Bombs for Bonds

Iran and the Geopolitics of Refinancing

Photo credit: US Central Command (CENTCOM)

Predictably, Iran is the next crisis in line. No sooner were we told to obsess over the latest unsealing of the Epstein files than our gaze was already redirected toward the geopolitical brinkmanship now threatening to engulf the entire Middle East. It is Iran’s turn, then, in rapid succession after Venezuela, the ongoing strangulation of Cuba, and especially the Gaza genocide—a catastrophe abruptly pushed from the news cycle. The theatre of war must be permanent, and it requires fresh meat. The long-awaited Iranian escalation fits the role: the latest bloodletting in a permanent and carefully curated carnival of violence, chaos, and outrage staged by the custodians of our glorious civilisation. The carnage is real, and so are its victims. But to focus on this theatre alone is to miss the main event, the hidden trigger of the violence now detonating around us. The real story of American power in the twenty-first century is being written in the arcane world of bond auctions, speculative bubbles, repo markets, and the relentless, silent mechanics of debt.

The modern financial system is no longer built on productivity, wages, or shared prosperity. It is built on highly leveraged speculations: an ever-expanding, increasingly abstract tower of claims on future wealth creation that the underlying economy can no longer generate. Since the 1980s, as technological productivity surged and labour’s share of value stagnated, finance metastasized to compensate. Leverage substituted for growth and debt became not just an instrument but the system’s organizing principle. And now, as the United States confronts an unprecedented wall of IOUs that must be refinanced, this foundational reality has come to drive everything else. With almost $39 trillion in federal debt and a maturity profile that demands constant rollover, the United States does not merely prefer low interest rates and exceptional monetary injections—it structurally depends on them. Moreover, it is not only the federal government that is drowning. American private-sector debt—corporate, household, and financial—now runs into the tens of trillions, much of it floating on a sea of opaque leverage and asset bubbles that would burst if interest rates failed to fall or liquidity dried up. In this context, geopolitical dominance should be framed as monetary dominance. Crisis drives capital into Treasuries, suppresses yields, and enables rollover.

Thus, the Iran escalation could paradoxically extend the lifespan of the AI bubble: geopolitical risk boosts defence-AI spending, while an oil shock may crush consumption and suppress core inflation (as the “pandemic shock” did in 2020), opening the door to renewed Federal Reserve easing and the liquidity injections required to keep the debt-driven architecture of US markets intact. Notably, the Iranian strikes themselves appear to have been coordinated through AI-assisted military systems—reportedly involving models such as Anthropic’s Claude, already deployed in earlier operations like the Venezuela raid—illustrating how the very technologies inflating financial markets are simultaneously becoming embedded in the infrastructure of modern warfare. Historically, capitalism’s great technological leaps—from railways to nuclear energy to the internet—have advanced in tandem with the machinery of war. AI proves no exception.

Strip away the geopolitical drama, then, and the real story is financial fragility. The least one can say is that without the weekend bombing of Iran, US market drops would have been more chaotic and disorderly, because investors would have focussed directly on financial fragility. The pressure has been building for months in the sprawling private-credit market, where lightly regulated lenders have pumped hundreds of billions into companies that traditional banks would not touch, from subprime auto financing to leveraged corporate borrowers. Early warning signs—such as the collapsing of Tricolor Holdings and First Brands (both filed for bankruptcy in September 2025, with extremely high liabilities)—suggest that cracks are appearing first in the weakest corners of the credit cycle, precisely where excess liquidity tends to accumulate when expanding. The latest rupture is the collapse of Market Financial Solutions (MFS), a UK property lender forced into administration after creditors alleged that the same collateral had been pledged multiple times, leaving more than 80% of roughly £1.2 billion in debts effectively unaccounted for.

Markets had started to notice, as even Wall Street giants like Goldman Sachs and Morgan Stanley have seen sharp equity declines of roughly 6%. It is a worrying signal when institutions of systemic importance come under pressure rather than the usual fringe lenders. Against this backdrop, warnings from Jamie Dimon (CEO of JP Morgan) about risks echoing the 2007-08 Global Financial Crisis sound less like cautious rhetoric and more like a reminder of a familiar pattern: excessive leverage, opaque credit structures and complacent markets suddenly colliding with tighter conditions. If the system begins to buckle, the Federal Reserve will once again be expected to step in.

The financial architecture operates through two interlocking mechanisms, both converging on the same objective: keeping US borrowing costs low. The first is the dollar’s exorbitant privilege as world reserve currency. When the US asserts dominance, global uncertainty rises—but mostly outside US borders. Capital tends to flee the periphery and concentrate in the core. Treasuries absorb this demand, and yields fall. In these instances, American power is rewarded with cheaper financing. This privilege must be actively maintained. Military assertiveness entails permanent commitments, including defence spending, security guarantees, and reconstruction. These are not costs incurred in service of stability; they are the machinery through which instability is perpetuated. We inhabit a permanent state of exception, a system that must manufacture enemies and crises in order to suspend fiscal and monetary restraint. In such a system, the measures justified as temporary quickly become permanent. War-related costs widen deficits, accelerate Treasury issuance, and eventually test the market’s capacity to absorb debt. At that point, the second mechanism begins: central bank intervention. The same state of exception that justified the bombs now justifies the printing press.

From the market’s perspective, demand is demand. A bond purchased by a Tokyo pension fund is indistinguishable from one purchased by the Federal Reserve. Capital is by definition anonymous and indifferent. To the algorithms governing modern finance, the buyer is invisible; all that registers is that bonds are being bought, yields suppressed, and debt rolled over without a disruptive spike in costs. This arrangement reflects a global economic order under mounting strain. The United States faces long-term challenges: the shrinking of its manufacturing sector, persistent trade deficits, and the emergence of alternative power centres seeking to reduce dependence on the dollar. In such conditions, aggressive military intervention is a tool for preserving global demand for US liabilities when market forces alone no longer suffice. Venezuela, then, is not simply about oil, just like Ukraine is not merely about borders, and the Middle East is not about ideology. These theatres are about preserving demand for dollar-denominated liabilities while slowing the consolidation of rival financial blocs.

Yet this strategy carries its own dangers. As geopolitical tensions multiply, prolonged conflicts could expose limits to the US military and political capacity rather than reaffirm its dominance. In that scenario, the very wars meant to support the financial order could undermine it, prompting foreign investors to reassess the safety of Wall Street assets and seek alternatives, gradually redirect capital elsewhere. What appears as a calculated mechanism for sustaining demand may therefore prove a desperate gamble—one whose failure would hasten the unravelling it is meant to forestall.

Regardless of the outcome, contemporary conflict increasingly feels permanent—not as a single cataclysm but as a Third World War unfolding in stages, detonated methodically along the empire’s periphery. The system cannot tolerate a clean resolution. Stability without dominance would invite diversification away from Treasuries; peace without leverage would mean confronting the real price of US debt. Ongoing tension becomes structural. Crisis justifies intervention, intervention sustains demand for US liabilities, and that demand keeps the system afloat.

Today’s phased world war should be framed as a single mechanism: the perpetual production of emergency, the only weather in which the monetary machine operates without its wires showing. Before Ukraine, Gaza, and Iran’s proxy networks, there was the “war on Covid”—a “pandemic” that legitimised the most extraordinary monetary deluge in history, normalizing the idea that trillions could materialize overnight to keep the leveraged edifice from collapsing. Each emergency trains the public to accept the next. Each crisis expands what monetary policy can do without democratic oversight.

This machinery, however, requires more than foreign battlefields. It also needs a domestic theatre: scandals and legal dramas that perform accountability while the real work of refinancing proceeds in the shadows. That is where the Epstein files saga and the tariff spectacle converge. The Supreme Court ruling on presidential tariff authority (20 February 2026) was framed as a constitutional showdown. Markets, however, barely flinched—a modest lift in equities, a flicker in precious metals—because the real game lay elsewhere. The ruling arrived just as the Treasury began navigating the largest debt rollover in history, roughly $9.6 trillion over twelve months. In other words, while pundits argued about executive power, the state was preoccupied with something more elementary: keeping the bond market in check.

Debt refinancing happens through auctions. The Treasury sells bonds to investors—banks, pension funds, foreign governments—in exchange for cash. When sales reach the scale required to roll over $9.6 trillion in a year, the system must absorb huge quantities of new bonds in a short period. This creates a liquidity drain: cash leaves other markets—stocks, corporate bonds, private lending—and flows to the Treasury. If too many large auctions happen back-to-back, cash gets withdrawn faster than it can circulate. When the Treasury sold a massive $602 billion in a single week in early December 2025, it strained banks and forced them into seeking short‑term funding. That lifeline is the repo market: overnight loans that the Federal Reserve can expand as needed by lending against Treasuries. After sitting largely dormant for a while, recently the Fed’s Standing Repo Facility was suddenly tapped in record size—$50 billion at October monthend and $74.6 billion at yearend 2025—a clear sign that the liquidity valve had been reopened.

From late March through April, the Treasury will likely drop further sizeable auctions, potentially pushing the system toward its breaking point. At such moments, the weather must turn. No wonder, then, that additional Epstein files were unsealed as March approached, the tariff showdown seized the headlines, and, most conveniently, Iran and the wider Middle East were ignited. The pattern is unmistakable: escalation coincides with peak refinancing pressure. Regional instability raises energy volatility and increases the probability of broader economic stress—conditions under which further monetary intervention can be legitimised.

War thus becomes another mechanism of destruction, deception, deficit expansion, and narrative management. While it is predictably sold as necessity wrapped in patriotism—the old, tired slogans reappear—the truth is simpler: the system is bankrupt. The US enters this next phase not from strength but from nearly $39 trillion in federal debt, planetary-scale deficits, and a private credit powder keg, therefore utterly dependent on issuing more debt just to sustain the illusion of normal functioning. The uncomfortable conclusion is that American hegemony is no longer about winning. It is about rolling over the IOUs. Foreign policy has become yield-curve control by other means. Power projection, monetary expansion, and financial repression are now structurally linked.

So ask always: cui prodest? Who benefits from chaos? Who benefits from well-timed volatility? Who benefits when crisis justifies monetary intervention that would otherwise be unthinkable? In a debt-based civilization that has hit the limits of its economic expansion, coincidence is a luxury that power cannot afford. The smokescreens—including those from real bombs—are an essential feature of a misanthropic system fighting to hide its implosion, cynically and systematically. The question is whether we will continue watching the spectacle—or finally turn to the grinding machinery upon which it all depends.