Wars are about control over resources in order that those resources are available to act as collateral for loans. It’s not about mere access through the ability to purchase necessary resources, but about control to the point of ownership. Without that level of control, the trust required to back loans with those resources would not exist. This is why bankers such as Jamie Dimon are now weighing in on geopolitics, although bankers typically fail to understand the realities on the ground. A network of military bases, a sanctions regime, and threats backed up by old-school military force no longer suffices to intimidate in the modern era of missile and drone warfare, cyberattacks, and AI. Assymmetric warfare now heavily favours those who have moved with the times.
Shadow banking exploded to some $220trillion since the last financial crisis – because shadow banks (non-depository financial institutions) are unregulated, so they were able to carry on their ponzi schemes out of sight of the victims being fleeced. Nothing was learned after 2008. The same practices, and worse, continued, turning the global economy into a self-cannibalising zombie system consuming whatever stores of wealth the oligarchs behind the system could get their hands on. However, that process can only continue for so long before the shortage of collateral becomes obvious. The dire need to find additional resoucres tomuse as collateral isnthe driving force behind the wars in both Ukraine and Iran. In both cases, the aim is to balkanise the country in order to divide and rule, while stealing anything of value. BlackRock has already essentially bought Ukraine, and now insists that its investment be protected, as impossible as that’s turning out to be.
The US is now in a position where a third of its outstanding debt must be rolled over this year, since the treasury has been borrowing at the short end of the curve for years. Interest rates have since risen, so this debt would have to be rolled over at a substantially higher rate, which is unaffordable, as the interest burden on some $40 trillion of debt would skyrocket. The Trump regime has been attempting to force rates lower by pressuring the Federal Reserve, but this has not worked. Now the supply shock due to the war in the Gulf is going to set prices rising sharply, causing central bankers to raise rates instead of lowering them. Trump is reduced to attempting to calm the markets with claims of victory, but thismis not going to work. Narcissists think they can alter reality by sheer force of will, but reality is about to unfold anyway. That reality is going to involve the demise of the petrodollar, and with it the exorbitant privilege that goes with controlling the reserve currency. This will be a financial catastrophe.
Trump has threatened to bomb Iran “back to the stone age where they belong” if they don’t reopen the Straits of Hormuz, which they’re not going to do. This would, of course, be a major war crime, although no one seems to care about those anymore. This war is existential for Iran, and they intend to take any consequences in order to drive the US out of West Asia (ie the Middle East). The proposed plans would create such an obvious disaster that a number of generals refused to comply and have been fired. Several air raft have been lost in the last day, making it clear that Iran still has air defences. This increases the risk considerably.
With very little traffic transiting the Straits, Ansar Allah (ie the Houthis) planning to close the Bab-al-Mandab southern entrance to the Red Sea, and 40% of Russia’s export capacity offline for repairs due to Ukrainian strikes on oil infrastructure, the oil market will be extremely heavily impacted. However, not all consumers obtain their supplies through the affected areas. For instance, the US has domestic production, and Europe obtains supplies from Norway. Despite this, these consumers are also facing much higher prices due to price gouging, cartelised price fixing, crypto betting scams, and all manner of financial chicanery. Trump’s tweets are market manipulation for the benefit of his friends and family, who are making obscene amounts of money. Ordinary people are being squeezed from all sides while the ultra-wealthy Epstein class is benefitting enormously. They never let a good crisis go to waste.
