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Song of the Week - Hootie & The Blowfish - Only Wanna Be With You
Table of Contents
Houthi’s and the Blowfish
New BRICS Members
FOMC Check-in
Crypto Macro
Price Action
Blur Speculation
Degen Activities
Conclusion
Internal References
1. Houthi’s and the Blowfish
Please forgive me for this section title. I know this is a serious topic, but I couldn’t help it.
Who are the Houthis?
The Houthis are a Shia Islamist, political and military organization that rose up in Yemen in the 1990s. You may remember from my Petro-dollar section in April that there is a significant pocket of Shia Muslims in Yemen.
That bit of blue I’ve circled above is the Houthis. Not all Shia’s in Yemen are Houthi, but most are. About 45% of Yemen’s population is Shia, while the other 55% are Sunni. Since the Houthis are Shia, they do offer more rights to women than the official Yemeni government, so some women have been escaping into Houthi territory so that they can have the right to vote, work, and serve in the Houthi Security Force.
The elected government of Yemen is Sunni and controls the oil fields and some of the less populated southern coastal regions. A new group emerged in 2018 when the Yemeni government at the time tried to dismiss the governor of Aden from his position. This is a secessionist group called the Southern Transitional Council (STC). It’s made up of the governors of several southern provinces in Yemen (marked above in Red). They were supported by the UAE and engaged in several clashes with the official Yemeni government at the time.
To be clear, a civil war has been ongoing in Yemen for about a decade. But in 2022, the president stepped down and no president was elected to replace him. The government of Yemen is currently ruled by a council of 8 members, 3 of which are STC members.
You could say that the STC and the Yemeni government have come back together again to continue opposing the Houthi rebels.
The government of Yemen is Sunni and supported by Saudi Arabia. The Houthis are Shia and supported by Iran. The US has been supplying Saudi Arabia with bombs and munitions that they have been using to target the Houthis for 10 years. Some of these armaments have been White Phosphorous (WP) munitions. Typically, WP is used against armored targets like tanks as it burns incredibly hot and can melt armor. But when used on civilians it can cause excruciating pain and severe injuries. International Agreements restrict its usage to areas not significantly populated with civilians, but International Agreements aren’t enforceable in any court. There is quite a bit of evidence that the Saudis have been using US-supplied WP in civilian areas of Yemen for the better part of the last decade. This is in direct violation of the Foreign Military Sales Program, but I don’t think any member of the US legislature is functionally literate, so the weapons sales have continued.
From 2014 to 2021, it is estimated that 157,000 civilians have been killed directly, with another 227,000 dead from Famine as a result of the civil war. In a population of 32m, this represents over 1% of the country’s population. An estimated 4.5 million are homeless as a result of the conflict, and another 21 million require humanitarian aid as the country’s power grid has been mostly destroyed, as well as half of the hospitals and 2/5ths of the schools.
Despite being called “rebels,” the Houthis have moderate military capacity. You’ve probably seen the video of them hijacking this ship last month.
While they do have some modern armaments, their air force consists of a handful of helicopters and a single F-5 fighter jet. The F-5 is a supersonic fighter jet design from the 1950’s and is outclassed by just about anything any modern air force is running. Most of the Houthi military equipment has either been captured from the Yemeni government or provided to them by Iran. They have a significant number of anti-ship missiles and limited production capacity for anti-ship missiles. They have some tanks and captured patrol boats, but nothing of substantial size.
Their primary means of disrupting shipping right now involves launching small drones from dinghies, using the handful of remaining helicopters they have to board ships, or firing barrages of anti-ship missiles from the shore.
The threat they pose to international shipping is not of actual damage and capturing ships. The threat is simply that they make passing through the Red Sea too expensive to insure for commercial ships. Even with Western warships present to use their missile defenses, EW, and drone defenses to secure the passage, this still is too expensive for insurance at the international level to properly financialize.
It is unlikely that the Houthis will let up so long as Iran is sending them armaments for the simple fact that they have nothing to lose and currently have no means of integrating into broader Sunni society or normalizing relations with Saudi Arabia.
As much as the Houthis are their own distinct group among a fractious Islamic polity, I do not think they can be viewed outside of Iran. Both groups have been under economic sanctions/embargos for the past 10 years and are gripped with similar angst and misanthropy toward the broader Western world. Who can blame them? We cut off Iran’s ability to do business in 2012 through SWIFT and then watched as they starved and could no longer ship medicine to their home ports. They’ve managed to claw their way back to semi-relevance through China, Russia, India, and now BRICS as a whole. They no longer wish to come to the table and rejoin the Western world. We bullied the school shooter for a decade and now he’s back as an adult outside the door with a rifle and a backpack full of 10-round magazines. The time for bargaining has ended, and you could certainly put the blame on our shoulders for this mess we’re in, but all the same, we’re in it. Similarly, the Houthis have been pounded by outsiders who are supporting a government that would have otherwise lost power long ago if the Saudis and UAE had not intervened. They have nothing to lose, and feel some type of way towards us.
Yes, we could easily wipe them out in a military invasion, but short of killing millions of civilians and wiping everyone out, there is no way to end the emotional core driving the insurgency. Similar to Iraq and Afghanistan. You can win the battle, but the hearts and minds have been chiseled into stone due to our foreign policy towards both countries. Most Taliban angst towards the West melted away as soon as the Taliban had to take up office jobs and run their own country with no foreign soldiers to shoot at anymore. Getting the copier to connect to the Wifi is their new jihad.
Most in Yemen have many friends, relatives, and acquaintances who have died, starved, had their homes blown up, lost their jobs, lost their way of life, etc. because of outside interference in the civil war. The thing about Civil Wars is that they typically end when one side wins and can take power. Western-aligned powers decided not to let that happen, and what was previously a self-destructive war has turned into an outwardly destructive one as well.
Our strongest weapon against Islamic extremism is an unfinished expense report and an Epson ink cartridge that the printer refuses to recognize.
What I don’t like about Kabul is its ever-increasing traffic holdups. Last year, it was tolerable but in the last few months, it’s become more and more congested. People complain that the Taleban brought poverty, but, looking at this traffic and the large number of people in the bazaars and restaurants, I wonder where that poverty is.
Another thing I don’t like, not only about Kabul but broadly about life after the fatha, are the new restrictions. In the group, we had a great degree of freedom about where to go, where to stay, and whether to participate in the war.
However, these days, you have to go to the office before 8 AM and stay there till 4 PM. If you don’t go, you’re considered absent, and [the wage for] that day is cut from your salary. We’re now used to that, but it was especially difficult in the first two or three months.
The other problem in Kabul is that my comrades are now scattered throughout Afghanistan. Those in Kabul, like me, work from 8 AM to 4 PM. So, most of the week, we don’t get any time to meet each other. Only on Fridays, if I don’t go home, do we all go to Qargha, Paghman or Zazai Park. I really like Paghman and going there with friends makes me very happy. Such a place doesn’t exist in the entire province of Paktika.
This man lived in the mountains and caves for 14 years as a deputy and then regional commander of the Taliban. Running from MQ-Reaper drones, and hellfire missiles. Eating cold food and shivering through the winter because the drones have thermal trafficking and FLIR cameras You put him behind a desk and after a few weeks, he finds himself missing American occupation.
We could pacify the entire Islamic world if we simply had the will and the copier paper for it.
2. New BRICS Members
You may have seen that on Jan. 1st, 2024, BRICS announced new members joining. Not quite. They have extended an official invitation for countries to join. Those countries were:
Saudi Arabia
United Arab Emirates
Egypt
Argentina
Ethiopia
Iran
Their official member status is here below.
Saudi Arabia - Has not officially joined and mulling their decision
United Arab Emirates - Confirmed membership at Davos
Argentina- Rejected membership invitation in December
You’ll note that most news media you find will make no note about Argentina’s refusal or about Saudi Arabia not deciding to join yet. The reporters likely did not confirm these countries actually joined and never bothered to look for individual confirmations from each country. Reporters look at the world and accept everything they see as true. Completely lacking a critical eye.
This is of course a concern for a few reasons. Mainly because all of these countries are oil exporters or have critical positioning around global shipping.
The anti-dollar bloc is slowly coming together. How the Middle East resolves around the issue of Israel, Iran, and Yemen will determine the future of global shipping. Sudan is war-torn and has little influence on its coasts. The only players that matter here in terms of the Suez are Saudia Arabia, the UAE, Egypt, and Iran. Ethiopia used to matter here, but after losing all of its port cities to Eritrea, its Navy was in an awkward position, a Navy with no home port. Ethiopian ships drifted around from port to port for a few years, eventually settling in Yemen where the ships were sold for scrap/scuttled.
After the collapse of the USSR, without Soviet support, and without port access; Ethiopian army morale plummeted, and the rebels managed to capture several Ethiopian cities and Adis Ababa (the capital of Ethiopia). Ethiopia surrendered and Eritrea voted for independence, which they won.
Since then Ethiopia has had no port cities, no Navy, and no influence on the Red Sea. However, in 2018 they signed several deals with France, China, and Djibouti to re-establish an Ethiopian Navy. This Navy will be using a city in Djibouti for their home port.
It’s fairly clear what BRICS’s goal is. As has been stated here many times before, their goal is to subvert the dollar’s control over global exchange and to create a larger trading sphere for their home currencies. Through Iran, Egypt, Saudi Arabia, and eventually Ethiopia, I suspect the goal is to control who accesses the Suez Canal and the Red Sea. Through the UAE, Iran, and Saudi Arabia, I suspect the goal is to decrease the direct convertibility of dollars to oil, and also resolve the Yemen situation.
You’ll remember that the Saudi Riyal is directly pegged to the US dollar. You’ll also remember from that post, that the Saudis have so far resisted all attempts by the Chinese to sell oil in anything but dollars.
When the Saudis do eventually convert away from dollars, it won’t happen overnight, simply because it can’t happen overnight. The Saudis would have to unwind liquidity, debt financing, treasury, and portfolio positions; they’re moving in this direction as part of their Vision 2030 government plan. But it takes time to set the groundwork in place to make this kind of thing possible.
The end of the petro-dollar is inevitable, but as I stated in April of last year, it’s not around the corner nor is it going to happen this year. But by the end of the decade, we may very well be staring down the barrel of a loaded gun. BRICS will only get one shot, I don’t believe they will risk missing it.
This means two things. One, the real threat hasn’t emerged yet. Two, any attempt to legitimately dethrone the petro-dollar will not be done frivolously.
When you aim at the king, you best not miss. When/If China convinces Saudi Arabia and OPEC to invoice for oil in yuan, gold, or any other currency other than the dollar, it will be done alongside a number of other moves to de-dollarize and separate the euro-dollar from the forex dominance it currently has which we discussed last year.
Looking forward, my outlook for BRICS growth is that no one else of significance is going to join before a larger war breaks out. The remaining Asian sphere that is still relevant does not like China. South America falls into two camps at the moment, they are either sufficiently tied into the American/Western sphere of influence, they are destabilized with ongoing coups/civil strife (Ecuador, and Peru), or they are just literally Venezuela. No one meaningful in Central America or the Caribbean Sea is going to join BRICS. In Europe, maybe Erdogan knee-jerks Turkey into BRICS. In Africa, either Algeria or Morocco could join (not both, lol) and plausibly enact further pressure on Mediterranean shipping. Beyond that maybe Iraq, Venezuela, or Nigeria may be invited to gain some more leverage within OPEC.
But that’s it. From here, the purpose of BRICs will be to establish alternate international financial structures to rival Swift and SDRs. This international structure would serve to allow multi-national financial products to be serviced outside of the Western sphere, such as insurance for global shipping and FX liquidity that doesn’t go through the US dollar.
Beyond that, completely controlling the Suez Canal would upend the pecking order for global shipping overnight. The only effective way to do that is through a coalition that brings Saudi Arabia, Iran, and Egypt together. If SA does decide to join, that will be what BRICS has become.
It’s no wonder the Saudis are taking their time to think this over. It would lead to a huge shift in international shipping, and it would put them on a political collision course to either abandon BRICS or heavily break away from the US.
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