Doom loop warning by Paulson
Former Treasury Secretary Henry Paulson suggested US authorities prepare a back-up plan in order to avert a potential future collapse in demand for Treasuries resulting from long-running concerns over the federal debt load — an event that he warned would have “vicious” effects.
Just getting worse and worse
I’m convinced this is why some want to proliferate crypto stable coins here. Those will be forced to be backed 1:1, with US Treasuries the obvious choice for backing. They are trying to create an artificial demand for Treasuries through the use of new stable coins that solve no problem and fill no need.
Related, I think the anti-green push has everything to do with desperately trying to keep the petrol dollar afloat.
Israel-Iran War isn’t helping the Petro-Dollar – it’s causing nations to flee it.
intercst
Sounds very plausible!
The Captain
I agree that it’s not helping, but we’re still a long way from catastrophe.
Global oil markets are changing. The US controls the largest oil reserve in the world (Venezuela). This allows for more control over stabilizing supply AND ensuring dollar-denominated trade. The recent currency swap agreements will also reinforce the dollar’s dominance.
If the US can keep the petro-dollar afloat (maybe they can strengthen it), then the demand for US treasuries should remain strongish.
The UAE will be leaving OPEC. Their leadership has long felt OPEC unfairly constrained them.
The plot thickens.
Their oil is crap. And we seized it illegally. Sigh.
<< U.S. Treasury Secretary Scott Bessent has outlined a bold new strategy: expanding permanent dollar swap facilities with Gulf and Asian allies to reinforce the US Dollar >>
That’s going to be hard to do if the US is seen as advancing Israel’s military ambitions to the detriment of our other allies’ interests (i.e., access to oil through the Straits of Hourmoz.)
intercst
Yeah…but extra heavy sour crudeness doesn’t just occupy the WH, the US refineries were built to process it. It will take some time to build out capacity, but the US is set up for success.
Seizing the Venezuelan oil industry is just one of the many illegal things that has gone down. I’m not justifying it, just observing that the global oil market has shifted dramatically in less than 6 months.
Not to pick a nit, but you’ve got an extra “o” in there and a misplaced “u”. Also, it’s only one strait. But I digress…
The UAE swap is all but a done deal. Requesting a swap is a way for a country to express upsettedness about the war, while at the same time preparing for a cash crunch. Swaps help secure the dollar’s dominance, but also provide an incentive for the US to protect the currencies of its swapping partners.
The US being seen as advancing Israel’s military ambitions will not get in the way. It’s all about the Benjamins baby.
US Gulf refineries ready to run Venezuelan crude
https://www.reuters.com/business/energy/us-gulf-refineries-ready-run-venezuelan-crude-2026-01-08/
Refineries along the U.S. Gulf Coast from Corpus Christi, Texas to Pascagoula, Mississippi are configured to run the heavy sour, corrosive crude oil produced by Venezuela that President Donald Trump plans to sell in the U.S., following the capture last weekend of Nicolas Maduro.
Beginning in the 1990s, refiners reconfigured their plants with increased coking capacity and upgraded steel to be able to process growing supply from producers of dense, high-sulfur crude, like Venezuela, Mexico and Ecuador…
Following are the Gulf Coast refineries that could run Venezuelan crude…
DB2
And this is why we can’t refine our own light sweet - and why will never be energy independent without new refining capacity.
I’d much rather refine our own and let someone else refine their lousy oil.
Me too, but we’re not profitsmaxxing oil executives.
Nah, sa and uae are more at odds with iran than israel is.
The focus on israel alone is crap.
Frank India and China like doing business with israel
It puts far too much pressure on the Palestinian leadership. They might have make peace, a fate worse than death.
Not really. IIRC, it was the cheap heavy Canadian oil.
DB
Straight to the point! 
The Captain
The dollar swap facility doesn’t open the Strait. (thanks for the spelling correction.)
Iran still holds all the cards. Even a whiff of a drone strike on a tanker sends insurance rates sky high.
It would probably be cheaper to just let Iran charge a toll. {{ LOL }}
intercst
At the end of the day the only people who can bail out the Treasury are We The People. Everything else is window dressing.
The Captain
I agree, and you’re most welcome!
The swaps aren’t intended to open the strait. The US wants them to stabilize the petrodollar. Other countries want dollars to prepare for a cash crunch that will inevitably come if the strait doesn’t get striaghtened out soon.
Bottom line, currency swaps strengthen demand for US treasuries.