Japan’s new PM Taka Ichi (female heavy metal drummer) won the largest post-WWII election victory with her LDP party achieving such dominance that 13 seats had to be allocated to opposition due to lack of candidates, establishing her as Asia’s Iron Lady.
Japan’s BOJ is hiking rates for the first time since 1980s deflation amid inflation, causing JGB yields to rise with potential tens of big figure swings in FX rates and impacts on US Treasuries and the yen carry trade.
Taiwan functions as a geostrategic cork preventing China’s naval power projection eastward—if China controls Taiwan, it could reach Hawaii, making Taiwan’s status existential for Japan and fundamentally weakening the US position in Asia.
China prefers economic and political statecraft to weaken opponents before military action (as demonstrated in Vietnam in the 1970s), aiming to win hearts and minds in Taiwan to make reintegration a Taiwanese choice rather than forced takeover.
Neo-mercantilism blends liberal and traditional mercantilism to achieve balanced trade and reduced inequality by addressing domestic imbalances (wealth, income) and international imbalances (trade surpluses, deficits) simultaneously.
David Ricardo’s 19th century theory of comparative advantage (assuming no trade surpluses/deficits) is challenged by modern competitive advantage driven by capital flows, subsidized labor/infrastructure, and artificial exchange rates.
Trump’s neo-mercantilist playbook aims to re-industrialize the US through tariffs and global strategy as a liberal defensive approach, contrasting with authoritarian aggressive models that flood the world with subsidized goods.
US demands Europe invest $500-600B in US infrastructure and factories, redirecting money from Merkel-style surpluses, threatening no trade deal, tech access, or military protection otherwise.
US would not tolerate Canada approaching China, requiring Canada’s economic integration with US due to its critical resources, not just as an isolated market of 40 million people across a cold, vast territory.
US national security strategy targets local production in Latin America with balanced trade via tariffs, taking jobs from China to manufacture for locals, fundamentally shifting from current globalization model.
US under Trump commits more to military-industrial complex and domestic manufacturing of critical goods like pharmaceuticals and semiconductors, consistent with mercantilist system expectations.
Japan’s PM Taka Ichi will deepen US-Japan economic ties and military spending requiring US approval in US-China rivalry, impacting exchange rates, JGB vs Treasury yields, and Japan’s role in sectors like shipbuilding.
Dollar stablecoins could be a game changer, enabling people in non-tier one countries to save and transact in dollars rather than local currency, completely transforming the geometry and geography of the financial system.
Resource volatility will create extreme price swings in gold, silver, and copper due to their dual importance in the monetary system and industrial economy, though prices won’t rise to unaffordable levels.
If US neomercantilist policies are implemented properly, America’s long-term growth prospects are excellent with a bumpy transition involving some inflation but an extremely bullish outlook for both US and the Americas overall.
Private sector debt has migrated outside the traditional banking system since the early 1980s, creating fundamental uncertainty about who the lenders are, who the borrowers are, and what purposes the debt serves, while debt-to-GDP ratios have risen continuously over four decades.
The US must refinance $9 trillion in 2026, mostly short-dated debt, while short-term rates have declined but long-term rates remain flat to rising, creating a dangerous yield curve divergence that signals potential refinancing problems and fiscal dominance concerns as governments may lack capacity to honor debt service without central bank support.
The Japanese yen is falling despite both short and long rates rising simultaneously, indicating an increased currency risk premium that suggests currency markets are signaling debt problems even when traditional safe havens face their own structural issues.
The BIS designated gold as a tier one asset, fundamentally changing its status from commodity to “moneylike” reserve, driving increased physical demand from banks and central banks while gold prices rise as institutions adopt it as a counterparty-risk-free safe haven amid dollar weaponization through sanctions (particularly against Russia).
Project Embridge, a bank-based payment system enabling instantaneous large-value transactions, has been proven viable by the BIS despite US government opposition, offering lower costs, local currency payments, and avoidance of dollar depreciation particularly attractive to emerging markets and oil states like Saudi Arabia seeking to assert importance denied in IMF and World Bank governance.
The COVID period saw government debt increases matching central bank balance sheet expansion, with current macro conditions showing weakening dollar, rising gold prices, and diverging bond yields suggesting a potential tipping point where inflation expectations could break loose in a new age of scarcity.
Long bond rates and inflation are critical macro indicators to monitor for signs of policy rate increases and potential malfunctioning in the US Treasury market, as historical patterns suggest debt crises and hyperinflation emerge when fiscal dominance forces central banks to monetize government deficits.
Weaponization of the dollar through sanctions has accelerated reserve diversification into gold and alternative currencies, while Global South countries increasingly view alternative payment systems as strategic tools to escape dollar-denominated depreciation risk and gain financial system representation.
17 and 25-year market cycles converge at end of 2025, projecting S&P 500 correction of 20-30% in 2026 (midterm election year pattern matching 2010, 2018, 2022 drops), with gold falling to $4,000 before rebounding.
$136 trillion global debt (households, financials, corporates) currently requires $4.5 trillion new debt per 1% GDP growth, escalating to unsustainable $6 trillion per 1% growth by 2030 as global liquidity flatlines.
DXY dollar index expected to rise to 106, suppressing metal prices while 10-year Treasury yields drop below 3% as US institutions face forced bond purchases despite fiscal and monetary stimulus failing to generate inflation-driven recovery due to consumer saving behavior and China’s liquidity constraints.
BRICS nations (India, China, Russia leading) may announce new currency backed by 40% gold reserves, potentially driving gold price to $10,000/oz by 2028-2030 as alternative to US dollar dominance.
Iran conflict oil price impact mitigated by China’s strategic oil stockpiles and increased production from Russia and neighboring suppliers, with Europe facing greater disruption than China.
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