the point when the government reached out to him and asked him to work for them. Except this was not the legit, “official” government. He called them the shadow government which is, “as high level as possible,” including high-level ex- and current White House officials.

They run the country

Aviv clarified that this is “Not a club, not a cult, but a team of ex-officials, but they still think they know what’s good for America.” He named two individuals who were part of this shadow government: George Bush Sr. and Dick Cheney. Others were, “Ex-CIA, ex-presidents, … The people I met were the highest of the highest,” not all of whom Aviv knew.” He himself was brought in by Dick Cheney to take on “special assignments,” characterized as, “surprise, kill, vanish.”

At around the 45-min. mark, Aviv redeemed the loopy conspiracy theorists when he explained that these people - the shadow government - meet once or twice a month and make decisions: “They run the real country,” and said that the official government “are not doing what needs to be done.” In this Aviv largely corroborated the former intelligence asset and the famous “economic hit man” John Perkins, in whose scheme Aviv himself would qualify as a “jackal.” The jackals would be the “surprise, kill vanish” squads who would be sent in if the economic hit men failed in their missions.

The monolithic and ruthless conspiracy

Danny Jones asked if the shadow government was a monolith or if there are different factions? Aviv shook his head, answering categorically: “no, no, it’s one group.” In that, he corroborated what John F. Kennedy warned us about on 27 April 1961, when he spoke of the “monolithic and ruthless conspiracy,” using “covert means for expanding its sphere of influence.”

Kennedy also warned about the “very grave danger that an announced need for increased security will be seized upon” by the conspirators to advance their agenda. That did indeed happen on 11 September 2001, on Dick Cheney’s watch. Cheney was also put in charge of “continuity of government,” which raised the suspicion that he was empowering a parallel and illegitimate structure of power .

Through the interview, Aviv’s statements consistently suggest that he is still in the service of this shadow government and that, “This became the business I got into during the last 25 or 30 years.” When Jones asked him whether the shadow government still holds the same power as they did when he first joined them, Aviv says, “it’s the same power, different people. … Some of the old ones are still there, but I don’t see them so often.”

Everything’s Trump’s and Bibi’s fault!

When Danny Jones asked if these people control who becomes the president, Aviv answered in the affirmative, but thought that they “goofed” with Trump. He characterized Trump as somebody who could be entertaining as president but couldn’t do any real harm. They thought “it was going to be a show, a funny show, so that we can do our work quietly behind the scenes, and he won’t bother us. He’ll …occupy the media and we’ll, behind the scenes run America, and do what needs to be done.

Indeed, Aviv’s narrative is quite damaging to President Trump - he essentially paints him as a court jester who blundered into the Iran war all on his own while the grownups who really run the country tried to stop it, but were unable to. Given Aviv’s background, which includes having worked for Ghislaine Maxwell and familiarity with Jeffrey Epstein and Ghislaine’s father Robert Maxwell, his marathon interview left me with the impression that we’ll hear much more from and about him and that this is another “special assignment” for the shadow government.

This time, the assignment could be to drag Donald Trump through the mud and pin all the blame for the Iran blunder and its consequences solely on him. In fact, Aviv explicitly said that the Iran war was entirely Benjamin Netanyahu’s own show, and that Netanyahu fully has Donald Trump under control. Therefore, the culprits may have been designated, their heads will roll and the shadow government will replace them with the next set of court jesters to distract and entertain the proles.

There’s a lot more to ponder in Yuval Aviv’s interview, both in what he says and between the lines. The full three hours’ worth is below:

To learn more about TrendCompass reports please check our main TrendCompass web page. We encourage you to also have a read through our TrendCompass User Manual page. For U.S. investors: an investable, fully managed portfolio based on I-System TrendFollowing is available from our partner advisory (more about it here).

Today’s trading signals

With yesterday’s closing prices we have the following changes for the Key Markets portfolio:

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At present, it appears that all these crises are accelerating simultaneously. Already in March of 2010, I published the article, “Japan: the Harbinger of (bad) things to come,” opening with the sentence, “Large and gathering imbalances brewing in the Japanese economy threaten to generate a tsunami-like fallout that could soak most of the global economy.” Recall, Japan has been the pioneer among G7 nations in zero interest rates policy (since 1999) and quantitative easing (since 2001), which have both contributed to those “large and gathering imbalances.”

Yen will burn!

In the 8 March 2022 TrendCompass report, while the yen was trading around 115 to the US dollar, I wrote that the “yen will burn to a crisp over the coming years.” Four+ years (and numerous interventions) later, it takes 159.2 yen to buy one dollar, the weakest it’s been in 40 years, which is amplifying Japan’s rampant inflationary pressures. If the oil prices continue to rise, which seems likely; and if the yen continues to fall, which also seems likely, Japan could find itself in a disastrous double jeopardy.

Namely, Japan has to import about 3 million barrels of crude oil per day which, at current prices, is well in excess of $250 million/day, settled in US dollars. The higher the oil price goes, the greater Japan’s demand for US dollars, and the greater the downward pressure on the yen. The lower the yen, and the higher the prices of oil and other imported goods, the more inflation Japan imports via its US dollar oil purchases.

Raising rates is not an option

Ordinarily, when they wish to strengthen their currency, central bankers raise interest rates. That would make Japanese financial assets more attractive to global investors, which would boost the demand for and purchases of yen. But the Bank of Japan (BOJ) can hardly afford to do that, given that it would bankrupt the Japanese government, which is leading the developed world in terms of debt-to-GDP, which currently stands at around 240%.

Raising interest rates would also crash Japan’s financial markets and with it, Japan’s pension funds. When the BOJ raised the interest rates by only 0.25% on 31 July 2024, the Nikkei collapsed by -12.4% - its worst one-day crash since the Kobe earthquake in 1987. Currently, Japan’s debt to GDP stands at around 240%.

Sustainable market manipulation?

The answer, probably, is yes, but not this week. Given that raising interest rates is unpalatable, Japan had the option of selling its $1.1+ hoard of US Treasuries and using the proceeds to buy and prop up the yen. In fact, Japan’s Finance Minister Satsuki Katayama was anxious enough about her government’s fiscal position that on 10 Juy she explicitly encouraged Japanese households and pension funds, “to increase their investments in Japanese financial assets.”

But selling US investments to buy Japanese assets would put further pressure on US intrerest rates, putting a squeeze on the US Government which is already in a massive fiscal bind. In fact, the US Government can be so sensitive about foreign governments selling their Treasury debt that they can regard it as an act of war. Accordingly, Ms. Katayama quickly backpedalled from her cunning plan. Instead, the US and Japan together coordinated an intervention to support the yen and relieve Japan’s inflationary pressure.

In late July the US coordinated market operations with Japan to support the yen, which have been somewhat successful: they knocked the yen back up from its 40-year low of 164 yen to the dollar to below 156. Since then, however, the yen fell back to just under 160 yen/USD where it is trading today.

Even when governments do it, currency rate manipulations ultimately fail: they buy a temporary respite from the accelerating collapse, but they cannot reverse the decline as they leave the structural causes of the financial imbalances intact. In the end, I believe that the yen will indeed burn to a crisp (as will the euro and the British pound) and that Japan will ultimately drag the United States with it.

We’ll know it when it happens

Unfortunately, predicting the timing of all these events is out of the question. Note, my original article about Japan being the harbinger of bad things to come is over 16 years old, and its predictions are yet to unfold in full. US/Japanese joint yen rescue operation may not be over yet. Further efforts to boost the yen could be successful, especially if they trigger large-scale short covering in the markets.

Namely, global investors and traders have accumulated the largest short position on record against the yen. Panicked short-covering could give another boost to the yen in the near term, but in the end, the predictable disintegration of Japan’s fiscal and economic position are now all but inevitable.

What happens next

Reiterating my earlier prediction with relation to this crisis, we can make three predictions about Japan’s economy:

1. We’ll see a period of stagflation (inflation + recession) and the inflation part could ultimately morph into a hyperinflation;

2. Interest rates will continue to rise and the price of Japanese Government Bonds will collapse. I believe that the unravelling could resemble what Germany had experienced 100 years ago (see below);

3. The Nikkei could continue to rally (for now) - As currency and debt turn worthless, equities tend to go vertical as we saw in many cases through history, including Venezuela, Zimbabwe, Argentina, Israel and the Weimar Republic too:

Thus, as Japan’s inflation accelerates, the Nikkei cold continue to soar. However, the nominal gains in stocks will be more than offset by their losses in yen, still leaving investors with close to total losses in real terms. The reason why even real assets turn worthless is that inflation indiscriminately annihilates the purchasing power in an economy. When everyone’s purchasing power converges on zero, we really get the great reset: owning nothing minus being happy.

To learn more about TrendCompass reports please check our main TrendCompass web page. We encourage you to also have a read through our TrendCompass User Manual page. For U.S. investors: an investable, fully managed portfolio based on I-System TrendFollowing is available from our partner advisory (more about it here).

Today’s trading signals

With Friday’s closing prices we have the following changes for the Key Markets portfolio:

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Even if a government earnestly wanted to be conservative in the truest sense of that word, as their voters would wish, there is a systemic reason why this is simply not possible given the current fraudulent and pathogenic monetary system we are trapped with. That systemic reason has a name: it’s called the deflationary gap. If you studied economics in university as I have, you may never have heard of it.

I have covered the deflationary gap in this newsletter in the past, but the curriculum does bear repeating; American historian Carroll Quigley wrote about the deflationary gap that it was “the key to twentieth century economic crisis and one of the three central cores of the whole tragedy of the twentieth century.” We can add the first quarter of the 21st century to that also.

The deflationary gap

To understand the deflationary gap, we need to consider a closed economic system that produces a certain quantity of goods and services. By “closed” I mean that we’ll assume the system has no foreign trade. The total of all the price tags attached to the goods and services this system produces is the aggregate cost of the system’s output: it represents the amounts of money expended by the businesses on things like raw materials, wages, rents and interest plus the entrepreneurs’ profits.

These sums are income to those who receive them and also represent the system’s total purchasing power. On the whole, the aggregate costs, aggregate incomes and aggregate prices are all the same, because they represent different sides of the same transactions. The prices at which the system’s output can be sold in the marketplace are determined by the total amount of money which is available for spending in a given period of time.

For the system to be in equilibrium, aggregate prices should exactly absorb the system’s total purchasing power. But a problem arises because there are two factors that significantly reduce the system’s purchasing power: (1) savings and (2) debt repayments. Namely, people don’t typically spend all of their income. Instead, they prefer to set aside a part of it as savings which has the effect of reducing the total purchasing power available in the system.

So, if there are any savings, the available purchasing power will fall short of the aggregate asking prices. For the system to remain in balance the savings would have to reappear in the market in the form of investments, but if total investment is less than total savings, the purchasing power will still fall short of the amount needed for all of the output to be sold at asking prices. This shortfall of purchasing power in the system, the excess of savings over investment is the deflationary gap.

The other systemic drain on purchasing power are debt repayments: since (nearly) all currency enters into circulation as debt, paying down debts extinguishes the currency and the purchasing power with it.

Without government intervention we get a depression

The system can be balanced either by lowering the supply and prices of goods, by enhancing its total purchasing power, or a combination of both. Lowering prices and production of goods will stabilize the economic system at a low level of economic activity. Increasing the purchasing power in the system will stabilize it on a higher level of activity.

Left to itself and without intervention, a modern economic system would fall into a self-reinforcing deflationary depression: the deflationary gap would lead to falling prices and output, decline of income and rising unemployment. Furthermore, in recessions and depressions, the level of investment typically declines even more rapidly than savings. To avert this, government intervention is necessary.

Without government intervention, the economy would stabilize at the depression level of activity. Given the prevailing monetary system, sustaining economic growth is imperative to keep the economy from imploding, which is why pursuing growth is the unquestioned orthodoxy for any government. To generate growth, governments must keep injecting additional purchasing power into the system. This cannot be done through taxation since taxes don’t create new purchasing power: they only transfer money from those who earned it to the government.

Deflationary gap is the reason why governments have no alternative but to continuously engage in deficit spending, adding debt in excess of their tax receipts. This is why virtually all governments in the world today run budget deficits and grow public debt at rates that accelerate relentlessly over time regardless of what “conservative” politicians might promise to their voters. And it doesn’t matter at all whether system identifies itself as “socialist” or “capitalist,” they both necessitate an ever growing role of government in the economy.

Today, in many of the “capitalist” nations, government spending accounts for almost half of the GDP and in some cases significantly more. In the UK, the mothership of free market capitalism, the government’s share of GDP is approaching 50%. In France it’s over 58%.

We get socialism, whichever way ve vote

To sum up, averting depressions and achieving economic growth necessitates government intervention and guarantees an accelerating rise in deficit spending with the corresponding rise in public debt. Over time, and without a radical reform of the monetary system, it’s a mathematical certainty that the government sector will progressively crowd out private enterprise.

As a result, we get socialism whether we like it or not. Conservative thinkers may dream about some private capital utopia with a small, unintrusive government, but such a system doesn’t, and cannot exist so long as we are hostages to banker issued fiat currencies and a fractional reserve Ponzi credit system. Even if we start with zero public debt, the pursuit of economic growth will drag the whole system along the same trajectory.

The many passionate disciples of capitalist ideology will protest and invoke the theoretical works by economists like Ludwig Von Mises, Murray Rothbard or Friedrich Hayek but I would simply ask them to please name one real-world example of a successful free market capitalist economy where the government never ran budget deficits and piled up public debt.

This all is quite a predicament for all economies; it was created by the bankers and for the bankers, and we won’t get the opportunity to vote our way out of it. Perhaps the only nonviolent escape route is to make black markets great again.

To learn more about TrendCompass reports please check our main TrendCompass web page. We encourage you to also have a read through our TrendCompass User Manual page. For U.S. investors: an investable, fully managed portfolio based on I-System TrendFollowing is available from our partner advisory (more about it here).

Today’s trading signals

With yesterday’s closing prices we have the following changes for the Key Markets portfolio:

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Let’s just say that its contents should be rated not suitable for economic girly-men: through July, the US Federal Government spent $766 billion, collected $334 billion in tax receipts and added a shocking $432 billion in fiscal deficits. Breakdown of the imbalances hardly matters, but here it is since it’s a nice looking exhibit:

By now, the federal government is on track to reaching $2.1 trillion in federal budget deficits, adding to government debts at a pace that seems to be irreversibly accelerating over time:

This chart is slightly obsolete, however. Federal debt has reached $39.96 trillion in the meantime, a cool $298,000 per US household - a preposterous and clearly unpayable sum. Considering that one man’s (or woman’s, or government’s) debt is another’s asset, we might stop to wonder what is the value of debts that can never be repaid?

The answer should be straightforward enough, but the markets tend to adjust to such realities only gradually, in trends. The result is that the prices of US Treasury bonds have been gradually declining since 2020 and the interest rates have been soaring correspondingly:

The 30-year Treasury yield hit 5.27% last month, its highest since 2007. Given that its costs far outstrip its tax receipts, the government has to borrow ever larger sums of money to fund its operations; it must borrow money just to pay the interest on money it borrowed before. That expense has now become federal government’s second largest outlay:

As interest rates rise, the servicing of government debts is swallowing up ever greater proportion of the federal budget, in a trend that’s irreversibly accelerating.

Ultimately, there comes a point when the government borrowing needs exceed the capital markets’ appetite for US Treasury debt (we’re well past that point), and the choice facing policymakers is that between cost cutting and monetizing debt. At this point, common sense would raise the question: if that is so, why not reduce excessive spending, bring the deficits under control and start paying down the debts. It’s what any business person or household would do in that situation.

However, with governments, the borrow and spend logic is very different and the seeds of doom are baked into the mix from the moment the first fiat dollar enters circulation. Over the last few years I’ve written from time to time why the crisis of stagflation is inevitable, one of those things we can’t vote against, but as I couldn’t summarize the explanation in just a few paragraphs, I’ll leave that part for tomorrow’s report.

The bottom line, however, is this: cost cutting, or austerity predictably leads to deep recessions, business bankruptcies, high unemployment, and collapsing asset prices. Monetizing government debt predictably leads to accelerating price inflation. Almost invariably through history, the political classes have preferred the inflationary route, and there is no doubt that the US and other G7 governments will follow the road more travelled.

To learn more about TrendCompass reports please check our main TrendCompass web page. We encourage you to also have a read through our TrendCompass User Manual page. For U.S. investors: an investable, fully managed portfolio based on I-System TrendFollowing is available from our partner advisory (more about it here).

Today’s trading signals

With yesterday’s closing prices we have the following changes for the Key Markets portfolio:

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And yet, our elected officials seem determined to deliver more of the same. Even when the people vote for change, the candidates who propose changes are either disqualified from holding office, sabotaged in their work, or otherwise co-opted into perpetuating the same agendas that the voters rejected. The most obvious example was President Trump who won three elections on his MAGA platform, promising to end the forever wars, bring troops home and make the United States a global manufacturing superpower.

The MAGA mirage

Trump had a certain credibility. For one thing, he wasn’t a typical politician and in many ways, his rhetoric seemed like s a breath of fresh air. During his last electoral campaign he called on voters to join him in the battle against the global financier class, suggesting that he understood the ultimate source of our problems. Unlike his predecessors, he didn’t start any new wars during his first term, and tried to withdraw US troops from Afghanistan and Syria. He even talked about withdrawing them from Germany and made a serious attempt to reconcile the two Koreas.

During the first year of his second term he re-established US diplomatic relations with Russia, pacified the Balkans (which were on the precipice of a major war, brokered a cessation of hostilities between India and Pakistan and between Azerbaijan and Armenia. He even pressured the Israeli government to stop their rampage in Gaza and allow humanitarian aid to the Palestinian people.

Then, in February of this year, he shocked the world and many of his supporters by joining the Israeli attack against Iran which he clearly and explicitly promised to his voters that he would not do. It seems that when push comes to shove, our elected leaders can all somehow be coerced to implement policies that serve certain interests, regardless of what the voters demand.

This is even more obvious in the case of Great Britain where for decades, cabinet after cabinet, whether conservative or labour, pursued the same ruinous policies without even pretending that there’s any other alternative on the menu. The will of the British people is hardly an afterthought for their supposed servants in the political class. The same can be said about France and Germany, none of which are ever shy about lecturing other nations about “our values,” freedom, prosperity, human rights, transparency, etc.

What’s the explanation?

If economic, social, and foreign policies are voter-proof, we must conclude that the policies must be formulated, not at the grassroots, but elsewhere. But that “elsewhere” is clearly concealed from view and anyone who begins to notice is dismissed as a communist, conspiracy theorist, transphobe, islamophobe, antisemite, antivaxxer, or some such label. We are also instructed never to ascribe to malice what can adequately be explained by incompetence. Stuff just happens because we somehow consistently elect the most incompetent losers to shape our future. So unlucky!

However, even if they are incompetent losers, our politicians seem to be strangely consistent in their policies, and if we draw the line under their performance, it’s clear that we can never seem to get what we want (peace, prosperity, clean and safe streets, etc.), but keep getting more and more of what we don’t want (more taxes, more immigration, more surveillance, more censorship, more wars…). The system’s performance is clearly not random. It follows that there must be some driving force behind it all, and that driving force must have certain objectives in its sights.

About this we have many clues almost as soon as we open our eyes and observe what’s presented around us. Perhaps the best clue was dropped by Mayer Amschel Rothschild, who said, “Permit me to issue and control the money of a nation, and I care not who makes its laws.” Another clue was dropped by the current Prime Minister of Canada, Mark Carney, a former Goldman Sachs banker and governor of the Bank of Canada and the Bank of England.

In November 2020 Carney was the appointed global czar in charge of fighting climate change and at that time, he smugly explained how he planned to do that:

"We need a whole economy transition... it's really about looking for, and at the transition plans from all companies and backing those who are part of the solution and talking capital away from those who are part of the problem."

Carney’s statement revealed that the bankers have the power to fund their pet projects and kill the ones they don’t care for. If they can effect “a whole economy transition,” then they hold the power to shape the future of society. We might like freedom, but they prefer us under surveillance, so we get surveillance. We might like peace, but they need wars, so we get wars. We might like to feed our children healthy foods, but they prefer that we all eat fake meat and insect fodder, so they’re killing cows and building insect farms. That, by the way, is part of Carney’s fight against climate change, since science says that cows are destroying the planet.

Another important clue came from Britain’s former Prime Minister Liz Truss. In February 2024 she appeared in Steve Bannon's War Room and said this:

"What I found out when I got into No. 10 is, I thought that if I got to the top of the tree, I would be able to implement those conservative policies... And what I discovered was that I was not holding the levers. The levers were held by the Bank of England, by the Office of Budget Responsibility, they weren't held by the Prime Minister or the Chancellor..."

Truss then pointed out the obvious problem with this: you can sack the Prime Minister, but you can't sack the BOE officials who hold the levers of power. This all dovetails with the quote that, “the issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the bankers.”

That quote has been widely, but mistakenly attributed to Lord Acton (including by yours, truly). Thanks to AI, I was able to check and find its real author, so I thought I’d set the record straight: apparently, it was Sir Alexander James Edmund Cockburn (also known as Alexander Cockburn), Lord Chief Justice of England from 1859 until his death in 1880.

It’ll have to be fought, sooner or later…

If we accept the premise that the bankers are in charge, and not our democratically elected officials, we can begin to analyze why bankers do what they do, and what incentives drive their conduct. Thankfully, that’s not as complicated as it seems. In a nutshell, Bankers are after quality collateral, wherever and in whatever form it can be found. Collateral enables bankers to issue loans, which become assets on their institutions’ balance sheets, and which all the rest of us get to repay with interest.

If they can issue and control a nation’s money, and the rest of us are obliged to use that money (or else..), then all our debts become their assets. Effectively, we all become their serfs and our democracies provide no mechanism for us to overturn that arrangement at the ballot box, since our central banks are all “independent.” As Alan Greenspan famously told us, no institution of government can overturn the decisions made by the Fed. Therefore, it will have to be fought, sooner or later.

To learn more about TrendCompass reports please check our main TrendCompass web page. We encourage you to also have a read through our TrendCompass User Manual page. For U.S. investors: an investable, fully managed portfolio based on I-System TrendFollowing is available from our partner advisory (more about it here).

Today’s trading signals

With yesterday’s closing prices we have the following changes for the Key Markets portfolio:

Read more

Other reasons have to do with human psychology and the fact that our mental circuitry simply isn’t equipped to handle speculation in fast-moving markets as we have today. One of our main psychological obstacles is the hardwired loss aversion.

The psychology of loss aversion

Trading and investment management should be regarded as a long-term pursuit where performance accrues as the cumulative result of a long series of investment transactions. However, rather than considering every investment as just one of many, we treat each transaction as a departure from the status quo, where our fear of loss looms larger than our desire for gain.

In fact, the logic we apply to decisions about gains is opposite that which we apply to decisions about losses. This phenomenon was first described by psychologists Daniel Kahneman and Amos Tversky, who named it the “failure of invariance.” Through a series of empirical studies, they discovered that we tend to be strongly risk averse with regard to gains, and risk seeking when faced with losses.

Failure of invariance thus predicts that we tend to be risk averse when preserving a favorable status quo, but prone to taking risks when coping with losses. In trading, this creates the disposition to exit profitable trades too soon, and “work” the losing trades too long, even taking on more risk in order to try and reverse the losses.

The pressure to recover losses can lead traders to escalate risk to massive proportions, which can lead to disastrous outcomes. The first concrete, high profile case of this tendency that I came across in the early years of my trading career was that of the hedge fund manager Victor Niederhoffer. In 1996, he was rated the world’s top fund manager, but in October 1997, after 15 years of outstanding performance, his business came to an abrupt end: his entire fund was wiped out in a single day when the market moved against his huge short positions in S&P 500 put options.

The fact that an investor with top-notch credentials, experience and a stellar track record took such massive risk on a single trade was simply astonishing. Mr. Niederhoffer’s fatal trade was partly a consequence of loss aversion: in August 1997 his fund sustained heavy losses on investments in Thailand’s currency and stock market. In September, after recovering some losses, his fund was still down nearly 40% for the year. The pressure to recuperate the losses led him to excessive risk taking, a mistake which he warned against repeatedly in his book, “The Education of a Speculator”.

Let the losses run and cut your profits short

Loss aversion explains why it is so difficult for most people to follow the often quoted formula for successful investing: “let the profits run and cut losses short.” We are strongly predisposed to take profits while they are a sure thing, and let losses run, gambling that the markets will turn in our favor.

In other words, we seem to be hardwired to follow the exact opposite formula – to cut our profits short and let losses run. This creates a strong tendency in most traders and investors to gradually lose ground against the markets.

Loss aversion underscores the fact that our mental faculties simply aren’t suited to the task of speculating in fast moving securities markets. Human brain is the product of our natural evolution, designed to solve problems of survival we confronted through our evolutionary history. During more than 99% of that time, we lived as foragers in small nomadic bands, and in that environment, loss aversion bias did make good sense.

The evolutionary hardwiring

With no refrigerators, bank vaults or stock certificates, most improvements to our natural state had sharply diminishing marginal utility. More food is good, but there’s only so much you can eat or hoard before it starts to become a liability. By contrast, reduced access to food, or an injury could rapidly spell “game over.” MIT professor Andrew Lo formulated this point very succintly when he said that,

“This notion of loss aversion, being more aggressive when you’re losing and more conservative when you’re winning, is a very, very smart thing to do when you’re being hunted on the plains of the African savannah. However, it’s not a smart thing to do when you’re on the floor of the New York Stock Exchange.”

Our mental circuitry, however, did not evolve in modern security exchanges but in environment more similar to the African savannahs, and that circuitry is hardwired and extremely difficult to override.

Trend following to the rescue

I was in my mid-20s when I came across Victor Niederhoffer well before his notorious debacle and read his book. To me, he seemed to be the kind of successful professional I aspired to become, and the news of his failure hit me like a ton of bricks. What is the point of being a successful investor if your career ends in a fatal, humiliating blunder.

If this could happen to Niederhoffer, I reasoned, it could happen to anyone, and it did happen to many rock-star investors including the “market wizard” Staney Druckenmiller and the pair of nobel prize laureates, Myron Scholes and Robert Merton. Indeed, the graveyard of superstar traders is littered with such exalted names.

To sidestep all the pitfalls that caused such capital failures, it was necessary to find a way to isolate the decision-making process from loss aversion and other emotional biases that cause the investor to be his own “chief problem and even his worst enemy,” and make sure that we can let our profits run and cut our losses short sustainably, and regardless of the market environment.

An emotions-free, sound intellectual framework

As our fellow trend follower Warren Buffett put it, “What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework.” I know, someone will counter and say that Buffett is a value investor, but he’s no such thing as I discussed in this article. Either way, that same idea was what guided the creation of I-System, which generates trading decisions purely on the basis of market price fluctuations and trends with zero emotions and zero distractions.

For investors who want to do better than Niederhoffer, Druckenmiller, nobel prize economists, Cathy Wood and other market wizards, systematic trend following offers that alternative and should be used, at the very least, as a reality and a regular source of second opinion on the markets. Perhaps the best part is that the very same intellectual framework that enables us to navigate market trends in stocks and bonds also allows us to trade crude oil, gold, silver, bitcoin or any other market with exactly the same quality of trading decisions.

To learn more about TrendCompass reports please check our main TrendCompass web page. We encourage you to also have a read through our TrendCompass User Manual page. For U.S. investors: an investable, fully managed portfolio based on I-System TrendFollowing is available from our partner advisory (more about it here).

Today’s trading signals

With yesterday’s closing prices we have the following changes for the Key Markets portfolio:

Read more

For one thing, the full text of the agreement has not been made public. Instead, we only have a brief joint statement by the three signatories:

“Guided by the longstanding historical ties among the three states, based on the enduring bonds of brotherhood and Islamic solidarity that unite them, and building upon their shared strategic interests and longstanding defense cooperation, HRH the Crown Prince, the President of Türkiye, and the Prime Minister of Pakistan signed the Makkah Joint Defence Agreement, reflecting the three states’ shared commitment to further strengthening their collective security and to promoting peace, security, and stability in the region and beyond, in pursuit of a secure and prosperous future.

The agreement is intended to strengthen collective deterrence against any act of aggression, and stipulates that any armed attack against any one of the three states shall be regarded as an attack against them all. It further provides for the enhancement of all aspects of defense cooperation among the three states.”

Furthermore, at least for now, the agreement doesn’t seem to foresee a formal organization, headquarters or any joint command structures. In spite of that, the agreement could prove to be one of the more consequential geopolitical developments to emerge from the current Middle Eastern crisis.

A pro-, or anti-Israel alliance?

Given that all three signatories are, at least formally, allied with the United States, many analysts interpreted Friday’s announcement as a creation of a new alliance that would ultimately serve the interests of the United States in the Middle East, and by extension, represent a new bulwark for the defense of Israel. However, I believe that those interpretations will prove mistaken.

One thing all three of these nations have in common is that each has been threatened by Israel in the past. The Eretz Israel, or Greater Israel project has very significant territorial ambitions that include a very large chunk of Saudi Arabia. Here’s one the map of the Zionist leaders’s vision:

As we can see, Eretz Israel also includes a chunk of Turkey, and most of Syria, which Turkey regards as its own strategic sphere of influence. This has put Turkey in the crosshairs of Israeli officials’ escalating war rhetoric.

For example, Israeli Minister of Diaspora Affairs Amichai Chikli said that Israel should prepare for a possible future clash with Turkey, calling a naval encounter “not impossible” and something that “could happen even tomorrow morning.” Defense Minister Israel Katz explicitly warned Turkey against deepening its presence in Syria, and the former Prime Minister Naftali Bennett has called Turkey the “new Iran” and a strategic threat. Prime Minister Benjamin Netanyahu said that he takes President Erdogan’s anti-Israel statements “very seriously,” lobbied the Trump administration against selling F-35 aircraft to Turkey, saying it would destroy the regional power balance.

The ambition to crush Pakistan

That “regional power balance” also set Pakistan in the Zionists’ crosshairs, and in this sense, Israel has already planned hostile actions against Pakistan in collaboration with its ally, India. Already in 2011, Benjamin Netanyahu made the following statement:

“... the greatest mission that we have is to prevent a militant Islamic regime from meeting up with nuclear weapons or from nuclear weapons meeting up with a militant Islamic regime. The first is called Iran. The second is called Pakistan. Because if these radical regimes have nuclear weapons, they will not obey the rules that have been obeyed in the last, almost seven decades.”

The plan to tame and declaw Pakistan is clearly a long-standing one, with full support from Zionist and Indian lobbies in Washington DC. The requisite accusations and war rhetoric have already been doing the rounds in popular media programs, including labelling Pakistan as a state sponsor of terrorism:

Indeed, the fear of an Islamic nation possessing a nuclear bomb is not a new thing: it is why Israel attacked Egypt in 1967 and Iraq in 1981.

Operation Shakti

In 1981, Israel developed a plan to strike Pakistan’s nuclear program. In this plan, India was supporting Israel by providing air bases where Israeli F16s and F15s could land and refuel before the strikes. The Indians named the plan “Operation Shakti” and Israeli pilots already began training for it.

However, Pakistan’s intelligence agency ISI found out about this and the country’s then ruler Zia ul-Haq reacted immediately, warning Israel that if they strike Pakistan’s nuclear facilities, Pakistan would strike Dimona. Ul-Haq also issued a warning to India. Facing the prospect of a wider war against Pakistan, India backed off. Without India’s help, there was no way for Israel to carry out the attack, so the plan was shelved.

A new & improved plan was in the works in 1998. At that time, the Pakistani government received an intelligence report that India and Israel were again planning to carry out a joint attack against the country’s nuclear facilities. Shamshad Ahmad (former Pakistani Foreign Secretary) explained the intelligence report they received:

“Sir, we have just received intelligence report that at an Indian airport, squadrons of Indian and Israeli air forces are positioned and are preparing for an attack on Pakistan’s nuclear installations in Balochistan. Then I called our Ambassador in New York, Ahmed Kamal.

I told him, go... on CNN and say that Pakistan has information that India and Israel are about to launch a joint attack on Pakistan. The Ambassador went live on CNN and it resulted in a good impact because if India and Israel had made such a plan, it would be called off by morning.”

As Israel’s most important non-Western ally, India has relied on a very close collaboration with Israeli intelligence to direct action against Pakistan. Particularly since its humiliation by the Pakistani Air Force during their brief confrontation in May 2025, India has been anxious to support the next Israeli attack against Pakistan.

Last summer, Pakistani journalist Hamid Mir explained what brought this to world’s attention:

“Interestingly, the 12-days’ war [between Israel and Iran] exposed the plans of a new war: Israel and India against Pakistan. Now, the threat of a new war is hanging over South Asia. This threat is not just a flight of imagination.”

Mecca summit signifies the end of US hegemony in Western Asia

In view of all this, it would be hard to imagine why Pakistan, Saudi Arabia, or Turkey would come together to defend Israel. More likely, they would come together to protect themselves from Israel and its Western allies, including the US, UK, NATO, and also, in Pakistan’s case from India.

Judging by the statements from Thran and actions by the Ansarallah in Yemen, they clearly don’t seem to feel threatened by the new alliance. For example, just yesterday Yemen’s Ansarallah launched a drone strike on a Saudi Aramco refinery in Jazan, and followed up by striking at the Saudi-backed forces in Yemen’s Mocha port. This morning, Tehran issued an official statement on Mecca Joint Force Agreement.

Iran’s Foreign Ministry spokesman Esmaeil Baqaei called the pact a sign that regional countries are shifting away from relying on the US for security. He stressed Tehran’s perception that the treaty isn’t aimed against Iran, underscoring the deep historical and religious ties with Saudi Arabia, Turkey, and Pakistan.

I believe that Mr. Baqaei’s statement is correct. He didn’t mention that all three nations and Iran face the common threat and the same enemies. The new “Muslim NATO” signifies the redrawing of the power balance in the region and the emergence of a new security architecture that clearly has no use for either the US, UK, NATO, or Israel.

This view is corroborated by the conspicuous absence of any official statement regarding the Mecca agreement from the Trump administration, suggesting that they were neither consulted nor involved in forging the new defence pact. That silence indicates an embarrassment about being kept out of the loop on such momentous developments by their very allies. But what may be embarrassing to the US administration could be panic-inducing for Israel.

To learn more about TrendCompass reports please check our main TrendCompass web page. We encourage you to also have a read through our TrendCompass User Manual page. For U.S. investors: an investable, fully managed portfolio based on I-System TrendFollowing is available from our partner advisory (more about it here).

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With Friday’s closing prices we have the following changes for the Key Markets portfolio:

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In exacerbating financial, economic and social crises at home, it could turn out that Iran will be for the United States as Afghanistan was for the Soviet Union and iceberg was for the Titanic. The Trump admin continues to promote the positive narrative, but facts on the ground beg to differ.

Incidentally, zero barrels flowing out of Saudi Arabia toward the USA also means zero dollars flowing into US financial institutions to service those financial assets that are based on this trade as collateral. Part of all this is related to the undeniable oil market disruption which has only gotten a lot worse with the closure of the Bab-el-Mandeb Strait, severely reducing Saudi oil exports, including to the United States.

Billions and billions…

To reassure the markets, Trump came out with the compensating narrative that, “We're taking a lot of oil from Venezuela -- billions and billions of barrels of oil. To the victor belong the spoils.” In a way, Trump may be telling the truth, but “billions” of barrels are some figure close to 0.2 billions.

Namely, Nicolas Maduro was abducted exactly 2016 days ago today and since that day, Venezuelan oil production increased to just over 1 million barrels per day. If 100% of that oil was taken by the victors, that could’t be much more than 0.2 billion barrels. That’s a nice loot, to be sure, but Trump’s wording exaggerated it several-fold which doesn’t inspire confidence. Scott Bessent contributed further to the administration’s tall tales by declaring that there would be a deal this week with “freedom of movement.” That, too, was an exaggeration:

Clearly, for all the tough talk and bluster, Trump failed to gain control of the Hormuz Strait. Instead, Iran is still dictating the terms, and the terms just got a whole lot Worse for the US and its allies. According to the latest reports from Reuters, Iran is now pushing for fees calculated as 5–7% of the value of the cargo in transit, and they might have taken that idea from Trump himself, when he floated the idea of the US charging 20% of the value of the cargo.

Even if the Iranians climb down from their maximalist demands, they clearly feel like they’re in control and the result could be an energy cost inflation boost for the American people, many of whom are already struggling with the soaring costs of living. Their discontent seems to be getting real, and with real reasons, which go beyond the price of gasoline at the pump:

Eat ramen, ungrateful proles!

Squeezed between the soaring costs of living and rising taxes, the ordinary people are increasingly struggling and demanding changes, but that only seems to be annoying their devoted representatives in Congress. Texas Republican Dan Cranshaw admonished them to, "Stop whining, get a job, eat Ramen like the rest of us did in college, on a budget with [four] roommates." Again, the ideological clash seems to be shaping up between the reality, as perceived by the ordinary people and the ideology espoused by the ruling establishment.

Since the Americans already live in the freest country in all of history and benefit from the greatest system of free market capitalism ever devised, their struggles can only be explained as a result of their own failures and shortcomings. In the end, their “representatives” start to treat them with cold contempt exemplified by Cranshaw’s dumb rhetoric. President Trump and his core supporters largely share that same contempt.

The geopolitical catalyst and the hollowing base

This is how a class conflict could begin to escalate, moving the whole system toward a civil war or a revolution, in another parallel with the USSR, whose geopolitical blunder only catalyzed the unravelling of the system: the Soviets invaded Afghanistan in 1979. They withdrew by February 1989 and within two years, the USSR collapsed. The defeat in Afghanistan did not cause Soviet Union’s collapse, but it worsened its multiple brewing crises and accelerated the unravelling.

Today, the US is facing a similar precipice, although it is hard to say whether the US crisis is potentially worse than the Soviet one or not. As I mentioned yesterday, the ideology upholding “free market capitalism” may make it seem that the US economy is much more robust and resilient than that of the old USSR, but that is not entirely true.

Gradually, over the last few decades, the US has favored large monopolies and oligopolies while the bedrock of resilience - small and medium-sized enterprises - have been systematically hollowed out. For all the talk of tariffs and re-industrialization under Trump, the results on the ground now seem anemic and could amount to too little, too late.

To learn more about TrendCompass reports please check our main TrendCompass web page. We encourage you to also have a read through our TrendCompass User Manual page. For U.S. investors: an investable, fully managed portfolio based on I-System TrendFollowing is available from our partner advisory (more about it here).

Today’s trading signals

With yesterday’s closing prices we have the following changes for the Key Markets portfolio:

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For example, last November I pointed out my friend Matt Smith’s extraordinary report from Azerbaijan in which he described that nation’s major infrastructure development over the last five years:

By far, the most impressive thing I saw during our visit was the level of construction occurring in the country… the scale of which is almost beyond imagination. … occasionally I could glimpse below in the valley a brand new highway system which included dozens of tunnels. Now this is probably the most difficult terrain possible to do major construction.

And yet what I glimpsed from above was shocking in scale. … along the roads that we traveled, there were endless streams of heavy equipment, hard at work, reshaping the landscape to expand the highway system we were on. There were cement factories everywhere built bespoke to support this ambitious effort.

The scale was so massive, so inorganic, and so out of place, we had a hard time making sense of it. To do something like this in America would be utterly impossible. It would cost trillions of dollars. The thinking required, too big, the manpower, unavailable, the will, long gone. … seeing this scale of construction, the costs I imagined seemed utterly impossible. And so, at my earliest opportunity, I did some research. What I found was shocking.

And what Smith shared next was truly astonishing:

“Azerbaijan had built 4,000 kilometers of highway, 45 tunnels, including the second longest in the world, 447 bridges, 16 viaducts. Much of this over very, very difficult terrain. The project was mostly complete. And the total project time was less than five years. All this they’re doing for approximately $5 billion.

To put that in perspective, on March 26, 2024, the Francis Scott Key Bridge in Baltimore was damaged when a container ship collided into it. Currently, the bridge is expected to be rebuilt by late 2030 (more than six years from its collapse) at a cost that’s estimated at between $4.3 and $5.2 billion. In a recent report I highlighted how China built a high-speed railway hub in Chongqing at a scale of Egyptian pyramids and removed an entire mountain to build it. The whole project took only 38 months and cost $7.8 billion.

The case of high-speed railroads

Consider again the cost and pace of high speed railroad construction. In May of 2024, California High-Speed Rail Authority proudly announced completion of the Fresno River Viaduct in Madera County. Although the viaduct measured only 1,600 feet in length, it took 9 years to complete. Sadly, this was a rather typical example. In the 29 years since its establishment, the California High-Speed Rail Authority built 38 structures, totaling 39 miles at a cost $13.6 billion, nearly $350 million per mile of high-speed railroads that are still not remotely operational.

Across the entire US, in 2024 there were some 30 high speed rail structures under “active construction” totaling 119 miles. Meanwhile, in less than 20 years, China built over 50,000 kilometers (over 31,000 miles) at a cost of between $17 and $21 million per kilometer, or $27 to $34 million per mile. That’s less than 1/10^th of the cost per mile of American high speed rail which might never even become operational.

The AI arms race

Then there’s the AI industry. Some sum nearing $3 trillion was invested in the creation of the leading American AI models and their associated infrastructure. China’s DeepSeek AI spent a total only $6 million to develop a very credible rival offering, the DeepSeek R1 model.

On 23 April this year, OpenAI launched their most advanced model, the GPT 5.5. DeepSeek responded the very next day with their own challenger, the V4 model which nearly matched OpenAI’s model in terms of performance. But again, the real, gaping difference between “Made in USA,” and “Made in China” popped up in terms of cost: DeepSeek is up to 107 times cheaper than GPT 5.5. For heavy users, that difference could add up to tens of thousands of dollars a year, a make-or-break issue in the AI wars, which is driving most American startups to adopt Chinese AI platforms.

It’s pretty much everything…

Then there’s the costs of weapons systems, where Western systems cost 10x or more what the Russian, Chinese or Iranian systems cost. A particularly egregious case is the cost of health care. American people pay by far the world’s most expensive health care system, but they get some of the worst health outcomes of any advanced economy in the world, on almost any metric:

• Health care is the 3rd leading cause of death in the US

• 50% of U.S. adults and 30% of teens have pre-diabetes or type II diabetes

• 40% of 18-year olds have a mental health diagnosis

• U.S. has the highest infant and mother mortality rate in the developed world in spite of spending more than twice as much on infant and maternal care

• 25% of American women are on antidepressants

• One in 36 children have autism (in California, it’s one in 32)

• Rates of myocarditis, pericarditis and cancers among young people are exploding

• Since 2019 life expectancy in the US has been shrinking and is now 7.65% lower than in other developed nations (82.4 years vs. 76.1 years, based on 2021 data)

A stark contrast with Chinese health care was offered recently by an American young woman named Jennifer who posted a short video of her own experience on X. She had no health insurance of any kind in China, but she needed to see a doctor in order to obtain a prescription for some medicines. So, she walked into a public hospital and 19 minutes and $12 later, she walked out with everything she needed. Here is her video:

I could go on enumerating case after case after case exemplifying the value-for-money disproportion between Western economies and those of the unfree world. The picture that emerges is that in Western democracies, the people are consistently and radically short-changed and robbed of their health, their wealth, their freedom and their future, almost as though the whole system was built as an industrial-scale wealth extraction pump that loots the wealth created by the people in a thousand subtle ways, each of which can somehow be denied, or at least justified with some convenient narrative.

On top of that, we have a thick layer of ideology masquerading as economic theory, which insulates us from common sense, inducing a form of Stockholm Syndrome where can convince ourselves that being robbed blind is just glorious because bootstraps, hard work, free market capitalism, Murray Rothbard, Friedrich Hayek, “libertad, carajo,” and similar slogans prevent us from reaching sensible conclusions based on a simple observation of facts.

Instead, discussions often gravitate towards blowing up nations that fail to conform to liberal democracy and free market capitalism. But we really should be asking questions and demanding very concrete answers: why does nearly everything in the West cost double, triple or 10x what it costs elsewhere and what would our lives be like if everything cost 1/10th what it costs now?

To learn more about TrendCompass reports please check our main TrendCompass web page. We encourage you to also have a read through our TrendCompass User Manual page. For U.S. investors: an investable, fully managed portfolio based on I-System TrendFollowing is available from our partner advisory (more about it here).

Today’s trading signals

With yesterday’s closing prices we have the following changes for the Key Markets portfolio:

Read more