{"id":632107,"date":"2026-07-08T14:05:00","date_gmt":"2026-07-08T14:05:00","guid":{"rendered":"https:\/\/buglecall.org\/?p=632107"},"modified":"2026-07-08T14:05:00","modified_gmt":"2026-07-08T14:05:00","slug":"the-plumbing-for-vast-defense-spending-needs-to-be-set-up-3","status":"publish","type":"post","link":"https:\/\/buglecall.org\/?p=632107","title":{"rendered":"The Plumbing For Vast Defense Spending Needs To Be Set Up"},"content":{"rendered":"

The Plumbing For Vast Defense Spending Needs To Be Set Up<\/span><\/p>\n

\n

By Michael Every of Rabobank<\/em><\/p>\n

In response to Iranian strikes on ships using the Omani route in Hormuz, the US has struck Iranian air defense, missile, and drone sites in the Strait and suspended its oil sanctions waiver. These are clear breaches of the MoU, and we will now see if Iran escalates –it says it will take \u201cdecisive\u201d action– with the risk of war if the US is also prepared to go that route. We suspect the US will try to step back for now<\/em>. Even so, it should be clear why our base case is that more war is likely after the midterms. Obviously, oil prices are up today on this news; but crack spreads are already so wide that hardly matters.<\/em><\/strong><\/p>\n

Elsewhere in the Middle East, Secretary of War Hegseth is to visit Israel today as PM Netanyahu reiterates that he and Trump align on \u201dthe big things\u201d over Iran<\/strong>; bomb attacks rocked Damascus as France\u2019s Macron visited; Lebanon\u2019s president is to get his first White House visit; and the FT reports Saudi Arabia is blocking private sector payments to Dubai <\/strong>\u2013 a sign of rising tensions between those two GCC economies.<\/p>\n

At the Ankara NATO summit, Trump struck a friendlier tone towards Turkey than many in Europe, removed sanctions over its purchase of the S-400 Russian antiaircraft system, and saying he\u2019ll \u201ccertainly consider\u201d selling them F-35s \u2013 setting off alarms in Jerusalem and Athens.<\/em><\/strong><\/p>\n

The summit has already seen Secretary General Rutte say, \u201cAdmit it – Trump was right<\/a>.\u201d Yes, Trump just reiterated he could pull all his troops out of Europe (no: Congress wouldn\u2019t allow it) <\/strong>and still wants to control Greenland, which implies fission. But NATO announced joint economic projects to counter Russia and China<\/em>, ranging from critical minerals to drones to missile shields, aimed at building up a joint military-industrial base: that implies fusion. So does South Korea and NATO agreeing to open procurement talks as President Lee Jae Myung calls for a higher-level defence partnership, something Japan is also pushing for; and as Japan, South Korea, and the US announced cooperation over a new US breakthrough in small modular nuclear reactors. If we count Australia in too at some point, that all seems like a potential building \u2018bloc\u2019.<\/em><\/p>\n

That still comes at a very high price. Ankara has already seen $50bn in defense deals, but that\u2019s a tiny fraction of what\u2019s needed to rearm. Indeed, as European and Canadian defence spending growth is expected to slow this year, and the UK\u2019s new plan falls far short of what\u2019s required, there\u2019s chatter of a \u2018World Bank for Defence\u2019, as the UK Chancellor also calls for rival international defense schemes to merge. In short, the plumbing for vast spending needs to be set up.<\/em><\/strong><\/p>\n

In that light, yesterday saw the BOE float easing bank capital rules despite what Bloomberg calls \u201cmounting risks,\u201d following new Fed Chair Warsh\u2019s stance<\/u><\/em>: will the BOE also encourage lending into the physical economy, i.e., the military-industrial complex, rather than just holding financial assets; and could it follow a potential US lead on a new inflation measure, as our US strategist plots here<\/a>? Moreover, the BOE\u2019s new crypto framework regulates GBP stablecoins but allows foreign ones, i.e., USD, to operate under US legislation, opening the door to their adoption.<\/strong><\/p>\n

Not in the same arena (yet), the RBNZ today hiked rates 25bps to 2.50%, as both we and the market had expected<\/strong>. The Bank said that more tightening is needed to bring inflation sustainably back to the 2% midpoint of its target, and RaboResearch maintains a forecast of two more 25bp rate hikes in 2026, with an additional 25bp hike in Q1 next year to bring the OCR to 3.25%.<\/p>\n

Meanwhile, German business leaders warned Chancellor Merz that far more is needed to prevent the country experiencing a \u2018lost decade\u2019; <\/strong>Airbus is to make its first foray into engine manufacturing with a hydrogen project; and EU border chaos has prompted a delay to a planned pre-authorized travel system.<\/p>\n

In the Americas, the White House is pressuring retailers over beef prices; and Canada told the UAE it\u2019s not ready for a planned C$70bn of FDI as it doesn\u2019t have any projects on hand(!)<\/strong><\/p>\n

In Asia, a Chinese policy advisor stated that China has the potential to become the world\u2019s largest consumer market by 2041 \u2013 as data show its housing market has reversed 20-years of price gains (not always a bad thing in terms of consumer spending power), <\/strong>and a report has it that hundreds of millions of workers are now in the gig economy. That would imply China\u2019s huge trade surplus will be very <\/em>hard to eliminate, as a trade war with Europe looms alongside tariffs from the US and an emerging bloc-based NATO architecture.<\/p>\n

Indeed, as the IMF appoints former BOE advisor Tenreyro as its next chief economist, the old establishment is on the back foot. See the op-ed today in the New York Times from Mohamed El-Erian arguing \u2018America was being played. The Bessent Doctrine says those days are over<\/a>\u2019, which says economic statecraft has taken over and the global leaders of tomorrow need to learn that \u201cconsiderations of national security, domestic politics, and geopolitics no longer play second fiddle to traditional business interests in determining corporate and economic outcomes. Those business interests are now being sidelined.\u201d <\/em>This will be a shock to anyone who didn\u2019t read Grand Macro Strategy<\/a> in November 2024, which made the same arguments and showed how it would happen.<\/p>\n

Contrast that with the argument made by Adam Tooze in the Financial Times that the USD is no longer a global reserve FX but just a \u201cprofit dollar<\/a>\u201d backed by rising asset prices<\/strong>. There\u2019s a vast realpolitik difference between financialisation and production but arguing one shouldn\u2019t hold dollars because US assets appreciate is rather odd absent a counterargument for Hamiltonian neomercantilism which many, if not all, critics of the US also reject as the solution.<\/p>\n

But back to \u201cdomestic politics.\u201d The US Democratic Party candidate for a Maine Senate seat is being pressured to step down over a serious criminal allegation, opening a tug-of-war not just for that seat but within the Democrats between the mainstream and populist wing. That\u2019s after President Trump used an Independence Day speech to rail against \u201ccommunism.\u201d<\/p>\n

In France, Le Pen was given the legal all clear to run for president in 2027, while wearing a police ankle tag. Does this open the door to populists winning or is this an Establishment tactic to put forward a hobbled Le Pen rather than her nimbler (and more popular) deputy Bardella?<\/p>\n

Reform UK leader Farage resigned his parliamentary seat over allegations he should have reported a large personal gift and possible party financial support before becoming an MP. He wants to fight a \u201ctwo-fingers up to the Establishment\u201d by-election, which Labour and the Tories will not contest. One view is Farage is now a farce, as when he wins the pointless by-election the parliamentary investigation into the gifts will just continue. Yet if it concludes there was wrongdoing, he faces suspension from Parliament for 30 days\u2026 and another by-election<\/em>. Another view is Farage is a force and White Van Man will see the Establishment as the farce, just as happened with Trump. Mirroring that episode, the Guardian are pushing a criminal<\/em> component to the gifts: but Channel 4 interviews of \u2018pub-ulists\u2019 in Farage\u2019s seat of Clacton, even with leading questions, saw that as a stitch-up.<\/p>\n

Indeed, the Establishment can<\/em> lose: Prince Harry and other claimants could face a \u00a350m(!) legal bill after losing a phone-hacking court case<\/strong>. Expect a slew of new streaming specials on how to make cupcakes soon?<\/p>\n

It\u2019s not only the IMF, central banks, and NATO, who need to get baking, perhaps.<\/p>\n<\/div>\n

Tyler Durden<\/a><\/span>
\nWed, 07\/08\/2026 – 10:05<\/span><\/p>","protected":false},"excerpt":{"rendered":"

The Plumbing For Vast Defense Spending Needs To Be Set Up By Michael Every of Rabobank In response to Iranian strikes on ships using the Omani route in Hormuz, the US has struck Iranian air defense, missile, and drone sites in the Strait and suspended its oil sanctions waiver. These are clear breaches of the… Continue reading The Plumbing For Vast Defense Spending Needs To Be Set Up<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"rop_custom_images_group":[],"rop_custom_messages_group":[],"rop_publish_now":"initial","rop_publish_now_accounts":[],"rop_publish_now_history":[],"rop_publish_now_status":"pending","footnotes":""},"categories":[20,23],"tags":[],"class_list":["post-632107","post","type-post","status-publish","format-standard","hentry","category-economic-empowerment","category-national-security","entry"],"_links":{"self":[{"href":"https:\/\/buglecall.org\/index.php?rest_route=\/wp\/v2\/posts\/632107","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buglecall.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buglecall.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buglecall.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buglecall.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=632107"}],"version-history":[{"count":0,"href":"https:\/\/buglecall.org\/index.php?rest_route=\/wp\/v2\/posts\/632107\/revisions"}],"wp:attachment":[{"href":"https:\/\/buglecall.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=632107"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buglecall.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=632107"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buglecall.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=632107"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}