Iran Iran Iran, Iran Iran... Bomb?

It was just last April when John McCain made the "joke" to bomb bomb bomb, bomb bomb Iran. Clever, but not funny.

Just over 14 months later, oil prices rose to a record high above $144 today. We are now seeing analysts cite oil prices that range from $300-$400 a barrel if Iran is attacked, which is $12-$15 dollars a gallon of gas. This comes at a critical point in the position of the US economy, the dollar is in steady decline, the Fed can't make a decision, housing is on its way to bust, debt is running wild, signs of inflation are everywhere, Americans continue to consume without saving, Washington has become completely ineffective, and there is an absence of leadership to go along with the abundance of rhetoric.

The noise of war is no longer exclusive to the troops in Iraq, because it is now everywhere in the domestic press, and continues to build a steady drumbeat. We just did a Google News Search of bomb Iran, and our return generated "about 12,393 from Jul 1, 2024 to today for bomb Iran" which is less than 48 hours of news. When we wrote this almost two months ago, the return was "about 1,681 from May 5, 2024 to today for bomb Iran" (May 6th about 11:00pm). That is a seven fold increase of news about war with Iran in two months, and there are few signs of the rhetoric cooling anytime soon.

This week alone we have seen Iran threaten to shut down the Strait of Hormuz, diplomats trying to play down the rhetoric, calls by the international community to lean on Iran, the Joint Chiefs of Staff conducting high level discussions about Iran in Israel, and...

what we have seen described as the last sign of hope for diplomacy.

There has been a lot of speculation that at the point the rhetoric hits a high pitch, when it becomes fairly obvious that either the United States or Israel is going to attack Iran, a diplomatic solution would emerge credited to Ayatollah Ali Khamenei, who would step in and seek to avoid war. We admit to being impressed when this happened today, because it looks like that analysis might be proving accurate.

“We see the possibility of arriving at a multi-faceted solution,” Manouchehr Mottaki, Iran’s foreign minister told a press conference at the United Nations in New York. Ali Akbar Velayati, a top adviser to Ayatollah Ali Khamenei, Iran’s Supreme Leader, also insisted that a “compromise” could be found.

Both men have led public statements on the nuclear issue in recent days while Mahmoud Ahmadinejad, Iran’s uncompromising president, has kept a low profile.

The shape of a possible face-saving compromise that would open full negotiations is now becoming clearer. A report on Fararu, an unofficial Iranian news agency close to influential opponents of Mr Ahmadinejad, said Tehran may be willing to limit uranium enrichment for a six-week period to pave the way for fully-fledged negotiations.

This offer was part of an incentives package offered to Iran last month by the US, Britain, Russia, China, France and Germany. As we examine the details disclosed in the press, we believe this will be the last diplomatic push before Israel strikes. We note that this offer is intended to create a six week period of preparation for negotiations, at which time the real negotiations would begin. The intent of the six week period is to insure the seriousness on the part of Iran, that they really are interested in a diplomatic solution. It has been suggested that if Iran violates the agreed upon framework during that six week period, they would not be acting like a serious player in the international community, and diplomatic solutions would become very unlikely. The diplomatic package was formally presented to Iran a month ago. Iran has yet to formally accept the offer.

The administration does not believe the Iranians will accept the offer, indeed, it is legitimate to suggest some are hoping Iran rejects it. The next move will determine where the narrative for Iran goes from here.

I'm going to close this with a theory, discuss if you wish, but I will not elaborate on nor defend the theory as it is not mine, and I honestly don't know what to think about it.

If Iran rejects the proposal, and the rhetoric regarding war continues, keep an eye on the dollar. If the dollar continues to decline, it will increase, not decrease, the likelihood of war. In the event of war, as events unfold the global economy will move towards crisis and potential collapse every day the crisis continues, and it will lead to the re-evaluation of the value of individual currencies on a global scale. If that happens, which currency will the major powers lean on? Ask your banker.

The currencies of major markets of globalization are not backed by gold, modern currencies are backed by the F-16. If you don't bring your F-16 to the bank, or you fail to bring your investment in the currency that supports the F-16, you won't get a loan. This theory was forwarded from the economists view why China sits quietly as the world draws near a war that could supposedly collapse the US economy, and the Chinese economy. I thought it was an interesting theory.