All current information points toward one thing: a pervasive pessimism about slumping demand. The clearest example is Germany’s PMI — the manufacturing powerhouse of Europe — approaching 30. This so-called Purchasing Managers’ Index reflects the judgments made by supply chain participants, based on industry experience and their own conditions, about future production expectations — judgments that drive decisions to increase or reduce inventory. The figure signals whether production willingness is expanding or contracting. Over the past few months, it broke above 50 several times, prompting sweeping pessimistic coverage from Western media. But Germany’s index has since fallen below 40. Subsequently released US data shows that over the first seven months, American imports from the rest of the world dropped by $1 trillion compared to the same period last year. As the world’s largest consumer market, the Eagle’s (America’s) imports are other countries’ exports; its demand is other nations’ production. This sharp drop in demand has left mid- and downstream manufacturers starved of orders, which in turn has kept raw material exports and commodities in a sustained slump. The commodity price cycle, therefore, will determine the overall direction of the global economy.
Earlier predictions called for the commodity price cycle to complete its turn by the end of 2024. But current conditions suggest this shift will arrive sooner. To be clear, this refers to the commodity cycle as it plays out in financial markets — not the cycle of actual economic demand. The reasons are closely tied to the current geopolitical landscape and the state of the US dollar.
Every time the Eagle needs to solve its own problems, it expands its debt and prints more money. But that excess currency must complete a “value exchange” — turning wastepaper into real money — in order to effectively finance itself from the rest of the world. Otherwise, it only generates persistent domestic inflation.
This so-called value exchange means securing the things everyone else needs for production and daily life, thereby providing backing for the excess dollars. On the financial side, every time a sustained rate-hiking cycle is used to trigger a strong dollar, it must first lock in pricing power over commodities and force non-dollar currencies and assets into sustained decline. By whatever means necessary — pushing non-dollar exchange rates down, dragging non-dollar assets lower — only then can the excess dollars gain global acceptance, completing the value exchange.
The other party supplies goods and services at low prices. The hidden thread is the premium placed on raw materials and energy, which raises the other party’s production costs and extracts profit from that spread. So manufacturing nations work feverishly while seeing little profit. The Eagle takes the money. Without enough left over, whether for imports or settlements, they need dollars — and to earn dollars, they have to earn them from the Eagle. When their governments or enterprises need capital for development or infrastructure, they borrow from the Eagle and pay it back with interest. This creates a self-reinforcing loop. The excess wastepaper, through control of commodity pricing and the pricing of mid- and downstream production and services, acquires real, tangible value backing.
At present, the Eagle has shifted household debt onto government balance sheets, and that government debt is carried by financial institutions. The Federal Reserve has been printing money to purchase this debt, which has now accumulated to $34 trillion. Normally, other countries would be expected to buy this debt. But the largest buyer this time has refused — holding firm, digging in, refusing to yield. That is why Secretary Yellen raised the issue at the last G7, calling on the other six members to share the burden of the debt. Through the leverage created by the war it engineered, the Eagle has indeed forced its European allies to swallow a considerable amount of debt. But compared to the volume it has printed, this is a drop in the ocean. The Eagle is anxious. All of its risk now concentrates on one mechanism: the Federal Reserve must use rate hikes and balance sheet reduction to complete a global value exchange for the excess currency. But this round of rate hikes and balance sheet reduction has failed to hit its targets. Despite engineering a war, it has not been able to lock in commodity pricing power — and as the war drags on, that goal is becoming even more remote. Everything is being funneled into financial markets. It must keep inflating bubbles to hold things together.
Yet no matter how the GDP statistics are rejigged, the bubble is losing its backing. Chips without value support are highly unstable in the market. Shifting household debt onto government balance sheets was meant to let the private sector move forward unburdened. If that could generate a genuine economic boom, it might provide market support — which, through controlled media, narrative dominance, and financial leverage tools, could be amplified and even manufacture optimistic expectations in the market. But the problem is that at this stage, the Eagle’s economic structure no longer has that capacity. If the other side achieves breakthroughs in high-value-added industries, the pivot points that generate others’ optimism will gradually crumble. That is why the Eagle is now going all out — even desperately, furiously — exaggerating that others stand on the brink of collapse.
The war the Eagle engineered did not go as planned. Instead, it has pushed major commodity and energy-exporting nations toward some form of alliance. Not long ago, Saudi Arabia and Russia reached a deal to cut production and prop up oil prices. As Europe’s and the world’s largest grain exporter, the collapse of the Black Sea Grain Initiative blocked grain exports from both Russia and Ukraine. Russia has struck a cooperation arrangement with China, building a dedicated grain-transport railway line entering through Manzhouli — current capacity stands at 8 million tons, with the first shipment supplying 5 million. In addition, just days ago, Russia successfully made its first delivery of export goods to China via the Arctic shipping route, cutting more than a week off the original transit time. In other words, through transshipment via China, this trade falls entirely outside the Eagle’s reach. If the Eagle cannot control global commodity and energy pricing, then even its grand blueprints for infrastructure-led economic growth — and those promises still sitting on PowerPoint slides — will face energy and raw material costs it cannot control. Who absorbs that cost? Times have changed; ambition has outrun capacity. It is all just talk now.
If China doesn’t buy Eagle debt, the excess dollars piling up inside financial market bubbles will become increasingly dangerous. As long as non-dollar economies can hold firm under pressure — especially the largest among them — the Eagle won’t just fail to harvest. The dollar crisis will detonate in the markets first.
Once that pricing power begins to loosen and is ultimately lost, chain reactions will follow across finance, equities, bonds, real estate — everything that is highly dependent on dollar pricing power. Because once pricing power shifts, every valuation must be recalibrated.
And so, the things that were undervalued and severely depreciated under dollar pricing power will rise. The commodity price cycle will shift sooner than expected. Our own related assets — those that have been heavily devalued — will reverse course as well. Our greatest challenge is to keep filling holes. The Eagle’s greatest challenge is to keep inflating bubbles. As more high-value-added industries break through and develop, the vast pit dug by layers of accumulated debt can eventually be filled, bit by bit. But for the Eagle, inflating that bubble is no longer so easy. If value exchange continues to fail while the bubble must keep growing, the risk of it bursting will only increase — and there is no way out.
It is because of this certainty that, in a private conversation with several officers at headquarters a few days ago, I said: we must always be prepared for the Eagle — backed into a corner — to provoke a conflict. Stay vigilant, sword in hand, ready for whatever the moment demands.