In last week‘s article, I wrote how I believed that the Middle East conflict between Israel and Iran would de-escalate quicker than many would expect.
On Sunday, I was at a local indoor amusement centre with my son when Woody messaged me, ‘Trump takes out Iran’s nuclear capability. Boom.’
I paused.
What? Serious?
I checked the news headlines and saw it. In his characteristic grandstanding tone, he announced the completion of the mission and congratulated the US warrior who participated in it. He then ended the announcement with ‘NOW IS THE TIME FOR PEACE.’
My eyes widened. Hmm… how is this going to lead to peace? Wouldn’t Iran be fuming and seek vengeance?
I decided to scroll through a few news articles to get a handle on it.
I found one that detailed the response from the Iranian media.
When I read it, I realised that yes, things should likely blow over after a few days…
January 2020 reprise
I’m not sure how many of you still remember that fateful day of 3rd January 2020. A US drone launched missiles at an Iranian convoy near Baghdad airport, killing Iranian elite general Qassim Soleimani.
Deep-seated tensions exist between the US and Iran, whether direct or through their respective allies. At that time, the US and Iran clashed over the Iraqi government with the two countries taking opposite sides.
The assassination of the Iranian general and his convoy caused the world to hold its breath. Many accused President Trump of risking World War 3 with this move. Especially when President Trump boldly declared that the US military was responsible for this attack.
The world braced for Iran to retaliate and the counterstrike by the US would lead to a massive conflict.
What Iran did afterwards surprised many. It launched more than a dozen ballistic missiles at two Iraqi air bases that housed US forces a few days later. President Trump announced that no one was hurt by the strike as the occupants left hours beforehand. The Ayatollah and the Iranian military had contacted the Trump administration and informed them of their plans.
Was there a World War 3 in 2020? No.
A symbolic gesture and then time
to move on
As I read about the Iranian media reporting that the nuclear facilities were evacuated hours before the bombing, I realised what happened.
The US and Iranian administrations talked. They must have haggled over the terms of engagement.
The Trump administration must have indicated to the Iranian regime that the nuclear facilities have to go. The Iranian regime relented, but likely for a deal they couldn’t refuse.
We don’t know exactly what the deal is. That may reveal itself in the coming few weeks.
In return, the Trump administration gave the Iranian military a concession on where they could launch their retaliatory strike.
That was why we saw a muted response from Iran after the nuclear facilities bombing. They launched a few rockets into the US bases in Qatar and then that was it.
The US then brokered a ceasefire between Israel and Iran on Tuesday. However, like most ceasefires, the two sides didn’t leave the table without leaving a mark. It’s like a teacher bringing together two brawling children in the playground, forcing them to shake hands, and they land one or two cheap shots at each other before parting ways.
The dawn of a new global order and all eyes on the Federal Reserve
We might have just witnessed an example of how the US will manage global affairs from here. Rather than leaning in favour of its allies and aggravating a conflict, it could come in between conflicting nations to broker a deal and minimise bloodshed.
Perhaps the America First agenda will prevail, leading to the US intervening in regional conflicts if there are signs of it spiralling out of control.
That is my optimistic read of it. It would hopefully result in less forever wars and more regional stability.
While there are fears that Iran could still decide to close to the Strait of Hormuz and cripple the supply of oil to Western nations, the price of oil no longer reflects that.
Last week, the US Federal Reserve met and announced it would leave the Federal Funds Rate steady amidst the uncertainty around the economy and the Middle East.
That call looked reasonable while oil spiked. But not anymore.
The Federal Reserve is now looking increasingly behind the curve as inflation proved to be slower than expected.
As a regular reader, you know that the Federal Reserve’s game is up. They were never about being independent nor is their track record of providing stability to the financial system particularly good.
With the Trump administration breathing down its neck and the Congress sitting on an Audit the Fed Bill, it is clearly on notice.
We may even witness the unthinkable – the end of the Federal Reserve as we know it. It’s long overdue anyway.
But what would come afterwards?
You may know that our resident geopolitical expert, Jim Rickards, has been monitoring developments in the monetary system, among other things. He is expecting a monumental change in this area possibly as early as next year.
It has something to do with gold, but not about buying physical bullion, ETFs or gold mining stocks.
Curious about what he’s identified? Why not check out this presentation?
God bless,
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Brian Chu,
Editor, Gold Stock Pro and The Australian Gold Report
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