0:04 I just want to welcome Simon Dixon onto the show. Simon Dixon is a OG Bitcoiner, financial expert, and the markets are in chaos. And so we need to get him back in to give us an update. We've just seen today, Simon, that there was an attack by the United States of America and or Israel on Iran's energy infrastructure. And Iran has now given a warning. They're going to go after the energy structure infrastructure in the GCC countries. What I mean what does this mean? What's happening and what could be the implications from in from a financial perspective? >> Yeah, absolutely. So, um this is the next phase of the escalation cycle. So throughout the whole war um the maximum price in the futures market on Sunday um
0:50 and then leading into Monday a couple of weeks back I'm losing track of time um was approximately $115. Uh Brent crude oil is now back up to approximately 110. So >> it set a floor of around about the $100 mark and now we're back up to 110. um if um if the more and more of the infrastructure in Iran um is targeted um that then leads to a retaliation of more of the um oil infrastructure across the Gulf countries um then we're starting to hit uh the new the new ceiling at which America last time um decided to intervene in the futures market to oppress the price. Um, we talked
1:36 yesterday in the 10-minute update about the the the systemic issues in the American financial system. They kick in when oil is above $115 uh because that's the acceptable um level that the futures market have set. Um we're currently in backidation. What that means is that the futures are predicting a significantly lower price for oil in the future, like $77. But right now we're at $109. Um I think the American Treasury in their intervention is structurally short oil. Uh which means that at some point in the next month or two um they need the price of oil to go down in order to not kick off um a real many of the
2:24 economic consequences of what we discussed um in yesterday's episode. >> Right. So oil's at 109. You're saying that they believe that the oil is going to drop down if it goes above 115 and closes above 115. You think that's going to be a catastrophic catastrophic is uh situation? >> Yeah, if it stays there and then it stays there for a week. Um then we've already seen that's the point at which US takes drastic action. They make more sanction relief for Russia. They get the G7 countries to try and drain some of their strategic petroleum reserve. America drains more of its strategic petroleum reserves um and you get a bit of a kism on um uh on on true social um
3:12 and then at that point that's where they probably do futures market intervention which makes increases what I believe is a big structural short oil position that has been built up. Um and so yeah, if we if we stay above 110 for another week and this escalates to the next cycle, um then we know that the next step after this, if this escalates further, is obviously um the Red Sea and the Houthis. And so if we enter into the Red Sea being closed, um we're probably looking at 120 150 oil prices. um that causes significant issues for America's structural short futures position. Um and it also hits the demand destruction
3:58 guaranteed global recession. Um right now uh we are set in 2026 to have significantly higher gas prices. Um significant inflation as this rolls through and also food insecurity. Supply chains are breaking. Um fertilizers are not getting to where they need to be. uh which means that certain countries are missing their crop cycles. Um so in 2026 we're going to see um parts of the world that either pays significantly more for their food um or is able to or there's going to be empty shelf in certain regions. We're seeing stress in Sri Lanka, Bangladesh, many of the Asian countries, Vietnam, Australia is a very um dangerous areas of low reserves. Um
4:44 and pretty much the only country um on the oil and energy side that can resolve this um is Russia um at speed. Um and so that's where you know the the worse this gets, the better it gets for for Russia. And remember, we talked yesterday, it may benefit private oil companies in America. America doesn't have a shortage issue. Um, but it does have an inflation issue. Um, and America doesn't benefit because they don't have nationalized oil. This just benefits a small set of companies um within America, but everyone else um suffers. So, yeah. And um obviously we spoke about the attack by um the United States of America and Israel on Iranian energy infrastructure
5:32 if Iran fulfills its threat, its promise and which it has always done in the past. I mean how bad can this get? I mean if they start hitting Saudi uh Qatari uh Emirati infrastructure, how bad can this get? Uh yeah, we're the the worse this gets, the more inflation and more violent inflation's going to be. The higher the price of oil, um the more inflation we're all going to have and more supply chains break. Um we are already in a disaster situation in the months ahead. Um the the the higher the price of oil, the more the more um uh you know, the the worse this gets in the future. This will all be um the Federal Reserve is meeting today. um that is factoring in previous action. Um and there's that
6:20 transitory phase where they can't really fix anything. Um so the only way to dampen the impact of this in terms of supply chains, in terms of inflation, in terms of the severity of the global recession, in terms of preventing um some of the structural issues which we can we can cover um with the petro dollar, euro dollar and Japan um carry trade. um those are the things that structurally break um the financial system and could lead to a 2008 global financial crisis that would require a big print massive intervention from the Fed um and a large quantitative easing cycle which again is double inflationary. Um so if you have negative growth then we can end up in stagflation if this goes on for longer in the months
7:06 ahead. But 2026 already guaranteed is going to be an incredibly challenging year if we open today. Um that's already factored into the equation. Now what break what breaks things is if the price of oil um the breaking point has always been forecasted at $160. We've never been there in the history of humankind. Um, so that's unprecedented territory. If we get to $160, a few of the things that are causing um issues right now, >> what's the highest oil has been? $147 during um 2000 pandemic phase. Um and then we've tested those during global financial crisis which was slightly lower and then during the um Ukraine
7:54 Russia war. And the only thing that dampened that um was um obviously Saudi Arabia decided to align itself with Russia rather than America at the time during the Biden administration. Um and then we had massive release and the full drain of the American strategic petroleum reserves. Uh but we did have um a set of events that led to the inflation that everyone's complaining about that they're still suffering from today. Um but also we had the breaking of um the bond market which broke Silicon Valley Bank and led to um the second largest bank bailout in history. um led to new tools being constructed to save the banking system. We had four
8:40 bank closures and then we had the failure of credit Swiss which was rolled up into UBS and we had significant stress in Deutsche Bank. Um so this this um this is the you know at those oil prices we start to hit those um duration risk markets. The reason for that is because it breaks the bond market. Um and the bond market at the moment rates um which is the 10-year Treasury, 20 year and 30-year Treasury are going up. That impacts mortgages, credit card debt, auto loans, and really any type of mortgage structuring um which increases prices uh for uh for those that need to refinance um as well. Now once you break
9:26 um higher and higher rates on on the bond market um you start to have issues around Europe um Japan and obviously we're already experiencing the issues with the pro dollar and the the Middle East. These are the three pillars as it were that prop up the US system. Um in Japan the issue is uh that they are a a huge surplus country very very large debt one of the largest debt to GDP rates in the world 250%. Uh but also their export industry is dependent upon um cheap oil and they've got an oil issue right now that they need to resolve with Russia. Um but they're probably going to have to lock in pretty bad terms because these are,
10:13 you know, very very tricky circumstances when everybody wants um Russian oil. Um then you end up getting the worst type of deal. Um the issue here is that the Bank of Japan has been pushing away from America and the Federal Reserve. Um and what they've been doing hit typically the the hedge fund speculation industry you know based out of Cayman Island but mainly um you know American hedge funds um they rely upon borrowing at virtually 0% from Japan um so that they can then um do massive leverage in purchasing US bonds about 40% of US bonds are purchased via Cayman Island which is
10:59 hedge funds that also rely upon this trade. So, this is a hugely leveraged trade. Um, this becomes very sensitive to the price of oil, to inflation, to interest rates and the the long-term bonds. So, it increases the chances of something um breaking in the Japan carry trade. Now, Japan has a choice. They either break away from US by increasing their interest rates. Um and if they increase their interest rates um then they kind of break away from that Japan carry trade. It creates structural issues in America. Last time they did that uh the Fed and the Bank of Japan had to intervene. Um this can resurface um that trade there. Um if if Japan decides that
11:47 it's going to move eastwards. Now, if it's negotiating its economy with Russia, then Russia is probably going to have some of those structural bricks aligned types of leverage in there. Um, just as the the pro dollar, um, you know, is happening with the Middle Eastern countries. Um, and so this is a form of the only way to solve that again is to crash the price of oil. And at the moment they're running out of tools to do that. Um the other issue is um the throughout this war um the Trump administration has been looking for an an alliance in order to get the largest naval fleets in the world to align with America to try and get the straight o open. Now it's a bit of a narrative war,
12:32 but publicly um all of the European countries are saying we're not on board. We're not doing it. Um and so this is really re-imagining the NATO relationship that was already under stress as well. Um and currently Europe is in the worst is the most impacted by high gas and oil prices. Um so it's going to get significantly worse for the economies. You can see that in the bond market in the guilts in UK. Um in France their yields are going up and up and up. So, they're in pretty much a guaranteed stagflation environment. Um, and they need to lick lock in their energy security right now. Most likely they'll go to America or they can go to Russia,
13:18 whichever side they choose. Um, basically it breaks the NATO alliance. Um, and so this is significant geopolitically. um or they go to America but they have to have a recession and a stagflation which they can't um at you know they can't sustain at these at these high prices. So Europe, Asia, Japan, uh the pro dollar uh these are the fundamentals that really um you know prop up the the US overleveraged economy right now. >> That sounds uh highly concerning. Now, in terms of um what we're looking at at the moment, you mentioned that um if it goes above 115 for more than a week, this would be uh catastrophic. But one
14:06 of the things they can do, right, is they can just print more money, they can try and repress it. How do they um so there are there are tools available, right? It's not going to be like massively catastrophic unless it goes above to the 150 160 marks, right? >> Yeah. You can't print oil, you can print dollars. What can you do with dollars? Well, you can create futures contracts >> which means that you bet on the market going down in order to oppress the price. >> Um, but if those if that breaks away and you get a short squeeze, then you get cascading liquidations which would take down depending on how severe that short position is by the US, it could take down the financial system entirely. That's one tool you got. The other is reserves. Reserves are being drained. >> Just on that one, can we just to clarify for the audience? So, what you mean by
14:52 that is, and just clarify cuz I'm not an expert on this, but what you mean by that is if the price goes down, sorry, if they short the uh oil, >> Yeah. >> and it doesn't drop and it ends up increasing, that would cause a financial collapse. Is that is that what you're saying? And if it doesn't drop, which period of time? >> Yeah. With the difference, we we don't have transparency on that. So the difference with futures contracts is that it adds an element of time to the trade. And so those contracts expire and if you're short, you either have to buy back at a significantly lower price, in which case you're what's called in the money, or you have if the price is higher by the time the contract expires, >> uh you either have to roll it over or you have to um you have to unwind that
15:37 trade um out of the money. and that means you make a significant loss. Uh the more futures contracts they take out in order to suppress the price um and the trade doesn't go in their favor, the more catastrophic this becomes um in terms of needing emergency bailout. So what can you do? You can print dollars um but you can't print oil. So that's a structural problem there. um you can oppress the price by betting on the market going down which could be a very profitable trade or it could take down the whole system in a disastrous trade um you know during a during that short squeeze. >> Um and what is the the side effect of money printing? Well, it's inflation. And so the more you print, the more
16:23 inflation you get. The higher the price of oil, the more inflation you get. um this is set to make the last inflationary cycle a walk in the park um if this if these trades go wrong. >> Yeah, that's highly concerning. And uh Simon, what's your kind of thoughts? Your last question. What's your thoughts on where things may go over the next few days, especially with this possible escalation? Um to me we are either headed to a you know a global a global right there's only a few outcomes here. One outcome is that Trump through some kind of miracle is able to get 600,000 soldiers from my understanding and I'm not a military expert in order to do a boots on the
17:10 ground invasion. Um and they're able to occupy um and take over the oil in Iran. um and they're able to maintain some kind of um stability in the country and they force it into being priced in dollars and they flood the market um then that's one way of fixing this >> and I think anybody um knows that that's not firstly not possible and secondly not possible in a reasonable time frame. Maybe you can do it in 10 years who knows but you can't do that quick. There's no time frame about that. Or you reach a deal um and that deal crashes the price of oil and there's significant concessions. Or we try and break
17:57 everything, mutually assured destruction and we enter into a global financial crisis. Um some of those futures contracts expire um and we get global issues um that are going to take a long long time. Um or there is a way of opening the straight through military action which my understanding and the people that I listen to and many of your podcasts um and your interviews sorry um say that's not possible. >> Yeah. Yeah. This is a highly concerning.
