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Source: Operation Disclosure Official | By David Lifschultz, Contributing Writer
Submitted on July 4, 2024
GLOBAL CHOKEPOINTS IN MARITIME TRADE AND ITS WORLD FINANCIAL DANGERS
Compliments of The Lifschultz Organization, Founded in 1899
The first link covers the Straits of Hormuz chokepoint which if shut down would collapse the US financial system that the Pentagon at the highest levels maintained cannot be kept open by the US Naval forces as quoted in the same link. The entire world financial system would implode. The direct quotes with the Pentagon are in the first link. This link reflects the danger if the war in the Middle East spreads. This is the wild card that can bring down the entire world financial system by triggering the implosion of the 618 trillion dollar derivative exposures as reported by the BIS or Bank for International Settlements where the central bank representatives meet each month to coordinate currency flows. No major newspaper such as the New York Times will even touch this danger in detail. Other sources say the actual exposure in derivatives is two quadrillion in the second link. Over 20% of the world oil supply travels through the Straits of Hormuz and my inquiry sometime back with the Goldman Sachs oilderivative specialist said the oil price would go over $700.00 a barrel imploding the entire world financial system. Of course, then the price of oil he went on to say would collapse as the world collapsed. Dr. Doom (Henry Kaufman) in a conversation with me said the day it happens all the national banking systems in the world would have to be nationalized by each nation. Warren Buffett has talked repeatedly about these derivative exposures characterizing the danger which if detonated would act in a chain reaction manner as a nuclear bomb imploding all the world financial markets. In footnote one I cover this in more detail in a letter to Jamie Dimon the CEO of J. P. Morgan Chase.
If anyone doubts these conclusions we would refer them to review how a tiny and primitive group such as the al-Houthis have been able to block half the commercial traffic via the Suez Canal-Red Sea covered in the third link. We can assure the reader that no traffic will go through the Straits of Hormuz cutting off 22% of the world oil supply. Here at least there is an alternative which is to travel around Africa though it is more costly as the travel time massively increases.
https://goldbroker.com/news/two-quadrillion-dollars-global-timebomb-2261
https://www.imf.org/en/Blogs/Articles/2024/03/07/Red-Sea-Attacks-Disrupt-Global-Trade
Graphic Essay: Global Chokepoints in Maritime Trade
When these passages are blocked, it dramatically affects the availability and price of goods in every corner of the world.
By Geopolitical Futures – July 3, 2024
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Editor’s note: The following is the first of what we hope will be many Monthly Graphics, a visual-rich, subscriber-only essay that complements our long-form offerings and doubles down on what makes our Weekly Graphic so popular. Please feel free to provide any feedback you might have.
More than 90 percent of all goods traded – food, construction material, pharmaceuticals, you name it – are transported on water. Under normal circumstances, it is easily the safest and most cost-effective way to get a product from one place to another. But maritime trade is inherently vulnerable to natural chokepoints. When these passages are blocked – for whatever reason – it dramatically affects the availability and price of goods in every corner of the world.
The importance of the Suez Canal – in case anyone ever doubted it – was brought home in 2021 when a container ship known as Ever Given ran aground, blocking traffic for nearly a week and stranding many billions of dollars worth of goods. More recently, Yemen’s Houthi rebels last year threw their support behind Hamas after the Oct. 7 attack on Israel and have since intermittently fired rockets at commercial vessels in the Red Sea bound for the Bab al-Mandeb strait and the Suez Canal. The World Bank estimated that traffic through the two channels had been cut in half as of March 2024.
Many of the world’s leading oil producers export through the Strait of Hormuz, making it a critical passageway for the transportation of global hydrocarbons. Last year, nearly 21 million barrels of oil per day, or roughly 20 percent of global supply, sailed through the strait. Iran controls the northern rim of the strait, putting it in the best possible position to hold oil and gas supplies and prices hostage if it ever wanted to. The West’s general animosity toward Iran – and the possibility of spillover violence from the Israel-Hamas conflict – only adds to the uncertainty along this route.
China’s economy lives and dies by its ability to export goods cheaply to foreign markets. Hemmed in as it is by islands – many of which are loyal to the U.S.-led security alliance in the Western Pacific – China depends on the Strait of Malacca for its livelihood. Every year, some 60 percent of its total oil supply and more than 70 percent of its petroleum and liquified natural gas exports pass through these waters, cutting transit time by 40 to 90 hours compared to other routes. The strait itself opens up to the South China Sea, a hotspot of Chinese naval activity and military posturing meant solely to avail itself to other sea lanes. Naturally, this pits it against the United States, which regularly conducts freedom of navigation operations in the region.
The Panama Canal is as strategically important as it is economically vital. In connecting the Atlantic Ocean to the Pacific Ocean, it indirectly links the coasts of its primary supporter, the United States, and ensures the security of the Caribbean Sea. And unlike other chokepoints, the threat of conflict along the canal is low thanks to the understood support of the United States. The bigger problem for the Panama Canal is water shortages that have forced authorities to reduce transit. As the country enters its rainy season, efforts are now underway to build back capacity and increase vessel draft.
Footnote one:
Letter to Jamie Dimon:
Mr. Jamie Dimon
J. P. Morgan Chase
Dear Jamie:
Here is a summary of the problem the international banking system faces if the BRICS, Arabian and Russian producers cut off the oil that Washington has not addressed in the calculations of the dangers that we face which are not entirely of a military nature in the Middle East.
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With best wishes.
David
618 TRILLION NOTIONAL DERIVATIVE VALUATION
I was called upon to handle the 1987 emergency stock market crash and my point man at the Fed was Ted Truman. I just noticed an article that Ted Truman just wrote in the Financial Times so he is alive and kicking in his eighties. We just ordered the major firms to reverse their cash settlement rigs. Ted understood everything in a minute. He was the George Smiley at the Fed of the John Le Carre novels. What had happened was the major Wall Street firms were then experimenting with a new vehicle called cash settlement which they would use to move the market up by placing their cash settlement positions above the market that settled for cash before they moved the market up and below when they would move the market down. It took less money to move the indexes than they received from the cash settlement derivatives and settled their profits in cash. The swings became too large and went out of control on the downward swing.
The self-correcting mechanism of buying back the security to cover the short was eliminated.
We came in to order the players to place their positions above the market and drive it upwards coordinated with the Federal Reserve System which worked. The atmosphere was painted in the background by executives proclaiming they were buying their own stocks because the valuations were so cheap. A detailed explanation as to what happened is given in a link below entitled “Straits of Hormuz” under the subtitle “Stochastic Control Theory”.
I was also involved in ending the other grand manipulation of 2008 which forced the issuance of 27 trillion dollars in Federal Reserve Credit as they hesitated to follow my advice when in 1987 there are hardly a ripple. I was preoccupied in another emergency situation for the United States in 2008 but wrote out the rescue plan but they delayed its implementation for two months requiring 27 trillion dollars of new Federal Reserve Credit based on the delay when I came back to implement the plan. This could just as easily been rescued as in 1987. In matters such as this he who hesitates is lost.
When love once pleas admission to our hearts
(In spite of all the virtue we can boast)
The woman that deliberates is lost.
If we wish to understand what this meant from 1913-1914 to 2008 about two trillion of Federal Reserve Credit had been created. When I came in we had to create 27 trillion dollars to save the situation all of which was subsequently paid back. But we never showed any Federal Reserve Credit having been above two trillion dollars in 2008 as that would have created a world crisis which you can see for yourself in the third link. Here are the links. Link one covers the 27 trillion dollar cover on top of the two trillion base for their mistake, and link two the Federal Reserve balance sheet for 2008 showing no relative increase in credit which report was false.
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Today we face another potential crisis of even greater magnitude as outlined below as our ability to control it is limited as the players are outside of our jurisdiction as noted in the next two quotes. The solution requires an understanding of the great danger the international financial system is in and requires decisive action to forestall an Arabian and Russian cutoff of potentially 25 to 50 percent of the world oil supply that would irretrievably implode the international financial system.
Here are warnings:
Iraqi Prime Minister Mohammed Shia al-Sudani warning supplies of Middle East oil to international markets could be put off because of the Israel-Gaza War.
The other reason this is very significant is because if a larger war were to kick off, oil would become the primary geostrategic global lightning rod. That’s because Iran can wreak havoc on global markets, transits via the known chokepoints of the Persian Gulf, etc. This is underscored by the fact that the Iranian minister called for a total oil embargo on Israel during this meeting:
Iranian Foreign Minister: We call on a total oil and gas embargo by the Islamic countries against nations that support Israel.
There is the potential of Iran shutting down of the Straits of Hormuz and Russia shutting down in Russia and their former provinces about half the world’s oil supply if we include the Straits of Hormuz discussed below. This would bring down the entire world economy which is sitting on a notional value of derivatives of 618 trillion dollars. They say notional as most are not in the money but if the economy collapses with an oil cutoff Goldman Sachs oil derivative experts say that the exposure will rise in the notional derivatives who become in the money obliterating the world financial system. We compare this risk to the world GDP of 96.5 trillion dollars.
Warren Buffett’s concern with derivatives is not their present value but the value in a crisis which is why he moved to eliminate derivatives in the Swiss insurance company that he bought some years back though it would take 50 years. A 618 trillion dollar derivative crash could be our Baron Louis de Rothschild bank’s collapse in Vienna which was the Creditanstalt that triggered the collapse of the German economy in 1931 raising the unemployment to 50% if we include the itinerant workers that made the National Socialist revolution successful. 50% unemployment seems to be the key for the west today. The US system in 1933 weathered the 25% unemployment. We are saying if the US and European unemployment rises to 50% their governmental systems will similarly collapse as in Germany in 1933. This is entirely possible as we sit just above the abyss as the Middle East nears Armageddon.
Here are current comments by the Bank for International Settlements founded by Hjalmar Horace Greeley Schacht. Dr. Schacht, who was nicknamed the old wizard, stopped the German hyperinflation creating a gold backed mark though there was no gold behind it following the verses of Goethe in his Faust:
I am fed up with this endless how and when,
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if there is no money let us make it then.
He was also behind ironically enough the creation of the Bank for International Settlements where once a month the central bankers meet in these times to chart the world financial system.
Here are the BIS comments:
The sharp increases in gross market values contrasted with the stability seen in the notional value of outstanding derivatives. These sagged by only $14 trillion to $618 trillion at end-2022 after a small rebound the previous period, continuing the sawtooth pattern evident since at least 2016 (Graph 1.B).
$2 Quadrillion Debt Precariously Resting On $2 Trillion Gold | GoldBroker.com
https://www.bis.org/publ/otc_hy2305.htm#graph1
Here we discuss Russia potentially blocking 23 million barrels of oil from Russia and its former eastern provinces. If we combine this with Iran shutting the Straits of Hormuz, this represents a shut off of about half the world’s oil supply. Oil is the ultimate weapon. The next link is a reprint of my July 2, 2019 speech before the Peace Conference at the Russian Duma where I predicted the Ukraine War after Russia refused my 700 billion dollar offer to redirect their oil and natural gas to China as the US would not tolerate Europe being dependent on Russia for which reason the US started the Ukraine War.
David Lifschultz
THE LIFSCHULTZ ORGANIZATION
DAVID@LIFSCHULTZORGANIZATION.COM
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