Lysander Spooner said it plainly in 1867: the Constitution has no authority over anyone who never consented to it.

At the time, people thought he was being provocative. A century and a half later, the evidence is on his side.

The document that was supposed to limit government power has become the very thing it was designed to prevent — a rubber stamp for whatever the political class decides to do. The Bill of Rights is still printed. It’s just not particularly enforced. And the gap between what the Constitution says and what Washington actually does has grown so wide that at some point you have to ask Spooner’s question: Was the document ever really in charge?

Let’s go through the evidence.

The First Amendment: Free Speech, With Exceptions

The text is unambiguous. “Congress shall make no law abridging the freedom of speech.” Not “limited law.” Not “reasonable law.” No law.

What we have instead is the Espionage Act of 1917, which has been used to prosecute journalists and whistleblowers. Section 230 pressure campaigns where the federal government leans on private platforms to remove content it dislikes — and calls it “misinformation.” The Treasury Department’s OFAC sanctions list makes it illegal to publish certain information about designated entities. Campus speech codes are blessed by federal funding conditions.

None of this is directly banned. It never is. The modern state has learned that you don’t need to repeal the First Amendment. All they have to do is build a suppression infrastructure around it and call it something else.

In No Treason, Spooner argued the Constitution’s protections were only as good as the willingness to enforce them. When the enforcers are the violators, the document is rendered useless.

The Fourth Amendment: The Right to Privacy, Mostly Gone

The Fourth Amendment reads, “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated.”

Then came the insidious third-party doctrine. In 1979, Smith v. Maryland held that information you share with a third party — a phone company, a bank, an internet provider — carries no Fourth Amendment protection. You “voluntarily” handed it over. The government can have it without a warrant.

In 1979, that meant phone records. In 2025, it means your location data, financial transactions, search history, and your messages. All of it sits with third parties. And since it does, with the right paperwork, all of it is accessible without the warrant the Fourth Amendment explicitly requires.

Exposed by Edward Snowden in 2013, the NSA’s bulk collection program collected the phone records of virtually every American. The FISA court approved it. The legal theory was that because the data sat with telecoms, there was no Fourth Amendment issue.

The Founders wrote the Fourth Amendment because the British used “general warrants” to conduct fishing expeditions through colonists’ papers. The NSA program was a general warrant for every American, running continuously, indefinitely. The Constitution said this was the one thing the government could never do. The government did it anyway, got a secret court to bless it, and kept it classified for a decade.

Spooner’s framework handles this cleanly. He argued that unjust law is no law at all — that legislation which violates prior natural rights has no moral claim to obedience. The FISA court didn’t make the surveillance constitutional. It made it legal. Those are different things.

The Fifth Amendment: Takings and the Death of “Public Use”

“Nor shall private property be taken for public use, without just compensation.”

Two qualifiers. Public use. Just compensation. The Founders were specific because they knew what governments do with vague language.

For most of American history, “public use” meant roads, bridges, and military installations—things the public actually used.

Then came Kelo v. City of New London in 2005. The Supreme Court held that the government could seize private homes and transfer them to a private developer because the development might generate tax revenue. The public benefit was theoretical. The seizure was real. Susette Kelo’s house — the one she’d painted pink in defiance — was bulldozed. The development was never built.

The Fifth Amendment said “public use.” The Court said “public benefit.” One word changed, and the constitutional protection for private property effectively disappeared. Any government that wants your land badly enough can now find a developer, project some tax revenue, and take it.

Spooner saw this coming. His argument about legal monopolies — that government routinely transfers wealth from private citizens to politically connected interests under cover of law — is precisely what Kelo institutionalized.

The Sixth Amendment: The Right to Trial, Quietly Abolished

The Sixth Amendment reads, “In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury.”

In all prosecutions. Not most. All.

Today, roughly 97% of federal convictions are obtained through plea bargains. There is no trial. No jury. No public proceeding. A prosecutor presents a defendant with a choice: plead guilty to a lesser charge, or face trial on the full indictment — which, given mandatory minimum sentencing, could mean decades in prison. Most people take the deal.

Most Americans have been priced out of the constitutional right to trial. Built up through legislation from the 1980s onward, the mandatory minimum sentencing system turned the right to trial into a trap. You can exercise it and risk catastrophic punishment. Or you can waive it and go home sooner.

Spooner identified this in An Essay on the Trial by Jury. He argued that the jury was the citizen’s last check on prosecutorial and legislative overreach. Remove the jury, and the state can enforce any law it likes without ever facing a citizen veto.

The Tenth Amendment: The One That Doesn’t Even Pretend Anymore

The Tenth Amendment reads, “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”

This was supposed to be the hard limit. The federal government has specific, enumerated powers. Everything else belongs to the states or the people. That’s not a suggestion. That’s the structure of the document.

The Commerce Clause killed it. Starting in the New Deal era, the Court ruled that Congress could regulate virtually any economic activity because that activity could, in theory, affect interstate commerce. In Wickard v. Filburn (1942), a farmer growing wheat on his own land for his own consumption was found to be affecting interstate commerce because his self-sufficiency reduced his purchases from the market. It doesn’t get more ludicrous than that.

The Tenth Amendment was reduced to a bunch of clauses with no teeth. Today, the federal government regulates education, healthcare, housing, agriculture, local policing, and school bathroom policies. These powers aren’t enumerated but are justified through Commerce Clause reasoning. The Founders didn’t intend this.

Spooner’s response to this would be the same as his response to everything: show me where the people consented. Not their representatives. Not their grandparents. Them.

The Through Line

Spooner’s great insight was that the document cannot enforce itself.

Every protection has been hollowed out the same way: redefine the terms, construct a legal doctrine that technically complies with the text while gutting the substance, and find a court to bless it.

Free speech applies “except in these categories,” like hate speech (whatever that is).

Unreasonable searches become reasonable when a third party holds the data.

Public use means public benefit.

The right to trial means the right to a trial you’d be insane to actually exercise.

The document is still there. It gets cited constantly — usually by the side trying to expand government power — to explain why the expansion is, in fact, constitutional. The Constitution has become a tool for justifying what the state wants to do, not a limit on it.

Which is exactly what Spooner said would happen.

He argued in No Treason that a constitution which the government interprets, enforces, and adjudicates cannot limit the government. The fox doesn’t guard the henhouse by constitutional design. The people who benefit from power decide what the limits on power mean.

Though anarchocapitalists have adopted Lysander Spooner, he wasn’t arguing for anarchic calm (or chaos, for that matter). He merely wanted an open conversation. If the Constitution doesn’t actually bind the people who wield power, let’s stop pretending it does. Start asking what real limits on power would look like and who would actually enforce them.

Wrap Up

The Fifth Amendment was supposed to protect property. It doesn’t. The dollar is legal tender by federal law. Its value is managed by an institution (the Fed) the Constitution doesn’t mention, and the Founders didn’t authorize. The Fed exists in the same constitutional gray zone as everything else. It’s technically sanctioned by Commerce Clause logic, practically beyond any limit the document anticipated.

Lysander Spooner’s solution was this: First, stop treating the Constitution as a living guarantee. Then, start treating it as a historical document that tells you what the government promised and failed to deliver. Finally, act accordingly.

The Bill of Rights is worth reading. It tells you what they took from you.

The post The Bill of Rights Museum appeared first on Daily Reckoning.

With the Iran war winding down, now is a good time to review what we’ve learned.

Unless something catastrophic derails the deal, the Strait of Hormuz will soon be fully open again.

Oil, natural gas, fertilizers, and more will once again flow freely through the world’s most critical naval chokepoint.

Today, let’s review what we learned about energy and the global economy from this conflict.

Exaggerated Damage?

In mid-March, when Iran struck Qatar’s massive Las Raffan liquified natural gas (LNG) hub, the situation looked dire.

LNG is a critically imported fuel and feedstock. It is used to generate electricity, is a key ingredient to make fertilizers, and provides heat and cooking fuel.

Qatar produces about 20% of the total world supply of LNG. So when Iranian missiles struck their primary hub, it looked bad.

Qatar’s Ras Laffan LNG hub

Qatari leaders came out and said at least 17% of output was down, and it would take 3-5 years to repair the damage.

Additionally, the shutdowns caused by the Strait being closed reportedly caused all sorts of problems that would take a long time to fix.

But now, we’re hearing a more optimistic story. Bloomberg energy specialist Javier Blas reports that Qatar’s LNG output will be back to 80% within 2 months.

Source: X

Now, we won’t know how bad the damage to Gulf oil wells and refineries is for a while. But in the heat of the moment, some of these damage estimates were probably too severe.

In hindsight, this makes sense. Qatar and other major energy producers had an incentive to overstate damage. “You’ve already damaged us enough, we won’t recover for years!”

The deception, if it was one, worked for both sides. Iran got to claim precise and asymmetric missile strikes, while the countries escaped without extreme lasting damage.

China: Tougher Than We Thought

There was a theory floating around at the beginning of this war that it was essentially a move against China.

The idea was straightforward. Since China normally imports 11 million barrels of oil per day, largely from the Persian Gulf, a major war and possible shutdown of Hormuz would cripple the country.

I don’t think the Iran war was primarily aimed at China. But if it was, it failed.

Beijing was clearly prepared for such a situation. Here’s are 3 factors which prevented shortages in the country:

• Electric cars – More than half of new cars in China are now electric
• Oil reserves – China has the largest oil reserves in the world at 1.5 billion barrels
• Coal-to-liquids – The country has made huge strides in converting coal to diesel and other petroleum substitutes

Before the war, the perception was that China’s Achilles’ Heel is Middle Eastern oil. But the country didn’t even dip into its oil reserves until mid-May, and even then they were drawing less than the U.S., at just half a million barrels per day.

Last month, China even began to export jet fuel and diesel to neighbors who faced severe shortages. This was… unexpected.

Over the past decade, China has electrified its transportation networks, built pipelines from Russia, developed its own oil industry, and stockpiled a huge amount of crude.

China is preparing for a world in which it no longer requires huge volumes of oil from the Middle East. This is a very important takeaway. It makes the country more resilient to energy shocks, and less vulnerable to economic warfare.

Worst Case Scenario – Rejected?

At the start of 2026, WTI Oil (American crude standard) was trading at about $57 per barrel. Today we’re at around $77.

It will take a while to restore traffic in the Strait of Hormuz to pre-war levels. There are mines to be cleared, and logistics to be worked out.

Then the world will need to refill strategic oil reserves and storage tanks. So oil prices are going to be higher than normal for a while to come.

But we didn’t reach the catastrophic shortages some (including me) thought would happen. Oil didn’t hit new highs, or stay above $110/barrel for long.

However, the spike in oil, fertilizer, and gas prices did hurt both consumers and commercial interests.

It put a serious strain on emerging economies, and we won’t know how badly the fertilizer shortages will affect food production for a bit.

Inflation will likely remain elevated for some time to come. But it looks like we escaped the worst-case scenario.

That doesn’t mean that stocks will keep rising forever. We’re getting a gnarly selloff today, and it could continue for a while. I continue to like hard assets, precious metals, and emerging markets over hot sectors like tech.

Israel, Lebanon, and Iran

Now, it’s still possible that something derails the peace deal and we re-enter crisis mode. Israel, our primary partner in the war, is clearly not happy with the proposed deal.

Personally, I think these issues will be figured out without a return to active conflict. There’s too much at stake. BUT… if anything goes wrong, it will likely involve these issues.

As part of the memorandum of understanding (MOU), the war is supposed to end on “all fronts, including Lebanon”. But Israel says these operations are necessary to prevent Hezbollah from striking settlements in the North of the country, and IDF forces near the border.

There is clearly tension developing between President Trump and Israeli leadership.

Source: X

Trump’s statements are interesting, and a bit worrying. What is this about letting “Syria take the lead against Hezbollah instead”?

That would just be a different kind of war. I suspect he’s frustrated that the Lebanon vs. Israel issue is a main issue holding up a deal, and is looking for a different path. But Iran is clearly determined to protect its Hezbollah allies/proxies. Syria will likely want nothing to do with fighting Hezbollah.

President Trump is clearly motivated to get the Iran issue resolved ASAP. That’s the important thing. Midterm elections approach. And if Hormuz stays shut much longer, we will actually reach those crisis levels. So I believe the deal will get done.

Still, it’s important to review this issue. If anything goes wrong, it will likely revolve around it. However, I doubt we’ll return to a situation where Hormuz is closed and the war restarts fully. We’re on a path to a (more) peaceful period in the Middle East. For a while, at least.

What to do with Oil Investments?

I’ve written quite a bit about Brazilian oil giant Petrobras (PBR, PBR.A). Most oil majors have fallen quite a bit from their wartime highs, including PBR.

But a falling oil price isn’t actually that bad for Petrobras. Due to the way the Brazilian government sets gasoline and diesel prices in the country, Petrobras has been forced to essentially subsidize the entire country.

Now, with falling oil prices, that pressure will be relieved. Yes, Petrobras will earn less from exports. But they’ll still be making plenty with a ~$40 all in cost per barrel.

Personally, I’m holding onto Petrobras and plan to reinvest the dividend for years to come. I might lighten up a bit sometime this year, because it became a rather large position, but this is one I plan to hold for years to come. It’s a nice pair trade with my gold and silver miners.

Needless to say, we’re keeping a close eye on the Iran situation and will keep you all well updated.

The post Worst Case Scenario – Rejected appeared first on Daily Reckoning.

Silt and anchovy scales.

Sometimes the greatest scientific discoveries start with the simplest things.

Today, meteorologists are worried about a severe global event. It’s part of an atmospheric pattern that wasn’t recognized until the late 1960’s. But it has had major economic impact over the decades. And it will have an impact this year if it’s as bad as predicted.

But the story starts with marine mud and frustrated fishermen.

Geologists saw something odd in sediment cores taken off the West coast of South America. The cores looked like layer cakes. One layer of mud, another of fish scales…repeated through the core.

The layers reflect massive shifts in weather patterns. But it wasn’t understood until the late 1960’s. That’s when Jacob Bjerknes, a Norwegian American meteorologist, linked the marine sediment record with atmospheric observations. He recognized that the ocean and atmosphere acted in a feedback loop that had dramatic impacts on the land.

The formal term is the El Niño, Southern Oscillation, or ENSO. It gets its name from Peruvian fisherman. They called the warm currents that sometimes occurred around Christmas “El Niño”.

What Bjerknes described was the change in surface water temperatures in the Pacific Ocean. When warm water hits Peru around Christmas, it rains. A lot. The rivers flood down from the mountains and drop an impressive amount of sediment.

The image below shows the warm Pacific from the 1998 El Niño event, compared to the cool period (called La Niña):

The Peruvian fishermen hated these warm currents, because the fishing was terrible. The warm water and strong rains disrupted the local food chain.

Normally, the cold, nutrient rich Humboldt current wells up against the coast. The nutrients feed massive schools of anchoveta and other bait fish. During these periods, the sediments become silvery layers of fish scales and biological debris.

That’s how geologists learned to track atmospheric events. It was a huge breakthrough for scientists. But it also had economic implications.

Major Impact

In modern times, two massive El Niño’s, in 1972 and again in 1982, devastated fish populations. Before 1972, Peru was the largest fishing nation in the world. In 1970, the country caught 12 million metric tons of anchoveta. Then a massive El Niño hit and crushed the fishing industry. The combination of over-fishing (to make up the catch) and the weather devastated the fishery.  In 1973, they landed 2 million metric tons. This caused a global fish-meal crisis. It drove agricultural feed up 250%.

However, the 1972 version was just a warmup. The real monster El Niño hit in 1982. This was an unprecedented weather disaster. Warm tropical waters pushed further south than ever before. The warmth stayed so long that it either killed off or forced cold water fish to migrate to other locations.

This time, the damage wasn’t limited to South America. Fishermen along the eastern side of the Pacific saw reduced catches of critical species. Tuna, smelt, mahi mahi, barracuda and other species suddenly show up in places they are never seen.

Here’s what the National Oceanographic and Atmospheric Administration says about strong El Niño and fish populations in California:

A major consequence of an El Niño is the loss of commercially important species where they traditionally occur. A notable example is the movement of the market squid to cooler waters to the north, away from established fisheries in California. This phenomenon is also true for many rockfish species that move from nearshore areas to deeper or more northerly and cooler waters. Pacific whiting likewise shift northward from their spawning and feeding areas off California, Oregon, and Washington to the more temperate latitudes centered off Vancouver Island.

And that’s only part of the economic impact of a strong El Niño. As we mentioned earlier, El Niño brings rain to the west coast of Peru. That can disrupt mining, along with fishing. But it does more than that. Here’s a general map of weather patterns associated with El Niño (from NOAA.gov):

The international monetary fund (IMF) tracked the real impact of El Niño on GDP growth around the world. They found that countries like Australia, India, Indonesia, New Zealand, Peru, and South Africa face a short-lived fall in economic activity in response to an El Niño.

The study also noted that El Niño brings strong storms to Chile, which disrupts copper mining. Japan sees more typhoon strikes.

El Niño does have some benefits for North America. California usually gets more rain, which helps the farmers. The Northeast sees warmer winters, so it uses less energy. And the east coast sees fewer hurricanes. In fact, there are zero recorded major hurricane strikes on the East Coast of the U.S. during El Niño…except Florida.

Hurricane Andrew struck Miami as a massive category five storm in August 1992. It’s unusual to have the first named storm that late in hurricane season.

If the forecast severe El Niño comes to pass, we can expect food inflation on things grown internationally. If history is correct, coffee, palm oil, and wheat will go up in price. And we can expect some local problems from flooding and severe weather.

It’s not enough to speculate on just yet, but there could be some short-term trades from this oddball weather phenomenon. We’ll keep an eye out.

The post Silt, Anchovies, and Economic Disaster appeared first on Daily Reckoning.

“The scale of what is to come has no precedent,” wrote Elon Musk in a recent post on X/Twitter.

And unless you’ve been quite isolated – maybe you just returned from a trip to Antarctica – you probably know that last week, Mr. Musk launched an initial public offering (IPO) for his company, Space Exploration Tech Group, aka SpaceX (SPCX).

The company raised $85.7 billion, a record that breaks all such records. Indeed, as I noted in a prior Morning Reckoning, last week was “SpaceX Week.”

Markets loved the SpaceX debut, “a Really Big Thing” as they say in show biz. Shares priced-out to give the company a market cap north of $2 trillion by close of business last Friday, and this morning (aka “Tuesday”) SpaceX is on track to a market cap larger than that of Amazon.

Below, I’ll lay out some other Really Big Numbers that offer more perspective on SpaceX. Plus, I’ll offer a few ideas on how to hitch a ride on this shiny new rocket and tech play. Definitely, my goal is to help lower the risk of getting burned in this very hot phenomenon.

But for now, it’s fair to say that Elon is the Big Boy of Space.

The Big Boy Heritage

Right away, I admit that I have “Big Boy” on my mind, and no it’s not Elon and SpaceX. That is, I’ve been following the real Big Boy, namely engine No. 4014 of the Union Pacific Railroad Corporation (UNP), as it makes an America 250 cross-country tour.

Union Pacific’s Big Boy locomotive. Credit RailwayAge.com.

Big Boy is a working, smoke-belching steam locomotive (see above). Built in 1941, No. 4014 was one of 25 built in Schenectady, New York. He tips the scales – i.e., loco and attached tender – at nearly 1.2 million pounds. And with 16 massive drive wheels and impressive traction, this muscular machine hauled freight for UPac within the Rocky Mountains throughout World War II and beyond, until retirement in 1962.

In many ways, Big Boy represents the epitome of railway engineering and tech of its era. As with, say, ships, airplanes, electronics, munitions, and much else, the circumstances of World War II offered a moment in time that allowed people to push the envelopes of engineering and design; in this case steam-locomotive tech after 130 years of development.

And looking back… Hey, when it comes to Big Boy and his ilk, ne plus ultra.

But as fate would have it, diesel-electric drive also improved dramatically during the war, and for a long list of reasons Big Boy and his 24 brothers were the last of their mighty breed.

Now, only eight of these locomotive sets remain, and all were in museums until 2019 when UPac pulled Big Boy from a long respite in Pomona, California. Then came a complex restoration that involved tearing the iron giant down to the last nuts and bolts, and a faithful rebuild that strived for historical accuracy, excepting that Big Boy now burns oil-based fuel, not coal.

Based in Cheyenne, Wyoming, UPac rolls out Big Boy for special events but also, on occasion, tasks the old guy to pull freight as well. And now, as 2026 unfolds, UPac has the train on a national tour to celebrate America 250.

Big Boy route map. Credit Union Pacific Railroad.

As you can imagine, No. 4014 is eye candy to rail fans young and old. By the thousands – even tens of thousands, in some places – people line the tracks just to watch the old guy roll past. In many ways, it’s a primal desire to see and smell smoke and steam, and hear that glorious, deeply sonorous whistle… unlike anything else! And it’s pure Americana to watch that powerful train rumble by, with flags snapping in the breeze right up front.

And if you can’t get down trackside to witness the spectacle, of course You Tube has many well-made videos of this unique moment in rail history.

All of which brings me back to… SpaceX!

The New Big Boy

You want “Big”? Well… last week, Elon Musk delivered Big. The SpaceX IPO raised $85.7 billion. That’s massive. That’s huge. It’s the largest IPO in history. It dwarfs even Saudi Aramco’s 2019 IPO that raised just over $25 billion.

And SpaceX’s raise is real money, meaning cash in the treasury. No vaporware here.

Pre-IPO, that $85.7 billion was someone else’s cash, sitting in other people’s bank and brokerage accounts or money funds. And SpaceX sold shares to individuals and institutions. Buyers wired the money to SpaceX; well… to SpaceX’s banks.

So now, a massive wad of hard cash sits in SpaceX’s corporate accounts. Musk and his managers can hold it over time, or spend it on more rockets, more Starlink, more Starship development, other tech, and whatever other new ideas or growth they see fit to fund.

Meanwhile, investors traded cash for ownership in the company; although the overall float is less than 5% of authorized shares. Which means, to be sure, that Musk and his team still run the entire show. He’s driving the locomotive, so to speak. He’s the new Big Boy.

And has there ever been a corporate treasury with this kind of moolah just sitting there, awaiting its fate? What can you do with this kind of money? Well, compare the current company cash stash versus historical cash burn on other SpaceX business units.

SpaceX’s current cash versus past R&D/spending. Various sources.

As the graph shows, SpaceX now has way more free cash in the bank than it ever spent on all of its past programs put together. That $85.7 billion is more than the company spent to develop the Falcon/Dragon system, Starship, Starlink, and even its AI division, which – by the way – paid for itself with its own capital raise.

In other words, with all the new cash on hand Musk and SpaceX could reproduce the company’s past efforts twice over; but that’s just a math example because SpaceX already has its successful line of launchers, a satellite constellation, advanced space vehicles in development, an AI angle, and much else up its sleeve.

So no, the new cash is for new ideas and investments, not operations. It’s enough cash to develop the company’s own brands of semiconductors, processing networks, AI systems, energy systems, launch them into orbit, and throw in a moon base and Mars efforts.

Meanwhile, it’s not as if Musk and SpaceX will have to do it all on their own dime, either (or “the shareholders’ dime,” to use a quaint old phrase).

After all, SpaceX rings its own cash register. It operates via significant revenues from its current range of businesses. Among other things, SpaceX is a key vendor to the U.S. government for space launches, communications, and even designing moon programs for NASA and the Department of War.

In other words, much of what SpaceX will do in the months and years to come will be more than paid for by what business school grads call “customers.” Maybe it’s a Paradigm Press subscriber with a Starlink terminal on the roof, or a mining company in remote Yukon or Alaska that uses Starlink to process data, or perhaps it’s Space Force working with SpaceX to place Golden Dome missile defense systems up in the sky.

SpaceX has its own money.

How Big is Big?

And of course, while we’re talking about “Big” things, SpaceX doesn’t do locomotives like old Big Boy; but it does do Big Rockets. In fact, SpaceX’s Starship system is larger than NASA’s Saturn V, which took U.S. astronauts to the moon, 1969 – 72.

SpaceX Falcon 9 and Starship, versus 1960s era Saturn V. Credit InspiredPencil.com.

All this, and SpaceX’s rocket engines, fuel systems, guidance, structural design, return-to-land capability and much more are things that would have been Star Trek science fiction to NASA in the 1960s and 70s.

In many ways, and just as Big Boy the locomotive was pinnacle steam tech in the 1940s, SpaceX has created pinnacle levels of rocket, satellite, communications and control tech for this era; and that pinnacle still has more growth ahead. Or in other words, nobody will be putting SpaceX systems into museums any time soon.

Plus, consider SpaceX’s astonishing efficiency in developing its tech. For example, the company spent under $5 billion to develop Falcon 9, which has already reshaped the entire aerospace sector by dropping cost-to-orbit by 95%.

In comparison, NASA, the U.S. military, foreign rocket wannabes like Europe’s Arianne, and even Russia and China have poured far more money into developmental rocket systems for far fewer launches with far less effect.

Or compare how, say, California has pumped something like $20 billion into so-called “high-speed rail,” and yet there’s not a single lane of suitable track, let alone a bullet train across the Golden State. Indeed, even old Big Boy the steam locomotive offers more efficient capital spending for rolling down the rails than California and its high-speed government boondoggles.

Consider that SpaceX can launch massive rockets into the high atmosphere, place satellites into orbit, and still bring home and land stages that fall at supersonic speeds out of the sky, all for under $5 billion; but California can’t lay a single rail in the Central Valley.

Looking Ahead at SpaceX

Okay, so SpaceX went public and now has a market cap north of $2 trillion, perhaps headed to $3 trillion soon. What do you do? Well, on this point I’ll crib from my colleague Davis Wilson of our sister e-letter The Million Mission. And this graph outlines his forecast:

In other words, SpaceX will go through five phases:

Phase 1: IPO hype. In all the excitement, many people and institutions lined up to buy shares right out of the gate. And yes, the share price rose from the IPO price. At the outset, there’s plenty of upward pressure on the stock.

Phase 2: Insiders sell. In the not-too-distant future, watch for venture capital and SpaceX employees to unload at least some of their shares. They’ve been patient and want some cash. According to the lockup structure and timetable, we’ll see waves of selling as different groups of people reach their release dates. And when they sell, buyers will move in; but early-on, the market and share price be more synthetic than true price discovery based on fundamentals like cash flow, internal costs and expenses, and of course earnings.

Phase 3: Investors lose interest. Believe it or not, and for all the SpaceX hype, the news cycle will roll on down the tracks to the next “hot” story. Some other Huge Company will do an IPO with all the attendant bells and whistles. And SpaceX could enter into a “dead money” period where a broad segment of investors lose interest.

Phase 4: Institutions buy. Meanwhile, many large funds can’t or don’t buy meaningful positions immediately after an IPO. They avoid hype and inflated prices, and just watch the dust settle. And once the media and retail investors are focused on other shiny things… they accumulate during the doldrums.

Phase 5: Retail buys back in. Eventually, SpaceX will become a new darling. People who ignored the stock in early days will dive in. And this is where investors are at risk of chasing momentum.

What to Do Now?

Along the way, Paradigm Press editors – including me – have followed SpaceX, but also counseled patience over the IPO. Watch, wait, let the hype play out, let the up-down cycles pass along; and eventually we’ll find our opportunity.

Along the way, though, there’s much that is SpaceX-adjacent. In particular, I’ve been looking at companies that supply critical metals and materials not just to SpaceX, but to other players whose satellites SpaceX launches into orbit.

One way or another, rocketry and satellites require aerospace grades of aluminum, titanium, beryllium, and innumerable other metals and materials; certainly, rare earth elements (REs) that are critical to alloys, magnets, phosphors, electronics and more.

Along with my colleagues Matt Badialli and Dan Amoss, I’ve recently outlined several great and promising names in the “space metals” sector, published and discussed in Strategic Intelligence and related letters.

Meanwhile, we’re watching history unfold with SpaceX, just as you can see history on display with Big Boy, currently at the Steamtown National Historic Site, near Scranton, Pennsylvania.

Big Boy No. 4014 alongside his brother, non-working engine No. 4012, at Steamtown National Historic Site. Credit Dept. of Interior.

And while there’s always more to say, that’s all for now. Thank you for subscribing and reading.

The post Elon: The Big Boy of Outer Space appeared first on Daily Reckoning.

The last few months have been brutal for gold and silver bugs.

But as the Iran war winds down (fingers crossed), the worst is behind us. There’s a good chance that gold, silver, and miners have all bottomed and will now surge to new highs over the next year.

The largest gold miner ETF (GDX) peaked exactly as the Iran conflict began in late February.

This was no coincidence.

Miners have been on a downhill slide ever since.

Source: Google Finance, with my notation

The war was a double-whammy for the precious metals (PM) space.

As oil prices spiked, costs jumped for mining stocks. Extracting metals from the ground requires lots of diesel fuel.

So that was the first hit.

Then came the second hit. A few countries in the Middle East were forced to sell a portion of their gold reserves. Their primary revenue source (oil and gas) was cut off. In some cases, countries went from billions of dollars in revenue per day to zero.

And some other countries, even ones without significant oil revenue, like Turkey, were forced to sell gold to cover rising expenses and defend their fiat currencies.

Gold served its purpose well, rescuing countries from economic destruction. This is exactly why countries (and people) should own PMs.

Miner Margins

Gold fell from a peak of near $5,500/oz to $4,330 today. Silver was trading at around $90 as the war began, and is sitting around $70/oz today.

That’s a hit to precious metals bugs by itself. But most of us own mining stocks too.

Gold miners that were making a profit of nearly $3,300 per ounce of gold at $5,000 were suddenly making a profit of around $2,100.

Higher fuel costs, lower realized prices on metals. Still very lucrative, but not quite so much as they were.

So investors with significant exposure to miners and metals (like yours truly) took a hit. Still, even after the selloff, gold is still up $2,000 an ounce over the past 2 years. Not bad.

Over the past year, the GDX gold miner ETF is still up 56%. But it was up well over 100%.

Buying Opportunity

If the Iran war is finished, miners and precious metals should rebound strongly from here.

The debt bubble is still building. Interest costs on global debt are still soaring. Inflation remains problematic.

I’m still holding my miners and metals. Today the GDX gold miner ETF rose 6% as of 2:10 pm ET. The SILJ silver miner ETF jumped 6.46%.

Gold is up 2.5% and silver by about 3%. A nice day. But if this is truly the end of the war, I think we’re going a lot higher.

Is the Deal Real?

A deal with Iran is scheduled to be signed June 19th in Switzerland.

It looks like it’ll probably happen. The active phase of fighting may be done.

There are still two big unanswered questions. Namely: Whether we can convince Israel to stop fighting in Lebanon, and what will happen with the upcoming nuclear negotiations.

However, it seems as if we’re headed towards some sort of resolution, even if it doesn’t last forever.

Hopefully the Strait of Hormuz opens up soon, and stays that way. Oil inventories and fertilizer stocks have gotten very low, but if it opens soon it looks like we’re going to avoid extreme economic damage.

Regular readers know my plan by now. I’m holding onto my miners and metals for at least another 3-5 years.

These precious metals bull markets tend to last a decade. And this recent run only began in 2022.

Given the size of today’s debt problems (120% U.S. debt-to-GDP vs 35% in the 1970s), this bull market could even last longer than the 1970s.

I suspect what we just experienced was a sort of early intermission of the PM bull market.

Nothing goes straight up. At some point, we were guaranteed a significant correction. Now we’ve got one. And I suspect it’s over.

The only thing that could spoil it at this point would be some catastrophic escalation in the Middle East. And at this point, I think both the U.S. and Iran have had enough war.

It looks like both sides compromised more quickly than I expected. Which I’m extremely happy to have been wrong about.

Now is a fine time to begin or add to existing gold/silver/miner positions. We’re buying at a nice discount, and this is still a world which calls for every portfolio to have a healthy helping of precious metals.

The post Gold Bugs: Get Bullish appeared first on Daily Reckoning.

We’ve been kicking around for two and a half centuries.

We went from the Thirteen Colonies to a global superpower. We went from expanding into the western frontier to Armstrong walking on the Moon.

And then — for a while — something got stuck.

I think we all felt it. Peter Thiel put it best:

“We wanted flying cars; we got 140 characters.”

He wasn’t wrong. From roughly 1970 to 2010, the most powerful civilization in human history optimized for the virtual and the frictionless.

We went from atoms to bits. Apps. Platforms. The “knowledge economy” — which was, if we’re honest, a polite way to rebrand forgetting how to build things.

Frederick Jackson Turner saw this coming in 1893. When the frontier closes, he argued, something essential about America closes with it. The restlessness. The reinvention. The bias toward the impossible.

He was right, too. For a while.

Then a South African-Canadian with a physics degree and a messiah complex decided to go atoms.

Hard atoms.

The hardest atoms that exist — orbital mechanics, reusable rockets, the most unforgiving engineering environment in the known universe.

The frontier didn’t close. It just moved to higher ground.

And just before the 250th anniversary of this magnificent, infuriating, inexhaustible republic — it’s going public.

Ticker: SPCX
Exchange: Nasdaq
Valuation: $1.77 trillion

The listing date is June 12th. Independence Day is July 4th. Twenty-two days apart.

The most consequential American IPO in history opens for business three weeks before the country turns 250.

That’s not a coincidence. That’s a timestamp.

Let’s be clear about what SpaceX actually is.

It’s not a rocket company. It isn’t a satellite internet company.

It’s not even, really, a technology company in the way Wall Street calls it.

SpaceX is what America looks like when it stops apologizing for its ambitions.

The original American project was an act of civilizational audacity. A handful of farmers, lawyers, and printers in Philadelphia decided the old order — the one that controlled trade routes, taxation, and the terms of human movement — was finished.

They were outgunned, outfinanced, and given no chance by the consensus of their time.

They gave the most powerful empire on earth the finger and made it stick.

Sound familiar?

When Elon Musk founded SpaceX in 2002, NASA gave him six months before he’d quit.

The aerospace establishment — Boeing, Lockheed, the whole cost-plus cartel bleeding the government dry — dismissed him completely.

Three rockets blew up, and bankruptcy was howling just outside the door. But the fourth one made orbit and changed everything.

The Founders didn’t win on the first try either.

This is what American reinvention actually looks like up close.

It’s ugly. It’s expensive. It fails publicly and spectacularly.

And then it works — at a scale and speed that leaves the old order standing in the rubble of its own certainty.

There’s a certain type of investor who looks at SpaceX at $1.75 trillion and sees a bubble.

They see Musk risk. Execution risk. Valuation risk. Geopolitical risk. They build their bear case in a spreadsheet and feel very smart about it.

They are making the same mistake people have made about America every single generation.

In 1776, the smart money was on the Crown. In 1863, the smart money was on disunion. In 1941, the smart money was on the Axis. In 1979, the smart money was on Soviet supremacy and American decline. In 2002, the smart money was on NASA and the cost-plus cartel.

The smart money has a perfect record of being wrong about America at the moments that matter most.

Because they always do the same thing: they look at where America is and extrapolate forward.

They never account for what America does — which is to reinvent itself, violently and repeatedly, the moment the old frontier closes, and a new one opens.

The America shorts never learn this lesson. They see the explosions and miss the trajectory. They see the valuation and miss the frontier.

SpaceX is not a bet on Elon Musk. It’s not even a bet on rockets.

It’s a bet on the oldest trade in financial history.

Going long America.

Happy 250th, America.

The post Going Long America appeared first on Daily Reckoning.

It’s SpaceX IPO day. As of 1:25 pm ET, stocks are up. And so is SPCX.

But there’s palpable tension in the air. Behind all the excitement, everyone knows reaching a deal with Iran remains critically important for the world economy, and stocks.

Every time President Trump makes an announcement about Iran, markets react violently. Up and down, depending on the message and tone.

Forgive me for imitating a broken record, but if the Strait of Hormuz remains closed much longer, economic chaos will be unleashed on the world. Inflation is jumping, and the effects of shortages have only just begun to hit.

So those of us hoping stocks continue to rise should still be paying close attention to the Iran issue.

Here’s where we stand today.

Optimism, But Little Trust

Yesterday, the market soared after President Trump canceled his planned strikes on Iran, and said a deal was (once again) right around the corner.

The President went so far as to say, “Time and place of the signing to be announced shortly”.

Source: Truth Social

That sounded extremely confident. But apparently, the deal still has kinks to be worked out.

This morning President Trump posted another message about the Iran situation. If it sounds familiar, it should.

Source: Truth Social

“Very dishonorable people to deal with.” There is little trust here, on either side. And that’s going to make a real, lasting peace deal very tricky. Especially one that re-opens the Strait soon.

Update From the Iranian Side

There is some reason for optimism about a deal. For the first time, an official Iranian government news outlet has stated the following. From the Islamic Republic News Agency (IRNA):

The general outline and text of the memorandum of understanding to end the war between Iran and the United States have been almost finalized and are awaiting the final decision of the decision-making bodies in Iran.

Ok, interesting. That’s the headline that’s floating around social media and getting everyone bulled up. And it does represent real progress.

However, I read the entire article (translated from Persian to English via Google). And there are… caveats:

It is clear that simply signing an agreement to end the war does not mean that the American and Israeli sides will abide by it…

In this regard, the possible signing of the memorandum of understanding to end the war is being carried out in complete suspicion of the other side and with the Iranian armed forces and people fully prepared to confront any breach of promise and deception. Officials of the Islamic Republic of Iran have repeatedly emphasized that “they have no trust in the American side and the signing of the memorandum does not mean the removal of suspicion and the abandonment of the country’s combat and defense readiness.”

Combined with Trump’s new post from this morning (second image from the top), I remain skeptical that a real deal will be signed soon.

We may get a ceasefire extension, or an agreement to “end the war” while negotiations are ongoing. But who knows when the Strait is going to open back up.

The Strait of Hormuz Issue

Both sides want a peace deal. But we both want our own version of a long-term agreement.

We keep hammering this point home. So forgive me for sounding repetitive.

We are still a long way from a real, lasting deal on the Strait of Hormuz and other key disputes. We know Trump wants total freedom of passage, and possibly even a role controlling the chokepoint.

But here’s what that Iranian state media article says regarding Hormuz:

Contrary to some strange claims in the media, Iran does not make any commitment in this text to hand over management or return the Strait of Hormuz to the other side before the US and Israeli military aggression.

The only issue mentioned is the normalization of passage through the Strait of Hormuz in the event of an end to the war, the establishment of maritime security by the coastal countries, the end of the illegal blockade and the removal of threats to the passage of commercial ships by the US and Israel.

So it sounds like if the war does end, Iran is willing to begin normalization of the Strait of Hormuz.

BUT that depends on Iran’s other demands being met. Including sanctions relief, frozen funds being released, and the U.S. leaving bases on Iran’s borders.

That’s a tall order. And I don’t see Trump agreeing to those terms.

Don’t get me wrong, some progress has been made. At least a deal is circulating and going back and forth. But we’re not on the verge of a miraculous resolution.

We remain in a similar situation as last month. Negotiations are ongoing (through proxies, not directly).

Trust is non-existent. And the world’s most important naval chokepoint, Hormuz, remains closed.

We’ll keep a close eye on this situation. If we move back into an escalation phase, it could certainly derail bullish action in stocks. And that remains a real possibility. In time, the Strait remaining closed could crush markets by itself.

In my most optimistic case, I could see Hormuz reopening in a month or so. But that will require compromise from both sides. And until we see otherwise, I’m highly skeptical on that front.

The post Iran: Deal, No Deal, Maybe Deal appeared first on Daily Reckoning.

Writing a newsletter about investing can be exhilarating.

When you’ve been pounding the table on an idea to readers, and it’s working, there’s nothing quite like it.

Helping our readers make money and navigate these crazy markets is our mission. So when we give readers our best ideas, and it goes really well, that’s a fantastic feeling.

And for a while, almost everything we like was going up. Gold, silver, miners, Brazil, oil, rare earths, etc.

We’re still up big on all these assets since we first covered them, but they’re now down significantly from the highs. Which is not nearly as much fun.

However, the decisions we make during these times are critical. Should I try to time the market, buy more, take profits, or just hold?

Here’s how I think about such decisions.

Trading vs. Investing

Whenever I invest in a new asset, I decide whether it’s a short-term trade, or something I plan to hold for a long time.

For me, anything less than a year is a trade. These could last anywhere from a week to 11 months.

With trades, timing is the tricky part. When a trade is working, I will typically scale out of it. Sell half once it’s up a certain amount, then let the rest ride for a while. It depends how durable the thesis is. All the editors here at Paradigm are excellent at this.

Anything longer than a year, I consider an investment. And I always aim to hold investments for a long time. I held Google from just after the IPO for 15 years before selling in 2019 (far too early, in hindsight).

I’ve had a few amazing trades that permanently moved the needle on my portfolio, but most of my biggest wins have been great assets held for a very long time. As Warren Buffett famously said, “When we own outstanding businesses with outstanding managements, our favorite holding period is forever.”

These days, many investors are too heavy on short-term trades and don’t allocate enough of their portfolios to long-term investments. I think it’s important to have a mix of both. Personally, about 80% of my assets are tied up in long-term ideas. The editors here at Paradigm Press also do a nice job providing long-term picks. Many of the positions in our various portfolios have been running for 4+ years, and are doing great. It’s one of the things that sets us apart from other publishers.

In the Daily Reckoning, I try to make it clear when I’m discussing ideas whether it’s an investment or a trade. But if I don’t specify, readers should assume it’s a long-term play.

Theory Meets Reality

When I started going heavy into gold and silver miners in early 2025, from the start it was a long-term investment.

The thesis is pretty simple. The world is in an out-of-control debt spiral. Trade wars, currency wars, and kinetic wars are raging.

Inflation is becoming problematic on a global scale. And the world’s central bankers have finally remembered why they used to love gold.

Precious metals and miners rose much faster than expected. I took a small amount (~15%) of profits once my 1-year mark was up, to take advantage of long-term capital gains. But I’m still holding the vast majority today. Despite this brutal correction.

It might seem crazy to watch silver go from $32 to $115 in less than a year, and not take any profits as it slides back down to $68. But I did, because I believe it’s going to at least $200 over the next 5 years. And maybe higher.

Trying to time such a volatile move is challenging, and usually involves paying taxes, so sometimes the best move is to simply hold.

My plan is to hold long-term, because I believe we’ve entered a very disruptive period where there’s going to be a lot of money printing, and unfortunately, inflation. So I’m sticking to it.

But my investment horizon is long. And I’m OK with volatility. Your situation may be different.

We’re All Unique

Whether you should buy, sell, or hold an asset depends on your unique situation. Here are some of the key factors to consider.

What does your investment horizon (timeline) look like? Are you already retired, or going to be soon? If so, it usually makes sense to take profits earlier.

If you’re on the younger side, and you own great companies, it often makes sense to hold at least a portion of the position for a very long time. Now, with that said, you have to be able to stomach the volatility.

Are you going to panic sell if the asset drops 30%, or possibly more? If so, it’s probably best to lean more towards trading. Eventually, every asset goes through a significant downturn.

Taxes Matter, Too

Another important question: Is the investment in a taxable account, or a 401k or IRA? That matters greatly. If it’s in a tax-sheltered retirement account, you don’t have to worry about the tax implications of every sell order. But sometimes it makes sense to hold long-term anyways, because market timing can be difficult.

Whether your gains are long or short-term also matters greatly. Long-term capital gains (investments held over 1 year, in the U.S.) are taxed at a much lower rate compared to short-term gains).

Short-term capital gains can hurt overall returns if you’re not careful. Assuming it’s in a taxable (non-retirement) account, these taxes can reach up to 54% in extreme cases (California, top tax bracket). Long-term capital gains for the top bracket in California are around 37%. Still high, but much more reasonable.

This is another reason why, whenever possible, we should max out our retirement account savings. IRAs, 401ks, and other tax shelters are amazing tools.

Today’s markets are absolutely crazy. So it’s best to go into such situations with a plan, and stick to it.

We’ll keep delivering our best investment ideas, and provide insight into different ways to manage them.

The post The Mental Rollercoaster appeared first on Daily Reckoning.

For most of its history, the United States treated debt with suspicion, if not outright fear. That instinct came from four men who understood, in ways modern policymakers seem to have forgotten, debt is less an economic tool and more a political weapon.

George Washington, Benjamin Franklin, Thomas Jefferson, and John Adams, America’s founders, architects, and revolutionaries, were students of history. History taught them one simple lesson: nations don’t collapse overnight. They decay under the weight of obligations they can’t control.

Washington warned against entanglements that could drag the young republic into endless commitments. Today, America is entangled in alliances abroad and its balance sheet at home.

Franklin, the pragmatist, understood the corrosive nature of excess. “Rather go to bed without dinner than to rise in debt,” he said. Today, the United States does neither. It spends without restraint and borrows without consequence… for now.

Unlike that statist Alexander Hamilton, Jefferson feared centralized financial power and permanent debt, arguing that each generation should pay its own way. Now, that idea is almost quaint. The current system doesn’t just pass the bill to the next generation; it compounds it.

Adams was blunter still: “There are two ways to conquer and enslave a nation. One is by the sword. The other is by debt.”

We chose the latter.

Now comes the reckoning. Not in soft theory, but hard mathematics.

When Interest Becomes the Budget

Within a few years, interest on the national debt is projected to become the single largest line item in the federal budget — overtaking defense, Medicare, and eventually Social Security, if nothing changes.

This is one obscenely incredible post:

Credit: @charliebilello

The numbers are already brutal. The government paid roughly $882 billion in net interest in fiscal 2024 — nearly triple the $345 billion paid in 2020, and more than it spent on national defense or Medicare. In 2025, that figure climbed again to an estimated $970 billion, or about 19 percent of all federal revenue collected.

Read that again. Nearly 1 in 5 tax dollars now goes just to pay interest. That’s before a single soldier is paid, a single pension check is mailed, or a single road is repaired.

Based on CBO projections, annual interest costs will exceed $1 trillion around 2026 and continue to climb to roughly $1.8 trillion by 2035. Over the next decade, cumulative interest payments will run into the tens of trillions. Over the next 30 years, the U.S. is on track to spend nearly $100 trillion on interest alone if current policies persist.

This is nothing if not a slow-motion transfer of national income from taxpayers to bondholders.

You can see this in the above chart. Net interest costs are rising from a few hundred billion in 2020 to roughly $1 trillion by the mid-2020s, then marching relentlessly toward $1.8 trillion by 2035. It’s not a gentle slope. It’s an accelerating curve.

From Spending Priorities to Interest Tribute

The more alarming story isn’t the nominal dollars. It’s the changing composition of the federal budget itself.

Interest costs have already become the government’s second-largest expenditure, trailing only Social Security and outpacing every other major program. As a share of total federal spending, interest is projected to reach 15–16 percent by the end of this decade — surpassing the prior peaks of the 1990s, but this time on a far larger debt base with far less room to maneuver.

As a share of the economy, interest is heading into uncharted territory. CBO-style projections show net interest rising from just over 3 percent of GDP in the mid-2020s to around 4.5 — 5 percent by the mid-2030s, and higher still beyond that.

The above chart tells this story cleanly: one line shows interest as a share of GDP grinding higher; another shows it climbing through the mid-teens as a share of federal outlays.

At some point, the budget is no longer about national priorities. It’s about servicing past decisions.

That’s the tipping point the four founders would have recognized immediately.

Once interest becomes your largest expense, you’re not governing freely. You’re managing liabilities.

Debt as Stealth Political Control

Every dollar spent on interest is a dollar that cannot go to defense or infrastructure. It’s a transfer from citizens to creditors. Those creditors include foreign governments and large institutional investors whose only concern is that America keeps paying.

To put a finer point on it, let’s look at the numbers for this past May, thanks again to Charlie Bilello:

Credit: @charliebilello

You read that right: $107 billion spent on interest in the month of May 2026, just behind Social Security.

This is where the founders’ warnings stop sounding like philosophical musings and start sounding like a risk memo.

Washington feared entanglements that would limit the republic’s independence of action. A government that must roll over trillions of dollars at ever-higher rates is not fully independent. It’s constrained by what markets will tolerate. One only needs to monitor The Donald’s war-on/war-off policy, which depends only on when the markets are open.

Jefferson’s skepticism of permanent debt was not anti-growth naivety. It was a recognition that a state that lives forever in arrears slowly mortgages its future policy choices.

Adams’ line about conquering a nation by debt rather than by the sword was not hyperbole. It was a description of how power actually operates: not through the now passé direct coercion, but through the more modern means of controlling cash flows.

We’re living in that world now. The U.S. is still nominally sovereign, militarily dominant, and the issuer of the world’s reserve currency. But its fiscal trajectory is increasingly dictated by a simple math problem: how to service a ballooning stock of debt in a world of higher rates.

When interest consumes 15–20% of your budget and a quarter of your revenues, you’re working for your bondholders, not your citizens.

What Happens When the Bill Comes Due

The markets will tolerate this… until they don’t.

There is no precise breakpoint on a chart where confidence disappears. But the mechanisms are familiar:

• Borrowing costs rise as investors demand compensation for fiscal risk.
• The currency weakens as foreigners question its long-term purchasing power and store-of-value status. (Just check out TLT’s dreadful returns since 2020.)
• Policymakers are forced into bad choices: higher taxes, sudden spending cuts, financial repression, or higher inflation.

The CBO’s long-term outlook already assumes that interest rates stay elevated enough to keep interest costs outpacing growth in both revenues and the underlying economy. That’s how you get to projections where interest alone may be the single largest category of federal spending within a decade.

None of this would surprise Washington, Franklin, Jefferson, or Adams. They had all studied what happened to overextended empires like Spain, France, and Britain. Their reach exceeded their revenue. Our Four Fathers understood that debt, if abused, was a slow form of national subjugation.

Unfortunately, their successors (and their voters) ignored them.

Wrap Up

The result is visible now, not in abstract theory, but in the federal budget line where interest is about to eclipse everything else.

The successors systematically dismantled every cultural, political, and fiscal safeguard its four founders had tried to leave in place to stop this from happening.

Debt becomes destiny. And the charts are telling you: destiny is getting closer.

The post Our Four Fathers Were Right appeared first on Daily Reckoning.

Trump has three ways out of the Iran War.

While the choices are all bad for Trump, they are not all bad for the U.S. economy. Some are better than others. Trump’s choice will not only determine the outcome of the war, it will determine the path of the U.S. economy over the year to come.

Choice One is surrender.

Basically, the U.S. would withdraw from the Iran War without having achieved any of its major goals (not that those goals have ever been well articulated by the administration). Iran would still have its highly-enriched uranium (HEU).

The Iranian regime, consisting of the Iran Revolutionary Guard Corps (IRGC) and Supreme Leader Mojtaba Khamenei or a successor, would still be in charge.

The Iranian people would be largely unified behind new leadership who are younger than the leaders Trump killed. This new group, in their 40s instead of their 70s and 80s, would feel more nationalist and more comfortable in power than their predecessors.

Iran would suffer enormous infrastructure damage, but it can repair and replace those assets over time. Most importantly, Iran would have de facto control of the Strait of Hormuz — something it has threatened but never actually accomplished in the 47 years since the Iranian Revolution.

Choice Two is stalemate.

This is basically the current state of the war. Calling it a ceasefire is a joke. Iran recently attacked the Kuwait airport and Israel. The U.S. bombed radar facilities in Iran. Israel struck Iranian energy infrastructure. Hezbollah and Israel continue to fight it out in southern Lebanon.

This is a low-intensity conflict — all sides back off after a few strikes. But it’s not a ceasefire.

The stalemate suits Iran because it gives them time to dig out missile sites, build more drones and receive financial assistance from Russia and China. The stalemate suits the U.S. because it gives us time to rebuild stockpiles of cruise missiles and Patriot anti-missiles.

Most importantly, the stalemate favors Iran because the Strait of Hormuz remains closed. Iran can suffer economic consequences longer than the world can do without Persian Gulf oil, liquid natural gas, helium, nitrates and sulfur. It’s a game of chicken, and the U.S. will swerve first because it has more to lose.

Choice Three is escalation.

The logic is simple. Trump won’t surrender, and the game of chicken can’t go on much longer.

Trump will unleash the U.S. Department of War to bomb Iranian infrastructure, including bridges, railroads, key highways and telecommunications. Bombing may include sites believed to hold the Iranian HEU.

More extreme versions of escalation could include a special operations mission to seize the Iranian HEU or precision bombing aimed at Iran’s oil export facilities on Kharg Island, or even desalination plants. The idea is to bomb Iran into submission and get the deal Trump wants while avoiding the stigma of surrender.

All three choices will fail.

A surrender might be papered over with some kind of memorandum involving an “agreement to agree” in the future, but the world will see it for what it is — just another Iranian stalling tactic that preserves the status quo for Iran and solidifies the rule of a new younger regime.

Iran won’t give Trump the satisfaction of saving face because Iran is winning. Trump won’t accept surrender because of ego and the bad optics. Neither side will accept the deal the other wants. So there will be no deal.

Choice Two will fail because the current stalemate is unsustainable.

The world has been without Persian Gulf oil exports for almost four months. A combination of Gulf oil already underway in tankers before the Strait was closed, some increased production from the U.S. and Russia and a drawdown of strategic reserves by various countries has kept the global industrial economy going.

Those lifelines are running out. There is no more Gulf oil in tankers on their way. Reserves are reaching critically low levels, at which pumps and pipelines begin to break down. The U.S. and Russia can supply some oil to their friends, but there’s not enough to go around.

Time is almost up on the stalemate. Something has to give.

Escalation may be attempted, but it will fail also.

There is no history of a side being bombed into submission without boots on the ground.

Germany tried to bomb Britain into submission during the Battle of Britain, the first major military campaign fought entirely with air forces. It failed. Germany was never able to invade.

The firebombing of Dresden did not defeat the Germans. It took D-Day, the Battle of the Bulge and the Red Army marching on Berlin after destroying Warsaw.

The firebombing of Tokyo, which used napalm on wooden structures, did not defeat the Japanese. The atomic bombs may have ended World War II, but that’s an exception that proves the rule. Is anyone up for using nukes in Iran?

Tokyo after the firebombing raids of March, 1945

Ten years of bombing North Vietnam did not win the war in Vietnam. The U.S. never invaded the North in that war.

In short, bombing doesn’t work without a land invasion.

Invading Iran would be a military undertaking on a massive scale. With 80 million people and a landmass roughly the size of the U.S. east of the Mississippi River, Iran would require perhaps 60 divisions organized into six armies and two Army Groups, backed by air power, naval aviation and submarine-launched missiles.

Anything short of that would risk defeat. You can escalate all you want, but it won’t win the war.

Surrender would be the best result for the U.S. economy.

It would be embarrassing, but not necessarily more embarrassing than the outcomes in Vietnam, Iraq, Ukraine and Afghanistan. Better to cut your losses and live to fight another day.

The Strait of Hormuz would reopen (possibly with tolls paid to Iran as reparations), but the oil would start flowing and oil prices would gradually return to the pre-war $60 per barrel level. The American people might actually be relieved that we got out of the Middle East. They’re more focused on the economy anyway.

A stalemate would be negative for the U.S. economy in the medium term because it would keep oil prices high and disrupt other critical supply chains, including helium for semiconductors, nitrates for fertilizers and sulfur as a precursor chemical for many important industrial processes.

It could lead to a global recession in the second half of 2026 and weigh heavily on stock markets. But because a stalemate is non-sustainable, it could eventually lead to surrender, which would be a much better outcome.

Escalation would produce the worst economic outcome by every measure.

It would offer all of the disruption of a stalemate, but for a longer period, at a higher cost and with no better outcome. If Trump pursued escalation, large parts of the global industrial economy could grind to a halt, putting millions at risk of starvation.

For those reasons, escalation would likely be abandoned in the end, but not before historic damage is done. Escalation could produce a market crash and a new Great Depression.

Our estimate is that the U.S. will pursue the current stalemate for another month and then turn to escalation because of the warmongers in the Republican Party.

The best strategy for investors is to reduce stock exposures, increase holdings of cash and gold and keep your car’s gas tank full. You may need it to flee from social unrest.

The post Trump’s 3 Bad Options in Iran appeared first on Daily Reckoning.