Shock and Aw Shucks

The pound sank into the mud of the Somme and never recovered. By the end of WWI, Britain was deeply in debt. It had to give up India in 1947. And then, in 1956, it was unable to control the Suez Canal

Tuesday, March 31st, 2026

Bill Bonner, writing from Baltimore, Maryland

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“We negotiate with bombs.”

--Pete Hegseth

Words are a lot less expensive than bombs. And you don’t have the costs of cleaning up. Which is why thinking, and expressing your thoughts in words — even single syllable words — rather than bombs, is almost always the cheaper and more effective way forward.

But far be it from us to offer advice to Pete Hegseth. He has a role to play — the ‘comic book tough guy’ contributing to the empire’s decline. And he plays it well. He says his forces will “destroy the enemy as viciously as possible from moment one.”

Maybe so. But the gods of war do not favor oafish amateurs. Which is the whole point; his historical role is to turn the gods against us. Kristi Noem is already out of Donald Trump’s inner circle. If the war goes badly, as it seems to be, Hegseth may soon be sent packing too.

In the meantime, Hegseth should be an inspiration to young men everywhere. He’s the kind of jockish guy who normally peaks out in the 11th grade, as captain of the football team. And here he is at the head of the biggest, most wealth-destroying enterprise in the world.

An empire is essentially a protection business...sometimes providing good service...but often, just a racket. People like Hegseth provide the muscle. But in order for the empire to survive, someone should probably do some thinking too. Somehow, the empire must enforce its monopoly on the use of violence so that people within the empire are able to go about their business with tolerable security. And it must have a reliable economic system, too, whereby people can trade, earn money, and save their wealth. Typically, both goals are served by protecting trading routes.

The Mongol Empire created a huge trading area that stretched from the Pacific coast of China all the way to the Bosporus. The Mongols set up way stations to make travel and transport easier. They made the Silk Road much safer, too. If goods were stolen by bandits along the way, the local community was held responsible for making up the losses.

In the 14th century, as the Mongol Empire broke apart, the trading routes became less safe and the empire itself ebbed into a backwater.

The British Empire, too, went out of business when it lost control of vital trade routes. After the decline of the Mongol Empire, the Ottomans took over Anatolia and much of the Levant. This left them in position to strangle traffic coming through the Bosporus Strait. When the Turks closed it to English shipping in WWI, prices in England rose...and the value of the pound fell. The UK tried to unblock the strait with an invasion of Gallipoli, but as we’ve seen, the invasion was a military disaster and the strait remained in Ottoman hands.

The next important pinch point to slip away was the Suez Canal. Built by a French company in the 1860s, the canal became a vital trade passage, connecting Europe to India and the East. It was by this canal that the British Empire was to fully exploit its crown jewel — India. So important was it that the English developed a word for how best to make the trip. POSH, port out, starboard home…and avoid the hot Egyptian sun.

But as we saw yesterday, the pound sank into the mud of the Somme and never recovered. By the end of WWI, Britain was deeply in debt. It had to give up India in 1947. And then, in 1956, it was unable to control the Suez Canal. That was when the sun set on the British Empire.

Could it be that the Strait of Hormuz marks a similar twilight for the US empire? Today, the world’s economies run on oil. The US controlled the oil flow, first by pricing it in dollars....and second, by providing ‘security’ to the oil producers.

As to the first condition, Iran has been off the reservation for the last 20 years. It sold oil for euros. Now, it is asking for yuan.

As to the second, all was fine until the US and Israel began ‘negotiating’ with Iran by bombing it. The Iranians then did the obvious thing. They blocked the strait of Hormuz to ‘enemy’ transit. The US may or may not be able to re-open it. Der Speigel:

Trump’s options against Iran have run out. The US president entered the field with the promise of a quick and powerful agreement, but now finds himself in the midst of a war that he can neither win nor find a dignified way out of. Iran has put Trump in a trap by targeting the world’s energy arteries, with no escape route, and he has no clear idea how to end this strategic suicide.

Meanwhile, the dollar seems to be taking too many sleeping pills too. AsiaTimes:

Iran is not simply disrupting oil supply — it is quietly challenging the currency structure underpinning global energy trade. Under sanctions, Tehran has developed alternative channels, exporting oil through barter arrangements, informal networks and increasingly through settlements in Chinese yuan. This shift is not merely tactical; it reflects a broader strategic alignment with efforts toward de-dollarization.

If Iran succeeds in institutionalizing yuan-based oil trade, the implications could extend well beyond sanctions evasion. Energy markets have long anchored dollar dominance. Even partial diversification in pricing and settlement mechanisms could begin to weaken that foundation.

Iran is still resisting.

Send more bombers to negotiate!

Regards,

Bill Bonner