“Let’s say this Twinkie™ represents the normal amount of psychokinetic energy in the New York area. Based on this morning’s reading, it would be a Twinkie© thirty-five feet long, weighting approximately 600 pounds.” – Ghostbusters
Is it wrong of me that I want this as a t-shirt?
When I was younger, I was reading the book Liar’s Poker by Michael Lewis.
In the book, the author related the story of how he was on the trading desk when news of the Chernobyl reactor meltdown hit. His co-worker, a seasoned trader who’d seen it all, looked at Lewis and said two words:
“Buy wheat.”
The reason was simple. Ukraine was the Soviet Union’s biggest supplier of wheat. Now, radioactive wheat would have sounded cool in the 1950s. Imagine the cereal ads: New Atomic Pops™: NOW FORTIFIED WITH GAMMA RAYS!
The seasoned trader, however, knew there was going to be a shortage of wheat on the world market since the RDA of uranium isotopes has been decreased under the Make America Healthy Again agenda rolled out.
But Chernobyl happened. The consequences? One event, one domino, and the price of bread halfway around the planet starts twitching like a tall tweaker on Tang™. That’s how fast these things move when the stakes are real.
I’ve moved on to nuclear jokes because most of the chemistry jokes argon. What, no reaction?
In a more serious world where consequences were to be a thing that actually happened, I’d bet on a huge economic tidal wave incoming from the current Israel-America-Iran War. Ten to twenty percent of the world’s daily oil supply is stuck behind blockades. To top it off, 14% of Qatar’s liquefied natural gas production is offline, and won’t be able to be repaired until 2029 or 2031.
Then, the Strait of Hormuz: closing, re-opening, closing again like a game of “duck, duck, missile” has already tumbled a lot of dominos.
Right now, the Strait isn’t exactly a freeway. Tankers are rerouting, insurance rates are through the roof, and every time someone blinks the flow sputters. One day it’s open enough for a few supertankers to sneak through. The next, it’s blocked again and prices expand like Madonna’s face after whatever it is she’s injecting into it.
Those first dominos are easy to spot, and they were the subject of a recent post. Fertilizer production is down because natural gas is the key feedstock, so (domino falls) food prices are headed up.
Gasoline, jet fuel, and bunker fuel costs are up, so (domino falls) transport prices are up, too. Trucks, ships, planes, and everything that moves stuff from farm to factory to your grocery shelf gets more expensive.
Freight rates for everything from soybeans to sneakers start climbing. Those are the obvious ones.
But dominos don’t stop at the first few if there are more in line.
I guess we know now who was holding the whole thing together.
Before the big inflation wave really crashes ashore, weird things start happening in the markets. Gold is up on good news and down on bad news. Same with silver.
Why? Because these are assets (at least the paper versions that pretend to be gold and silver) that people can sell fast and clean to cover margin calls, and other ways that they’ve leveraged the market. Each domino leads to other consequences.
What are the downstream consequences? Political unrest? Certainly. We’ve seen it before. We’re seeing it now.
When food prices spike, people in places that were already living on the edge don’t write polite letters to their congressman. They take to the streets. Empty bellies and expensive diesel have a way of turning into pitchforks and torches.
And what about a complete redo of the world economic stage? Yeah, that’s a hell of a big Twinkie®, er domino. But, it’s looking more likely every day.
Here’s the part that should keep you up at night if you’re the kind of person who still believes in fairy tales about “the system.” In a world where almost any country can convert whatever Christmas wrapping paper they crank out of their printing presses into any other currency almost instantly, why does the world need the dollar?
I’ve been asking this question forever on this blog.
I have absolute certainty that the dollar is the same as a cryptocoin made by Algerian, Albanian, or Albigensian pirates: it’s a meme. It’s just a meme that everyone has bought into for 100 years or so. If I can dump the Zimbabwe Zloty straight into Seychelles Shekels, well, no need for dollars as the go-between as I trade my diseased goats for your rotten cocoanuts.
I heard that the Pharaoh’s favorite cook was Gordon Ramesses.
No need at all.
Marco Rubio even let the cat out of the bag the other day when he said that in the future the United States wouldn’t be able to put sanctions on countries anymore because other countries wouldn’t be using the dollar very much.
Now that’s a huge domino!
It was going to happen. There was no way the world was going to forever let the United States print dollars forever and have people send us stuff like oil from the Orient or gold from Germany or PEZ® from Paraguay while we shipped them electronic representations of paper money that was now just too expensive for us to bother to print.
We’ve seen this domino before.
I later found out he had a trap door, so it was just a stage he was going through.
A nation that ceases to be a nation and starts to become a financial entity is toast. One example was Spain. They pulled in all that New World gold, let their economy wither, and offshored the real work to places like the Netherlands because they could not ditch the Dutch. For a while it looked like Spaniards were on top of the world. Then the Indians who gold ran out, and the bills came due.
The final nail in the coffin of Spain, which had been declining for hundreds of years?
When it ceased to be a military power that anyone noticed. The Spanish-American War was that moment for Spain. In the end, I think the Spanish were tired of being Spain since it was so much work, and were more than happy for Great Britain to take the helm.
But that was then. Now Great Britian looks more like Spain circa 1870.
The Royal Navy has more admirals (40) than total warships (25) and only six plausibly active surface warships. Guess that Britannia shan’t be ruling the waves of anything larger than a hot tub anytime soon.
Most of the time, nothing happens.
Markets drift. Politicians talk. Central bankers print and pretend. Then that domino hits, and it happens all at once.
One day the system is humming along on just-in-time deliveries and faith in the reserve currency. The next day the Strait is blocked for real, fertilizer plants shut down, grocery shelves get spotty, and suddenly everyone remembers that energy isn’t optional and cold showers suck. Energy is the blood in the veins of the whole machine.
When the price jumps, everything else has to adjust: wages, rents, retirement plans, and government budgets.
The dominos don’t ask permission.
The United States had to wait for COVID, but China got it right off the bat.
And here’s the part nobody wants to say out loud: the United States has been running on cheap energy and the dollar’s special status for eighty years. Both of those props just got kicked.
Hard. The reset isn’t coming in some distant future. It has already started.
The only question is how many more dominos have to fall before everyone admits the board has been tipped and the Monopoly™ pieces are stuck in the Cheez-Whiz™ covered Rice Krispie® treats.
In the end, dominos don’t care. They just fall. One after another, faster and faster, until the structure is gone. When the last domino drops, the only thing left is whatever you built that wasn’t made of paper and promises.
And sweet, nutritious, gamma rays!
Remember, Kim Jong Un and Dominos™ have a lot in common: they can both make a crispy Hawaiian in less than thirty minutes.
No reaction??? Yes, as argon is an inert gas. Speaking of which…
Nitrogen isn’t inert, but every single transformer has it to prevent condensate from contaminating the insulating fluid. You pump it in, purging ambient air, then pump the fluid into the transformer.
No nitrogen, no Reddy Kilowatt™. Haven’t seen that elsewhere.
Yup. But nitrogen is relatively easy – I can make that in quantity at home for less than $1000 plus power.
Portugal, Spain, The Netherlands, France, Britain: historically, reserve currency status switches after overspending on social services and a naval loss. Britain lost reserve currency status when they lost control of Suez. USA will lose it because they’re visibly losing control of Hormuz, which everyone has known would happen since the Navy’s Millennium Challenge Simulation of 2002. No dollar means the USA tax system no longer works. No taxes collected means the government can’t hire employees. No government employees means no police protecting criminals from victims, and a debt jubilee ending debt slavery and currency inflation (official counterfeiting). All of: mortgage, student debt, car loans, credit cards, alimony, zoning, permitting, licensing, and environmental impact statements will vanish. You can have financial privacy if you want it. The universities experience the Dissolution of the Monasteries. Everyone has to work for a living, there is no more welfare; however the middle class realizes technological growth has made it almost independently wealthy, it only has to work one day a week now that the parasites are removed. What are you planning to do with your newfound freedom? All the open frontier you could want is only 100 miles away from everywhere, straight up. Do your kids want to explore and settle the new frontier, the inner solar system?
“Do your kids want to explore and settle the new frontier, the inner solar system?”
Um, sadly, no….
https://www.cnbc.com/2019/07/19/more-children-dream-of-being-youtubers-than-astronauts-lego-says.html
…and I personally don’t think Artemis 2 changed this one bit. And I say this as the once-proud place-holder #46316 (seriously, my membership card is on my bulletin board this very moment) of the official Pan Am First Moon Flights Club.
https://en.wikipedia.org/wiki/First_Moon_Flights_Club
There won’t be an Artemis 3 – unless Elon gives his moon shot that name.
I think my mon threw my card out 50 or so years ago.
yep right after the civil war
Naval power was trade power. Is trade power now currency?
In the previous empires failing after a disastrous Scillian Expedition (please look it up, one of Wikipedia’s better articles) they still had basic economic support systems within their empires.
IE they were mostly food sufficient, had decent energy and manufacturing and so on.
Not badly dependent on imports for daily life. England was more dependent than the rest BUT they had Big Brother America to marginally support them (that “Special Relationship” we hear) so they had a cushion.
We have Offshored way too much of our basic manufacturing for cheaper wages and thus screwed the average American of a decent paying job (OOOPPPS) and substituted a FIRE Economy
SNIP A FIRE economy is any economy based primarily on the finance, insurance, and real estate sectors that made AWESOME gains and PROFITS to a select few and BEAUTIFUL, GREAT Stock market and so on stuff.
Meanwhile you and I get to have two, some folks I know 3 or 4 jobs to keep their heads above water. OR we use DEBT and lots of it (look it up) and it common to see folks using Walmart’s buy now and several payments app to buy freaking Groceries.
How many ads to you see about “Its MY Money and I Want it NOW” programs that pay you ahead of PAYDAY.
We used to call that Payday loans. Never seemed to get ahead of those if you got into them, eh?
Some posters tell me Trumps taking out the competition in OIL and THAT will make US BETTER as we have PLENTY of OIL.
And Trumps telling the world “Come here WE have Plenty of Oil” and bragging how massive oil tanker action heading to the USA.
Oil SELLS at WORLD MARKET prices. Lack of OIL makes it MORE EXPENSIVE and our Plenty of Oil will COST you and I MORE at the pump when it’s more valuable in say Europe than here?
Care to guess what that does to every things prices?
America IMPORTS Fertilizer some 15% shortfall expected this year. Maybe IF we don’t ship all that beautiful LOTS of OIL across the globe we can NEXT YEAR make a lot more fertilizer. Oil = fertilizer, plastics, and so on.
America IMPORTS some 15% of the food on our plate. THEY DEPEND on that Middle East Fertilizer.
Wanna bet how mush reduction in supply this year? 15% average but about 30% of our BEEF, all our coffee and chocolate a large bit of our seafood and so on.
Say goodbye to cheap shrimp folks. Free coffee refills also.
Could say more with links but already too long.
We can be self-sufficient in some fertilizer easily (nitrogen based) but phosphorus is a bit harder. Yup, oil is going to be a big deal.
SpaceX starting getting results when they had 1,500 employees. Now that the rockets are designed and proven, can copies be produced by 150 employees? copenhagensuborbitals.com is a crowdfunded replay of the manned Mercury mission: “We’re flying an amateur astronaut into space on an home build, crowdfunded rocket. Want to see it happen ?” The future is now.
Good for them. Skoal, even!
Imho the war is US vs. China, the regionals are all bit players with agendas. This maybe be our last hurrah to make another year before the string and bailing wire come apart. You sre sol if you are not somewhat prepared.
Great work John!
Thank you! That is the big struggle for now, but with the internal strains in the US (started by the Soviets and abetted by the open borders crowd) we’re far from fighting shape.
And then the “aliens” show up
Like all our other wars against oil nations, this one is not about conquering the oil itself – it’s about keeping it priced in dollars.
https://realinvestmentadvice.com/resources/blog/is-the-iran-war-good-for-the-petrodollar/
Blue beans!
Your post reinforces the mandate to get out of the large cities. I’ve seen what a panic can do to supplies, and even then there were more to be had. If things get bad enough, there won’t be any to replace what left the shelves, and the anarchy will begin.
Yes. And violence will rise there first.
From Zorost: for whatever reason this won’t post for Zorost, comment follows.
“why does the world need the dollar?
…It’s just a meme that everyone has bought into for 100 years or so.”
A world reserve currency is a convenient fiction for world bankers, and any nation that doesn’t buy into the fiction of it being the dollar is soon discovered to be a dictatorship in need of Democracy. Note that Saddam and Ghaddafi were both talking about accepting gold for oil rather than dollars shortly before their untimely demises.
This is why it is so worrisome that we can’t bring Iran to heel quickly. Due to changing technology, the amount of power we can put into a punitive expedition is no longer enough to kow nations into submitting to dollar dominance. Being a reserve currency means there are gajillions of dollars sitting in national banks in the same way gold used to sit in Fort Knox. The dollar losing it’s reserve currency will be like your Chernobyl and wheat example, with every national bank suddenly trying to trade their dollars for something with value. Which will massively accelerate the issues of our collapsing economy as all those inflationary dollars end up back in the US.
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“And what about a complete redo of the world economic stage?”
A suspicious, cynical person with a low opinion of international banker types might think that this was the plan all along.
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An excellent article that looks at some of the more technical and esoteric dominos, often from an investing perspective:
https://substack.com/home/post/p-192518871?selection=655292ba-70da-4bcf-aece-24636a23bdb3
On the bright side, now that oil prices are up around the globe, the guys in the Permian Basin are finally making money again.
“Lord, please give me another oil boom. I promise I won’t screw this one up.”
“….. starts twitching like a tall tweaker on Tang™”
Okay…..that is oddly specific. Care to share where you first encountered this sort of Tang twitching?
Totally.
Actually alliteration affinity.
Me thinks people will soon be worrying about eating not investing epically…the sheep and goats are going to choose sides
Sheep might be worth more than SpaceX.
IRT the whole “No blood for oil” argument, I read a very incisive point about that. It simply asked this question. What in the modern world is more vital to modern life than energy? Follow up question, if energy (oil) isn’t worth dying for what is? My answer is something like, nothing or maybe just very little, because without energy all modernity dies, including Pez and lesser things like roads, cars, phones, internet, clean water, food, medical care, things like that and many more.
He who controls the spice . . . er oil, controls the future.
We aren’t going to war to get more oil for US citizens, we are going to war (Special Non-Military Operation? Whatever) so that the oil goes where it will benefit bankers and financiers.