Posted Originally on Aug 26, 2026 by Martin Armstrong |
The United States has become the first nation to prohibit its central bank from creating a central bank digital currency, but Congress quietly placed an expiration date on that protection. The prohibition covers both retail and intermediated CBDCs, yet it expires at the end of 2030. That means the door to a programmable government currency will reopen in 2031, precisely as the Economic Confidence Model reaches its major 2030 turning point.
President Trump prohibited federal agencies from pursuing a CBDC through executive order, and Congress has now reinforced that position legislatively. Nevertheless, executive orders can be reversed by the next president, and the statutory ban was deliberately written to disappear. Governments do not normally surrender power permanently. They postpone unpopular policies until the political and economic conditions make them easier to impose.
The timing is remarkable because the Economic Confidence Model has long pointed to 2030 as a profound turning point in the confidence of government. These dates are not predictions that one isolated event must occur on a specific day. They identify concentrations of political, economic, and monetary stress when capital shifts and confidence changes direction. The fact that Congress chose the end of 2030 for the expiration of the CBDC ban places this monetary question directly within that critical window.
A CBDC is not merely another electronic payment system. Most money already moves digitally through banks, credit cards, and payment applications. The difference is that a central bank digital currency can create a direct financial relationship between the citizen and the state. Depending on its design, government could gain the ability to trace transactions, impose expiration dates on money, restrict purchases, enforce negative interest rates, collect taxes automatically, or prevent funds from being transferred beyond approved limits. Physical cash provides privacy and allows people to transact when banks, governments, or computer systems fail. A programmable CBDC transforms money into a permit controlled by the issuer.
The War Cycle began accelerating in August 2026, with the next major geopolitical pressure building into 2027–2029 and a significant risk of conflict involving China appearing in 2029. This then converges with the Economic Confidence Model’s 2030.05 turning point, approximately January 18, 2030, as the Sovereign Debt Crisis intensifies. Congress allowed the CBDC prohibition to expire on December 31, 2030, meaning a new administration could reopen the door to programmable central-bank money beginning January 1, 2031. War increases borrowing, borrowing accelerates the debt crisis, and collapsing confidence encourages governments to impose surveillance, capital controls, and emergency financial restrictions. By the time this protection expires, the world and government as we know them may be radically altered, creating precisely the kind of crisis politicians will use to resurrect a CBDC in the name of national security and monetary stability.
Posted Originally on Aug 26, 2026 by Martin Armstrong |
India is preparing to launch its first tokenized corporate bond in September, and this experiment exposes where the digital monetary system is ultimately heading. The bonds will be issued by REC, a state-owned power financier, in an offering worth less than 5 billion rupees, or approximately $57 million. The amount is small because this is a pilot program, but the structure is far more important than the size. India’s central bank digital currency will be used to purchase the bonds, which means the government is no longer merely testing digital money for ordinary payments. It is connecting CBDCs directly to the creation, ownership, and settlement of debt.
Reuters reports that investors will require two compatible digital accounts: a wholesale CBDC wallet supplied through a bank and a new electronic securities wallet known as DEMAT 2.0. The bonds will not trade through the conventional electronic book-provider system, and subsequent transactions can occur only between participants who possess both approved wallets. The initial investors will be selected, the bonds will have a three-month lock-in period, and a secondary market is expected to be developed by December. This creates a closed financial network in which the currency, security, investor, transaction, and settlement process are all identifiable and controlled within the same digital infrastructure.
The sales pitch will be efficiency, naturally. Tokenized securities can settle almost instantly. The same infrastructure that can settle a bond instantly can restrict who is permitted to buy it, determine where it may be traded, impose holding periods, monitor every transfer, and prevent capital from leaving the approved system. Once currency and securities exist inside compatible government-supervised wallets, compliance no longer depends on investigating a transaction afterward. The rules can be enforced before the transaction is even allowed to occur.
India is beginning with a corporate bond issued by a state-owned institution, but nobody constructs an entirely new financial architecture for a single $57 million experiment. If the pilot succeeds, the system can be expanded to corporate debt, municipal obligations, government securities, and eventually the savings of the broader population. Governments confronting a Sovereign Debt Crisis will need buyers for ever-increasing quantities of bonds. A CBDC provides the infrastructure to create captive demand by directing banks, pension funds, corporations, or individuals into approved debt instruments while making alternative uses of capital more difficult.
This is how capital controls will emerge in the modern era. There will be no official standing at the airport asking whether you are carrying gold or cash. The restrictions will be embedded inside the currency itself. A transaction can be rejected because the recipient lacks the proper wallet, the security is outside the approved platform, the funds crossed a prohibited jurisdiction, or the investor exceeded a government-imposed limit. Politicians will claim that this prevents fraud, money laundering, tax evasion, and financial instability, but every authoritarian financial restriction has always been introduced under the pretense of protecting the public.
The debt crisis is accelerating because governments have borrowed without any intention of repaying the principal. They perpetually roll over existing obligations while issuing new debt to cover interest, welfare promises, military expenditures, and the expanding cost of government itself. When private demand for sovereign debt weakens, interest rates rise and the fiscal situation deteriorates even faster. Rather than reduce spending, government invariably searches for methods to control capital and force the domestic economy to finance the state.
India is not yet forcing citizens to purchase government debt with digital rupees, and this pilot should not be misrepresented as though that has already occurred. Nevertheless, it demonstrates that the technical bridge between CBDCs and tokenized securities is being constructed now. Once that bridge exists, extending it from voluntary investment to regulatory compulsion requires only a political decision. The technology does not care whether participation is voluntary or mandatory.
India’s experiment should therefore be viewed as far more than a technological modernization of the bond market. It is a model for merging money and debt into one controlled digital ecosystem. The public will be promised speed and convenience, while government acquires the ability to see, approve, restrict, and eventually direct the movement of capital. CBDCs were never necessary simply to buy coffee more quickly. Their real value to government emerges when the state can connect programmable money to the debt it desperately needs someone to purchase.
Posted Originally on Aug 26, 2026 by Martin Armstrong |
QUESTION: What is going on? You were on Russian TV again today, and now there’s a question about a U.S. military transport aircraft that, according to tracking data, secretly landed in Moscow. You’ve appeared on Russian TV twice within days. I saw the film Brink of War. I also remember attending a major conference you did for Bain & Co here in Sydney, where the press ran a full-page article on you claiming you were an advisor to Reagan. You predicted communism would fall by 1990, and in that film, Reagan says he was meeting to bring Russia down. For once, come clean: were you advising Reagan?
PL
ANSWER: I remember that article well. If you have a copy, I would genuinely like one. I actually called that journalist afterward, because he accused me of advising Reagan and attributed trickle-down economics to me. I told him he should have interviewed me first—it was Art Laffer who sold the trickle-down theory to President Reagan, not me. I also recall attending a cocktail party where someone called me a liar because I denied working in the White House. My response was simple: if I had been working there, I certainly couldn’t have denied it. That journalist, in my view, was a real socialist.
As for whether Reagan acted on our forecast that communism would collapse by 1989.95—the ECM turning point—I honestly have no idea. Yes, after the Plaza Accord of 1985, I was in contact with the White House. But beyond that, I cannot say what the President did or did not do with our analysis.
I have published the Revolution Cycle on everything from the USA and EU to Iran. This has been consistent. The target was always 1989. I cannot say if Regan took that report to heart. I did not speak to him about it.
Regarding the U.S. military plane landing in Moscow and my appearances on Russian TV last week and this week—the two are not connected. I go on Russian TV because few others have the courage to do so, and someone needs to show them that not all Americans think like Lindsey Olin Graham. The only path to avoiding war is through dialogue. The Neocons always advise never talking to the enemy—which ensures there will never be peace.
Posted Originally on Aug 25, 2026 by Martin Armstrong |
QUESTION: Mr. Armstrong, I am new to your services and I attended the Tampa Conference. You have opened my eyes to see the world as a whole. A famous analyst just said and it is becoming a glaring issue that they are only domestically focused as you said blind to everything outside the United States. ________ said:
“We want long-term interest rates to go lower, but that’s only gonna happen if we can get inflation under control by reopening the Strait of Hormuz, and that’s a tall order,” _______ said. “The Treasury Department’s attempts to get this under control I think have only made investors more nervous.”
My question is with Trump’s tariff war and his war against Iran and we have Bessent imposing sanctions on Iran while trying to support the bond market, your track record record and computer puts everyone to shame. I am not an international hedge fund manager as you were. But I can see that they are trying to defend a view on tariffs, sanctions, and bonds that are a losing ticket. Why doesn’t Bessent call you in?
EK
ANSWER: Besides the Neocons who try to keep me away from Trump and I believe are now intercepting my letters to him, then there is the old rumor that those who lost big on the Russia collapse and the failed regime change blackmailing Yeltsin and expecting the IMF would never allow Russia to collapse, are the ones who blamed me and told the CFTC we had to be shut down. I wrote to Bessent, but got no response. They say beware a woman scorned for she knows no limit to fury, that appears to apply to sore losers in high-stake finance. They never believe in my forecasting. They always claimed I had too much influence which was greater than all the influence that they could bribe for their guaranteed trades. When the forecast that Russia would collapse made the front page of the London Financial Times, that was the icing on the cake. It wasn’t that my computer was correct, it was I had too much influence and had to be taken down so they could manipulate markets without interference.
In August 1998, during Russia’s financial crisis (ruble devaluation and debt default), George Soros’s Quantum Fund / Soros Fund Management group lost approximately $2 billion in Russian markets. Contemporary reports (including The New York Times) attribute this to the fund under chief investment strategist Stanley Druckenmiller. The positions were described as mostly equities, with some exposure to Russian GKOs (short-term ruble Treasury bills) and dollar bonds. Druckenmiller publicly acknowledged the losses at the time. Bessent’s role at Soros
Bessent joined Soros Fund Management in 1991 and worked there through roughly 2000 (first stint), including as head of the London office. He is well-documented as a key member of the team on the famous 1992 Black Wednesday trade that shorted the British pound and generated roughly $1 billion in profits for Soros. I was advising the British government then and warned them what the “club” was doing. So I believed in free markets, they believed in manipulating markets. Bessent later returned as Chief Investment Officer (2011–2015) and is credited with profitable trades such as shorting the Japanese yen.
The danger here is that after stepping in and doubling the purchases, the risk is that new lows will shatter the confidence in Bessent and the ability of the government to manipulate the bond market. As I have said before, in February 1987, there was the Louvre Accord where they said that the dollar had fallen enough. When it continued to make new lows, that was it. Confidence in the central banks collapsed and that led to the 1987 Crash. That is the risk we now have. Rates will rise thanks to geopolitical chaos and there will be no way to prevent long-term rates from rising. Germany is already blaming the US for their own warmongering that sends rates higher.
Bessent’s latest sanctions on Iran and going after any bank that has contact with Iran will fail. It just makes him look authoritative. Sanctions have NEVER worked even once the same as Marxist Communism/Socialism, which tries to eliminate the business cycle and create utopia void of any recession or depression. The US put sanctions on Cuba in 1960, they are still there. The sanctions on Russia did not end the Ukraine War against Russia.
Our computer has been projecting rising long-term rates since 2020. With the rising trend in geopolitical insanity with this need for war, there is no possible way that rates would decline long-term. This is far more that the Strait of Hormuz. The Madman Zelensky has attacked Russian energy to the point that they now must import refined products. Zelensky and Netanyahu belong in prison. Neither cares about the world and they only look at their own personal hatreds and to hell with the world.
Posted Originally on Aug 25, 2026 by Martin Armstrong |
The government claims unemployment stands at 4.1%, yet a new analysis cited by CBS News found that 24.9% of American workers were functionally unemployed in July. Functional unemployment includes those who cannot find employment, people forced into part-time work because full-time jobs are unavailable, and workers earning less than $26,000 annually before taxes. Washington can call these people employed, but try paying rent, food, insurance, utilities, transportation, and medical expenses on barely $2,000 per month before the government takes its share.
The Bureau of Labor Statistics is not measuring whether people are prospering or even surviving. If you worked as little as one hour during the survey period, you can be classified as “employed.” If you have searched for months, become discouraged, and finally stop looking, the government simply removes you from the labor force. You did not find a job and your circumstances did not improve, but you cease to exist statistically. Politicians then point to the lower unemployment rate and claim their policies are working.
Functional unemployment has now risen for four consecutive months while workforce participation has moved lower. Employers reportedly eliminated 23,000 jobs in July, consumer prices rose 3.4% year over year, and wages increased only 3.2%. Therefore, the average worker lost purchasing power even after receiving a nominal raise. This is why people become angry when politicians lecture them about a strong economy. The statistics say they are employed, inflation is under control, and everything is wonderful, yet the paycheck no longer covers the monthly bills.
This is how the political establishment disguises economic decline. Inflation statistics do not reflect the actual cost of maintaining a household, GDP rises when government borrows and spends money it does not have, and unemployment declines when people surrender and stop searching for work. Every major statistic has been constructed to make government appear competent while the standard of living steadily deteriorates. They measure whether money changed hands, not whether society became wealthier.
Americans have been forced to replace income with debt. They have depleted savings, increased credit-card balances, postponed major purchases, and begun cutting necessities because discretionary spending was already eliminated. Consumer spending may represent roughly two-thirds of the economy, but consumers cannot continue spending indefinitely when prices rise faster than wages and employment becomes increasingly unstable. Credit can postpone the reckoning, but it cannot replace real economic growth.
Functional unemployment explains why Washington can proclaim prosperity while millions of Americans feel trapped in a personal recession. The economy has produced millions of positions that satisfy the government’s definition of employment but cannot provide an independent life. The political class counts the number of people receiving paychecks while refusing to ask what those paychecks can actually buy. That is poverty disguised by statistics.
Posted originally onAug 25, 2026 by Martin Armstrong |
A bank does not actually have everyone’s money sitting in a vault waiting to be returned. The entire system functions because everyone assumes they will not demand their money at the same time. Once that confidence begins to crack, the numbers on a balance sheet become secondary because people want CASH.
That is what we must now watch in Russia. Russians have been pulling billions out of the banking system, with demand for physical cash accelerating dramatically this summer. According to Russian Central Bank data cited in the press, nearly $3.4 billion was withdrawn during just the first two weeks of August after approximately $7.3 billion in July and more than $4.5 billion in June. The Central Bank itself reported that cash in circulation increased by roughly 700 billion rubles during July, compared with about 500 billion in June.
This does not mean the Russian banking system is collapsing tomorrow. Nevertheless, something much more important is taking place beneath the surface. Russians are becoming nervous about leaving their money inside the financial system. Rumors have circulated that the government could eventually freeze or commandeer private deposits to help finance the war, and once people begin questioning whether they will retain unrestricted access to their own savings, government assurances become increasingly meaningless. Fear of possible seizure has become one factor driving the movement into cash, alongside drone attacks, economic uncertainty, and disruptions to electronic payments.
This is always the danger with capital controls. Russia has already demonstrated that it will restrict access to money when the state believes national interests require it. Foreign-currency withdrawals remain restricted, and accounts belonging to various foreigners from so-called “unfriendly” nations have faced controls since the war began. Putin recently relaxed some restrictions affecting foreign depositors.
People forget that money is ultimately a question of confidence in government. You can raise interest rates to 20%, offer attractive deposits, and tell everyone that the banking system is perfectly safe, but none of that matters if people begin fearing that the state itself may change the rules. The greatest threat to a banking system is not necessarily bad loans. It is the realization among depositors that their money exists inside a political system whose rules can change overnight.
Russia is also confronting a growing liquidity problem inside its banking sector. The structural liquidity deficit reportedly exceeded 2.7 trillion rubles by August 13, the highest level since the crisis surrounding the invasion in March 2022. The Russian Central Bank argues that this particular measure should not be confused with the availability of deposits or credit and says the deficit remains manageable. That distinction is valid, but the fact that liquidity conditions are attracting attention at precisely the same moment people are increasing their demand for cash should not simply be dismissed.
The war is becoming increasingly expensive, and this is where the economic pressure begins to matter politically. Defense spending has absorbed enormous resources while high interest rates have squeezed the civilian economy. Russian businesses have also reportedly made hundreds of billions of rubles in so-called voluntary contributions to the federal budget. Whenever governments use the word “voluntary” when asking businesses for money during a war, everyone understands what that really means.
Whenever government becomes desperate for revenue. They begin with taxes. Then come special assessments, forced loans, restrictions on capital, controls over foreign exchange, and eventually increasingly creative definitions of what property actually belongs to the individual. Governments rarely wake up one morning and announce that private wealth no longer exists. They change the rules one piece at a time because the fiscal demands of the state continually expand.
This is why the rumors concerning Russian deposits are potentially more damaging than the actual withdrawals themselves. There does not have to be an official plan to confiscate deposits for the rumor to affect behavior. If enough people believe there is even a possibility that their savings could become trapped, converting a portion into cash becomes perfectly rational. Then your neighbor sees you withdrawing money and begins wondering what you know that he does not.
The Russians have been through this before. They remember the collapse of the Soviet Union, the destruction of savings through inflation, the 1998 financial crisis, repeated currency devaluations, and the banking panic surrounding the invasion in 2022. Western analysts often look at Russia through spreadsheets and completely ignore that historical memory. Russians understand from experience that governments and currencies can change far faster than politicians promise.
There is also a geopolitical consequence that the Europeans should think very carefully about. Europe froze hundreds of billions in Russian sovereign assets and openly debated using those assets to finance Ukraine. Whatever moral justification Brussels offers, every government in the world watched what happened. Russia responded with its own restrictions and seizures involving Western assets. The result is that both sides have demonstrated that property rights can become conditional when geopolitical conflict becomes severe.
Capital will always seek safety, and safety does not simply mean the highest interest rate. It means confidence that you can retrieve your money when you want it. This is precisely why capital controls always backfire over the long term. The moment government tells people they cannot move their money, it teaches everyone else to move theirs before the same restriction reaches them.
We should therefore watch Russia carefully through September. This is not merely about whether a few hundred billion rubles leave bank accounts. Russia is heading toward its September elections while the economic burden of the war is becoming increasingly visible domestically. The real question is whether these withdrawals stabilize once the immediate demand for cash subsides or whether Russians continue pulling money from the banking system because confidence itself has changed.
Posted Ordinally on Aug 21, 2026 by Martin Armstrong |
The politicians continue to speak about the Strait of Hormuz as though this were merely a regional dispute between Iran and its neighbors. That is complete nonsense. The strait is one of the most important arteries in the global economy, carrying roughly one-fifth of the world’s oil and gas shipments. Brent crude has moved above $91, but the headline price of oil is only the beginning. The real economic damage appears in shipping rates, insurance premiums, refinery margins, diesel prices, electricity costs, and ultimately government borrowing. War does not remain confined to the battlefield. It enters every household through inflation.
Washington claims the strait is open while Iran insists it remains closed. Both statements are political propaganda because it is the shipowners, insurers, and commodity traders who determine whether a waterway is commercially open. A tanker can theoretically pass through Hormuz, but that means nothing if the insurance premium becomes prohibitive or the crew refuses to accept the risk. Most politicians have never operated a business and do not understand that commerce depends upon confidence—not government declarations. Once confidence collapses, trade will retreat regardless of how many officials stand before cameras insisting that everything remains under control.
This is why the cost of the conflict cannot be measured solely by the number of barrels temporarily removed from the market. Every vessel delayed or redirected reduces available shipping capacity and increases freight rates elsewhere. Insurers must reprice the probability of a tanker being damaged, captured, or destroyed. Refineries must compete for alternative supplies, while countries dependent upon Gulf energy begin building precautionary inventories. Traders add a geopolitical premium because nobody knows whether the next missile will strike a ship, a refinery, a pipeline, or an export terminal. These costs compound through the entire system long before the average person notices the increase at the gasoline station.
The more serious warning is coming from refined products, particularly diesel. Politicians obsess over crude because that is the price quoted every evening on television. Yet modern civilization runs on diesel. Trucks transport food and consumer goods, farmers operate machinery, construction companies run heavy equipment, and emergency generators protect hospitals and critical infrastructure. When diesel rises, the cost of virtually everything rises with it.
Governments will pretend that this inflation is temporary or caused by greedy corporations. They said the same thing after the monetary expansion of 2020. Inflation is never politically convenient because it exposes the true cost of government policy. A war financed through borrowing does not require politicians to present taxpayers with an immediate bill. The expense is transferred into sovereign debt, currency depreciation, and higher prices. The public pays through the destruction of purchasing power, while officials continue claiming that military operations can be conducted without domestic sacrifice.
Europe is particularly vulnerable. It has spent years undermining its own energy security while increasing sanctions, regulations, and military commitments. European governments are already struggling with weak growth, aging populations, expanding welfare obligations, and enormous debt. A sustained rise in energy prices will reduce industrial competitiveness and force governments to subsidize households once again. Those subsidies will require still more borrowing at precisely the moment bond yields are rising. This is the trap: war raises energy costs, energy raises inflation, inflation prevents central banks from reducing interest rates, and higher rates increase the cost of servicing government debt.
The bond market understands what politicians refuse to see. Long-term government yields are rising across Europe, the United States, and Japan because investors are beginning to question whether governments can continue borrowing without limit. The Middle East conflict is accelerating a sovereign-debt problem that already existed. Governments accumulated debt during the pandemic, borrowed again to subsidize energy after the war in Ukraine, and are now expected to finance another expanding conflict surrounding Iran. Each crisis is treated as temporary, but the debt is permanent.
This is how confidence collapses. The decline of an empire does not begin when it loses one battle. It begins when the cost of maintaining its military commitments exceeds the productive capacity of its economy. Rome debased its currency to pay the army and preserve the frontiers. Spain consumed the wealth of the New World financing wars across Europe. Britain emerged from two world wars victorious but financially exhausted, surrendering its position as the center of global capital to the United States. Military power is always dependent upon economic power, yet the warmongers imagine the relationship works in reverse.
Iran also understands that Hormuz is more valuable as a threat than as a permanently closed waterway. Completely stopping trade would damage Iran and alienate China, India, and other Asian customers dependent upon Gulf energy. Tehran does not need to seal the strait with an impenetrable naval blockade. It merely needs to create enough uncertainty that commercial traffic slows and the world pays a permanent risk premium. A missile landing near a tanker can accomplish economically what a fleet might fail to achieve militarily.
The United States may possess the naval power to escort ships, but it cannot force private capital to ignore risk. Nor can it guarantee that mines, drones, missiles, or small boats will never penetrate the security perimeter. Every escalation requires more ships, more aircraft, more personnel, and still more government spending. The attempt to protect the trade route therefore adds to the fiscal burden created by the disruption itself.
The Strait of Hormuz is becoming a tax imposed upon the entire world economy. It will appear in freight costs, food prices, utility bills, interest rates, government deficits, and eventually elections. Western leaders will blame Iran, corporations, speculators, or climate change before admitting that their endless wars carry an economic price.
Posted Ordinally on 21, 2026 by Martin Armstrong |
Saudi Arabia recorded a budget deficit of 125.7 billion riyals, approximately $33.5 billion, in the first quarter of 2026. That is almost as large as the $44 billion deficit the government projected for the entire year. Spending increased by 20% while oil revenue declined by 3%, creating the very contradiction Vision 2030 was intended to eliminate. The kingdom is spending enormous amounts of oil revenue and borrowed money to build an economy that will supposedly no longer depend upon oil.
The government approved financing needs of 217 billion riyals, or nearly $58 billion, for 2026. This includes 165 billion riyals to cover the projected budget deficit and another 52 billion to repay maturing debt. But the Q1 deficit has already consumed most of the amount projected for the entire year. The government may recover some ground if oil revenues rise, but this exposes the vulnerability of every state-directed economic transformation. The projections assume that politicians can control spending, oil prices, regional stability, and investor confidence simultaneously. History demonstrates that they can control none of them.
The war with Iran has accelerated the problem. Saudi military spending increased by 26% during the first quarter as the kingdom attempted to protect its population, oil facilities, shipping routes, and critical infrastructure. Government expenditure on goods and services increased sharply, subsidies rose, and capital spending was brought forward. This is the hidden cost of war even for a country attempting to remain outside the conflict. Saudi Arabia does not have to invade Iran to pay for the war. It must spend billions defending itself against missiles, drones, disrupted shipping, higher insurance costs, and the possibility that the Strait of Hormuz will remain unreliable.
Saudi Arabia’s Public Investment Fund is now scaling back and shifting toward phased projects tied more closely to profitability. The original plans for The Line, a 112-mile linear city, became the international symbol of Vision 2030, but symbols do not produce cash flow. Projects are being reevaluated while the kingdom redirects attention toward logistics, artificial intelligence, clean energy, religious tourism, utilities, and infrastructure connected to events such as Expo 2030 and the 2034 World Cup.
There is nothing inherently dangerous about Saudi Arabia borrowing money. Its debt burden remains far below that of the United States, Japan, or the major European governments. The issue is the direction of the trend and the productivity of the expenditure. Debt used to construct infrastructure that increases trade, tourism, energy capacity, and private investment may strengthen the economy. Debt used to maintain political prestige, absorb operating losses, or defend projects that cannot survive without government support becomes a permanent claim upon future revenue.
Vision 2030 was launched to diversify the Saudi economy away from oil, expand tourism, build new industries, and create private-sector employment for a young population. Those objectives are entirely rational. No government can assume that a single natural resource will finance the state indefinitely, particularly when Western governments are simultaneously regulating fossil fuels, subsidizing alternatives, and using energy policy as a geopolitical weapon. The problem is not the desire to diversify. The problem is the belief that diversification can be commanded from above through unlimited spending.
The danger emerges when government borrowing begins crowding out the private economy Vision 2030 was supposed to create. Saudi banks, contractors, and investors naturally prefer projects supported by the state because political backing appears to reduce risk. Capital then flows toward whatever the government has designated a national priority instead of toward enterprises responding to genuine market demand. This produces the illusion of private-sector growth while the entire system remains dependent upon public spending. If the state reduces expenditure, the supposed private boom disappears with it.
This pattern is not unique to Saudi Arabia. Japan attempted to support growth through enormous infrastructure spending after its 1990 asset bubble collapsed, leaving behind bridges, roads, and regional projects that could not restore private demand. China used state-directed credit to build cities, railways, and property developments on an unprecedented scale, but debt accumulated when economic returns failed to match political projections. Dubai itself experienced the limits of debt-financed development during the 2009 crisis and required assistance from Abu Dhabi. Governments always believe their current project is different because they cannot imagine the economic cycle turning against them.
Saudi Arabia’s advantage is that it still possesses enormous energy reserves, financial assets, and the ability to attract international capital. Its disadvantage is that this apparent wealth encourages the belief that every project can be completed regardless of cost. Oil revenues can conceal mistakes for decades, but they cannot transform an uneconomic project into a productive one. If the kingdom must continually borrow against future oil income to finance diversification, then oil dependency has not ended. It has simply been moved from the present budget onto the future balance sheet.
The regional war makes that contradiction more dangerous. Higher oil prices may increase revenue, but attacks on shipping and infrastructure can reduce export volumes and raise security expenses. Saudi Arabia can therefore receive more per barrel while still confronting a deteriorating fiscal position. This is why analyzing oil producers solely through the price of crude is foolish. Revenue depends upon price, volume, transportation, security, and the cost of maintaining the state. War can increase the first while damaging every other component.
Vision 2030 may ultimately produce valuable infrastructure and a more diverse Saudi economy. That outcome will depend upon whether the government is willing to abandon projects that cannot generate an economic return. The decision to scale back the most extravagant parts of Neom may be the first sign that reality is beginning to overcome political ambition. Continuing every project merely to avoid admitting error would transform Vision 2030 from an economic reform into a sovereign debt machine.
Posted Originally on Aug 20, 2026 by Martin Armstrong |
David Morens, the longtime senior adviser who worked inside Anthony Fauci’s Office of the Director at the National Institute of Allergy and Infectious Diseases, has pleaded guilty to conspiracy to commit offenses and defraud the United States. Morens admitted participating in a scheme to evade the Freedom of Information Act and the Federal Records Act regarding communications about coronavirus research grants.
According to the Justice Department, Morens and his associates anticipated that the public would request their records, so they agreed in writing to conduct government business through his private Gmail account. They used it to exchange nonpublic NIH information, influence funding decisions, edit letters to NIH leadership, and “back-channel” information to a senior NIAID official. This is not speculation or some social-media theory. It is a guilty plea in federal court by a man who served inside Fauci’s office from 2006 through 2022.
These were the same institutions that demanded access to everyone’s vaccination status, travel history, medical information, and personal contacts while their own officials deliberately concealed government communications. Morens also admitted participating in a conspiracy involving illegal gratuities. The Justice Department says he received wine for his “behind-the-scenes shenanigans” and identified an official act he could perform to “deserve” the gift—writing a scientific commentary advocating that COVID-19 had a natural origin. There were also offers involving meals at Michelin-starred restaurants in Paris, New York, and Washington. While ordinary people were prevented from visiting dying relatives and restaurant owners were driven into bankruptcy, insiders were discussing wine and expensive dinners. Is this what they meant when they ordered everyone to “trust the science”?
The entire pandemic response followed this pattern of demanding absolute obedience while avoiding accountability. The six-foot distancing rule transformed schools, businesses, churches, restaurants, and courtrooms. Yet when Congress asked Fauci about the evidence supporting that precise distance, he admitted that it “sort of just appeared” and that he was “not aware of studies” supporting it. Physical separation may reduce exposure under certain conditions, but that does not make six feet a scientifically proven dividing line between safety and danger. Government took a crude precaution, removed every qualification, and converted it into an inflexible command that helped keep children out of school and businesses closed.
Masks were handled in precisely the same manner. A properly fitted medical respirator used in a controlled environment was treated as equivalent to a loose cloth covering repeatedly worn by a child. Masks became a political uniform. Fauci initially discouraged widespread masking before reversing himself and helping turn it into a moral obligation. When Congress later asked whether he remembered reviewing studies supporting the masking of children, he could only respond that he “might have” but could not specifically recall. Children were forced to cover their faces for hours every day, but the official defending the policy could not identify the evidence he personally reviewed before supporting it.
Lockdowns became the most destructive expression of this bureaucratic arrogance. Governments closed businesses, interrupted medical treatment, suspended education, isolated the elderly, and restricted movement without conducting any credible assessment of the total long-term consequences. Officials claimed every decline in infections as proof that lockdowns worked and blamed every increase on the public’s failure to comply. Meanwhile, public employees continued receiving salaries, large corporations expanded their market share, technology companies gained extraordinary power over public debate, and pharmaceutical companies secured enormous government contracts. Small businesses, children, private workers, and future taxpayers were left to absorb the damage. The political class did not share the sacrifice it imposed upon everyone else.
Morens’ guilty plea exposes the real problem. Bureaucracies eventually cease protecting the public and begin protecting themselves. Records are concealed to preserve institutional reputations, dissent is suppressed to maintain official narratives, and failed policies are defended because admitting error would threaten the authority of those who imposed them. Confidence in government is not destroyed by people asking difficult questions. It is destroyed when the public discovers that those questions were justified and that government officials deliberately prevented the answers from emerging.
They told the public that questioning authority was misinformation. They censored critics, destroyed reputations, and presented political judgments as unquestionable science. Now a senior official from Fauci’s inner circle has admitted to participating in an actual conspiracy to conceal government records. The conspiracy is no longer a theory.
Posted Originally on Aug 20, 2026 by Martin Armstrong |
The United Arab Emirates has suspended all trade, commercial exchanges, and financial transactions with Iran until further notice after accusing Tehran of launching two ballistic missiles toward Emirati waters. Iran has denied responsibility, but that hardly matters once governments enter the cycle of retaliation. UAE-Iran trade has exceeded $28 billion annually, and Dubai has served for decades as Iran’s commercial doorway to the outside world. This is therefore not some symbolic diplomatic protest.
The UAE has severed one of Iran’s most important supply lines while simultaneously placing its own position as the neutral trading center of the Middle East at risk. Politicians never understand trade because they see only goods crossing a border. They do not see the networks of credit, shipping, insurance, currency conversion, warehousing, and personal relationships that can take generations to build and only days to destroy.
The UAE has been Iran’s largest source of non-oil imports, supplying nearly $22 billion in goods during the Iranian year ending in March 2025. Much of this was not produced in the Emirates but entered through its re-export system. Dubai became successful because it served as a bridge between East and West, facilitating trade for countries that could not trade directly due to sanctions. Iranian merchants used Dubai to obtain machinery, electronics, industrial components, and consumer goods, and to access international finance.
The new ban is therefore a financial blockade disguised as a trade regulation. Iran will now be forced to redirect transactions through China, Turkey, Iraq, Oman, Central Asia, cryptocurrencies, barter arrangements, and still more complicated front companies. Trade does not disappear simply because a politician signs an order. It moves underground, becomes more expensive, and rewards those willing to assume the greatest legal and political risk.
This is the same mistake governments have made throughout history. Athens attempted to use the Megarian Decree to cut Megara off from the markets of the Athenian Empire before the Peloponnesian War. Rather than forcing submission, economic warfare intensified the divisions that produced military conflict. Napoleon’s Continental System was intended to destroy Britain by excluding British commerce from Europe, but smuggling expanded, prices rose, allies resisted, and the policy ultimately weakened Napoleon’s own empire. The United States attempted to pressure Japan through restrictions on oil and strategic materials before Pearl Harbor. Politicians routinely imagine that economic sanctions are a peaceful alternative to war when they are historically one of the final steps toward war. Once a government attempts to strangle another nation economically, the targeted nation must either capitulate or escalate. There is rarely a third outcome.
The UAE is responding to a genuine security threat after attacks on shipping, infrastructure, and vessels connected to the Abu Dhabi National Oil Company. No government can tolerate missiles being fired toward its territory or repeated attacks on its commercial fleet. Nevertheless, cutting all commercial and financial ties will not eliminate the threat. Merchants do not profit from war. Bureaucrats and military establishments do. By destroying the commercial bridge, the UAE is weakening the very private-sector relationships that could have pressured both sides toward restraint. This is why the first duty of government should be to avoid war, but governments always listen to the military and intelligence agencies that see every problem as an opportunity for confrontation.
The ban will also damage Dubai. The UAE has spent decades presenting itself as a politically neutral financial and commercial center where capital from every region can find safety. That reputation is now being sacrificed to the expanding Middle Eastern war. Iranian-linked money will begin searching for alternatives, but it will not be alone. Russian, Chinese, Indian, and other foreign investors will examine the decision and ask whether their own assets and transactions could someday become bargaining chips in another geopolitical conflict. Capital is never patriotic. It flees uncertainty and seeks the jurisdiction most likely to protect property regardless of politics.
The greatest risk remains the Strait of Hormuz. Nearly every attempt to isolate Iran economically increases Tehran’s incentive to use geography as a weapon. The strait remains one of the most important energy corridors in the world, and any sustained interruption will push shipping costs, insurance premiums, oil, refined products, and ultimately consumer prices higher throughout the global economy. Europe is already economically fragile, governments are drowning in sovereign debt, and the cost of war is rising everywhere. Yet the politicians continue to impose sanctions and embargoes as if there will be no consequences beyond Iran. They never look beyond the immediate announcement. They cannot comprehend that interrupting a $28 billion trade relationship will produce secondary effects across currencies, banking, shipping, supply chains, and energy markets.
This ban will certainly damage Iran, but it will not force the Iranian government to disappear. Sanctions normally punish the population while strengthening the state because scarcity gives government even greater control over who receives access to foreign currency, imported goods, and political favors. Iran will adapt, smuggling will increase, and new intermediaries will collect enormous premiums for replacing Dubai’s role. The real consequence will be the further division of the world economy into competing political blocs. Trade once restrained governments because both sides had something to lose. Now politicians are systematically destroying those connections and then wondering why the risk of war continues to rise.
The UAE may believe this trade ban will compel Iran to retreat. History warns that economic warfare does not end the cycle of escalation. It accelerates it. When trade stops, capital flees, diplomacy collapses, and the military becomes the only institution left speaking between nations. That is how regional conflicts become world wars.
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