"Trouble Behind, Trouble Ahead"
by Bill Bonner
Poitou, France - "‘America lost its way after 9/11,’ says Gerald Baker in the London Times. The wars in Afghanistan and Iraq cost more than 7,000 American lives, hundreds of thousands of civilian ones and trillions of dollars, turning that surplus into a debt now above $40trn. Seeing the world’s sole superpower flounder for a decade against roadside bombs and Soviet-era rifles wrecked American self-esteem and drained Washington’s international authority. But the deeper damage was to Americans’ faith in their government and in themselves.
All over the media, commentators strove to make sense of recent developments...to explain the dramatic change in America’s place in the firmament of great nations. Typical of these assessments is the idea that the US ‘took the wrong path’...or was ‘blinded’ by the need for revenge...or that the emotional shock led to ‘chaos and insanity’ among Americans and their leaders. Daniel Larison: "The ‘War on Terror’ was a Failure." "The U.S. has spent the last two and a half decades dealing out death and destruction across two continents with remarkably little to show for the effort. All true. All beside the point.
All assume the US was headed somewhere else. It got on a train, bound for glory and ended up in Gary, Indiana. What a disappointment! But what if it had been aiming for dereliction all along? And what if neither grief, nor insanity, nor the stupidity of any particular administration led it thither? America did not lose its way. It found it. It was already doomed by its fake money system.
Nor is Donald Trump totally responsible for the latest reversals. He is just another in a procession of lunkheads - from Bush, to Obama, to Biden...and Trump. The latest one didn’t change direction; he just pushed down on the accelerator and enjoyed his reflection in the window as the train sped by. But watch out, Casey Jones; there’s trouble on the tracks ahead. Reuters: "Oil rises above $108 as attacks, pipeline outage deepen Saudi supply concerns."
On the evidence, the War on Terror seems to be going worse than ever. Iran controls the Strait of Hormuz. The Houthis seem to be gaining control of the Red Sea. And Iraqi militias are taking aim at the Saudi Pipeline. They seem to be cornering the world oil market in ways not covered by the finance textbooks. They do not ‘take delivery.’ They just make sure no one else can.
AP: "Houthis seize two Red Sea strategic islands."
AP, AFP, Reuters: "Baghdad confirms attack on Saudi pipeline came from Iraq." "Saudi Arabia has said it will not retaliate and wants Iraq to “take the necessary measures.” Baghdad is under pressure from the United States to rein in Iran-backed militias."
Meanwhile, WLOS: "Diesel prices hit historic high at over $6 a gallon on average nationwide." GasBuddy: "While ‘terrorists’ drive up oil prices, speculators do the job on interest rates. MarketWatch: "10-year Treasury yield hits 5% as oil prices jump and Fed meeting looms." Traders are betting against the ‘house,’ and winning. The Pentagon cannot control ‘terrorists.’ Scott Bessent can’t control the bond market. Even with the largest economy in the world at their fingertips, neither can control the price of diesel fuel.
Diesel is what delivers the stuff. The highways are full of trucks. And the trucks burn diesel fuel. Raise the cost of diesel and the price of the stuff the trucks deliver also goes up. Likewise, the cost of capital is the diesel fuel of finance. Everything depends on it. Raise the price and all the stuff capital buys becomes more expensive too. But there is nothing surprising about this...except perhaps in the details from the oilfields. Stuff becomes more expensive as the feds lose their grip. Gamblers switch from buying the empire’s paper (primarily US Treasury bonds)...to selling it.
Which brings us to the real heart of the ‘decline of the Empire’ story. America’s 21st century blunders were not quirky detours. They were the logical, and probably inevitable, coaling stations along the way. The Bubble Empire is, after all, essentially a massive inflation story. New money enters the economy when it is borrowed. So, each new dollar of debt is equal to an extra dollar of ‘money supply.’ Debt is the empire’s real fuel…its real currency.
Total US public and private debt in 1971 was about $2 trillion...and GDP was about half that much. So, for every dollar of debt there was 50 cents of output supporting it. Now, debt is as much as 4.5 times GDP. That difference - 2.5 times GDP or as much as $75 trillion - is a measure of the Bubble Empire. It is also a measure of how much fake ‘wealth’ could disappear when the bubble pops. But remember, real wealth doesn’t evaporate. The house is still there...so is the factory...and the sausage. The ‘stuff’ survives; the ‘paper’ burns.
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