It feels like summer has finally surrendered in the DC area. Mornings are crisp, even chilly, and afternoon highs have been consistently below 80 degrees. Traffic is abysmal. Of course, this weather is synonymous with election season, a time that consumes the Beltway but one that most Americans simply grit their teeth and endure.

What I’m watching:

The Middle East – Thus far my thinking on this has been correct (jinx!). Up until now Israel has opted against high-profile retaliatory action against Iran following Iran’s ballistic missile attack on 01 October. This is not to say that Israel has not been conducting retaliatory actions, as they have recently demonstrated that have a deep bench of capabilities at their disposal. But not the much-predicted kinetic attack on Iranian infrastructure.

As events unfold, I think Israel is looking to replicate the spirit of their Gaza operation in Lebanon against Hizballah. Decapitate it, cripple its ability to take the initiative militarily, and set the stage for an evolution of circumstances on the ground. The chattering classes in DC have also been floating the idea of a new paradigm in Lebanon. Ultimately, if Israel can defang Iran’s proxies in the region, the long-term effect will be greater than a potentially escalatory kinetic attack against energy infrastructure. Iran projects power through these proxies, their loss would be a significant blow.

China – The discussion about China’s hesitancy to dump a hot dose of adrenaline into the financial system reflects the choices Xi has made regarding China’s development. The WSJ journal just today ran a story about the scope and scale of China’s espionage operations – clearly a priority unaffected by the overall economic slowdown. What is interesting to me is how these choices are affecting the next generation of CCP leaders who grew up with the assumption of prosperity. Xi might have crowned himself leader for life, but even that lofty title is ultimately finite. I’m on the fence as to whether an economically suffering China under Xi is more or less likely to take military action against Taiwan. But I am reasonably optimistic that these same economic challenges make the prospect of a reprioritization of market reforms in a post-Xi world a decent bet.

What I’m Reading – The Fatal Conceit, Hayek.