Discombobulation
Wednesday, January 28th, 2026
Bill Bonner, from Rancho Santana, Nicaragua
We keep our spirits up by realizing that no matter how awful things get, they could be worse. And today...we take a peek at what ‘worse’ we’re talking about.
Here’s the latest from CBS:
Trump says U.S. used secret ‘discombobulator’ on Venezuelan equipment during Maduro raid
But the discombobulation appears to be temporary. The Independent:
Venezuela’s acting leader says she has ‘had enough’ of US orders
Recall that the US empire rested on three legs. A strong economy, with the world’s reserve currency. A respect for the rule of law (albeit often hypocritical). And superior firepower.
Our vassal states were attracted by all three. They looked to US dollar trade to bring growth and prosperity. They depended on the US to stick to the rules of a law-based consensual democracy. And they welcomed the protection offered by the US military.
But now, the US uses its dollars, its trade policies, and its military might not to protect its friends from its foes, but to discombobulate them all. The Washington Post:
Pentagon’s new defense strategy...
The 2026 National Defense Strategy signals that European allies can no longer depend on the U.S. to deter Russia.
What can friends and allies do but look elsewhere? Indian Express:
‘Mother of all deals’ India-EU FTA to boost India’s manufacturing and services sectors, strengthen investors’ confidence: PM Modi
‘The trade agreement is expected to be among the most comprehensive that India would sign, which could benefit India’s labor-intensive sectors, ranging from marine products, textiles, footwear and sports goods.’
The Wall Street Journal adds:
Stung by Trump, America’s top trading partners cozy up to China
They may be leaving the dollar, too. Larry Johnson:
Losing Dollar Supremacy...The Savage Consequences of Weaponizing the Dollar as a Political Cudgel
The 54-year reign of the US dollar as the world’s preeminent reserve currency is coming to an inglorious end.
The dollar’s reserve status is an exorbitant privilege. It lowers our borrowing costs, expands our fiscal room, and lets us export risk and import goods on uniquely favorable terms. But privileges are not entitlements. They are conditional. And they come with responsibilities. A reserve currency must satisfy three conditions. Liquidity, stability, and neutrality. The United States has always provided the first two. The third was assumed. It is no longer assumed.
The Cradle adds:
‘The US dollar’s centrality to cross-border transactions and its role as the world’s reserve currency are no longer guaranteed – and this shift is no longer theoretical.’
Jeffrey Sachs and Sybil Fares:
‘In an interview at Davos, Secretary Bessent explained in detail how US Treasury sanctions were deliberately designed to drive Iran’s currency to collapse, cripple its banking system, and drive Iran’s population into the streets. This is the “maximum pressure” campaign to deny Iran access to international finance, trade, and payment systems.’
Where does this lead? Inflation? Debt? Defaults? War? Violence?
What is the point?
More to come...
Regards,
Bill Bonner
Wondering and asking the sage (BB) what would happen if the US came out with the statement and backed up that going forward the U.S. would provide the Liquidity, stability, and neutrality of the dollar?
No more weaponization of the financial instruments.
I also wonder, had Russia for example been able to access their 300 or so billion, would it be pretty much exhausted by now?
What would the effect be on the U.S. and world economies?
Larry Johnson thinks the dollar has been stable? Liquid surely as we have flooded the world with dollars. Stable not so much - the dollar has lost 88% of its value since 1971.