The Fuse is Lit

We’ve seen what a sharp, sudden spike in interest rates (the availability of credit) does; businesses tighten up, employees are let go, spending goes down and GDP rates go from positive to negative.

Source: Getty Images

Wednesday, March 18th, 2026

Bill Bonner, from Youghal, Ireland

‘What message are we sending? We’re sending a message that we’re a bunch of fools — that we started a war we can’t win.’

--John Mearsheimer, Professor, U. of Chicago

Our point of departure today is Tom’s insight...that oil is to the real economy what credit is to Wall Street. In preview, they work together.

Amid so many explosions, it’s hard to keep our eyes on the real prize — that is, on the Primary Trend. Prices can go up and down, day to day, month to month. People can think whatever they want. But it’s the long-term trend that will make you either rich...or poor.

Are we in a bull market...or a bear market? Are we getting richer...or poorer? Are we headed for peace...or war; for freedom...or slavery? Should we stay in oil and gold...or is it time to move on?

So far, our emphasis on gold has paid off well. When the century began, we were able to trade 40 ounces of gold for the Dow stocks. Now we can get all 30 of them for just ten ounces.

Could that trend continue for another 25 years? Maybe. But there are no guarantees.

Remember, there are two key ways to ruin an empire: debt and war. The Trump team, bless its heart, is eagerly advancing on both fronts, doing the gods’ dirty work.

This just in, Fortune:

America’s $38 trillion debt crisis is already here. The reckoning comes next

The US has over $38 trillion of national debt. We now spend more annually on interest than on the military. The primary trust funds for Social Security and Medicare are also projected to become insolvent within the next seven years, requiring an automatic benefit cut or even more deficit spending to backfill these programs. These pressures will intensify as the population ages, health care costs rise, and economic growth slows.

And the current war with Iran just makes everything worse. First, because it costs $11 billion per week. And second, because it threatens to wreak havoc on the entire world economy.

In this respect, the Trump Team may have a hidden ‘fourth- or fifth- order effects’ agenda. Or it may be remarkably benighted. After the Iranians closed the Strait of Hormuz, Trump commented that “...nobody expected that. We were shocked. They fought back.”

Yes, it was a real curve ball...out of left field...like dawn or bankruptcy, nobody would have seen that coming. Nobody. But now that it is here, what effect will it have?

We’ve seen what a sharp, sudden spike in interest rates (the availability of credit) does; businesses tighten up, employees are let go, spending goes down and GDP rates go from positive to negative — a recession, in other words...one that can easily become a depression if the credit tap is turned off for a prolonged period.

This is not necessarily a bad thing. Excess credit — not backed by real savings — has to go away somehow. Typically, it disappears in higher prices for consumers...and booms and busts for investors.

Does oil work the same way?

Not exactly.

Too much (fake) credit is as bad or worse than not enough. Easy money invites sloppy spending. And while fake credit can be created out of thin air...the resources it commands are not. They’re real. Oil, skilled labor, and raw materials take time, capital, and discipline to put together. And once used, they are gone forever. A guy puts in a day’s work; day gone by can never be recovered.

That’s how fake credit destroys real wealth. On Main Street, it is wasted on projects that don’t make economic sense. On Wall Street it is gambled away — on cryptos...tokens...Nvidia....AI...and other things unlikely to pay off.

Fake credit is the secret to how the feds can waste so many trillions of dollars. They borrow savings that were never earned, never saved, and never taxed...and use them to fund pointless bureaucracy and corrupt giveaways as well as unnecessary wars. In that regard, the war in Iran is just another way fake credit destroys real wealth.

Yes, the attack on Iran lights the fuse on both ends of the dynamite. It undermines the empire’s wealth while engaging it in nonsense wars at the same time. And it is funded by fake credit.

But there’s no such thing as fake oil. And therein lie the ‘short hairs’ by which the mullahs seem to have taken hold of the world economy. The US fake money system can create all the credit you might want — and more! — but it can’t readily add to the world’s supply of oil.

Where this will lead, exactly, we don’t know. But we are happy to stay in Maximum Safety Mode until the dust settles.

Stay tuned.

Regards,

Bill Bonner