MARKET PERSPECTIVE

By J Mulraj

Oct 25- 31, 2025

Debt, debasement of wars, and distrust, will ensure collapse

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Several empires have collapsed in the past. The Roman Empire, Portugal, Spain, The Netherlands, the British Empire; all had their days of glory and ultimately collapsed. The collapse follows a predictable pattern of steps. The Empire extends, through conquest. It has to maintain its farflung army, and runs out of resources to do so. So it ends up devaluing it’s currency. The Roman currency, the denarius, was a coin made entirely of silver, hence instinctively trusted. It became the universal currency, accepted in global trade.

When the expenses of maintaining its vast empire became unaffordable, Rome lowered, in steps, the silver content of the denarius. Other nations lost trust in the currency, which got replaced by another. Rome resorted to borrowing, ending in a debt trap, leading to collapse

The same series of steps is being observed in America today. Its currency, the US $, is internationally accepted by other countries, and is required for global trade. The US has over 750 military bases, across 80 countries, which deploy 170,000 active duty troops, as of March 2024, the, strategic commitments and alliances worldwide. These bases are maintained to protect US interests, to ensure international trade, obviating the need for trading nations to send military vessels to accompany commercial ones, and, importantly, to honour its commitments to defend alliance partners.the, strategic commitments and alliances worldwide.) These bases are maintained to protect US interests, to ensure international trade, obviating the need for trading nations to send military vessels to accompany commercial ones, and, importantly, to honour its commitments to defend alliance partners. For example, Trump reiterated US commitments to defend ASEAN nations at a summit this week, in which he made deals with Japan and South Korea favourable to it. Both will buy goods from USA at zero tariffs, but will be subject to tariffs on their exports to USA. Both will invest in USA, in sectors determined by USA and with USA taking a large bite of profits.

The military-industrial-complex (MIC) directs US Government towards wars, which are expensive, and debt financed. After the prolonged Vietnam war, President Nixon debased the USD by reneging on its promise to redeem USD for gold at $35 / ounce, making it a fiat currency.

US debt has hit $38 trillion, unsustainable. Of this $9 trillion falls due for repayment in 2025, and raising this amount in fresh debt will be difficult. Will the US Government seize private wealth? There is a precedent. In May 1933 President Roosevelt passed an order requiring private citizens to surrender gold to the Government. And now California is seeking a popular vote for a bill to levy a one time tax @ 5% of net worth of individuals ).

The wars in Afghanistan and Iraq reportedly drained US coffers by $2 trillion each. To finance its wars and its trade deficits, the US Government issues Treasury bonds. The main buyers of these are domestic banks and institutions; purchases by other countries is waning because the trust they had in USA is eroding. The US prints money to facilitate purchase of its own T Bills.

This printing would lead to rampant domestic inflation, but hasn’t, because other countries absorb the newly issued USD. They require these for trade. But now the share of USD in global trade is shrinking, although it’s still significant. Other payment and settlement options for global trade have been/are being developed. It will take time, alternative but the signs suggest that an alternative to USD as a globally accepted currency will develop. Once it is, the collapse of the American empire will be swift.

The collapse would take away the US ability to sanction other countries and to freeze their funds, as it did with some $ 350 b. funds of Russia’s central bank when the Ukrainian invasion began. But, unless it is replaced by a rules based order, and unless some global body can assure freedom of navigation, it may not be the desired outcome.

There were some interesting developments last week.

Jerome Powell, chairman of US Federal Reserve, cut interest rates by 0.25%. The Fed has two mandates viz. to keep inflation in check and to help facilitate growth in employment. The cut was dictated by rising unemployment, and implemented despite threats of rising inflation. Powell voiced caution about chances of another cut in its December meeting.

Trump attended the ASEAN summit in Malaysia, where, as per his claims, he brokered a ceasefire agreement between warring Thailand and Cambodia. He made trade deals with several ASEAN countries, culminating in a meeting with China’s Xi Jinping in South Korea.

Trump announced a one year deal with China which allows continuation of supply of rare earths by China for a year and a Chinese promise to see if fentanyl precursors originated in China, and to stop the flow to USA if they were. For this promise, US tariffs were reduced by 10%.

The US has a year in which to ensure alternative supply chains for rare earth elements. These are crucial across several industries, including solar power, Electric Vehicles, and, most crucially, in defence. Without these, the F-35 stealth aircraft wouldn’t be able to fly, nor would the Tomahawk missiles have the ability of guidance.

The discouraging news emanates from the jingoistic MIC which revels in creating conflicts and chaos.

The US Government, prodded by MIC, has turned its attention towards Venezuela, ostensibly to prevent its drug cartels from smuggling drugs into USA, but actually because USA covets Venezuelan oil reserves, the world’s largest.

In a redux of the Cuban missile crisis, Russia has placed missiles in Venezuela, in close proximity to USA, as a counter to NATO missiles placed in close proximity to Moscow, in neighbouring European countries (). So any attempt by USA on Venezuela can light a powder keg of unintended consequences.

In US corporate news, Nvidia becomes the first company to hit a $5 trillion market cap! Kudos to it, for having achieved it without the Chinese market after Trump banned export of its chips to China.

In India corporate news, Mehul Mistry was ousted as a trustee of two Tata Trusts which control the Tata holding company. This trust structure was devised so that about 2/3rds of the profits of Tata group operating companies flows to charity, through these trusts. However, the structure endangers the control of the group, depending, as it does, on trustees possessing the same set of values and charitable disposition. It should be re examined for contemporary relevance.

Infosys has announced a stock buy back valued at Rs 180 billion, offering to buy back upto. 100 million shares at Rs 1800/share (market price is just under Rs 1500. The original promoters are not offering their shares. Buy back offers are a way to distribute surplus cash to shareholders and, by thus reducing stock of the outstanding shares, improve the EPS in future.

One thought for Infosys, a leading, and most reputed IT company. Could not they have considered using the Rs 180 b to establish a startup accelerator like Y Combinator? With the threat to many jobs from AI, such attempts to encourage start up entrepreneurs would, probably, be of greater service than distributing to (amply rewarded) shareholders.

Last week the BSE Sensex ended at  83958 being flat through the week.

PM Narendra Modi has plans to make India a ‘Viksit Bharat’ (developed Bharat). The vision is good, the implementation in certain areas, not so. We CANNOT become Viksit Bharat unless we tackle rampant corruption and a woefully slow judiciary.

Maharashtra is the State with the highest GDP amongst all States. This report highlights the rampant and flagrant corruption that prevails, unchecked in Maharashtra. Several incidents are revealed in this video, including one in which a Government official charged by investigative agencies for extorting bribes from builders, and linked to a sum of Rs 169 crores!, was let off by the High Court for ‘lack of evidence’ (even though a Government agency had brought the charge.

Contrast this with the case of a railway ticket checker accused of taking a Rs 50 bribe! It took 29 years to dismiss this case which went up to the Supreme Court.

Mr Modi – do you not see the sad direction the country is taking, where a Government official linked to a Rs 169 crore extortion case is let off immediately for ‘lack of evidence’ but a ticket checker is subjected to harassment over 29 years for a Rs 50 bribe accusation? Will India become Viksit unless issues like corruption and slow judiciary wasting time on inconsequential issues and lenient on offenders, are tackled with unrelenting firmness?

The Trumpian announcement of a China deal should have been met with more jubilation by stock markets than it did. His rantings against world leaders, and his frequent course corrections, have destroyed trust. It is trust that is the foundation of the USD being the global currency.

It is the privilege of being the global currency that is the foundation of the American empire.

If the foundation is often the subject of tremors, it collapses. Not today, not tomorrow, but it is headed in that direction.

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Comments may be sent to jmulraj@asiaconverge.com