Mia Wong (2:08)
Media. Welcome to It Could Happen Here, a podcast where the economy is falling apart in new and exciting ways faster than I can write about it. I am your host, Mia Wong. Welcome to what has turned into a Kind of Emergency Is the Economy Collapsing episode. This episode was originally supposed to be about tariffs, but while I was writing the tariff episodes, a bunch of shit happened like we invaded Iran. And kospi, which is the leading Korean stock market index, had its largest single drop in its entire history, which triggered its circuit breaker. Circuit breakers are a thing that stock markets have now where if the stock market collapses, like, if it loses points too fast in a certain period of time, all trading will automatically stop for a bit. So it hits its circuit breaker. The tie index also hits its circuit breaker. And then in the wee hours of sort of Monday morning American time, I start seeing a bunch of people posting that Kosby hit the circuit breaker. And I'm very confused because that happened on like, Wednesday, right? Like, this already happened. No, no, no, no. Wrong, wrong. Happened again. It's two circuit breakers in like four sessions. So this has turned into an unbelievable crisis. Yeah. So we're going to get the tariff episode at some point, talking about the Supreme Court tariff rulings and stuff like that. That will happen. There's a lot of interesting stuff there. But right now we need to answer the question, is the economy about to collapse? And tentatively, it has been held off at least for a little bit. Now, if this is being recorded early Monday afternoon on March 9th, by the time this goes out on March 10th, who the fuck knows what will have happened? But let's talk about what happens in the run up to all of this because it's very important. So in the lead up to the open of the American markets, we had a massive spike in oil futures. Like one of the largest single day spikes in oil futures ever. It looks like it's going to be the apocalypse for the markets. And the reason it looks like this is because, and this is something that's genuinely astounding. So one fifth of the world's oil moves through the Strait of Hormuz. We're going to talk about this in more detail later. And obviously there is now a war, which means that you can't move oil through it. And people suddenly realized that, oh, my God, this is going to raise oil prices. Now, when I was originally writing this episode in the halcyon days of Friday of last week, part of this episode was about why oil prices were not spiking because they didn't spike immediately upon the start of the war. Right? And I was very confused about this because the explanation at the time was that people were like, oh, it'll be fine. The US Navy can escort oil tankers. The straight Okoro Moose. No, they can't. Like, the narrowest part of it's 23 miles wide. Like, what are we doing here? Like, forget drones, you can hit these oil tankers with like a fucking trebuchet. What are we doing here? What was the administration telling the oil companies? Right? And then a few days later, everyone collectively realized, oh, my God, we can't move oil. And, yeah, no shit, you can't move oil. Jesus Christ. Like, this is unbelievable stuff from the people who are in the oil markets, from the oil executives, from the Gulf monarchies, from all of the people planning this. Why would you think this wouldn't happen? And we're going to get into that actually in a little bit because there is apparently a reason why they thought this is going to happen, which is some combination of just pure lies and willful belief and some of the worst strategic planning I've ever seen in my entire life. But, you know, the ability to close the Strait of Hormuz is the reason why, even if you are like President Donald Trump, the kind of person who doesn't give a shit if you know your army burns Iranian children to death, right? Even if you don't care that you fucking bombed a fucking school, you don't fight this war because it fucks with the money. Now, in anticipation of what looked like it was going to be just a market pounding, Trump gave a phone interview with CBS's senior White House correspondent, Weijia Jiang, who posted this on Twitter. This is her reporting of his statements. This is from Donald Trump, quote, I think the war is very complete, pretty much. They have no navy, no communication, they've got no air force. He added that the US Is, quote, very far ahead of his initial three to four week time frame. You know, he also said that ships are moving through it now, but he's also, quote, thinking about taking it over, which, what, just officially conquering the Strait of Hormuz instead of merely, like, protecting it with American fleet assets. This is completely unhinged. And then he also said, quote, they've shot everything they have to shoot, and they better not try anything cute or it's going to be the end of that country now. Okay, so the part of this, right, that went to the markets is that he thinks the war is over. Now, the part of it where he says if Iran fights back in any way, quote, it's going to be the end of that country, apparently did not hit the markets. The people running the markets are really, really dumb. They think and act like herd animals. This is, I guess, slightly an insult to herd animals because herd animals react that way for a reason. These people are human beings. They have the capacity for logic and reason. They have the same capacity for logic and reason that we do, and they still act like this. But this has calmed the markets down and it's sent oil prices back down again. We're going to get into why that's kind of nonsense in a little bit. But it's also worth noting in terms of Trump saying the war is nearly over, that every single other quote Trump has said about this war has been, he's in this for the long haul. He's thinking about troops on the ground. He is not going to get bored with it. He doesn't care that gas prices are going up. Someone asked his press secretary about whether he had ruled out the draft and she said no, he hadn't. Which is, I mean, like, they're not going to do a draft. But like, that's ridiculous. Why would you say that? It's also worth noting that, so he has a 250 year anniversary commission thing that he set up that he's very, very excited about. That's like it's America's 250 year, blah, blah, blah, blah. And that commission's like one of their big people was ringing the opening bell on Wall street this morning. So, you know, I suspect that there's a lot of sort of motivated reasoning here going on with Trump saying, oh, it's fine, it's going to be fine. The war is nearly over. Do, do, do, do, do, do, do. Okay. So I quite frankly do not believe the President when he says that the war is nearly over. I mean, I guess maybe there's a scenario where everything we're about causes a crisis that is large enough to, you know, actually set off Trump pulling out of the war under pressure from his allies in the region, which is to say the Arab monarchies. I don't know to what extent that's actually going to happen, but let's talk about what the crisis here is. So the US's war against Iran has triggered what could be the start of a full on energy crisis. The energy crisis has been postponed for one day, I guess as of again, time of recording Monday, March 9th. But this could be the start of a fallout energy crisis. And it's not just me saying this. Here is the subtitle of the Wall Street Journal's big piece on this quote, quote, traffic through the Strait of Hormuz has ground to a virtual halt, unleashing the most severe energy crisis since the 1970s and threatening the global economy. So that's not good. Now, I began this episode talking about a collapse on South Korean and Thai markets. And I should also mention, by the way, that like when that collapse happened, all the other Asian markets kind of ate shit. The Chinese markets were sort of more stable for reasons we'll get to in a second. But like Japan, like the Nikkei was down like 4%. Like all of the other Asian markets kind of ate shit, right. Taiwanese market. And the reason for that is, well, again, as I said above, one fifth of the world's oil supply, crude oil, is shipped through the Strait of Hormuz. And this is an issue for a country like South Korea, which imports almost all of its oil, you know, and whose economy, like manufacturing economy in particular, is very, very heavily dependent on oil. This is true of a lot of other countries in that region. And, and South Korea and Thailand and Taiwan and Japan are not countries like China which have bunch of oil stockpiles and have the ability to get oil through other ways. Now, I want to take a second to actually explain what the Strait of Hormuz is. So the Strait of Hormuz is a strait. It's like there's a little bit of water, but it's close to land. I talked to Set earlier that the narrowest part of it is 23 miles. So it's very narrow. And it is a passage between the Persian Gulf and effectively the Indian Ocean river. Right? And once you're out into the Indian Ocean, you can get to the rest of the world that is, you know, east of that, which is all of Asia, most of the rest of the world that's not west of you. Right now, countries bordering the Persian Gulf who are in the area who need to ship their oil out through here include Iran, Iraq, Bahrain, Qatar, the UAE and Saudi Arabia. Those are a bunch of oil producing countries. You know, they are now also countries that are embroiled in this war because they are part of the American alliance. And you can ask the very reasonable question, okay, so if you're part of the American alliance, why the fuck would you be like, okay with the United States launching this attack on Iran? On a more vulgar level, you can ask the question, how the fuck was this allowed to happen? This is the money, this is the global economy that you are fucking with right now. One of the things that the Wall Street Journal talks about is that officials in the US and Israel told the Gulf states that there wouldn't be retaliation by Iran. Right? That Iran wouldn't target oil facilities, they would just target American military bases. They had a whole thing about how, oh, well, during the war with Israel, they didn't target American military bases. They didn't like, bomb any of the oil infrastructure. They were sending Mr. Bean memes in their group chats about how weak the Iranian retaliation was going to be. So this is not just a situation of pure, you know, motivated reasoning. We were lying to them, et cetera, et cetera. Like, the Americans appeared to have actually believed some of this, that Iran's retaliation was going to be weak. I've seen reports that they thought that Iran was out of drones. I don't know why you would think this baffling. Their drones are extremely cheap to produce, like they've used them, but why would you think they didn't have more? And I just want to point out, right, so their point of reference here was, oh, Iran showed restraint in the war with Israel. You know, this is a 12 day conflict where Israel and Iran sort of fired missiles at each other and stuff after Israel assassinated a bunch of people for doing nuclear stuff. But okay, let's look at this for a second. My brother in Christ, you killed the fucking Ayatollah. This is an existential war for survival of the regime. Of course they were going to target your oil facilities. Are you fucking kidding me? Your goal here was regime change. You literally assassinated their fucking head of state. You literally killed him. What the fuck did you think was going to happen? Oh my God, these people are so fucking dumb. And like, you know, and it's obviously not clear exactly, like who knew what about this plan. But again, like, it seems like the plan was put into place because they had the opportunity to kill Ayatollah Khomeini. And like, ok, if that's true, and presumably the Gulf states would know that, why the fuck would they not expect retaliation? I expected this. I'm a podcaster. I mean, I know I'm very smart, but like these people and their advisors are running fucking like some of the most important governments in the entire world. I don't know. Monarchy, Bad system of governments electing Donald Trump also apparently bad system of government. You're getting just, oh my God. Holy fuck, these people are stupid. Oh my God. They really, truly, they really, truly believed that Iran was not going to pick up the weapon that it has always had. That has always been the thing for the reason why you don't fight this fucking war. Even if you don't care about Iranian lives and you're willing to spend American lives. Right? They really thought they wouldn't do it. I, I, I just, I just, I can't get over this. I just, oh my God. I don't know. I don't know. Okay, we're, we're, we're gonna go to ads. I'm mad as hell. I'm not gonna take it anymore. Here's the bads.
