Trump’s War Is Worse Than the Market Thinks (w/ Jeffrey Goldberg & Joe Weisenthal) | Bulwark Podcast

Defense Secretary Hexath's public persona and actions, particularly his communication regarding military operations, are characterized by 'preemptive hyperaggression' and a focus on performance rather than substantive leadership. He actively dismisses the importance of military education, which is seen as a dangerous stance, contrasting sharply with historical military leaders like General Patton who emphasized continuous learning and understanding of history for effective command. This approach suggests a lack of judgment and serious engagement with the responsibilities of his office.

Hexath was 'performing in the chat for JD Vance' during sensitive operational disclosures. He's described as having 'one performance mode' of 'preemptive hyperaggression.' His 'dismissal and insulting attitude about military education' is highlighted, contrasting with General Patton's belief that 'no military officer could be competent unless he understood... the dynamics of the Peloponnesian War.'

The US military's tactical execution in the Iran war, particularly by forces like Sentcom, is highly effective, achieving an 'A to A+' grade in neutralizing targets such as ballistic missile capacity and naval assets. However, this tactical success operates in a strategic vacuum. There is no clear long-term strategy or objective from the political leadership, raising questions about the ultimate purpose and sustainability of these military actions. This lack of strategic homework means that even successful operations might be pointless if they don't contribute to a larger, defined goal.

Tactical level performance is 'somewhere between an A and an A+.' On a strategic level, 'you can't grade it because they didn't hand in the homework.' The generals' job is to answer 'can you neutralize the ballistic missile sites?' not to define the 'long-term strategy for the Middle East.'

Global markets are significantly underpricing the economic fallout of the Iran war, particularly regarding oil prices. This underestimation is attributed to a 'psychological hold' by Trump, where traders expect him to de-escalate or 'taco' (fold) the crisis, based on his past behavior of walking back aggressive stances. This expectation prevents markets from fully pricing in the catastrophic potential of a prolonged conflict, such as the sustained closure of the Strait of Hormuz, which would drive oil prices much higher than current levels.

The market's belief that 'Trump is going to taco' means actual crude prices are 'much higher than they are today' if the market took the war seriously. Oil fell 14% in seconds when Trump indicated a desire for an offramp, demonstrating this market sensitivity.

The Iran war is the latest in a series of global shocks (including trade wars, COVID, Ukraine, and the AI phenomenon) that are fundamentally reshaping the global economy. These events repeatedly remind nations of the need to stockpile commodities and build redundant supply chains, moving away from an efficient, open global trading system. This trend creates a permanent 'higher bid' or inflationary floor under commodity prices, as countries prioritize security of supply over cost efficiency, leading to sustained long-term inflation.

Every country in the world needs to stockpile things, moving away from an 'open global trading system' that was 'efficient.' This creates a 'higher bid under commodities because every countries are like we need to have oil. We need to have gas. We need to have our own refineries.'

The concept of a 'safe haven' investment is a moving target, with different assets performing differently depending on the crisis. In the current inflationary war environment, traditional safe havens like US Treasuries (due to fixed coupons losing value) and even gold (sold to meet margin calls) are not performing as expected. The US dollar, however, remains a primary safe haven due to its liquidity and the perceived stability of the US government, but its long-term reserve currency status faces challenges from internal US issues and rising global competitors.

Treasuries aren't working because 'a war is inflationary.' Gold isn't working because 'people need to sell their winners to pay their margin calls.' The 'only thing that's been working, weirdly enough, is just the US dollar because when you panic... you want the most liquid thing in the world.'

The Iran war creates a strange distributional moment for oil-producing nations. Gulf States, despite surging oil prices, face a 'GDP catastrophe' because they cannot ship their oil in sufficient volume due to the conflict's impact on shipping routes. Conversely, Russia benefits significantly as it faces no geographical or political constraints on selling its oil, allowing it to capitalize on higher global prices. This shift in economic power has ripple effects, potentially impacting global investment flows from sovereign wealth funds.

Gulf economies are in a 'very strange situation' where their primary export is surging in price 'and yet everyone expects their economies to slide.' Russia is in a position where 'the price of its main export oil is surging... There are no constraints geographically on its ability to sell its oil and there aren't really any constraints politically.'

Beyond oil, the Iran war is severely disrupting the supply of niche but crucial industrial commodities like helium and fertilizer. Helium, vital for semiconductors and other high-tech applications, faces supply constraints from the Gulf with no obvious substitutes. Fertilizer, particularly urea, is experiencing a crisis during planting season, directly linking to future food inflation. These disruptions highlight the fragility of global supply chains for specialized goods, with potential 'jolts' to markets if major manufacturers reduce output.

The war is 'creating a fertilizer crisis like never before,' impacting 'planting season' and leading to 'food inflation.' Helium, important for 'semiconductors and a few other things,' faces supply issues from the Gulf with 'no obvious substitute.'

Israel's political trajectory, particularly its increasing illiberalism and the inclusion of extremist elements in government, poses a significant challenge to its relationship with liberal-minded American Jews. This shift, driven by internal dynamics and the rejection of past peace opportunities, creates a 'Pandora's box' where these new political forces are difficult to dislodge. The growing divergence between the 'lived experience' and political outlook of American Jews (liberal) and Israelis (more Middle Eastern, power politics-focused) threatens to erode crucial support for Israel.

Goldberg warned in 2013 that if Israel becomes 'more of a theocratic totalitarian style state, how could the liberal-minded American Jews support that?' Netanyahu 'opened up Pandora's box by bringing in people into the government who never would have been allowed into a previous Israeli government.'