Now the fun part starts. · Storyflo

First and foremost— thank you to everyone who has subscribed!! Cannot express my gratitude ( and surprise), and I hope to live up to expectations.

Meet the 9-year-old who can lift 3 times her body weight- nbcThere are going to be a lot of links in this note; better to let readers read the solid analysis than my truncated summaries.

Let’s start here:

OK, maybe it is too soon, but it makes the point; we should not be surprised at e continued distractions from the flailing war effort. One such track is emerging;, like an episode of

*This Old House, ‘*The Great Cabinet Renovation” portion of Trump, Season 2 is now underway.Noem was ‘re-assigned’ last week (oddly followed by leaks about her hubby’s kinks), and now Bondi is fired 12 days before her scheduled appearance before Congress. Note her failure to get indictments against James, Comey, and Schiff, and her ‘binders of documents' Epstein Files disaster, which was Patient Zero of the tsunami of revelations. Interestingly, as a private-sector individual, she is no longer covered by executive privilege but must still testify or face contempt charges. Let’s see how that plays, as well as who the next nominee is. The leaks have accelerated, with Patel, Lutnick, and Gabbard all being mentioned as on the hot seat and ‘ short-timers. Expect more announcements as the distraction campaign continues.

Another will be increased attacks on Blue States and accusations of past and potential election fraud. JD-the Fraud Czar- was just directed by Trump to focus on those states as that distraction gains strength. Likewise the recent effoerts begginning to create Administration-created lists of those who will be ‘allowed’ mail-in ballots. Probably illegal but, ya know…

**Metternich. Sun-Tzu. Machiavelli.**Great strategic thinkers, who all understood that the critical component of any encounter, be it diplomatic or military, was understanding the enemy, not just comparing military size. To fight an adversary effectively, one must understand its weaknesses, its philosophical and cultural underpinnings, and its pressure points. We seem to have failed on all these fronts in the current~~war~~excursion. Perhaps the siren song of overwhelming force proved irresistible. Perhaps they do believe the “Miller Mantra”: “We live in the real world… that is governed by strength… force… power. These are the iron laws of the world since the beginning of time.” Whatever it is, the misunderstanding of broader strokes of history seems to be an increasingly costly mistake.It's a long podcast, and it is an Israeli commentator, so there is some shading, but if you want to understand the Iranian mind better, I highly recommend The ‘Ask Haviv’ podcast linked below. We forget at our peril that unlike our 250-year lifespan, many countries have an underpinning of civilizations that go back millennia,

Petrodollar PerilOf the many diplomatic successes that marked the career of Henry Kissinger, the creation of the petrodollar system, along with opening China, were the most consequential.

According to Claude, ‘The petrodollar system, engineered between 1971-1975, is the arrangement by which global oil trade is priced and settled in US dollars. It replaced the Bretton Woods gold standard and became the structural foundation of dollar hegemony.’ In the wake of the 73 war and the oil embargo in the early 70s, Kissinger engineered the agreement which required that middle eastern oil be traded in dollars. With oil being the critical comodity for the global economy, the plan resulted in the vast majority of all global trade being transacted in dollars, which has massive economic consequences

Again, from Claude;

In August 1971, Nixon “closed the gold window” - unilaterally ending dollar-gold convertibility. The dollar was now a fiat currency with nothing backing it. This was an existential threat to dollar reserve status. If the dollar wasn’t backed by gold, why would the world hold dollars? Nixon and Kissinger engineered a secret bilateral agreement with Saudi Arabia between 1972-1975. The core terms:

Saudi Arabia (and then OPEC broadly) would price and sell oil exclusively in US dollars.

The US would provide military protection of the Saudi regime and the Arabian Peninsula.

Saudi petrodollar surpluses would be recycled into US Treasuries - essentially financing American debt.

The US replaced a gold constraint with an energy constraint. Instead of “dollars are backed by gold,” the implicit guarantee became “dollars are what you need to buy energy.”

Synthetic Global Demand for Dollars

Every country on earth needs oil. Every barrel of oil must be purchased in dollars.

This creates

permanent, structural demand for US dollarsregardless of US economic fundamentals.Countries must maintain dollar reserves just to participate in the global energy market.

Estimated petrodollar-driven Treasury demand has historically been $500B-$1T+ annually.

The “Exorbitant Privilege”

The US can run persistent current account deficits without the normal currency/rates punishment.

Dollars exported via trade deficits come back as Treasury purchases - the US effectively borrows in its own currency at artificially suppressed rates.

This subsidy to US borrowing costs is estimated at

50-100bps across the yield curve- worth hundreds of billions annually in interest savings.No other country in history has had this privilege at scale.

Dollar as Sanctions Weapon

Because oil = dollars = SWIFT, the US can weaponize the dollar system.

Dollar exclusion (Iran, Russia, North Korea) is economically devastating.

This coercive power only works because the petrodollar system equates dollar exclusion with energy market exclusion.

The closure of the Strait of Hormuz puts this entire structure in peril. The Chinese and Russians have wanted to break the system for decades- with the seizure of Russian Assets in SWIFT being the accelerant. Again from Claude: “ The 2022 freezing of Russian central bank reserves ($300B+) was a watershed moment. It demonstrated to every non-Western sovereign that dollar reserves are not safe stores of value if geopolitical alignment shifts.”

The Chinese already pay Iran in yuan for their oil and have been building gold reserves in an effort to develop an alternative currency system.Now, Iran is charging a toll for passage, giving it immense leverage

**that it is using strategically.**Remember, controlling the Strait means control of 20% of global petrochemical supply.The toll means a steady revenue increase, and selective ‘approval’ can and likely will hive off support for the US as economics trumps alliances ( no pun intended).

Discussion of a joint Oman-Iran control system (post war) creates bifuracted motivations amongst GCC)

Iran can decide

it will accept; it has recently granted some passage to Spanish and French tankers, and chatter is that it will only accept Euros.what currency

So, for all the bluster and rambling speeches, and truth social abuses of the Cap Lock, Trump and the US CANNOT allow the Strait to remain under Iranian control. period, Full Stop.

**Wild Card.**The United States and Israel have differing perceptions of victory- widening with each day this drags on- with Israel requiring a much longer-term (if not permanent) devastation of any Irnain ability to maintain power and influence. A wounded yet functioning Iran, still able to project power and influence in the region, does not satisfy Israeli needs. Note they are purported to have assassinated the former Iranian FM involved in backchannle negotiations.**And Israel has tactical nukes.**How to win friends and influence allies“Trump brags about how MBS The Saudi crown prince has to “kiss his ass”‘French-Owned Container Ship Exits Hormuz in First Since War’- bbrg‘Iran Beefs Up Defenses, Recruits Children as It Prepares for Ground War’- wsjNOT on my bingo card- from Bloomberg:

‘Macron Criticizes Trump and Calls on Allies to Unite Against US’Explain to me again why we are un-sanctioning Russian and Iranian oil.

Makes sense in the middle of a war. ‘War Secretary Pete Hegseth has removed Army Chief of Staff Gen. Randy George — the Army’s top uniformed officer — along with two other senior leaders, Gen. David Hodne and Maj. Gen. William Green Jr., in a major Pentagon shakeup.’

Now the fun part starts. · Storyflo