Easily Squeezed
Look for higher interest rates. Savings that might have been used to fund past borrowing must now be directed to current expenses. Lenders begin to think their money might be safer at home.
Wednesday, May 6th, 2026
Bill Bonner, from Youghal, Ireland
‘What will be unfolding at unprecedented scale during the months ahead is dislocations, screaming imbalances, severe bottlenecks and absolute physical shortages in global markets for upwards of 200 million BOE of liquid petroleum, LNG, LPGs and hydrocarbon processing by-products — fertilizer, sulfur, helium, aluminum etc. These unfolding dislocations will be roiling the global economy like never before.’
--David Stockman
A recent poll reported in The Hill:
Most Americans say Trump is mentally, physically unfit to serve effectively
This may be good news to Republicans and maybe even to Trump himself. It gives him space to exit the stage with at least some grace; he can simply retire.
He knows that if the Democrats get control of Congress the investigations and indictments won’t be long in coming. Who made those near-perfect trades based on Trump’s upcoming announcements? How much did the Trumps make from their World Liberty Financial scheme; what exactly were the Trump boys offering investors? Should the Navy officers who killed alleged drug importers stand trial for murder?
This may not be just idle day-dreaming. There is a powerful undertow that is poisoning Trump’s poll numbers, threatening Republican control of Congress, and menacing the empire itself.
We’re entertaining the idea that the double blockades on the Strait of Hormuz may have repercussions on the banks of the Potomac.
Trump’s blue water troops besiege the Indo-Aryans (Iranians), while the Iranians besiege the world oil market. POTUS bets that the Iranians will yell ‘uncle’ first.
Maybe. But Iranians have little debt. Who would lend to them? Their economy is like a walnut — small, dry, with a hard shell. You could press it in a vise, but you’d be unlikely to get much juice. The entire public debt of Iran is only $162 billion — about 25% of its tiny GDP.
How different is the economy of the US and much of the rest of the world — so lush, airy and soft...so easily squeezed. In the US, the feds owe $39 trillion...130% of GDP. Including private debt, for every dollar of output, Americans owe $2.50.
Iran can afford to suffer. Its people are used to it. They have been hammered by years of US sanctions and steeled white hot by bombing and killings.
In the US, on the other hand, even a temporary lapse in broadband coverage could set off a revolution. As for a dollar-a-gallon increase in the price of gasoline, come the next election...it is probably a ‘regime changer.’
So far, the world has missed out on about 900 million barrels of oil. They didn’t disappear...they just got stuck in the ‘pipe.’
And Goldman Sachs estimates that even if the two sides decide to work out a re-opening of the strait today, the total accumulated loss of ready oil supplies will be 1.6 billion barrels.
A rich, debt-drenched society is fragile. A poor, pay-as-you-go economy is not. So, what happens when a billion barrels of oil are removed from the world economy...that is, when people have to spend more to get gas, fertilizer, sulphur, etc?
How do voters feel if they have to wait in line for gasoline...or their supermarkets run out of potatoes? And what do farmers do when they can’t afford fertilizers?
These ‘dislocations’ are already in the ‘pipe.’ They took the place of the oil that wasn’t delivered. How it will work, exactly...what link will break first — we’ll find out.
But look for higher interest rates. Because the savings that might have been used to fund past borrowing must now be directed to current expenses. Also, lenders begin to think their money might be safer at home, rather than lent out to people who may, or may not, be able to pay it back.
And the higher rates could easily hasten the decline of the leveraged empire, which may be the real historical intent. Why else send three Israeli advocates – Kushner, Lutnick, and now Stewart – to bargain for peace…unless you didn’t want to succeed?
Regards,
Bill Bonner
Research Note, by Dan Denning
Will a $2.5 trillion fiscal year deficit cause a ‘buyer’s strike’ in the US Treasury market? The yield on the 30-year US Treasury Bond is near 5%, just below a 20-year high. BPR’s Official List has zero allocation to bonds, despite the historical performance of a 60-40 portfolio (60% stocks, 40% bonds).
Recent research by GMO shows that there have been six periods, averaging eleven years in length, in which a traditional 60/40 portfolio would have lost money in real terms, or barely broken even with inflation. What did they all have in common? Each period came after years of strong price performance in stocks and with very high beginning valuations (kind of like today).
If you’re facing five to ten years of flat or negative real returns (because of high inflation and starting high valuations), what you do next matters. This is why BPR’s investment posture is still in Maximum Safety Mode. Investment Director Tom Dyson will update paid subscribers on the tanker and energy trades, plus bonds, gold, and more, in his market note later today.