The first thing is that through the pre-session, the market response was predictable. Risk-off, oil up, dollar up, gold up, and shot term bond prices up (although long term came down). The Euro isn’t there yet as a safe-haven, so it dropped. But right now we’re dealing with the early and largely automated response from the market. There hasn’t been time to parse out any nuance.

If this war in Iran is over in a couple of days, I expect things to return back to normal, although maybe no immediately. A quick exit before anything other than a new batch of religious psychopaths take power, will make US policy seem even more chaotic and poorly planned. The realization will set in that the US does what the president decides to do, even illegally, and no one is effective enough to oppose him. Jefferies and Schumer are weak beer. The exit will be seen as driven by factors such as polling or stock market declines. How much money does the rest of the world want to lend a vindictive tyrant who rips up deals he negotiates and runs around the world starting fights?

Medium term, this lasts weeks, an exit without an outcome may be more plausible. If nothing is really changing, other than occasional US or Israeli casualties, and the aftermath of bombs accidentally dropped on schools and hospitals make the news, just leaving may be a reasoned option. And I don’t think they will target civilians, but it does happen that bad things happen in war. Which is why you’re supposed to avoid it. But they could claim “we’ve degraded Iran” and leave. What’s left might be a refugee crisis for Europe and a failed state that will harbor god knows what.

Long term, we enter World War III territory. If two carriers are bogged down around Iran, China may see its opening to send helicopters full of troops across the Taiwan straight. I don’t think it will be boats. It will be some form of air assault. With boats to follow with reinforcements and supplies. But it would be their opening as the US has its attentions focused elsewhere. There is another byproduct of a long engagement that favors China. There’s a lot of evidence the US isn’t replacing its stocks of munitions anywhere nearly as quickly as it depletes them. A drawn out engagement in Iran might leave the US low on a number of systems.

But even when this ends, we have the prospect the military will be used in more conflicts, combined with expected increases in military spending, and the mounting debt from a tax cut that will drive debt to surreal levels. I would say peace-time debt, but it’s not a peace-time increase in the debt. But it’s not really a war. It’s just lighting money on fire. Which leaves inflation and devaluing the dollar as the way out of the debt overhang. Which works exactly once. After that rates go up to compensate lenders for the added risks.

Every day I wonder how did 79 million people think this was the person who should be in charge?