I know: this newsletter had been silent for about three months and now a torrent of this stuff. I’d been working on other pieces of writing, which I hope will see the light of day in the next year or two. Now, forgive me as I venture a little outside the legal and political niche that The Venal Times generally stays in. Please let me know if I’m out over my skis.
A serious question: do Pete Hegseth, Steven Himmler Miller, and Donald Trump have any real understanding that Europe doesn’t need a single round of munitions to cripple the United States?1
I keep hearing these guys talking about how we have the mightiest military in the world and no army would stand in our way if the US decided to plant a squadron in Nuuk and say, “New flag, bitches.” And you know what? They’re right. No army would stand in our way. The Danish military is not going to repel the 82nd Airborne. This is not in dispute.
But here’s the thing about men who think in terms of carriers and fighter jets and troops: they tend to be men who have never had to think very hard about where the money comes from. The United States does not fund its $850 billion defense budget from savings. It borrows—roughly $2 trillion a year—and it borrows cheaply because global markets treat US Treasuries as the safest asset in the world. In the 1960s, French Finance Minister Valéry Giscard d’Estaing coined a term for this arrangement: the exorbitant privilege. It means we can print money to buy real goods from the rest of the world, and they thank us for it. America gets to run massive deficits, fund a globe-spanning military, and consume more than it produces, all because the world wants to hold dollars.
It’s a hell of a deal. And it rests entirely on the belief that American institutions are stable, predictable, and professionally managed—that we are not, in other words, a banana republic with aircraft carriers and enough nuclear weapons to kill us all.
The centerpiece of that belief is the Federal Reserve. An independent central bank, insulated from political pressure, making decisions based on data rather than the whims of whoever occupies the Oval Office—this is what separates the United States from Argentina or Turkey, countries where presidents lean on central bankers and then act surprised when their currencies collapse and inflation eats the middle class alive. The exorbitant privilege is not, as Stephen Miller (ahem) might call it, an iron law true throughout history. The US financial system is a high-stakes confidence game, and confidence, once lost, is hard to rebuild.
Which brings us to last week. The attack on the Fed and the lust for Greenland are not separate issues. They are the same delusion: the belief that America is so powerful it no longer needs to follow rules—economic rules at home, or sovereign boundaries abroad.
Jay Powell (the Fed chair Trump himself appointed) announced that the Justice Department had served the Fed with grand jury subpoenas threatening criminal indictment. The nominal subject is a building renovation. The Fed is fixing up its headquarters, the thing is full of asbestos, it costs $2.5 billion, there were cost overruns, etc. It’s a video you must see.
The investigation is being overseen by Jeanine Box-of-Wine Pirro, the former Fox News host Trump installed as US Attorney for DC, because of course it is.
Powell is not pretending this is about construction costs. “The threat of criminal charges,” he said, “is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President.”
Let me translate: Trump wants lower rates. Powell, looking at the data, has declined to cut them as fast as Trump demands. So now Powell faces indictment over congressional testimony about drywall and HVAC systems. A bipartisan group of former Fed chairs called it “an unprecedented attempt to use prosecutorial attacks to undermine independence”—the kind of thing you see in “emerging markets with weak institutions.” They were being diplomatic. What they meant was: this is how monetary policy gets made in countries that are falling apart.
Powell’s term as chair ends in May. Trump has made clear he wants a replacement who will follow orders.2 He’s reportedly drawn a red line: anyone who disagrees with cutting rates “will never be the Fed Chairman.” Elizabeth Warren, in a moment of clarity, called it what it is—Trump wants a “sock puppet” running the central bank.
Now. Imagine you’re a reserve manager at the European Central Bank, or the Bank of Japan, or some sovereign wealth fund in Singapore. Your job is to park a few hundred billion dollars somewhere safe. You’ve been buying US Treasuries for decades because they’re the safest asset in the world—liquid, stable, backed by institutions that don’t bend to the passing fancies of populist strongmen. And you’re watching the President of the United States threaten to indict the Fed chair for the crime of not cutting rates fast enough, while openly shopping for a loyalist replacement who will debase the currency on command.
How safe do those Treasuries look now?
How eager are you to keep buying?
This is the backdrop against which we should understand what happens if the United States actually moves on Greenland. Not the military question. We’ve established that the military part is easy. The question is what comes after.
European entities hold somewhere between $2-2.5 trillion in US government debt. Add Japan, South Korea, and the other allies who would be appalled by an unprovoked attack on a NATO founding member, and you’re looking at a substantial share of America’s foreign creditors. They wouldn’t need to dump their holdings all at once—that would crater the value of their own portfolios, and nobody wants to lose money to make a point. They’d just need to start a slow, coordinated exit. Stop rolling over maturing Treasuries. Shift reserves into euros, gold, Swiss francs, maybe even yuan if they’re feeling spicy. Let it be known, quietly, in the way that central bankers let things be known, that the United States is no longer a safe harbor.
A 2-3% rise in average US borrowing costs would add something like $700 billion to $1 trillion in annual interest payments. That is, give or take, the entire defense budget—devoured by debt service. At which point Congress would face a trilemma with no good options: cut the military, slash entitlements, or accept a fiscal death spiral. Probably some combination of all three, implemented badly, with a lot of screaming. Market sentiment doesn't move at the speed of government procurement. It moves at the speed of fiber optics. The rates wouldn't drift up over a year; they would gap up in a morning.
The carrier strike groups and the forward bases and the F-35 procurement programs all assume unlimited budget headroom. They assume a country that can always borrow more, cheaply, forever. Take that assumption away and the mightiest military in the world starts looking like an expensive hobby we can no longer afford.
That’s just the financial retaliation.
The EU represents 450 million consumers and an $18 trillion economy. That is not a minor trade partner throwing a tantrum; that’s a genuine peer. European regulators could decide that Google and Amazon need breaking up. They could decide Boeing’s safety certifications are no longer trusted. They could impose export controls on the specialty chemicals and precision machinery and pharmaceuticals that American industry depends on. They could systematically redirect procurement to Airbus, to European tech firms, to anyone who isn’t American. None of this requires a soldier. None of it requires a missile. It just requires a continent that has decided the United States is no longer a partner but a problem to be managed.
And Europe wouldn’t be acting alone. An unprovoked American attack on Denmark—a NATO founding member, for god’s sake—would signal to Tokyo and Seoul and Canberra and Ottawa that the American security guarantee is worthless, that being in America’s orbit means you might be next. Japan holds over $1 trillion in Treasuries. The coalition that could form against a rogue America isn’t just European. It’s the entire network of liberal democracies we spent seventy years constructing.
Now, there’s a counter-argument to all this, and I want to be fair to it because it’s not entirely stupid: Europe is dependent on American LNG after cutting itself off from Russian gas. European unity is fragile, and Hungary or Italy might cut separate deals rather than hold the line. Financial retaliation takes months to bite; an energy cutoff hurts in days. The banker gets knocked out before he forecloses on the house.
Fine. But this scenario requires a rogue America that’s also strategically competent—one that times the LNG cutoff perfectly, holds the Western Hemisphere in line, maintains global sea-lane control, and plays Europe like a Stradivarius while the world watches in horror and admiration.
Have you been watching this administration? These fucking guys? I mean, I have raging ADHD and even I find myself muttering, “Jesus Christ, can you hold your attention on anything for more than 20 seconds?!”
Months of chest-thumping on Venezuela, and Maduro has simply been replaced by a seemingly pliant lieutenant, leaving the whole authoritarian apparatus in place. Tariff whack-a-mole. Pressing every button in the executive branch control panel to see what they can turn on and operate. The Big Boy Birthday Party sad military parade. The Greenland fixation itself has accomplished nothing except to push European rearmament sentiment higher before a single American soldier has set foot on Danish soil. These are not the actions of strategic geniuses. These are the actions of men who confuse talking tough with being strong, who announce dramatic intentions and then wander off when the follow-through gets complicated.
Meanwhile, Russia, the supposed beneficiary of NATO’s collapse, has bled out a generation of men and equipment in Ukraine. A million casualties. A tank fleet in ruins. An economy running on wartime adrenaline and Chinese life support. The idea that Moscow immediately lunges into the Baltics the moment NATO wobbles requires a Russian military that does not currently exist, and probably won’t for a decade. The window of vulnerability is real, but it’s narrower than the doomsayers suggest, and Europe is not starting from zero. France and the UK have nuclear arsenals already.
The counter-argument assumes American chaos is an asset and European disorder is fatal. But chaos cuts both ways, and an incompetent rogue is easier to outmaneuver than a competent one.
Which brings us to the nuclear question—not ours, theirs.
The moment the United States reelected Trump and began the Fuck Around phase of the program, serious people in Berlin and Warsaw and Stockholm had to start gaming out a world in which the American nuclear umbrella is gone—or worse, has become a threat. Germany has the technical capacity to develop a weapon within a few years. It has the fissile material, the engineering base, the delivery systems. An American attack on a NATO ally would void, in the most spectacular way possible, the security guarantees that convinced Germany to forgo nuclear weapons in the first place. The same logic applies to Japan and South Korea. The non-proliferation regime we spent decades building—the NPT, the IAEA, the whole delicate architecture—could collapse in months. Nobody really wants this, but the fundamental bargain (we give up the bomb, you protect us) would have been exposed as a lie.
A world with a nuclear Germany, a nuclear Japan, a nuclear South Korea, a nuclear Saudi Arabia—this is not a world where the United States is more secure. It’s a world we spent seventy years and incalculable treasure trying to prevent. And we could get there remarkably fast if the clowns currently running American foreign policy keep honking their horns and falling out of the little car.
Here is the deepest irony, the thing I can’t stop thinking about: the administration that talks endlessly about American strength is systematically destroying the foundations that make American strength possible. Our soft power. The dollar’s reserve status. The alliance network. The non-proliferation regime. The independence of the Federal Reserve. USAID and the goodwill we earned by being the Good Guys. These are not gifts from God. They are not natural features of the landscape, like the Grand Canyon or the Great Plains. We painstakingly constructed this world over decades. We used to be people who understood that power is not just about how many tanks you have. You can’t build a global system on American reliability and then behave unreliably and expect the system to remain intact. It will route around you. It is already beginning to.
The US military is a fantastic instrument for destroying things. It is less useful against central bank reserve managers quietly rotating out of Treasuries, or European commissioners deciding American tech platforms need to be dismembered, or German engineers working late nights in a newly funded weapons lab. These are not problems you can solve with a carrier strike group.
I don’t know whether Hegseth and Miller and Trump understand any of this. My guess is they don’t—that they think in terms of guns and troops and territory, that they’ve never spent ten minutes considering how the money works, that the phrase “exorbitant privilege” has never crossed their desks. They see the carriers and the fighter jets and they conclude that nobody can touch us.3
And in a narrow sense, they’re right. Nobody can touch us militarily.
But that’s not where the retaliation would come from. That’s not how we enter the Find Out phase of things.
The guns are real. The money that pays for them is a collective fiction—a story the world tells itself about American stability and American reliability and American institutions that operate according to rules rather than the whims of the guy in charge. Criminally investigating your own Fed chair because he won’t cut rates fast enough is one way to undermine that story. Invading a NATO ally to satisfy a real-estate fantasy is another.
The privilege is exorbitant. It is not, however, guaranteed. As the boys in the Situation Room are about to find out, it is not an iron law. It is a loan. And the bill is coming due.
This is a serious question only insofar as I genuinely don’t know whether they’re this dumb or just true believers. I’m not sure which is worse.
If you haven’t already destroyed some brain cells watching Pete Hegseth’s ludicrous lecture to the entire flag officer corp, it is instructive to watch. This guy—this guy—is leading the most complicated and successful organization our species has ever developed.