The most crucial dimensions of the U.S.-Iran war, beyond the military aspect, are financial, monetary, and energy-related.
Is there a possibility that Trump’s repeated cycles of deals, no deals, escalations, and pauses cannot simply be emotionally labeled as TACO?
Beneath the surface of TACO lies a deliberate strategy to gradually acclimate markets to risk—thus avoiding the need to fully price in geopolitical risks all at once.
If policymakers believe the current situation has a high likelihood of evolving into a prolonged regional conflict, then allowing markets to adjust incrementally is far more stable than forcing them to digest this possibility overnight.
Trump’s chaos first impacts U.S. bonds, where there is already little room left at these yields.
Old Trump is buying time, managing expectations, and slowing down the repricing process, while governments worldwide prepare for a longer-term strategic confrontation.
The Persians aren’t stupid, nor should they simplistically interpret Old Trump’s TACO. The recurring pattern only proves that Trump is not a rational actor capable of achieving lasting and stable agreements.
Given this, Iran has an incentive to drag the global economy down with it, creating more markets to share the burden—so that any future attempt by Trump to restart war would immediately trigger a global economic collapse, rather than waiting months.
This is called cutting off one’s retreat—a brinkmanship strategy by the Iranians.
Viewed from both sides, the economic damage from this war may far exceed current levels.
It truly sends a chill down one’s spine.
Original: toutiao.com/article/1872407715461120/
Disclaimer: The views expressed in this article are solely those of the author.