{"id":99218,"date":"2018-05-12T22:09:33","date_gmt":"2018-05-13T02:09:33","guid":{"rendered":"https:\/\/stateofthenation2012.com\/?p=99218"},"modified":"2018-05-12T22:09:46","modified_gmt":"2018-05-13T02:09:46","slug":"trumps-neocon-folly-goodbye-nuke-deal-hello-global-debt-crisis","status":"publish","type":"post","link":"https:\/\/stateofthenation2012.com\/?p=99218","title":{"rendered":"Trump’s Neocon Folly: Goodbye Nuke Deal, Hello Global Debt Crisis"},"content":{"rendered":"

\"\"<\/a><\/p>\n

Will Trump Torch the Global Economy on the Bonfire of his\u00a0Vanity?<\/h2>\n

Tom Luongo<\/p>\n

At least it is confirmed for us.\u00a0 Donald Trump wants regime change in Iran.\u00a0 His cancellation of the JCPOA was a decision born his myopia.\u00a0 He has surrounded himself with people who reinforce his view and manipulate him via his vanity.<\/p>\n

And the price of implementing his current plan will be a global debt crisis which no one will escape.\u00a0 The problem will be very few will see the links.<\/p>\n

He wants to remake America and the world in his image while undoing anything President Obama touched.\u00a0 Most of this I\u2019m wholly on board with.\u00a0 Obama was a vandal.\u00a0 So, however, were Bush the Lesser and Bill Clinton.<\/p>\n

We\u2019re All Neocons Now<\/h2>\n

We have a leaked (yeah, right) memo<\/a>\u00a0explaining this is the plan.\u00a0 But, we didn\u2019t need this if we were being honest with ourselves.\u00a0 Nothing Trump has done since he\u2019s been in office has been contra to this goal; overthrowing the theocracy in Iran.<\/p>\n

In fact, it has been a step-wise move in this direction with each decision he\u2019s made.\u00a0\u00a0Commentators I respect and have learned at the knee of\u00a0<\/a>still want to give Trump the benefit of the doubt.\u00a0 Not me.<\/p>\n

It\u2019s right there in plain text.<\/p>\n

Trump has capitalized on the insane Deep State opposition to his presidency to politicize this goal and get his base to ab-react for regime change, when he explicitly said that was off the table at his inauguration.<\/p>\n

If the Democrats and Merkel want to stay in the deal, then the deal must be bad.\u00a0 Obama Bad, Trump Good.\u00a0 Trump is Orange Jesus.\u00a0 He knows stuff, man.<\/p>\n

What was a worry about Israeli influence in his administration in 2017 has now morphed into a call to duty to create chaos in Iran to assuage the American ego by saving the Iranian people from themselves.<\/p>\n

You have to hand it to these folks, they understand how to run a successful mass psy-op.\u00a0 Beware the Master Persuader, as Scott Adams would put it, his skills can be put to\u00a0any use.<\/em><\/p>\n

These men and their Deep State handlers\/billionaire donors have had a strategic goal for decades, remake the Middle East for Israel and the Oil Complex, bottle up Russia and China.<\/p>\n

Donald Trump\u2019s patriotism is revealed to be jingoism.\u00a0 But, he made this clear in his speech to the U.N. last year.\u00a0 At some point you have to put away childish things and face the world we\u2019ve got.<\/p>\n

And that world is one of extreme uncertainty.<\/p>\n

Back to the Future<\/h2>\n

As I said the other day,\u00a0<\/a>Trump wants to reset the clock back to 2012.\u00a0 Bottle up Iran, cut its ties to the world.\u00a0 Remove 1 million barrels of oil per day from the markets (for his Saudi weapons customers \u201cLook!\u00a0 Yuge JOBS!\u201d). And bully our allies into getting the plan to atomize Syria back on track.<\/p>\n

But, it\u2019s not 2012.\u00a0 It\u2019s 2018 and everything is different.\u00a0 Iran has friends it didn\u2019t have then.\u00a0 Yes, there is local unrest and unhappiness which could grow.\u00a0 The rial is falling like a rock, people in Iran can\u2019t get dollars.\u00a0 Not solely because Trump has cut them off from the dollar but because Iran has.<\/p>\n

It anticipated this move by him and the chaos of today turns into the de-dollarization of tomorrow.\u00a0 These people still think destroying a national currency is the path to political change. It\u2019s a dangerous gambit that doesn\u2019t always work.<\/p>\n

It didn\u2019t work with Russia in 2014\/5.\u00a0 It\u2019s not working in Venezuela today.\u00a0And if those countries have friends, China for Russia in 2015, Russia and others for Venezuela today, then the longer the regime stays in power once the worst of the crisis hits, the lower the probability regime change becomes.<\/p>\n

I told everyone last year the Saudi gambit to isolate Qatar wouldn\u2019t work.\u00a0 If they didn\u2019t get regime change in Doha within two weeks, then the government would survive.\u00a0 It has and now it is free to pursue whatever it wants, having finally bought a 19% stake in Russian state oil giant Rosneft.<\/p>\n

Trump has been signaling this moment for almost two years.\u00a0 Do you think Russia, Iran and China have not been game-planning this?\u00a0 When the attack on the ruble began in 2014, Putin did the unthinkable.\u00a0 In doing so revealed his central bank\u2019s disloyalty.<\/p>\n

By demanding to free-float the ruble, under objection from his economic advisor Alexander Kudrin and central bank President Elvira Nabullina, Putin stabilized the situation quickly.\u00a0 Then he ordered the Bank of Russia to assist payment of more than $50 billion in Russian corporate debt denominated in dollars from central bank reserves.<\/p>\n

China opened up ruble\/yuan swap lines to help funnel dollars into Russia.\u00a0 The Bank of Russia had to abandon IMF-style austerity and serve Russian interests first rather than continue playing into the hands of U.S. hybrid war tactics.<\/p>\n

Iran has these people as its friends now.\u00a0 They are committed to its survival.\u00a0 They may not be committed to the IRGC staying in Syria post-ISIS\/Al-Qaeda, but they are committed to an Iran aligned with them for the road ahead.\u00a0 And that Road has a Belt attached to it.<\/p>\n

Because they know that if they lead the opposition to U.S. aggression, then they will gain allies over time.\u00a0 In acting this way Trump is revealing the U.S. to be the repressive, messianic global oligarch of the world order it claims the Iranian Islamic Republic to be over its citizens.<\/p>\n

Everyone will get in line behind the Orange Emperor or suffer his wrath.\u00a0 Why?\u00a0 Because Bibi Netanyahu can\u2019t sleep at night?\u00a0 Get that psychopath a plushie and leave a night light on for pity\u2019s sake.<\/p>\n

It also has an EU wanting to establish itself as a separate power from the U.S.\u00a0 Angela Merkel and French Poodle Emmanuel Macron both want an independent EU foreign policy and a\u00a0Grand Army of the EU<\/a>\u00a0to put down any internal rebellions.<\/p>\n

China can and will assist Iran in overcoming the sanctions.\u00a0 So will Turkey, who did so in 2012. Will it be enough save the Islamic Republic?\u00a0 Possibly.\u00a0 If that happens will the U.S. get what it wants?<\/p>\n

Most probably not.\u00a0 National Security Advisor and Certified Crazy Person John Bolton wants to put the Saudi-backed MEK (Mujahedeen-e-Khalq), a\u00a0cult-like Sunni group with zero support in Iran<\/a>.\u00a0 You\u2019ll hear in the coming days about how great these guys are.<\/p>\n

Just like U.S. NGO-backed Russian agitator Alexei Navalny is promoted in the Western press even though he can\u2019t get 2,000 people to march in Moscow on the day of Putin\u2019s inarguration.<\/p>\n

Sanctions Cut Both Ways<\/h2>\n

Russia, ultimately, has the sanctions hammer in its control of the uranium market.\u00a0 It\u2019s also a major supplier of both titanium and aluminum.\u00a0 The U.S. has never considered sanctioning the first two and it\u2019s plan to sanction Rusal has been close to a disaster.<\/p>\n

Trump believes in the primacy of the U.S. threat both militarily and financially so much that he\u2019s willing to project it everywhere and at everyone to get what he wants in Iran.\u00a0 We thought he reluctantly signed those new sanctions last summer.\u00a0 Nonsense.<\/p>\n

If so, he wouldn\u2019t be using those new powers in ways that are the height of hubris.\u00a0 Explicit in his threats to Iran and his demands that are, as\u00a0Alexander Mercouris put it at The Duran<\/a>\u00a0yesterday, \u201cso extreme that no sovereign state could ever accept them and retain its independence.\u201d<\/p>\n

So, let\u2019s again put away childish things and think that Trump will not take this to whatever point he thinks is necessary to get his desired outcome.<\/p>\n

But, in doing this he will upset world financial markets already fragile from a decade of QE and an explosion of cheap dollar-denominated debt.\u00a0 The Fed is raising interest rates. Bond traders are resisting raising rates at the long-end of the U.S. Treasury yield curve, causing it to flatten dangerously.<\/p>\n

Trump wants a continued weaker dollar but geopolitical uncertainty creates dollar demand because so much of the world\u2019s debt and trade is based in it.\u00a0 For over a year Foreign Central Banks have been parking U.S. Treasury purchases with the Fed as the dollar weakened.<\/p>\n

Now that trend has firmly changed.<\/p>\n

\"USTs<\/p>\n

The Dollar Debt Bomb<\/h2>\n

Moreover, the ECB is trapped at the negative-bound.\u00a0 Mario Draghi keeps telling everyone he has no Plan B.\u00a0 He will keep being the marginal (or only) buyer of EU sovereign debt until the market finally pukes all over him.<\/p>\n

If Trump is serious about putting sanctions on any foreign entity that does any business with Iran then that will set off chain reactions around the globe.\u00a0 It\u2019s why I\u2019m not sanguine about EU leadership standing up to Trump in the long run.<\/p>\n

But it\u2019s a real opportunity for Merkel et. al. to establish a new pole in the proposed multi-polar world advocated by Putin and Chinese Premier Xi Jinping.<\/p>\n

The worry now is a technical breakout of the U.S. 10 year above 3.05%.\u00a0 U.S.\/EU credit spreads\u00a0 \u00a0With the dollar strengthening low loan servicing costs become big quick.\u00a0 Anyone who has\/had an adjustable rate mortgage understands this viscerally.<\/p>\n

With China no long buying U.S. debt, it is free to funnel dollars to Iran through proxies and its own oil trade to keep things from escalating.\u00a0 That lack of recycling of its trade surplus is part of what kept the dollar weaker longer.\u00a0 Now that the dollar is rising, we can safely say that that effect has been over-run.<\/p>\n

China can and will put pressure on the Saudis by buying more Iranian oil.\u00a0 Expect Iran now to cut it\u2019s monthly tender price to undercut Saudi Arabia on a forward basis.\u00a0 In 2012 U.S. sanctions made it difficult for shippers to insure oil shipments and that was part of the reason they were initially so successful.<\/p>\n

With the Fed tightening, reserves of the U.S. banking system are falling thanks to excess reserves being mobilized. The U.S. budget will strain from rising debt servicing costs, now above 8.6% of total outlay, compared to less than 8% this time last year.\u00a0 Again this puts upward pressure on the dollar as foreign markets are starved of dollars.<\/p>\n

Next, Trump wants more balanced trade with China and Europe and he\u2019s willing to guy global trade to do it.\u00a0 But that also means a stronger dollar in the long run as debt still needs to be serviced while trade is falling.<\/p>\n

Again, fewer exported dollars while the budget deficit grows.\u00a0 Emerging Markets are already suffering\u00a0horrendous capital outflows.\u00a0<\/a>\u00a0Just wait until things actually get bad.<\/p>\n

\"JPM<\/p>\n

Eurodollar markets have been drained of their liquidity in recent months as U.S. corporates repatriate funds and, like Apple, buy back their stock.<\/p>\n

All of this points to reaping a whirlwind of dollar strength, not weakness, which to me, looks like the spark of the global debt crisis the Fed delayed for over a year by not raising interest rates sooner.\u00a0 It bowed to IMF pressure in 2014\/15 to delay raising rates.<\/p>\n

And the world is not prepared for the dollar spiking 20 or 30% over the next year.\u00a0 It is not prepared for a shift in risk assets stocks to bonds.\u00a0 A spiking dollar will create a perfect storm of debt defaults that will unleash chaos which will topple governments (and not Iran\u2019s).<\/p>\n

Trump will not react well to this, claiming, like all U.S. Presidents that China is manipulating its currency down to harm us.\u00a0 That\u2019s utter nonsense.\u00a0 As I\u2019ve laid out, Trump is creating the very whirlwind he\u2019s trying to avoid.<\/p>\n

It\u2019s why the DOW is holding above 24,000.\u00a0 And why the euro is about to collapse.<\/p>\n

Survival is Winning<\/h2>\n

So, here we are.\u00a0 This is why I keep saying China, Russia and Iran\u2019s best moves politically are to do nothing overt.\u00a0 Iran was not the aggressor the other day.\u00a0 That\u2019s another of Bibi\u2019s blatant lies.<\/p>\n

Russia looks weak by not responding to Israel\u2019s spastic flailing the other day, but it knows that time is on its side.\u00a0 The SAA\/IRGC and Russian forces continue to destroy pocket after pocket of resistance in Syria.<\/p>\n

Putin will continue to hold his water, waiting for the opportune moment to reverse his opponent.\u00a0 Russia\u2019s limit has not been reached in Syria yet.\u00a0 Putin always does this.\u00a0 It drives his critics and\u00a0his supporters crazy<\/a>.<\/p>\n

It\u2019s geopolitical judo and he\u2019s the master at it.\u00a0 And when that reversal comes and Israel has been thrown flat on its back, Trump\u2019s only move will be to settle.\u00a0 Why speculate on what he\u2019ll do.\u00a0 Just watch and wait it out.\u00a0 The signs are all there.<\/p>\n

When that happens John Bolton will retreat farther into madness, hopefully he\u2019ll throw himself off a building and put us all out of his misery.\u00a0 Let\u2019s hope someone\u2019s iPhone captures it for posterity\u2019s sake.<\/p>\n

After a brief spasm in the financial markets thanks to Trump\u2019s insane aluminum tariffs, Russian equities and the ruble are rallying.<\/p>\n

\"MICES<\/p>\n

In fact the MICEX Index just put in its all-time highest weekly closing price.\u00a0 Its sovereign debt markets are stable and the yield curve is widening.\u00a0 Capital is flowing into Russia despite horrific U.S. sanctions.<\/p>\n

This is the model for Iran\u2019s resistance.<\/p>\n

Russia is winning the financial war of attrition and the stronger it gets the more it can support Iran in the long run alongside China.<\/p>\n

This is the limit of Trump\u2019s unwillingness to update his worldview from 2003.\u00a0 He\u2019s held this view of Iran his entire life and surrounded himself with the \u2018experts\u2019 to take Iran out.\u00a0 Even if the Mullahs fall, the backlash from the process whatever form it takes will set the global debt markets aflame, a bonfire of Trump\u2019s vanity.<\/p>\n

___
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