Dmitry Orlov

Today the US-Israeli war on Iran turns one month old. The Strait of Hormuz is now open for Iran’s friends only (China is at the top of the list; Thailand just joined the club). A thousand oil tankers stay anchored within the Persian Gulf with scant hope of sailing out of it any time soon. The tankers that had made it out though the Strait before the attacks began have by now reached their destinations. Call that “old oil” and it has already been repriced up. But now will come “new oil” and its prices will be limited only by the ability to pay because the volumes will be restricted to just 80% of what oil importing nations require.

As I explained in two of my last two articles (1, 2) the US attack on Iran had scant chances of success. Why, then, did it happen? Explanations range from plain old stupidity — “Look who’s in charge!” — to “It doesn’t matter.” Why wouldn’t it matter? Why would a military quagmire that shuts down much of the world’s economy and triggers force majeure breaches of contract throughout much of it — not matter? One answer that immediately springs to mind is that “This sucker is going down” anyway. The attack on Iran would then be simply used as a way to deflect attention from this fact. The plan, then, would be as follows:

1. Attack Iran
2. Watch global economy seize up as a direct result
3. Blame Iran to pacify the angry mobs back home

But is this sucker going down? Let’s briefly review the fiscal position of the United States. According to the numbers most recently published by the US Treasury, it is as follows:

• Assets: $6 trillion
• Liabilities: $48 trillion
• Additional liabilities (virtually all social spending): $88 trillion
• Household debt: $19 trillion (a record)

That is, for every dollar the US actually has there are almost 26 dollars that the US must have but doesn’t. Another way to look at it is that the US has a debt to GDP ratio of over 500% while anything over 100% is generally considered economically fatal. Please keep comments about “the printing press” to yourself; when the only oil that makes it out of the Persian Gulf has to be paid for in yuan and when even the Gulf Arabs are selling off US debt as fast as they can, printing even more dollars would only accelerate the fiscal death spiral.

The Washingtonians must understand full well that no one will bail out the American economy. This may have been possible before because other nations saw potential in it. Indeed, the United States was the engine of innovation and global economic growth for several decades. But today the American economy is no longer in the lead and the rest of the world would rather turn off its life support and let it die.

What most mainstream economists would recommend in this situation is austerity: cut social spending before it’s too late; cancel Social Security, Medicare, disability, SNAP, housing subsidies, federal pensions and much else. Of course, such measures would not be sufficient unless the US defense budget were also zeroed out. But such measures would be unpopular and no politician would want to be held responsible for taking them. This is where tipping the entire world into a horrific energy crisis would be advantageous: it would give the politicians someone other than themselves to blame when the money machine that keeps a good half of the US population housed and fed suddenly stops working.

That seems like a good explanation. But if you prefer “It’s the stupidity, stupid!” — that works too. Of course, starting a war that has an excellent chance of ending in defeat is pretty stupid too, so it’s stupidity any way you look at it. And, either way, “This sucker is going down.”

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Via https://boosty.to/cluborlov/posts/f9ea2a7f-6529-4f32-8bc1-da7016ad4b7c