a stitch in time
market vibes
“An appeaser is one who feeds a crocodile, hoping it will eat him last.” Winston Churchill
Reports from the Middle East piercing the fog of war are mixed. According to Kobeissi the IRGC is warning ships in the Gulf they are planning to close the Straits of Hormuz. One might think if they were hostile, they would not be warning anyone. At any rate, JPM thinks oil prices could spike to $120/barrel (they could be long?). As of 12:30 PM ET Saturday, the US recommended ships avoid the Strait of Hormuz.
The DOE reported last Wednesday US inventories of crude are => 435 million barrels. America is the largest producer of oil in the world and an exporter of 4.5 million barrels a day. If we need more oil we will stop exporting it. China’s strategic reserve of crude oil is estimated at 1.2 to 1.5 billion barrels. Closing the Straits will hurt Iran every bit as much as it will hurt the world and it will hurt the OPEC neighbors they attacked today most of all.
Apparently the Ayatollah and as many as 40 senior leaders are dead. X posters are showing direct Iranian hits on Israel, Saudi Arabia and Dubai. I think Trump attacked on a Friday night because he hopes the war will be over by 6 PM Sunday evening. If not I expect significant intervention to stabilize markets on Monday.
1938
As I researched this “Modern Munich” idea I learned it is not a novel observation. Parallels between the 2015 JCPOA nuclear deal and the September 1938 “Munich Agreement” have been around since the entire world watched agog as Obama airlifted billions of cold cash to Tehran just prior to leaving office at the end of his second term.
In September 1938, The Prime Minister of England Neville Chamberlain flew to Munich and signed an agreement ceding the Sudetenland, a region of Czechoslovakia to Germany without any Czechoslovak representation at the talks. Upon his return to London he famously said, we have “peace for our time.” The French Prime Minister Édouard Daladier, Italian Dictator Benito Mussolini were not present but signed the agreement later at Hitler’s behest. On September 1, 1939 Hitler attacked Poland. Britain and France were obliged by treaty to declare war on Germany. In early May 1940, Hitler launched all out war on Europe.
At this point I need to digress and mention a notable republican 2015 web ad from a conservative group that directly compared Obama to Chamberlain signing the Munich Pact, portraying the JCPOA as total capitulation to an arch enemy of America. The Hill, US News and World Report and Thomas Sowell and many other Senators and pundits explicitly linked the JCPOA to Chamberlain and Munich 1938.
On October 5, 1938 in a speech to the House of Commons, Churchill decried the agreement as a total and unmitigated defeat: “The utmost my right hon. Friend the Prime Minister has been able to secure by all his immense exertions... has been that the German dictator, instead of snatching the victuals from the table, has been content to have them served to him course by course.”
Churchill concluded: “[And do not suppose that this is the end]. This is only the beginning of the reckoning. This is only the first sip, the first foretaste of a bitter cup which will be proffered to us year by year unless, by a supreme recovery of moral health and martial vigour, we arise again and take our stand for freedom as in the olden time.”
In early 2009, just days after Obama took office a bronze bust of Winston Churchill in the Oval office was returned to the British Embassy in Washington, D.C. The statue was on loan since 9/11 as a sign of solidarity from the British people.
When I was growing up in the 1960s, the question that haunted historians in hindsight was why on earth was Winston Churchill ignored when the military danger from Nazi Germany was so blindingly obvious? The answer, we now know, was not ignorance of the facts. It was the seductive trap of appeasement. When the Iranians ousted the Shah and took American Hostages, an attempt to free them failed killing eight U.S. servicemen. Jimmy Carter gave the Revolutionary Council 8 billion dollars, allowed them to sue us in court, and pledged to never interfere with their affairs ever again.
no chance this this will be a drawn out war
The question today is not whether appeasement is a good strategy or whether peace through strength is just. It is whether America can reinstate its role as a force for global stability, something for which President Trump is facing stiff resistance. In his Farewell Address delivered on January 17, 1961, President Dwight D. Eisenhower famously warned about the dangers of the “military-industrial complex.
“[This conjunction of an immense military establishment] and a large arms industry is new in the American experience. We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together.” However, there is a difference between foreverwars and denial of a nuclear arsenal to a medieval theocracy. More on that in a minute.
