Despite it being obvious to anyone paying attention that the US has lost the war with Iran, Trump is now demanding that Iran “wave the white flag of surrender”. He also threatened to “bomb the shit” out of Oman if the country didn’t coooperate with the US in attempting to prevent Iran from controlling the strait of Hormuz. Apparently the US has already frozen Omani assets as a means of pressuring them – mafia style of course. Oman is supposed to be an ally, but as has been previously pointed out, “to be America’s enemy is dangerous, but to be its friend is fatal”. Fortunately, the world is waking up to the reality of the US empire’s decline, made much more stark than before by the demented occupant of the Oval Office. The empire has a ‘Wizard of Oz’ problem, where instead of being all-powerful, it’s looking increasingly like a little man behind the curtain. Reality cannot match up to the overblown rhetoric.
Although less obvious than the energy and other commodity issues arising from the war in the Gulf, the financial consequences of the end of a debt cycle are equally vital. The empire’s financial regulators long ago lost any semblance of control over the money supply and the extent of leverage within it, as shadow banks, private credit, and derivatives have ballooned in terms of credit creation, none of which are regulated and all of which are over-extended and close to hitting a wall. Financial securities, notably sovereign bonds, have been the backbone of the collateral necessary for credit expansion and therefore economic growth, but there are cracks in this system too, reflected in rising bond yields. Bond yields represent the risk premium demanded by purchasers, but as perceived risk rises, more of a premium is demanded. This increases the interest burden on sovereign debtors, and where the interest rises above the rate of economic growth, an exploding debt scenario has been created.
The US debt currently stands at $40trillion, and trillions must be rolled over this year at higher rates. 5% on the ten year bond appears to be the critical limit for avoiding a debt doom loop. Japan’s massive debt and the long standing yen carry trade, which had been providing global liquidity for decades, are also reaching limits. Gulf countries deprived of oil revenues, and with their assets held hostage by the US, are also in trouble. Treasury Secretary Scott Bessent’s tool box of financial alchemy cannot prevent any of the engines of growth reaching the end of the line, although he’s attempting to do so. Countries on the verge of being forced to sell US treasuries to raise dollars are being offered swap lines instead, in an attempt to minimise treasury selling, as this is exactly what would push US interest rates over the edge. It will not be possible to, prevent the unwinding if the yen carry trade or the end of the petrodollar, both of which will propagate contagion around the global financial system.
The US economy is increasingly synonymous with the AI bubble, but the bubble inturn relies on fraudulent circular financing. The impending financial upheaval is very likely to burst this bubble, likely taking the stock market down with it. This in turn could sink the current regime that has staked its reputation to the fortunes of AI and the stock market. The leverage in the system is vast, but unquantifiable. As it begins to unwind, a volley of margin calls will occur, sparking off a downward spiral. There’s no telling how deep the damage would go, but it would be devastating. If this dynamic sets off before the plans for extreme centralisation of the financial system under digitisation and tokenisation, the latter plans may fall by the wayside in the ensuing chaos. One way or another, a financial reset is coming.
As for the war the US was lied into it on the understanding that it would be short and sharp, lasting about four days. The Iranian government was supposed to fall after decapitation and foreign-inspired insurrgency, but months later there is much greater unity and strength that before the war. The US went to war without a plan or any form of strategic thinking, and as a result failed to assess its own capacities or ensure logistics. It is now critically short of ammunition, and is failing to feed its own people on entended deployment. Having grossly underestimated its adversary, it never ensured that its bases in the region were constructed in such as way as to protect troops stationed there. What has unfolded over the last several months is a litany of conflicting statements designed to manipulate the markets, generate huge profits by insider traders, and suppress the price of crude oil in order to hide the true impact of the war.
Expect the US to be driven from the region, with no ability to rebuild its infrastructure there. It will not longer have access to the Persian Gulf, and its erstwhile allies in the area have woken up to the protection racket that was being run against them. They were hosting bases that were for the protection of Israel, and that made them targets in their own right rather than doing anything to protect them. Their financial assets are under US control, and both their physical assets and their means of generating income through exports are under extreme threat. Their governments are also corrupt and unpopular, meaning a wholesale restructuring of the power dynamics in the region is likely underway.
The US and Israel are not currently seeing eye to eye on aspects of the war. The US cannot make Israel withdraw from Lebanon, nor can it convince Israel to allow an international force into Gaza in preparation for turning it into an upscale resort, as Jared Kushner is determined to do. Israel doesn’t want outside observers seeing the horror it’s inflicted, and continues to inflict, there. Israeli security minister Ben Gvir is on the record as saying that Israel must kill 30-40 Palestinians a day, and that they are not human and don’t deserve to live. The US lacks the capacity to restart the war, but Israel is determined to see Iran completely destroyed, and it may bomb Iran itself with a view to dragging the US back in to the conflict. Mossad (controlled by Netanyahu) supports the war, but the IDF (not controlled by Netanyahu) does not, meaning that Israel may descend into civil war. This whole tinderbox scenario is becoming a disaster for all concerned, although so far less of one for Iran than for the belligerents.
The wildcard is the potential for either the US or Israel to use nuclear weapons, since they’ve reached a dead end with conventional options. Unfortunately the possibility is all too real. Trump and Netanyahu are both malignant narcissists desperate to cling to power and never admit defeat, even if the price could easily be mutually assured destruction. The US seems determined to bomb locations where it thinks Iran’s nuclear material is concealed, although even nuclear weapons are not going to destroy the mountains that the material will be underneath. What such an attack would do is destroy the Nuclear Non-Proliferation Treaty, and quite possibly result in spreading nuclear retaliation. This is the most dangerous period in living memory.
