Scream All You Like...

An interesting post by David Seaton, where he argues that there is increased pressure on Arab countries, from their own populations, to punish the US for its support of Israel:

They are not going to cut off the oil like in 1973, they simply will refuse to buy any more US treasury bills until the US government pressures Israel into accepting the two state solution outlined in the Saudi plan.

In this refusal to finance the American economy that arms and enables Israel, they will be probably be accompanied by all the other kinglets and princelings of the Persian Gulf, who are also anxious to prove their Muslim credentials in the face of militant Iran's growing influence over their infuriated subjects.

In short a creditors strike, which in America present condition would be terminally devastating.

This will mean the bursting of the T-Bill bubble and with it any hope of success for a stimulus plan to save the US economy by printing more money. It might also cause America's creditors, such as China, to unload their dollar reserves. This would mean the collapse of the dollar and a galloping, Argentine style, inflation which would wipe out what little purchasing power America's middle class might still possess and leave all those on fixed incomes destitute.

"Impossible! They wouldn't dare!", you say.

If you don't believe that great disasters that everyone can see coming and would want to avoid can happen, think about the tragic summer of 1914, the lead up to World War One, that Barbara Tuchman so perfectly described in her best-selling masterpiece "The Guns of August".

Like then, a complex mechanism that we do not, perhaps cannot, fully understand, has been set in motion and as in classic Greek tragedies the character of the participants leads irremediably to their downfall. In this play Israel's attack on Gaza takes the role of Gavilo Princip.

This scenario is not impossible, though it seems unlikely. Dollar devaluation would hurt these countries as well, as they hold billions of Dollars in US Treasuries. Pulling the trigger on this would bring about their own downfall, and they know it.