By Tyler Durden

Summary:

• Trump's Economic War against Iran Begins
• Trump says "severe economic consequences" for any country that does businesses with Tehran
• Trump says "ECONOMIC D-DAY" begins against Iran
• UAE Cuts Ties As Iran Warns Gulf States Against Helping Washington; Kpler Says US Navy Gaining Ground In Hormuz
• Last week, Derek Holt, head of Capital Markets Economics at Scotiabank in Toronto, offered clients a preview of what the campaign to economically isolate Iran could look like (view here), including the potential targeting of China. Notably, much of Iran's crude exports flow to Chinese buyers.

• UAE Cuts Ties As Iran Warns Gulf States Against Helping Washington; Kpler Says US Navy Gaining Ground In Hormuz

• As for Ghalibaf, he blasted War Secretary Pete Hegseth and Treasury Secretary Scott Bessent on Tuesday, mocking this new disengagement strategy, given the US has already failed to bring Tehran to its knees.

Meanwhile, below are some of the latest major developments and reports related to the Iran conflict:

Iran has weighed attacking US military targets in Europe should Donald Trump escalate the war, according to people close to the regime, as Tehran considers its options to increase the stakes of the conflict. FT

Even as Iran projects resilience in the war with the United States, its leaders are worried that a threat of more economic punishment by Donald Trump could increase hardships, reignite unrest and further erode the Islamic Republic’s legitimacy. RTRS

Iranian attacks on shipping in the Strait of Hormuz are piling up without an American military response, raising the risks of crossing the strategic waterway and frustrating some Arab allies who worry the U.S. doesn’t have a strategy to wind down the conflict. WSJ

Claire's Observations:  I would love to be able to say, with a straight face, that military hostilities here are over, and all that's left is two governments, screaming at each other before they sit down and negotiate; folks, I absolutely cannot do this right now.

Time... is absolutely NOT on Trump's side, for the following reasons:  

Trump allegedly "reset" the War Powers Act Clock to 7 July, which (theoretically) gives him until 5 September to continue the conflict without Congressional authorization.  That's 18 days from now, folks.  

This "clock re-set" on the Iran war, has a few historical precedents;  first, with Clinton in Kosovo, and secondly, with Obama in Libya, but both were allegedly "justified" with entirely different legal frameworks.

Congress officially re-convenes on 14 September; that's 9 days after the expiration of Trump's alleged "Clock Reset" on the War Powers actions against Iran. 

The US has mid-terms (theoretically) happening on 4 November.  Will Trump and his Trumpistas cobble together some "national emergency" giving him the power to suspend the Constitution and Bill of Rights, and declare martial law, enabling him to "postpone" the mid-terms?  In my world, the jury is still out on this, but do stay tuned between now and 4 November.

The mood regarding Trump and his policies, has markedly soured, between a lousy economy for those other than the monied; the undeclared war against Iran; and Trump's consistent ticking off of nearly every country with which this country previously enjoyed decent to good relationships in the recent past.

And topping it all off, like glyphosate-fermented cherries on a deadly economic sundae,  we have a national debt which just "crossed the Rubicon" of $40 trillion dollars yesterday.  Forgive me, but I have a really hard time, visualizing all those zeros.

If the Administration decides to "inflate the debt away", what will that do to the purchasing power of American's money? We're looking at "Wiemar-style inflation" of they do, and here's how Throck, my AI, defines this:

"This is where  'inflating the debt away' becomes dramatic.

What would it take to really destroy the debt's real value?

If the government somehow produced 20% inflation every year for five years, prices would rise approximately:

1.20⁵ = 2.49

So a dollar would have only about 40 cents of its original purchasing power.

At 50% annual inflation for five years:

1.50⁵ = 7.59

Your dollar would have only about 13 cents of its former purchasing power.

At 100% annual inflation for five years:

2⁵ = 32

Your dollar would have only about 3 cents of its former purchasing power.

That's the mechanism by which extreme inflation can dramatically reduce the real burden of nominal government debt."

If, upon reading this,  you find yourself putting down your morning coffee and grabbing for your wallet, I don't blame you. 

 And the hell of it is,  you didn't control this horrific growth in Federal printing of money; borrowing; and spending which put the government in this predicament; the Federal Government did it to itself.

And the second "hell of it", is that voting for either established party in the next round of Federal Elections, won't change this at all; it will just be a different cast of characters, making money for themselves and their friends, who will be taking office.