Ian Welsh – Page 8 – The horizon is not so far as we can see, but as far as we can imagine

The end of this credit cycle is going to include the following macro events: a credit crisis, a housing crisis, an energy shock, with the potential for massive failed deliveries necessary to third world nations creating famine on a biblical scale, at least one Too Big To Fail failing, as Lehman Bros and AIG did in 2008, and the AI bubble bust. All of these will happen. Locked in. Fixed. No way out.

In a previous post I outlined the order in which the financial catastrophe barreling down on us like oncoming freight will occur. I’ve simply included one new variable: the energy shock.

Here’s how it’ll go down.

First, there is an expansion. Stocks rise. At some point the rise becomes divorced from realistic earnings expectations. This is when intense speculation drives equities into bubble territory. After all, Nvidia’s market cap is just shy of ($4.2trillion) the annual GDP of India ($4.4trillion) as of Monday March 23, 2026. Simultaneously, US Treasury buyers, ‘prudent’ investors, qualified investors (people with more than $5 million in net worth), pension funds, insurance and re-insurance companies and good old orphans and widows, as they always do, got a bit jealous and so reached for yield. They wanted safety with high returns. But in this world you can have safe or you can have high returns. You’re a fool to think you can get both at the same time; alas we have a superabundance of fools these days.

So just like in 2007-08, the shadow banking system, ie. the issuers of supposedly safe and high yielding assets, called subprime loans, experienced serious losses, that lead to the unwinding phase of the financial crisis. The 2008 fin crisis started on a lovely summer day in NYC, June 22 2007—I think the Yankees won that day—when two Bear Stearns subprime hedge funs went belly up. This was 2008’s canary in the coal mine.

This time around it isn’t subprime that has precipitated the unwind but the dominance of private equity/private credit shadow banks, such as Blue Owl, Blackstone, Blackrock, and others.

As previously noted, the current crisis’ canary in the coal mine was Blue Owl. Their very rude wake up call arrived in the form of $1.4 bn in redemption demands, which forced Blue Owl to sell assets to meet redemption needs. It was a catastrophe for Blue Owl, in every way a fire sale in which every Wall Street trader exacted his pound of flesh. It also led to a very ugly unravelling of contracts with Oracle. Oracle’ stock plummeted.

Many others have followed in the weeks since Blue Owl burped up a massive fur ball. The specifics can be found in this post and are beyond the scope of this discussion. They are pertinent, but listing them would make this a Tolstoyian endeavor. The upshot is this: normally, an enormous amount of credit destruction (read, debt) has to happen until we get to phase three of the credit cycle. One counterintuitive effect: a stronger dollar. We’re already seeing this versus the other major fiat currencies.

Moving on to one of the other developments I outlined in the first paragraph: a housing crisis. Home building has long been the foundation of the American economy. It’s in serious stress right now. As I mentioned before, last month saw a full -17.6% collapse in the purchase of new homes. In the Northeast it was an epic cow patty catastrophe: -44%. In my hometown, sellers outstrip buyers buy a full 114%. This in the heart of the ‘Texas miracle.’ I honestly don’t know how a collapse in homebuilding will effect this economy coupled with the headwinds it’s facing. I know it won’t be salutary and will exacerbate already dangerous liquidity and solvency issues caused by the private credit/private debt unwind. What else? “Cannot say. Saying, I would know. Do not know, so cannot say.” Five bucks to whoever gets that reference.

Will the Fed be able to contain both? FuckifIknow?

Adding to fierce headwinds, Trump’s war against Iran has had a similar effect on the global economy as Odysseus ill-timed opening of Aeolus’s wind bag: it’s blown us on a completely fucktarded vector, beyond any rational goal, that will take five years-at a minimum-to recover from if we stop now. Plenty of us predicted this but we’re just dipshits sitting in the basement wearing our jammies. If the Israeli’s continue their wanton destruction of everything, there is no telling how Iran will respond. And I’m not even pondering nukes here.

The effects the closure of the Straits of Hormuz are and will continue to have on the global economy, rather the effects faced by the Rules Based Order the West imposed on much of the globe will be make the European energy crisis look like a night out with Sidney Sweeney.

One effect: potential famine in those third world countries-on a biblical scale-unable to import desperately needed fertilizer from the Persian Gulf at reasonable prices.

Second, no helium. Helium is a gas essential to modern industrial life, everywhere.

Third, my best friend in Denmark joked, “hell, we might soon be back on bikes eating only porridge for dinner.” He also rued the demise of Nordstream and said, unequivocally that Danish renewables won’t be enough. This from the one European nation with the largest sector of renewables. Imagine the second order effects cascading out across the globe?

And what about the cost of transport? Not just everywhere, but especially here in the US? Anyone given any thought to just how super human stupid just in time delivery looks now? I’ve always warned about this. You know: chickens, roosting; shit like that.

Fuck it. I’ve got more than ten years of Wall Street experience so what the hell do I know?

Well, I know this as I know the sun rises in the East and sets in the West: the exogenous shock waves rippling towards the US economy are bad. Vewwy, vewwy bad. And there is no double-slilt experiement available to cancel out the oncoming waves.

What next?

Oh yeah: Too Big To Fail. Nope. Stress test? Are you Dave Chapelle?

Just ask Lehman Bros or AIG. This time around one of the Too Big To Fail institutions will fail. Maybe more than one. If I had my choice it would be Goldman, but if I am being realistic I’d put odds on Wells Fargo and/or Citigroup. Why? Well, Wells Fargo has a history of laundering tons of cartel cash, so no real culture of compliance/risk management. Citigroup has brazenly challenged the SEC to regulate them on multiple occasions. Those would be my two choices.

Finally, I’ll recap phase three of the credit cycle: the Ponzi unwind. As I wrote here,

“Crypto will be the first big Ponzi unwind. And it will take a lot of suckers with it. Plus, a damn lot of fools who worked for investment, commercial banks and private credit/equity shops. Crypto is bullshit, wrapped in dead fish skin that’s been perfumed by Chanel. No matter how good it smells, it’s rotten to the core. Crypto is to this financial crisis as CDOs and synthetic CDOs were to 2008.”

Moroever,

“The AI-hyperscalers will suffer as well, during the Ponzi unwind. Why? They are in essence engaging in a similar sort of vendor financing like CISCO and Juniper Networks did in the dot-com bubble. Nvidia is giving chips to AI-hyperscalers as collateral for loans. Never mind the chips will depreciate long before the earnings are solid enough for the AI-hyperscalers to payback the “loans.”

It’s accounting legerdemain in extremis.

So, to be clear: multiple endogenous-domestic-headwinds coupled with very ugly exogenous-international-shocks, real and potential, increase the odds, hourly, that we’re nearing financial armageddon.

To recount what to expect: a housing crisis, a credit crisis, an energy-shock, fertilizer shortages leading to potential famine, one or two Too Big To Fail, failing and the AI bubble bursting. All at the same time. Same time. Boom. Boom. Boom.

This ain’t gonna resemble your daddy’s financial crisis. In the words of Grunge’s greatest lyricist, Chris Cornell, “I’m feeling California, but looking Minnesota.”

Week-end Wrap – Political Economy – March 22, 2026

By Tony Wikrent

On March 22, 2026

28 Comments

Week-end Wrap – Political Economy – March 22, 2026

by Tony Wikrent

War

Beijing to Tel-Aviv and Washington: “Israel will cease to exist the moment it uses a nuclear weapon!”

Dimitris Konstantakopoulos, 20/03/2026 [defenddemocracy.press]

In the following paper, we will present the reasons why a nuclear war in the Middle East is now quite possible, the deterrent intervention of China which interrupted a period of dangerous tolerance of Israel by the great powers, and the relationship between what is happening in West Asia and what is happening around Ukraine and the American continent, particularly in Cuba….

These statements, and most likely the information it possesses, provoked an unofficial but very harsh statement from Beijing. This is the first time a major power has interrupted the unprecedented tolerance enjoyed by Israel and its lobbies, a tolerance that has now led humanity to the brink of the abyss.

…Specifically, Victor Gao, vice-president of the Chinese Institute for China and Globalization, when asked what the two nuclear powers, Russia and China, would do if Israel used nuclear weapons, he stated to the American The Cradle, that “the moment Israel uses a nuclear warhead against any country, it will be considered the number one enemy of humanity, it will be the demise of Israel as a state, as a regime, as a country.” He simultaneously warned Prime Minister Netanyahu, the government of Israel, and its armed forces that they will be considered enemies of humanity and responsible for whatever happens, in an indirect but clear reference to the Nuremberg trials that judged the Nazi leaders. Mr. Gao made it clear that what he says does not concern condemnatory statements but an advance notice of actions. He congratulated Mr. Trump on his statement that Israel will not use nuclear weapons and expressed the wish that he acts effectively in this direction.

Mr. Gao adds that any use of nuclear weapons by Israel will lead to an explosive proliferation of nuclear weapons in the Middle East and their use would result in hundreds of millions of deaths and the transformation of the entire region into an uninhabitable zone.

Mr. Gao makes also a reference to the Epstein archives.

The Chinese warning has been phrased in a… Chinese way. Mr. Gao is the head of a small party allied with the Communist Party and holds no government position, so the responsibility for his statement cannot be directly attributed to the Chinese leadership or the CCP. Nevertheless, there is no doubt that it constitutes an unofficial but authoritative expression of the Chinese position on the matter. And to leave us in no doubt on the issue, the Chinese Academy distributed this specific excerpt of Gao’s statements under the characteristic title “What would China do if Israel dropped a nuclear weapon?”….

IDF threatens ‘elimination’ for Russian leaders who ‘wish Israel ill’

Wyatt Reed, Mar 19, 2026 [defenddemocracy.press]

Israel’s veiled threat to Moscow came just after Russian media warned traffic cameras in Moscow were vulnerable to the same exploits that Israel reportedly used to monitor Ayatollah Khamenei’s residence before assassinating him.

Breaking the Nuclear Taboo

Peter Kuznick and Ivana Nikolić Hughes, March 13, 2026 [defenddemocracy.press]

…It would be the ultimate expression of Trump’s unbounded power for him to break the one remaining international taboo – which, despite far too many close calls, has persisted for more than 80 years – detonating a nuclear weapon. There are many indications that, despite the U.S. and Israel’s ability to bomb Iran at will, this war may not be going well for them. But that need not be the pretext for using a nuclear weapon. In Trump’s mind, the more unprovoked, outrageous, and unnecessary something is, the better. Given his fragile ego and rapidly deteriorating mental powers – going off on bizarre rants about poisonous snakes in Peru or the White House drapes – the more unhinged he is, the more he thinks it demonstrates his dominance.

Since the end of the Cold War, many people who pay attention have worried about an accidental or a miscalculated stumble into nuclear war. But with Trump breaking every taboo domestically and internationally, demonstrating that he is above the law and can do as he pleases at every turn, the ultimate taboo waiting to be broken is the nuclear one….

[TW: I wonder if there will be a mass resignation of military officers as Trump stumbles aver closer to using nuclear weapons. But they would lose their pensions. So, probably secret approaches to some (anti)Republican Senators and Congressmen begging for Congress to do something? And if Trump does issue orders to use nuclear weapons, would military officers refuse? Might they even demand Trump be arrested? Trump and Hegseth have pissed all over the Code of Conduct numerous times — Hegseth this past week, by declaring “no quarter” toward Iran, explicitly violated violated the Hague and Geneva Conventions, the U.S. War Crimes Act of 1996, and the Pentagon’s own Law of War Manual. The commander in chief and the top civilian official at the Department of Defense should also be subject to the Code.]

Remember the Titan: The Fragility of Trump’s Golden Egg

Jim Stewartson, Mar 18, 2026 [MindWar]

GRAPH: Trump’s Pathologies

…While I hesitate to bring up the dreaded notion of bipartisanship, the best way to try to prevent the explosive scenario, to try and contain the criticality when it happens, is for the political system to present a combined show of force that draws a red line before it happens.

If he’s not given a sandbox to play in, Trump will take the entire playground.

For example, if the Democrats and 20 GOP Senators could find a way to agree publicly that if Trump engages in a preemptive nuclear strike for any reason without consulting Congress, he will be impeached and removed immediately. Even if he was not considering such a strike, just the statement would make clear to him that he is not, in fact, omnipotent….

The South Pars Pulse: Why the ‘Energy War’ is Actually a Thermodynamic Singularity

[The Ultimate Avatar of Balance, via Naked Capitalism 03-19-2025]

…By treating the destruction of the world’s largest natural gas reservoir merely as a ‘supply chain disruption’, the geopolitical establishment is exhibiting a fatal, terminal blindness. We are no longer dealing with economics; we are dealing with physics.

The strike on South Pars is not an ‘energy war’. It is an unmodelled Thermodynamic Pulse that threatens to liquidate the biological carrying capacity of the entire Persian Gulf.

The Methane Blind Spot

South Pars/North Dome holds an estimated 1,800 trillion cubic feet of natural gas. When upstream infrastructure of this magnitude is ruptured, the result is not just fire and smoke (particulate matter), which the environmental NGOs are currently monitoring. The far greater threat is uncontained venting of raw methane (CH₄).

Methane possesses a Global Warming Potential (GWP) roughly 80 times that of CO₂ over a 20-year horizon. However, in the immediate aftermath of a massive, concentrated release, the ‘horizon’ is not 20 years. It is measured in weeks….

Trump says he’s ‘not afraid’ of Vietnam-style ground combat in Iran

[Daily Mail, via Naked Capitalism 03-18-2025]

…Speaking from the Oval Office alongside Ireland’s Taoiseach, Micheal Martin, the President fielded many questions about the Iran war.

‘Are you afraid that if you put boots on the ground in Iran, it could be another Vietnam?’ one reporter asked.

‘No,’ Trump shot back, adding, ‘I’m not afraid of anything.’

The Geopolitical Consequences of Defeat

[Policy Tensor, via Naked Capitalism 03-16-2025]

…The only way in which the United States can evade outright defeat is by suppressing and degrading Iran’s ability to hold gulf assets at high levels of risk and keep Hormuz closed.1 If the US cannot, through either the direct application of force or indirectly through military coercion, accomplish this strategic objective, the outcome will be indistinguishable from strategic defeat, even if the war ends in a ceasefire, for then Iran would’ve demonstrated for all to see that the United States does not, in fact, have the military means to impose its will on the gulf.

This means that the dynamics of the interdiction campaign are decisive.

If the interdiction campaign rapidly degrades Iran’s ability to attack gulf assets, that would still not guarantee victory, however. For victory requires the further success of countermining operations if the Iranians mine the gulf, as they have reportedly started doing. Countermining operations are not a solved military problem either. At the very least, they will also take many months. What is clear is that, a successful prosecution of the interdiction campaign to conclusion is a necessary condition for effective countermining operations….

Burning the Lifeboats to Keep the Lights On

[The Ultimate Avatar of Balance, via Naked Capitalism 03-16-2025]

… something important needs saying: the US’s totally aimless campaign of wanton and indiscriminate destruction in Iran is definitionally tantamount to terrorism. An operation requires a stated strategic objective to qualify as a “war” or military action of some sort, legitimate or not. Trump’s clumsy bomb-fest—during which he proudly boasts he can “bomb” certain Iranian targets “for fun”—does not fit that description, and as such definitionally qualifies as a campaign of terrorism against a sovereign state and its civilian population. Let’s not even mention what the US is currently doing to Cuba, with the blockade having collapsed the nation’s entire electric grid as of yesterday.

The closest the US has come to stated goals in this debacle in fact align with definitional terrorism: the US wants to create economic hardship and infrastructural pain in the country which would spur the populace into overthrowing “the regime”….

Things Go Haywire as Israeli Escalation Throws Iran Conflict into Dangerous New Phase

[Simplicius, via Naked Capitalism 03-19-2025]

Things really hit the fan earlier today after Iran’s largest natural gas field, the South Pars, was struck by Israel. This field reportedly accounts for 75% of Iran’s natural gas production and 80-85% of its electric grid….

Open Thread

By Ian Welsh

On March 21, 2026

26 Comments

Use to discuss topics unrelated to recent posts.

This Is The End Of The American Empire. Period.

By Ian Welsh

On March 20, 2026

31 Comments

My friends, this is it. America isn’t going to win this war, unless they use nukes, but even if I’m wrong and they squeeze out their .01% chance of success, it is over. The army is exhausted and can’t be re-armed in less than a decade, with Chinese help. The Middle East will be in ruins. The AI bubble will crash out without money and resources from the Gulf. Everyone’s going to turn hard from hydrocarbons to renewables, especially solar, and that means China is going to make absolute bank.

This is the second stupidest war decision I’ve seen in my entire life. (The first was Ukraine refusing a very generous peace deal and, as a result, losing the majority of its fighting and breeding age male population.)

The war is lost. It was lost the moment Iran proved it could keep fighting and wouldn’t accept a peace without achieving its aims. The Americans, with, it appears, help from NATO nations, are going to try and open the Strait militarily. They will fail and it will be a military clusterfuck of epic proportions. There is approximately zero chance of opening the Strait, and if they are stupid enough to try and land marines, those marines are DEAD.

I have never seen such military insanity in my life. If I were a colonel in the US army I’d be organizing a coup and I am not kidding. There are suicide missions and then there’s trying to land troops in the Strait while Iran has missile and drone dominance, thousands of speed boats and has mined the Strait. The US does not have air superiority, even, we just saw the Iranians hit an f-35, they’ve shot down at least eight aerial refueling planes, forced the US to keep its aircraft carriers far away, made it impossible to use most of the local bases and taken out almost all US radars in the area.

This is a loss. The smart thing for the US to do would be to just declare the war is over and evacuate the region. If Israel wants to fight on its own, let it.

But the Israelis almost certainly have video of Trump raping kids, and Americans can’t admit they’re losing, so the war will go on.

The oil field damage is severe enough already that it will take years to repair. Iran will probably retain control over the Strait permanently, deciding who gets to transit. Nations they like go thru free. Nations they hate have no access. Everyone else pays: after all Iran’s going to have a lot of rebuilding to do.

Meanwhile France, still under the delusion that it’s a great power, seized another Russian oil tanker. The Russians have said they’re considering military escorts in the future. This could go south in very bad ways, and France’s missile defense systems and interceptor stockpiles are not in any shape to fight a war with Russia. The EU has decided not to ease Russian oil sanctions and Putin, in any case, has said he doesn’t want to sell to Europeans any more because they’re unreliable.

Europe’s industrial base is evaporating. They’re so far behind in tech that they don’t even show up on lists of the top five tech leaders, even when you lump all of the EU together. (Top 4 are China/US/Japan/South Korea.) Trump just massively cut science and tech spending and scientists and academics are fleeing the US, often for China. Russia, by itself, produces more missiles, drones and artillery shells than all of NATO, which should tell you meaningless GDP is as a measure of state capacity.

The US is about to become a regional power. And I don’t think it will sustain even that. Iran has just taught everyone how to make tangling with even a medium sized nation unbelievably painful. The process of turning into porcupines should take five to ten years, at which point the US navy loses 90% of its power projection ability.

Further the loss of dollar hegemony will lead to a good 30% drop in the American standard of living. But America’s cost structure (if you need an MRI fly to China, stay in a five star hotel for a week and pay cash for your MRI. It’ll cost less than getting it in America) means that high nominal wages mean very little. Americans are going to strangle slowly to death. Meanwhile one-third of the world’s fertilizer supplies are about to evaporate, helium (used to make chips among other things) is about to become rare and expensive and China has put export controls on key elements like silver and all petroleum products. As the supply chain shocks multiply (who thought just in time was smart? Oh, all the usual morons) multiple countries will stop exporting key goods up to and including food.

US bases have been proven not to protect your country but to make it a target. Every American ally is noticing this and the Phillipines and South Korea in particular are taking note. Japan is still talking tough, but they’re being morons. They either get nukes and destroy their economy when China sanctions them, or they cut a deal.

The scale of this clusterfuck is mind boggling. America is destroying its ability to coerce other nations, destroying its economy and making having an alliance with it not just worthless but actively a detriment, while devastating all of its allies’ economies: Europe, Japan and South Korea are all going to take HUGE hits from this.

Meanwhile China’s oil stockpiles are at record highs, they spent the last 4 years buying 50% of the world’s grain supply and piling it up, and their hard move into renewables has proved to be 100% correct. As for Russia, another big winner, since their oil and gas, minus some minor damage from the Ukraine war is just fine, thanks.

While Ukraine’s decision to fight the Russians as a cat’s paw for the US was arguably worse it lacks the awe-inspring scale of this bout of epic stupidity.

As Mencken wrote,

“the office of president represents, more and more closely, the inner soul of the people. On some great and glorious day the plain folks of the land will reach their heart’s desire at last and the White House will be adorned by a downright moron.”

And here we are. Americans elected the stupidest President in history, a known rapist, a pedophile being blackmailed by a foreign power, a con man, who is also suffering from dementia and all of this was known before he was elected to anyone paying attention.

America’s empire was doomed by Reagan and Clinton. Trump’s just bringing it to a messy end. But the decline could have taken another twenty years and been much, much less painful. Trump has decided to end it in the most spectacular and stupid manner unimaginable to anyone with the intelligence of a door-mouse. Meanwhile, Europe’s pygmy leaders are feeding Europe’s economy into a woodchipper, foot first and greasing the gears, “why is this machine so slow!? What can we do to speed it up?”

Welcome to the end of Western hegemony. It’s stupider, more venal and more darkly funny than I could ever have imagined.

Had a lot of subscribers unsubscribe recently. I assume it’s the economy and/or hating my coverage of Israel. If you value my writing and can, please subscribe or donate.

Israel, Nukes and Armageddon For Real

By Sean Paul Kelley

On March 20, 2026

24 Comments

~by Sean Paul Kelley

I planned on writing a post about how the Russians were the ultimate winners of the Iran War, what with all that petroleum and natural gas they have. Truly, the Russian’s have got God by the balls (Как бога за яйца поймал).Windfall after windfall is accreting in an economy that is supposed to be in the doldrums. The reverse is true: Trump’s witless pursuit of war against Iran is effecting the collapse of the entire global economic order, except those nations trading with, well, you guessed it: Russia. I can’t fathom right now. How does one convey the stupendous amount of boomerangishness happening? It’s like karma grew a pair of balls and teabagged the entire Western order.

That said, I failed to write the post. Instead I got profoundly distracted by Col. Larry Wilkerson’s disturbing prediction that Israel will more than likely use up to 15 nukes on Iran to settle the conflict. Watch the video yourself. It’s a mercifully brief 7:03 minutes of terror. It’s the stuff of nightmares. I ain’t kidding. I’m dumbfounded. Dismayed because he makes a plausible case for Israel’s use of nukes.

If Israel opts for nukes the entire calculus of war changes. Nukes virtually guarantee the inclusion of other great powers in the war. I’ve taken to joking lately that we’re watching Armageddon. I didn’t mean literally, but now? I’m really at a lack for words.

We’re all going to die.

Afterthought #1: Before we all perish in flames, some more shitty news: sales of newly built houses fell a full 17.6% nationwide. In the Northeast it was a rout: down 44%. Adding insult to injury, McDonald’s, Pepsi and Dollar Tree are all racing to the bottom by reducing prices. Not goody, vewwy baddy.

Afterthought #2: The spread between home-sellers and home-buyers in San Antonio, my town, has widened to an astonishing 114%. That’s absolute brutality to home-builders. So, the end of this credit cycle is going to include the following macro events: housing crash, credit crisis, energy shock and at least one Too Big To Fail will fail, just as Lehman Bros and AIG did in 2008. Oh, and the AI bubble will unravel. Wow, that’s almost a perfect storm.

The Credit Cycle: Phase Two Accelerating

Here are today’s Phase Two developments. Many are ominous. Things not looky so goody.

The smartest guys in the room, i.e., Goldman Sachs had this to say about AI: “Massive investment in AI contributed basically zero to US economic growth last year.” What will they predict next? An oil price spike if we go to war with Iran? Oh wait.

Dario notes that the liquidity crisis is going global: “Middle East liquidity crisis in the financial system is surfacing.”

He cites Rashid ben Saeed who elaborates: “Citi and Standard Chartered literally evacuated their offices this week. Told staff go home, work remote. HSBC closed their Qatar branches. Hedge funds are in “contingency mode.” That’s a polite way of saying they’re bricking it. Analysts are saying customers could pull out $307 BILLION if this goes on another month.”

First Squawk writes that both JP Morgan and Goldman are offering Hedge Funds ways to short private credit. That’s just weird.

Ripplebrain conveys just how devastating the attack on QatarEnergy’s LNG production is: “17% of QatarEnergy’s production is 3.4% of the world’s LNG production.” Ending ominously saying, that it’s “gone in the blink of an eye, perhaps for years.”

The irrepressible Matt Stoller highlights a video that highlights “straightforward market manipulation.” He also points our attention to the #2 story at the Wall Street Journal: “U.S. Regulators Propose More Lenient Capital Rules for Big Banks.” This kind of proposal is in direct contravention to the ‘stress test’ rules put in place after the 2008 Financial Crisis. It also clearly foreshadows liquidity and/or solvency issues that the commericial banks will soon face.

In another clear phase two clusterfuck is this story from the WSJ, cited by Unicus Research. The upshot: “Stone Ridge’s LENDX fund just told investors it would honor only 11% of redemption requests.” The post on X also includes what kind of garbage is in the fund. Go take a look. It’ll engender a ton of schadenfruede. Enjoy!

As pending crises morph into full blown disasters investment banks often prepare by enacting the following policies. First, they raise production quotas for their employees while simultaneously cutting their commission payouts. It’s a cut-throat business. Payout cuts are painful. I’ve lived it. And they always cut payouts right before or during bear markets. I endured this twice at Morgan Stanley. Guess what: Goldman has begun that process, as First Squawk reports: “Goldman plans performance-based job cuts in late April.” This we can infer two important factoids from this: Goldman is worried about cash-flow. You don’t plan to run employees off if you’re flush with cash. Two: timing, Goldman clearly sees this credit cycle accelerating rapidly with an April inflection point.

Shashank Joshi catches an excellent highlight from the Economist: “Average prices of petrol and diesel have reached $3.88 and $5.09 a gallon, compared with $3.11 and $3.72 at Mr Trump’s inauguration. Republican support for the war is strong, but softening.”

More Perfect Union informs us “the cost of vegetables jumped 49% last month as inflation hit hard and companies raised prices.” Its source is BLS data. Now I know, some will dispute how the CPI is computed. I thinks it full of balderdash and male bovine excrement. So does Ian. So I post and you decide.

Sohrab Ahmari notes, unconfirmed but entirely plausible, that “force majeur [has been declared] on Qatari LNG contracts for up to five years.” Five years? That’s going to pile Pelion atop the already messa Ossa of the energy markets globaly.

CORRECTION: according to EarlyGray the video below does not say anything about Japan buying Russian oil. Mea culpa. I regret the error. SPK

~~Richard posts a video and apparently translates it.~~ If true, it’s a bombshell: “Japan is now openly buying Russian oil with the yuan.” Why not with JPY? I would imagine that China has already set up a Yuan based transaction system for buying and selling oil to steadily chip, chip, chip away at dollar hegemony. Yeah, Japan has said it publically and officialy. That’s pretty much like pissing on the petrodollar. Our closest North East Asian Ally. That’s fuckery on an hitherto unseen level.

Meanwhile, to Japan’s northwest, South Korea is considering resuming imports of Russian oil.

And I make the observation, in utterly obscene Russian fashion that “with these high oil prices the Russian Treasury has certainly Как бога за яйца поймал.” Translated idiomatically: Russia is in the catbird seat. Translated directly:they got God by the balls.

Rory Johnston notes just how high Dubai crude prices have risen: “Cash Dubai crude (balance of the month) just broke above $170 per barrel.”

Here’s what I’ve previously written on this credit cycle. I stand by it all. The only comment I’ll add at present is this: if the exogenous shocks to the US economy continue and the energy shock intensifies, all bets are off on the proximate cause of the end of dollar hegemony.

Donald Trump and the Apotheosis of Chimpanzee Politics

By Sean Paul Kelley

On March 19, 2026

15 Comments

The most salient observation in Lawrence Freedman’s book Strategy: A History, comes early, paraphrasing Frans De Waal’s seminal study Chimpanzee Politics, Freedman writes, “De Waal concluded that rather than changing the social relationships, the fights [to become or overthrow and alpha or to wage war] tended to reflect the changes that had already taken place.”

This “Chimpanzee Framework” is a useful way of understanding the catastrophe unfolding in the Persian Gulf today and the accelerating collapse of American power globally. The “Chimpanzee framework” clarifies just how and why American foreign and economic policy actions resemble a honey drenched giant fighting off an hungry sleuth of bears more than a smart, historically informed nation. American policy and its actions are uncoordinated, moored in shared delusion and filled with several metric shit-tons of hopium. (See, more proof ‘Muricans can do Metric!)

Why would American actions be otherwise? America inhabits a fundamentally different world than it did a decade ago. The unipolar moment is gone; multipolarity is fact, not wishful thinking. BRICS grow faster every day, searching for the perfect red-pill of knocking the dollar off its hegemony throne. Meanwhile, the United States cannot affect international policy change to its liking regardless where it acts. Not in the Ukraine. Not in Iran. Worse, the inevitable defeat in Iran will cascade into Venezuelan and Cuban failure as the small shrug off the rotten shackles of a wounded giant.

America’s inept inefficacy is not limited to international policy: economic policy vis-a-vis tariffs is an abject failure as it was under Biden. The United States will find re-industrializing an impossible adjustment when the reality of a nationwide collapse of its standard of living happens. Reindustrializing starts with a vigorous textile industry, not more computer and AI chip plants.

So, just how many Americans are willing to work for peanuts in sweat-shops? How many machinists can we realistically turn out in five, ten, even fifteen years? Do Americans even know what machinists do? How many high school graduates can use a lathe, much less know what one is? Our domestic reality is as equally grim as our international one, except our international collapse will compound already enormous burdens pervading an economy of misaligned priorities and a poorly performing one at that.

In Strategy, Freedman also discusses the utility and efficacy of coalition building among chimpanzees, their alphas and those tribes they war against. In his most striking note, he describes the political complexities, violence and the necessity of building stronger, effective coalitions, be they to wage war for a nearby fig tree or to install a new alpha. His conclusion is counterintuitive and profound: chimpanzee violence doesn’t represent an overthrow or revolution. It confirms a preexisting reality.

Henry Kissinger made the same argument in his doctoral dissertation, later published as A World Restored, not regarding chimpanzees, but in the context of Metternich’s formation of the Sixth Coalition against Bonaparte. The Befreiungskriege, as it was called in Metternich’s native German, confirmed the reality on the ground that Bonaparte’s 1812 invasion of Russia was a mortal own goal for the French; the War of the Sixth Coalition merely confirmed it; and the subsequent peace codified it for almost a hundred years.

The same argument can be made regarding the United States and its quickly deteriorating Western coalition of the unwilling. Not to mention its Far East allies who are quickly tiring of American shenanigans, outright betrayal and economic, tariff-related fuckery. That this coalition, a coalition that dominated the post-Cold War world, cannot now manufacture more artillery shells than a single nation, the Russian Federation, is proof positive of a deeply misunderstood alignment of power and an pre-existing altered reality is met with blank stares and outright denial.

That this coalition is blindly following a great power lead by the nose by a tiny, recalcitrant and criminal regime running Israel has historical precedent. Think Serbia and Russia in the days before August 1914. The Serbs were deeply complicit in the assassination of the Austrian Archduke (read Sleepwalkers by Christopher Clark for proof). And Russian mobilization in support of their little Slav Brothers (or if you really need me to spell it out in today’s terms, those who we share Judeo-Christian values with) guaranteed German entry into the war.

Freedman’s “Chimpanzee framework” goes far in explaining the escalating devastation of petroleum related infrastructure and targeting of natural gas fields in the Persian Gulf. The world desperately needs to move away from fossil fuels. And many nations have made great efforts to do so. Thus, the destruction in the Persian Gulf of petroleum assets, refineries, gas wells, LNG and oil terminals, represents a symptom of a larger global reality: the world has turned an epoch making corner on fossil fuels. The day of fossil fuels is far from over, but this is the beginning of the end. There will be winners and losers, cliché I know, and yet countries that have made strong investments in renewable energy will make the inevitable and painful adjustments successfully. The losers like the USA, are those who will maintain their reliance on petroleum, come hell or high-water.

Most Americans dispute the idea that we higher primates and chimpanzees have a common ancestor or share any commonalities for that matter. They are in need of a rethink. Our politics are too similar, our warmaking just as brutal and our collective decision-making is too catastrophe prone to deny.

So, anyone got a fig? Or know where a fig tree is?

Personal Consequences Of The Iran War

By Ian Welsh

On March 18, 2026

19 Comments

I’ll keep this one short. Israel just hit a major Iranian oilfield. Iran has said it will now hit Gulf oilfields in retaliation. Ali Larijani, probably the last person in the Iranian administration who could have negotiated an off-ramp, has been assassinated.

This war is about to enter the economic devastation phase.

Unless you live in China (bought half the world’s grain production for the last 4 years and massively increased its fuel stockpiles) you’d better start preparing. Stock up on food. Check your local power grid to see how reliant it is on natural gas and oil turbines (Europeans, this is you.) Buy medicine. Acetaminophen, for example, is basically 100% a petroleum product. Figure out how to stay warm or cool and how to cook — can you still get some solar power and batteries. India mostly relies on gas for cooking, and it’s going to run out soon.

Australia’s got maybe 3 weeks of petroleum left. The Gulf States aren’t going to be able to run air conditioning soon. Everyone’s going to start putting export bans on key supply chain items soon. The Chinese have already banned export of natural gas and oil, but this will spread to food, key medicines, etc, etc… if the war goes on much longer.

Don’t assume this is all going to work out, even in most countries which can keep the power on and enough food, there will be price increases. A lot of the world economy is based around oil, gas and… fertilizers. About a third of the world’s fertilizers come from the Gulf, thru the Strait. Even if the war ends in a couple weeks, there will be aftershocks, and, of course, companies like supermarkets will jack up prices then keep them up even after the shock, just like they did during Covid.

But over the next few months expect shortages and increased prices and in some parts of the world straight up energy brown outs.

Unless you’re Chinese or Russian, don’t expect your government to do anything competent to protect you. Even if it can, it won’t, unless you’re part of the 1% at least.

Prepare. Perhaps we’ll be lucky, but don’t be count on it.

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