My question remains--who's paying the insurance on these ships? My suspicion is that the US is doing that, because no sane insurance company would do it.
The Hormuz Letter @HormuzLetter
1h
BREAKING: Iran has just struck 2 "hostile" targets in the Strait of Hormuz, with the likely targets being the oil tankers NISSOS KEA and NISSOS KEROS that were transiting via the southern Omani US-backed corridor under US escort and AIS switched off in the past hour, per Tasnim.
Iran adds "the achievements of this operation by our brave forces will be announced to the public in the coming hours."
The US is running ship escorts through the southern corridor while Trump simultaneously claims he is close to a deal that will open the Strait.
You're right it's scary---like Donald, as a troubled teen sent to a military academy to get straightened out, decided to put in the effort, do the drills, and then, with his elephant-sized memory for vengeance, conquer the military world as General Gold Donald---and make them bend to his will. A horror film straight outta USrael's conquest manifesto.
 The first real casualty of the Hormuz war may not be oil. It may be America's Taiwan strategy.
Philip Pilkington says the Iran conflict has unintentionally demonstrated the exact kind of blockade China has long envisioned for Taiwan.
For years, Washington focused on an amphibious invasion. Pilkington argues Beijing's own military writings pointed elsewhere: isolate the island, choke off fuel and food, then force the US Navy to decide whether breaking the blockade is worth a wider war.
Now, after Iran disrupted Middle East energy flows, Taiwan is already feeling what an energy blockade looks like without a single Chinese missile being fired.
Recall when Trump said he rules America and the world? He thought he could break the MOU with no consequences. When Iran attacked ships avoiding their control, Trump pulled out of the MOU in a pique of anger. He decided to unleash total war and destroy Iran rather than comply with the MOU. Now the economic situation worsens and Israel remains belligerent. Trump wants to change the protocols to make it easier for him to bomb Iran with nukes! Is that the plan Trump and Netanyahu have hatched for their next step?
That’s been my base case for about two years: move the chess pieces around to create a scenario in which we (Israel) “have no choice” but to use nukes. More recently I’ve come to think they’re trying to get the US to do the deed, for obvious reasons. Nauseating.
Okay, dumb question for commenters who understand economics,
does this "great reset" to higher energy prices drive inflation in a way that will... help the US roll over its debt? By making dollars worth less? By inflating our way out? Yes, crushing the common man, but holding the elites harmless, and their casino intact, for their progeny?
I get it that we can make dollars worth less by "printing" too many for too many years chasing scarce goods. Some of those dollars are played in the casino... some of those dollars buy health, education, and welfare for the masses... Our debt-to-GDP ratio stands at 122.59pc with a very diseased GDP. We owe more than we earn. We're never going to pay it down, not with AI productivity and we're never going to grow our way out of it, not with AI productivity.
To the elites, does it matter *how* they make dollars worth less, if they think that is the way to reset the table for themselves?
Apologies in advance. Wish I could ask Mr. Pilkington directly.
Well, economics shows me the limitations of my own brain and makes me feel dense. Is that why I am so interested in it? Anyway (and that aside), just looking at the fundamentals of the system in the very limited sense that I can grasp them in relation to your question:
There are basically four ways the U.S. government can influence its financial position in the refinancing of its debt:
1) Raising taxes.
2) Setting short term Treasury interest rates via the Fed Funds target range.
3) Selling more Treasury bills, Treasury notes, and Treasury bonds.
4) The Fed engaging in open market operations to purchase (primarily) Treasuries and Mortgage-Backed Securities from its primary dealers. This "Quantitative Easing" introduces greater reserves into the banking system and enables a greater capacity for banks to loan out money (which, in practice, creates more Dollars and expands M2 money supply). As you note this leads to a greater inflation and Dollar debasement due to the lessened value of existing Dollars.
Normally, the Fed should/will act to raise short term (T bill) interest rates in the face of heightened consumer inflation as one part of its dual mandate. But longer term rates remain a factor of market demand. So increased oil prices should ultimately result in a higher short term Fed Funds rate but will not affect longer term rates as much as fiscal profligacy and debt. The Fed will probably continue to borrow more short term (T-Bills) because of that.
We know that #1 is right out the window for political reasons.
#2 is where the Fed is constrained because if it raises rates it risks causing bubble bursts and a recession; if it lowers rates it risks very likely inflation.
#3 is contingent largely on foreign buyers. As long as the retain faith in the Dollar and the U.S financial system as the best place to put their investments it will be OK. It is becoming a lot shakier lately though (witness the concerns with Japan and China drawing down their
Treasury holdings). Treasury has been selling predominately short term T-Bills over the last few years because they have had lower yields than longer term Treasury Bonds. That will likely continue to be the case because buyers do not want to risk losses by purchasing longer term Treasury Bonds.
#4 is the biggest risk of all but it is the most attractive of all because it pushes the problem down the road. This is the "inflating away the debt" option, where future Dollars become worth less than current Dollars and lessens the overall debt burden (for the government) but increases the inflation burden on all of US.
So, my short reply is that oil prices are probably not a lever the oligarchs are positioned to use against us to devalue the Dollar. BUT higher oil prices could result in higher short term Treasury rates.
Sorry for writing a book and yeah I am not an expert by a long shot. Hope this helps a bit.
They seem like a solution seeking a problem to me. Is that problem declining demand for US debt? By requiring stablecoins to be backed by an equivalent sum of TBills is this a further strategy privatising the debt?
From what little I have read stablecoins are typically backed by short-term Treasuries (T-Bills), to mitigate interest rate risk.
Even though T-Bills are sold through auctions, their yields largely move in step with the Fed Funds rate. For example the 3-Month T-Bill yield pretty much moves exactly along with the Fed Funds rate. Moreover, because they are very short term this debt all rolls over pretty quickly.
The larger problem of U.S. government debt and continued deficit spending is reflected more in auctions for longer-term Treasury Bonds (results depending on market confidence in government credit along with confidence in the future macro-economic environment).
So given what little I know about them, it is hard for me to envision that stablecoins will be a significant part of any solution for lowering the rates the government must pay to borrow money longer term.
Thank you so much for writing out this framework for review, it really helps.
Speaking of #4, in which QE "enables a greater capacity for banks to loan out money", I was reading Havenstein (who I think you originally linked in this combox, what a trip!) pointing out that in March 2020 the Fed reduced the reserve requirements to zero. Which affects their capactity to loan out money.
He asks, "what do you call a fractional reserve system if the fraction is zero?" and includes an old educational video assuring Americans that the Fed can and will alter the fraction to control the money supply to control inflation for Americans.
I'm not a professional economist but I know a little bit and will try to answer your question (which is both extremely good and not at all easy to answer). If I seem a bit pedantic, my apologies in advance.
Milton Friedman coined the phrase "Inflation is everywhere and always a monetary phenomenon"; this has entered into the public's mind as "common knowledge". And while it's certainly true that inflation MAY be a monetary phenomenon, it's not always. The way to think about "true" inflation is a general or overall decline in the value of currency - not just a "price increase".
In the case you're suggesting, the energy "reset" has nothing to do with monetary inflation; it's a true supply shock (note - i'm ignoring the complexities of the oil market - light crude, heavy crude, etc). There's less energy available than in the past so the way the US and most of the world allocates is by price. In theory, the least productive uses of energy will be discontinued or changed in some way. Note that this isn't the only way - you could have government rationing as an alternative (not recommended but it is an alternative). In reality the rationing by price will hit the poorest individuals: I may be able to afford more expensive propane for my "fire table' but someone in Bangladesh will not be able to afford propane to cook their food.
Second, the size of the US government's debt is an issue, but not the one that we think it is. I've recommended the Bank of England's 2014 papers on how the monetary system actually works (https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy); in short non-inflationary monetary growth is governed by changes in real productive output (the real economy). The US is not going to go bankrupt, is not going to default on its debt, and is going to be able to roll over debt that is coming up. And there's no "crowding out" either. But if it increases the amount of currency at a rate faster than real economic growth, then you should get monetary inflation.
Frankly, the debt (and deficit) issue could be resolved immediately by cutting spending, raising taxes, and making some additional minor changes. But the people who really run the US economy have no desire to cut spending or raise taxes. Finally, watch out for the "oh, the rich pay all of the income taxes" argument. The rich who pay income taxes are those who have INCOME. If you're rich enough (not any paltry $750k per year in salary), you can avoid most taxes. So is the US government (Executive and Congress) worried in any realistic sense about the debt? I'd say no or they'd do something about it. But I suspect that it can be used as a cudgel to reduce Social Security and Medicare. BTW - you could "fix" Soc Sec by eliminating the current salary cap. One final point - taxes aren't necessary to fund the government but are necessary to control inflation and other economic aspects.
One additional point on the debt - interest is paid to those LEAST likely to spend it. The interest gets re-invested or is used to bid up existing assets. Put differently - the interest goes to rich people (or rich and older people) and they sit on it. A slowing velocity is an issue.
One more thought - the US will never re-industrialize with the financial, neo-liberal economy that's currently in place. Our labor costs are simply too high - as is our cost of living. Why does US health care cost double that of anywhere else in the world? Because rich people are getting richer from the current system (and it's a great way to "discipline" labor). Why is the cost of education so high? A barrier to entry, credentialism, and quasi-slavery (is there any reason why education debt is non-dischargeable in bankruptcy?). I can buy a Lambo on credit, wreck it, and declare bankruptcy and have the debt discharged. But if I borrow for education and I can't (truly can't) pay the debt back, I'm just SOL? Finally in our current economic system, the only way to re-industrialize is to have real trade barriers (as the US did in its history, and China did, etc).
Two recommendations for further research - Steve Keen and Stephanie Kelton. Both are iconoclastic economists who focus on how the world really works.
Happy to say more if you find this useful but I think I've rambled on enough for one comment.
In my older age, I find the call to arms, "your taxes [are or are not] paying for this [terrible or wonderful] thing!" to be slightly irritating insofar as our elected representatives, left and right, once elected behave as if there is no real debt emergency. Watch what they do, not what they say. The tax debate serves to draw attention away from the real mechanics of how the empire funds itself and rewards itself. We are an Empire, not a Republic, now.
"Frankly, the debt (and deficit) issue could be resolved immediately by cutting spending, raising taxes, and making some additional minor changes. But the people who really run the US economy have no desire to cut spending or raise taxes."
For whatever reasons, that does, ultimately, seem to be the crux of the matter.
The US needs to devalue the dollar against other currencies in order to reindustrialise, and to burn down the nominal debt. That's going to be painful, because of the dependency on imports, so imo it needs to happen in a controlled manner, with persistently high inflation and money printing, while the rest of the world stays the course, and without riots in the street.
Inflating the money supply is going to cause a nominal equity boom in dollar terms, maintaining the illusion of wealth and economic boom, even though it'll go down in terms of real money (gold). The pricing-out of imports will ease the trade balance. Basically the original China model in reverse: suppressed currency, cheap labour.
Unintuitively, high oil prices are counterproductive, because of the Petrodollar system. Other oil-importing nations need US$ to buy oil, which strengthens the currency, and puts pressure on the bonds market, while weakening other currencies like the Yen.
That's one reason Bessent did the to-do list photo op, he needs the market to believe that he wants Yen up, dollar down. The whole Iran debacle really doesn't help with the "soft landing" plan.
The other option is a major crisis, potentially war, that allows to override the "keep people happy" constraint via patriotism. If you look at the escalations under that light, they make more sense. A war in Europe and the Middle East would be the repeat of the WW2 playbook.
"Inflating the money supply is going to cause a nominal equity boom in dollar terms, maintaining the illusion of wealth" --> Has Caused. House prices have almost doubled in ten years where we live in the US.
Guess we'll wait and see as the petrodollar system breaks down, what does rolling over the debt look like?
And since energy costs underlie all real production, reindustrialization seems out of reach, not even for war-making... though our MIC can't be too sad that we're running out of ammo. We'll find the money to pay for new ammo in the couch cushions.
Oh, dear. Where to even start? Trump wants the munitions problem "fixed"? That would mean years of building whole new factories, training a whole new workforce and finding rare metals out of thin air. For a supposed businessman, he has absolutely no idea how the world of industry works.
You really have to wonder who he's talking to when he tweets about all those defense firms building more factories than ever before. Iran? Russia? China?
There you go again Steg, trying to confuse the issue with real facts!!
Man that gets old, get with the program; we don’t need no stinking facts, we’re jus gonna wish and fantasy island our way out of this mess. We’ll have plenty of gas, diesel, munitions! Nothing to worry about. Why we could even invade Russia, China and maybe even Greenland. Piece of cake, all three operations be over in a few days. And don’t forget the ultimate weapon; empty threats! Yeh, that’ll showem who’s in charge. If had written a book with this kind of story line, no publisher on the planet would have been interested.
I know, it ain’t funny, but sometimes a little dark humor is the highlight of the day. Wish it weren’t so, but there “I” go again “wishin”
Just for perspective, Ray, a litre of unleaded gas costs 2.01 Swiss francs today. That's $2.47 a litre or $9.40 dollars a gallon. Thank you Trump and Netanyahu!
So, did Feinberg tell Hegseth to tell Trump that there is no way to quickly replenish weapons stockpiles, after his emergency meeting? Meanwhile our troops are eating some really sorry chow while floating around aimlessly aboard ships out of missile range.
There has to be a correlation between failed foreign policies and all the statues, ponds, arches, and the Epstein Ballroom, but I haven't been able to find it yet.
It's obvious from every chart I've seen of Big Oil's profits that they are manipulating the markets: demand stays the same, as do prices, but supply shrinks, and profits go through the roof. I'm not a brilliant economist like Scott Bessent, but these anomalies just don't fit reality.
And I didn't even address the out-of-control stock market. Are they intentionally inflating that as well?
What's happening right now is a million miles away from reality. What will be the first domino?
There are many factors at play that work to inflate the stock market.
The well-timed Truth social posts are one.
Another are the regularly injected masses of automatic 401k purchases every two weeks. This is an invaluable regular income stream they use as an excuse to lever up equities.
Finally, it is known that skyrocketing equities are a sign of a decaying currency. Zimbabwe is probably the best example.
Doesn't Big Oil have trading desks all over the world?
I don't think they are trading stocks; they are most likely trading commodities the instant Trump drops one of his overnight announcements that impact the commodity exchanges.
He denies there’s a shortage in one breath and in the next admits there’s a deficiency. Since Trump hears what he wants to hear, he figures all is well and if needed he can just call someone to fix the problem lickety-split, just like manufacturing dollars needed to buy yen.
Hegseth hears what he wants to hear, too. He knows how shallow the ground on which he walks is (no experience, no qualifications, and totally beholden to Trump). Just like Trump he will try to bullshit his way out of predicaments day by day and to deny any contradictions in his own statements or between his statements vs. reality. He is like a Trump mini-me, and reflects Trump's spinelessness and lack of morals.
Yep. Any deal will be signed with Iranian missiles and drones, not pens. They have to keep up the pressure until even Trump will be forced to agree and stick to an agreement.
If they put their minds to it the Russians could do a lot to mitigate the Manichean view the West propagates toward them and toward Putin in particular, IMO. Putin actually reflects (and believes in) many of the views on international relations that most of us in the West were taught to believe in!
Largely ceding the information space is a huge mistake on Russia's part.
Narratives are a critical tool the collective West uses to keep a key percentage of their populations on-side with the oligarchy's goals.
The West is also enamored of personality cults. They project this love onto other societies, which is why Western leaders are always discussing, threatening, or carrying out regime change operations.
They probably know that they will never win over anyone in the West to their point of view, so why bother? Even here in "neutral" Switzerland people still froth at the mouth about Russian orcs. The only audience the Russians have to convince is the other Brics nations. And anyway, they are winning the war on the ground.
Are Europeans so under the spell of the Western MSM press that they believe "The Russians are coming, the Russians are coming!"? Wow, that is probably worse than the Trump true believers who watch Fox News unquestioningly.
For what it is worth the Europeans that I know (grannted there aren't that many, anymore) haven't fallen for the EU's and their governments' anti-Russian blather.
I don't think most Euros think too much about it, Diss, but there is this instinctive distrust of the Russians. They are still seen as semi-Asiatic barbarians.
I think he's finally learnt his lesson. The Russians have definitely taken the gloves off. They are doing what they should have done 4 years ago: closing down Odessa and landlocking the country.
My question remains--who's paying the insurance on these ships? My suspicion is that the US is doing that, because no sane insurance company would do it.
The Hormuz Letter @HormuzLetter
1h
BREAKING: Iran has just struck 2 "hostile" targets in the Strait of Hormuz, with the likely targets being the oil tankers NISSOS KEA and NISSOS KEROS that were transiting via the southern Omani US-backed corridor under US escort and AIS switched off in the past hour, per Tasnim.
Iran adds "the achievements of this operation by our brave forces will be announced to the public in the coming hours."
The US is running ship escorts through the southern corridor while Trump simultaneously claims he is close to a deal that will open the Strait.
I can't remember if you or anyone else has covered this, Mark, but it shows the depth of Trump's insanity. This is not a MAGA diehard posting this; it is Trump himself. We are in big, big trouble! https://www.theburningplatform.com/wp-content/uploads/2026/08/Screenshot-2026-08-06-092227.jpg
You're right it's scary---like Donald, as a troubled teen sent to a military academy to get straightened out, decided to put in the effort, do the drills, and then, with his elephant-sized memory for vengeance, conquer the military world as General Gold Donald---and make them bend to his will. A horror film straight outta USrael's conquest manifesto.
Yeah, I thought about the military academy, too. But you have described the implications much better than I ever could have.
Mario Nawfal @MarioNawfal
5m
 The first real casualty of the Hormuz war may not be oil. It may be America's Taiwan strategy.
Philip Pilkington says the Iran conflict has unintentionally demonstrated the exact kind of blockade China has long envisioned for Taiwan.
For years, Washington focused on an amphibious invasion. Pilkington argues Beijing's own military writings pointed elsewhere: isolate the island, choke off fuel and food, then force the US Navy to decide whether breaking the blockade is worth a wider war.
Now, after Iran disrupted Middle East energy flows, Taiwan is already feeling what an energy blockade looks like without a single Chinese missile being fired.
"The blockade on Taiwan... Iran did it."
Recall when Trump said he rules America and the world? He thought he could break the MOU with no consequences. When Iran attacked ships avoiding their control, Trump pulled out of the MOU in a pique of anger. He decided to unleash total war and destroy Iran rather than comply with the MOU. Now the economic situation worsens and Israel remains belligerent. Trump wants to change the protocols to make it easier for him to bomb Iran with nukes! Is that the plan Trump and Netanyahu have hatched for their next step?
That’s been my base case for about two years: move the chess pieces around to create a scenario in which we (Israel) “have no choice” but to use nukes. More recently I’ve come to think they’re trying to get the US to do the deed, for obvious reasons. Nauseating.
Okay, dumb question for commenters who understand economics,
does this "great reset" to higher energy prices drive inflation in a way that will... help the US roll over its debt? By making dollars worth less? By inflating our way out? Yes, crushing the common man, but holding the elites harmless, and their casino intact, for their progeny?
I get it that we can make dollars worth less by "printing" too many for too many years chasing scarce goods. Some of those dollars are played in the casino... some of those dollars buy health, education, and welfare for the masses... Our debt-to-GDP ratio stands at 122.59pc with a very diseased GDP. We owe more than we earn. We're never going to pay it down, not with AI productivity and we're never going to grow our way out of it, not with AI productivity.
To the elites, does it matter *how* they make dollars worth less, if they think that is the way to reset the table for themselves?
Apologies in advance. Wish I could ask Mr. Pilkington directly.
Well, economics shows me the limitations of my own brain and makes me feel dense. Is that why I am so interested in it? Anyway (and that aside), just looking at the fundamentals of the system in the very limited sense that I can grasp them in relation to your question:
There are basically four ways the U.S. government can influence its financial position in the refinancing of its debt:
1) Raising taxes.
2) Setting short term Treasury interest rates via the Fed Funds target range.
3) Selling more Treasury bills, Treasury notes, and Treasury bonds.
4) The Fed engaging in open market operations to purchase (primarily) Treasuries and Mortgage-Backed Securities from its primary dealers. This "Quantitative Easing" introduces greater reserves into the banking system and enables a greater capacity for banks to loan out money (which, in practice, creates more Dollars and expands M2 money supply). As you note this leads to a greater inflation and Dollar debasement due to the lessened value of existing Dollars.
Normally, the Fed should/will act to raise short term (T bill) interest rates in the face of heightened consumer inflation as one part of its dual mandate. But longer term rates remain a factor of market demand. So increased oil prices should ultimately result in a higher short term Fed Funds rate but will not affect longer term rates as much as fiscal profligacy and debt. The Fed will probably continue to borrow more short term (T-Bills) because of that.
We know that #1 is right out the window for political reasons.
#2 is where the Fed is constrained because if it raises rates it risks causing bubble bursts and a recession; if it lowers rates it risks very likely inflation.
#3 is contingent largely on foreign buyers. As long as the retain faith in the Dollar and the U.S financial system as the best place to put their investments it will be OK. It is becoming a lot shakier lately though (witness the concerns with Japan and China drawing down their
Treasury holdings). Treasury has been selling predominately short term T-Bills over the last few years because they have had lower yields than longer term Treasury Bonds. That will likely continue to be the case because buyers do not want to risk losses by purchasing longer term Treasury Bonds.
#4 is the biggest risk of all but it is the most attractive of all because it pushes the problem down the road. This is the "inflating away the debt" option, where future Dollars become worth less than current Dollars and lessens the overall debt burden (for the government) but increases the inflation burden on all of US.
So, my short reply is that oil prices are probably not a lever the oligarchs are positioned to use against us to devalue the Dollar. BUT higher oil prices could result in higher short term Treasury rates.
Sorry for writing a book and yeah I am not an expert by a long shot. Hope this helps a bit.
Do stablecoins enter the equation then?
They seem like a solution seeking a problem to me. Is that problem declining demand for US debt? By requiring stablecoins to be backed by an equivalent sum of TBills is this a further strategy privatising the debt?
From what little I have read stablecoins are typically backed by short-term Treasuries (T-Bills), to mitigate interest rate risk.
Even though T-Bills are sold through auctions, their yields largely move in step with the Fed Funds rate. For example the 3-Month T-Bill yield pretty much moves exactly along with the Fed Funds rate. Moreover, because they are very short term this debt all rolls over pretty quickly.
The larger problem of U.S. government debt and continued deficit spending is reflected more in auctions for longer-term Treasury Bonds (results depending on market confidence in government credit along with confidence in the future macro-economic environment).
So given what little I know about them, it is hard for me to envision that stablecoins will be a significant part of any solution for lowering the rates the government must pay to borrow money longer term.
Thank you so much for writing out this framework for review, it really helps.
Speaking of #4, in which QE "enables a greater capacity for banks to loan out money", I was reading Havenstein (who I think you originally linked in this combox, what a trip!) pointing out that in March 2020 the Fed reduced the reserve requirements to zero. Which affects their capactity to loan out money.
He asks, "what do you call a fractional reserve system if the fraction is zero?" and includes an old educational video assuring Americans that the Fed can and will alter the fraction to control the money supply to control inflation for Americans.
https://rudy.substack.com/i/208842901/bank-reserve-requirements
Hello Tamsin,
I'm not a professional economist but I know a little bit and will try to answer your question (which is both extremely good and not at all easy to answer). If I seem a bit pedantic, my apologies in advance.
Milton Friedman coined the phrase "Inflation is everywhere and always a monetary phenomenon"; this has entered into the public's mind as "common knowledge". And while it's certainly true that inflation MAY be a monetary phenomenon, it's not always. The way to think about "true" inflation is a general or overall decline in the value of currency - not just a "price increase".
In the case you're suggesting, the energy "reset" has nothing to do with monetary inflation; it's a true supply shock (note - i'm ignoring the complexities of the oil market - light crude, heavy crude, etc). There's less energy available than in the past so the way the US and most of the world allocates is by price. In theory, the least productive uses of energy will be discontinued or changed in some way. Note that this isn't the only way - you could have government rationing as an alternative (not recommended but it is an alternative). In reality the rationing by price will hit the poorest individuals: I may be able to afford more expensive propane for my "fire table' but someone in Bangladesh will not be able to afford propane to cook their food.
Second, the size of the US government's debt is an issue, but not the one that we think it is. I've recommended the Bank of England's 2014 papers on how the monetary system actually works (https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy); in short non-inflationary monetary growth is governed by changes in real productive output (the real economy). The US is not going to go bankrupt, is not going to default on its debt, and is going to be able to roll over debt that is coming up. And there's no "crowding out" either. But if it increases the amount of currency at a rate faster than real economic growth, then you should get monetary inflation.
Frankly, the debt (and deficit) issue could be resolved immediately by cutting spending, raising taxes, and making some additional minor changes. But the people who really run the US economy have no desire to cut spending or raise taxes. Finally, watch out for the "oh, the rich pay all of the income taxes" argument. The rich who pay income taxes are those who have INCOME. If you're rich enough (not any paltry $750k per year in salary), you can avoid most taxes. So is the US government (Executive and Congress) worried in any realistic sense about the debt? I'd say no or they'd do something about it. But I suspect that it can be used as a cudgel to reduce Social Security and Medicare. BTW - you could "fix" Soc Sec by eliminating the current salary cap. One final point - taxes aren't necessary to fund the government but are necessary to control inflation and other economic aspects.
One additional point on the debt - interest is paid to those LEAST likely to spend it. The interest gets re-invested or is used to bid up existing assets. Put differently - the interest goes to rich people (or rich and older people) and they sit on it. A slowing velocity is an issue.
One more thought - the US will never re-industrialize with the financial, neo-liberal economy that's currently in place. Our labor costs are simply too high - as is our cost of living. Why does US health care cost double that of anywhere else in the world? Because rich people are getting richer from the current system (and it's a great way to "discipline" labor). Why is the cost of education so high? A barrier to entry, credentialism, and quasi-slavery (is there any reason why education debt is non-dischargeable in bankruptcy?). I can buy a Lambo on credit, wreck it, and declare bankruptcy and have the debt discharged. But if I borrow for education and I can't (truly can't) pay the debt back, I'm just SOL? Finally in our current economic system, the only way to re-industrialize is to have real trade barriers (as the US did in its history, and China did, etc).
Two recommendations for further research - Steve Keen and Stephanie Kelton. Both are iconoclastic economists who focus on how the world really works.
Happy to say more if you find this useful but I think I've rambled on enough for one comment.
Thank you very much for the ramble.
In my older age, I find the call to arms, "your taxes [are or are not] paying for this [terrible or wonderful] thing!" to be slightly irritating insofar as our elected representatives, left and right, once elected behave as if there is no real debt emergency. Watch what they do, not what they say. The tax debate serves to draw attention away from the real mechanics of how the empire funds itself and rewards itself. We are an Empire, not a Republic, now.
Not a ramble; and thank you very much for saying it.
Thanks for the very interesting observations.
"Frankly, the debt (and deficit) issue could be resolved immediately by cutting spending, raising taxes, and making some additional minor changes. But the people who really run the US economy have no desire to cut spending or raise taxes."
For whatever reasons, that does, ultimately, seem to be the crux of the matter.
Thanks
I'm no expert, but here are my two cents.
The US needs to devalue the dollar against other currencies in order to reindustrialise, and to burn down the nominal debt. That's going to be painful, because of the dependency on imports, so imo it needs to happen in a controlled manner, with persistently high inflation and money printing, while the rest of the world stays the course, and without riots in the street.
Inflating the money supply is going to cause a nominal equity boom in dollar terms, maintaining the illusion of wealth and economic boom, even though it'll go down in terms of real money (gold). The pricing-out of imports will ease the trade balance. Basically the original China model in reverse: suppressed currency, cheap labour.
Unintuitively, high oil prices are counterproductive, because of the Petrodollar system. Other oil-importing nations need US$ to buy oil, which strengthens the currency, and puts pressure on the bonds market, while weakening other currencies like the Yen.
That's one reason Bessent did the to-do list photo op, he needs the market to believe that he wants Yen up, dollar down. The whole Iran debacle really doesn't help with the "soft landing" plan.
The other option is a major crisis, potentially war, that allows to override the "keep people happy" constraint via patriotism. If you look at the escalations under that light, they make more sense. A war in Europe and the Middle East would be the repeat of the WW2 playbook.
Any corrections or additions appreciated.
"Inflating the money supply is going to cause a nominal equity boom in dollar terms, maintaining the illusion of wealth" --> Has Caused. House prices have almost doubled in ten years where we live in the US.
Guess we'll wait and see as the petrodollar system breaks down, what does rolling over the debt look like?
And since energy costs underlie all real production, reindustrialization seems out of reach, not even for war-making... though our MIC can't be too sad that we're running out of ammo. We'll find the money to pay for new ammo in the couch cushions.
Fair point, printing has been going on since '08
Oh, dear. Where to even start? Trump wants the munitions problem "fixed"? That would mean years of building whole new factories, training a whole new workforce and finding rare metals out of thin air. For a supposed businessman, he has absolutely no idea how the world of industry works.
You really have to wonder who he's talking to when he tweets about all those defense firms building more factories than ever before. Iran? Russia? China?
Steg-
I have been harping about the workforce issue for quite a while.
For various reasons, it is likely the US will never again have the STEM workforce that it had from the 1920s until the mid/late 2000s.
It would take an absolute miracle to reverse and nullify all of the societal trends that have created this situation with the US workforce.
There you go again Steg, trying to confuse the issue with real facts!!
Man that gets old, get with the program; we don’t need no stinking facts, we’re jus gonna wish and fantasy island our way out of this mess. We’ll have plenty of gas, diesel, munitions! Nothing to worry about. Why we could even invade Russia, China and maybe even Greenland. Piece of cake, all three operations be over in a few days. And don’t forget the ultimate weapon; empty threats! Yeh, that’ll showem who’s in charge. If had written a book with this kind of story line, no publisher on the planet would have been interested.
I know, it ain’t funny, but sometimes a little dark humor is the highlight of the day. Wish it weren’t so, but there “I” go again “wishin”
SMH, humour is going to be as important a resource as oil and gas over the coming years. Stay humorous, my friend!
California average diesel price is $7 today.
U.S. average is $5.40
https://www.eia.gov/petroleum/gasdiesel/
https://gasprices.aaa.com/todays-state-averages/
So does that mean Ca will go to $9?
UPS is in lockdown per my neighbor that works there on spending.
Just for perspective, Ray, a litre of unleaded gas costs 2.01 Swiss francs today. That's $2.47 a litre or $9.40 dollars a gallon. Thank you Trump and Netanyahu!
So, did Feinberg tell Hegseth to tell Trump that there is no way to quickly replenish weapons stockpiles, after his emergency meeting? Meanwhile our troops are eating some really sorry chow while floating around aimlessly aboard ships out of missile range.
Meanwhile, the majority of the populace is blind to the massive storm in the vicinity 🤦♂️
There has to be a correlation between failed foreign policies and all the statues, ponds, arches, and the Epstein Ballroom, but I haven't been able to find it yet.
It's obvious from every chart I've seen of Big Oil's profits that they are manipulating the markets: demand stays the same, as do prices, but supply shrinks, and profits go through the roof. I'm not a brilliant economist like Scott Bessent, but these anomalies just don't fit reality.
And I didn't even address the out-of-control stock market. Are they intentionally inflating that as well?
What's happening right now is a million miles away from reality. What will be the first domino?
There are many factors at play that work to inflate the stock market.
The well-timed Truth social posts are one.
Another are the regularly injected masses of automatic 401k purchases every two weeks. This is an invaluable regular income stream they use as an excuse to lever up equities.
Finally, it is known that skyrocketing equities are a sign of a decaying currency. Zimbabwe is probably the best example.
Doesn't Big Oil have trading desks all over the world?
I don't think they are trading stocks; they are most likely trading commodities the instant Trump drops one of his overnight announcements that impact the commodity exchanges.
Hegseth has been all over the place on the munitions’ situation depending on who he’s talking to.
https://www.usatoday.com/story/news/politics/2026/06/15/hegseth-iran-war-munitions-stockpiles/90556294007/
He denies there’s a shortage in one breath and in the next admits there’s a deficiency. Since Trump hears what he wants to hear, he figures all is well and if needed he can just call someone to fix the problem lickety-split, just like manufacturing dollars needed to buy yen.
Hegseth hears what he wants to hear, too. He knows how shallow the ground on which he walks is (no experience, no qualifications, and totally beholden to Trump). Just like Trump he will try to bullshit his way out of predicaments day by day and to deny any contradictions in his own statements or between his statements vs. reality. He is like a Trump mini-me, and reflects Trump's spinelessness and lack of morals.
Does Hegseth have daddy issues? Was his own father absent, or abusive, or distant? Is Mark Rutte Hegseth's big brother?
Mark Rutte is his wife.
I'd not waste any mental energy on this endless parade of ephemeral "deals" until the US:
1) Releases all frozen funds
2) Replaces Witkoff/Kushner with actual diplomats
Until then, they are NOT serious
Yep. Any deal will be signed with Iranian missiles and drones, not pens. They have to keep up the pressure until even Trump will be forced to agree and stick to an agreement.
"Iranian missiles and drones, not pens." Probably, that's the only way the war closes out since Trump doesn't read and has ADHD.
I like the way Iranians shit talk.
One recently said that their response (to an attack) would be "regret inducing" :-)
And those lego vids! They were a metaphor for the sophistication and higher order thinking the Iranians have brought to their strategy.
Russia could learn a lot from Persia, re PR :-)
They seem genetically incapable of it!
Or maybe they consider it beneath them.
I dunno
If they put their minds to it the Russians could do a lot to mitigate the Manichean view the West propagates toward them and toward Putin in particular, IMO. Putin actually reflects (and believes in) many of the views on international relations that most of us in the West were taught to believe in!
Maybe the Russians are beyond caring what we think about them. We need them; they don't need us.
Which is a large part of my reason for admiring the man. Also, he's a Judo black belt.
Largely ceding the information space is a huge mistake on Russia's part.
Narratives are a critical tool the collective West uses to keep a key percentage of their populations on-side with the oligarchy's goals.
The West is also enamored of personality cults. They project this love onto other societies, which is why Western leaders are always discussing, threatening, or carrying out regime change operations.
Perhaps Putin likes it this way.
He took the opportunity to drain the west from all these resources they poured into Ukraine.
Very good point. He's demilitarising Ukraine AND Nato.
They probably know that they will never win over anyone in the West to their point of view, so why bother? Even here in "neutral" Switzerland people still froth at the mouth about Russian orcs. The only audience the Russians have to convince is the other Brics nations. And anyway, they are winning the war on the ground.
Are Europeans so under the spell of the Western MSM press that they believe "The Russians are coming, the Russians are coming!"? Wow, that is probably worse than the Trump true believers who watch Fox News unquestioningly.
For what it is worth the Europeans that I know (grannted there aren't that many, anymore) haven't fallen for the EU's and their governments' anti-Russian blather.
I don't think most Euros think too much about it, Diss, but there is this instinctive distrust of the Russians. They are still seen as semi-Asiatic barbarians.
on that subject see Helmer's amusing Dr Doolittle spin;
https://johnhelmer.org/the-doolittle-question-the-do-nothing-answer-the-power-shift-which-the-iran-war-is-causing-in-moscow/#more-72370
Putin seems incapable of comprhending the mindset of psychopaths.
Thinking you can negotiate with The West is like expecting an alligator to distinguish btw your hand and the food you're holding.
And no, Mr Putin - the gator will not consider you "special".
I think he's finally learnt his lesson. The Russians have definitely taken the gloves off. They are doing what they should have done 4 years ago: closing down Odessa and landlocking the country.
they've entered beast mode for sure!