Spheres of Influence and the Balance of Power
The so-called Donroe Doctrine marks a retreat of the USA to the Western Hemisphere. The landslide victory of Sanae Takaichi and the LDP in Japan, marks a new Balance of Power.
There are many in the West whose base case for China involves military expansion.
Aside from their obvious campaign to garrison the South China Sea with bases on artificial islands, naval and air patrols of the East China Sea, and Yellow Sea, plus a persistence to frame the predicament of Taiwan as unification, or else, I can’t see it. Military conquest of foreign lands is risky and expensive. Why do it?
China built a bunch of bases in the South China Sea to defend its claim to those waters inside the so-called Nine Dash Line. Clearly, they care about it.
Donald J. Trump invaded Venezuela, for a few hours, threatened to invade Greenland, and wants to annex Canada as the 51st State. The 2026 US National Defense Strategy declared that Latin America belongs to the exclusive US Sphere of Influence.
Welcome to Great Power strategy in a world of multi-polar realism.
The Western Press will be full of debates concerning the supposed evils of argument by analogy and the sins of moral relativism committed by those who can think.
Pragmatic investors like me prefer to call a spade a spade.
The business of carving out a sphere of influence, and the defense of that sphere is the raison d’être of being a Great Power in an age of strategic competition.
The Chinese have saying:
一座山上不可能有两只老虎
I cannot speak or read Mandarin, so I must rely on automatic translation.
One mountain cannot have two tigers.
This proverb is interpreted to mean that two equally dominant leaders or rivals cannot coexist in the same domain, as that will usually result in conflict.
For the past eighty years, the USA has defined its domain as the entire globe, as shown by the density and span of 700+ American military bases worldwide.
There has been peace since WWII, in most parts of Europe, and North America.
However, we have not had peace in the Middle East, Africa, or Central Asia.
When foreign military power appeared in Latin America it was most-often American.
It is commonplace for Australians to view the US Alliance as our great protector, but that simply resulted in all of our wars since WWII being overseas.
The truth is that Australia has one great and inviolate protector: the sea.
Australia was not at peace much in the past eighty years.
We were off fighting wars in the Malayan Peninsula, the Korean Peninsula, Vietnam, the Middle East, via Iraq, and Central Asia, via Afghanistan.
Nothing that was happening in any of these distant lands threatened Australia. The proximate threat for such wars was an unhappy USA.
Australia has now learned that the USA will be unhappy if it cannot have Greenland, if the Canadians do not bend to its will, and will frown on minerals trade with China.
There are Vassal Puppets in government and Media Drones who will defend this.
I do not defend it, and I absolutely refuse to be bowed to it.
What keeps the peace across Asia is trade and commerce.
According to the Observatory of Economic Complexity:
In November 2025, Australia exported mostly to China ($14.9B), Japan ($5B), South Korea ($3.91B), Channel Islands ($2.31B), and Hong Kong ($2.06B), and imported mostly from China ($11.8B), United States ($4.48B), Japan ($2.01B), South Korea ($1.96B), and Thailand ($1.52B). - OEC, November 2025.
The Media Drones of Australia consistently ignore these facts in commentary.
What we have, in Australia, is a cabal of people who are making security arguments for this nation on behalf of a foreign nation, the USA.
When you look at the import and export register of Australia you can see that we have an economic center of gravity with Asia and an import dependence on the USA.
In a time of blatant economic coercion, from the United States of America, the Vassal Puppets and Media Drones of this land would have us “reduce risk” by trading more with the USA and less with Asia. Why? How does that help us?
Canadian Prime Minister Mark Carney framed it very well at Davos.
What is the Australian Sphere of Influence?
The natural sphere of influence is what you can defend.
This is an all-domains challenge:
social cohesion
political autonomy
economic security
national sovereignty
freedom of action
military security
You cannot pretend that one domain trumps all the others.
The geographical sphere of influence is defined by our Exclusive Economic Zone (EEZ).
You will note that this map does not include the Malayan Peninsular, the Korean Peninsula, Vietnam, Iraq, or even Afghanistan.
However, our EEZ does encompass the totality of our near approaches by air or sea, and the claims we lay to fisheries and mineral rights within that territory.
This will not please our Vassal Puppets or Media Drones, but that map is properly the legally defined and acknowledged, under International Law, Australian backyard. That is our designated Sphere of Influence.
You could make the case that we need to bug the East Timorese to shut them out of any fair deal for LNG or otherwise interfere covertly with the South Pacific.
It is a spy versus spy world, so it is hard to see that not happening. However, I cannot see why the South China Sea is our natural sphere of influence.
I will grant that there is Australian iron ore, travelling on (mostly) Chinese ships, that traverses these waters to unload cargoes, in China, paid for by Chinese firms.
It is a stretch, for me, to understand why Australia has to waste $368B on nuclear powered submarines, armed with Tomahawk strike missiles, to protect cargoes destined for China, from the Chinese PLA Navy (PLAN).
Perhaps you need to study here to understand that twisted piece of logic.
Do not get me wrong.
I come from a proud military family, that landed at ANZAC Cove on April 25th, 1915.
Gallipoli was a stupid military operation that failed.
None other than Winston Churchill hatched the stupid plan to “bottle up” the Turks through the narrows of the Dardanelles. It was judged a failure on day one.
Fast forward until today.
Elbridge Colby has hatched a stupid plan to “bottle up” the Chinese by defending a red line in the ocean called the First Island Chain.
Supposedly, this posture of “Forward Denial” will avert war.
That is a plan to be found in every packet of Cornflakes at RMC Duntroon.
There are some (admittedly) foolish people, like Sam Roggeveen, who (mistakenly) think that the central role of the Australian Defense Force (ADF), is to go defend Australia, as defined by our natural Sphere of Influence.
If you are a fully paid up (bought off) Australian Vassal Puppet, or some mentally challenged (but vocal) Australian Media Drone, you know that this is bad advice because it did not come with a lifetime supply of free Cornflakes.
The smart thing for Australia to do is to “muscle up” and tool around in the South China Sea, the East China Sea, or the Yellow Sea, until we don’t anymore.
The outcome of this charade is 100% predictable.
No ADF, no more.
Eat your cornflakes while they are still served in the officer’s mess!
Conclusion
It ought to be plain what I think of Australian Vassal Puppets and Media Drones.
It will be underarm bowling from here on in.
The good news…
I think Takaichi will be good for the region as neither China nor Japan really want a war. This new phase will cause the USA to recede from Asia.
If the price of peace is more verbal fireworks from both Japan and China, then I think that a stable Balance of Power is possible.
China and Japan have been in conflict before.
However, they have each been there a long, long, long time.
The USA has not been around very long.
They have yet to understand what that means in the Art of Wars Not Fought.
Domestically, the Officer School at RMC Duntroon should open a brand-new course on military strategy. They very clearly need one, and urgently.
I will have a good rant to the four winds :-)
Happy investing!
Forthcoming: A deeper research note on Japanese Stocks under Takaichi.