Richard D. Wolff & Michael Hudson: Iran Just Flipped the Script on the U.S. -Global Crisis Incoming?
Quick Read
Summary
Takeaways
- ❖Iran's closure of the Strait of Hormuz has imposed military-equivalent sanctions on OPEC oil, forcing a global shift towards Russian and Iranian oil supplies.
- ❖The US policy of dollarizing OPEC's foreign exchange wealth is being reversed as OPEC countries are forced to sell dollarized reserves to finance their economies.
- ❖The perception of the US as a global protector is eroding, with the US increasingly viewed as a primary threat to world stability.
- ❖US attempts to finance escalating wars through debt are driving up national debt, compromising its credit rating, and pushing interest rates higher, threatening global economic stability.
- ❖US arms exports, including sophisticated aircraft, are being exposed as ineffective or compromised by 'kill switches,' leading allies to question their value.
- ❖Iran's stated long-term goal is the complete withdrawal of the United States from the Middle East.
- ❖European leaders are beginning to consider breaking away from NATO and reorienting trade due to the economic costs of supporting US foreign policy.
Insights
1Iran's Strait of Hormuz Actions Reverse US Sanctions Strategy
By effectively closing the Strait of Hormuz, Iran has imposed a military sanction on OPEC oil, forcing countries to rely on Russian and Iranian oil. This action directly reverses US sanctions aimed at preventing these countries from selling their oil, undermining a core US foreign policy objective.
Qatar lost 17% of its LNG production capacity. Scott Bessant's plan to 'unsanction' Russian and Iranian oil temporarily to keep prices down demonstrates the immediate reversal. Michael Hudson states this 'reversed the whole aim of what Trump had tried to do in seizing Iran's oil.'
2Erosion of the Petrodollar System and OPEC Dollar Reserves
The US aim to be the primary financial recipient of OPEC's dollarized wealth is being undone. Destroying OPEC's export capacity obliges these countries to sell off their dollarized reserves (US bonds, stocks, bank deposits) to finance their own debt-burdened economies, directly weakening the dollar's global financial role.
Michael Hudson details how OPEC's savings were meant to flow into US financial assets. He states, 'destroying OPEC's export capacity now is obliging these countries to start selling off their dollarized reserves.'
3US as a Global Threat, Not Protector
The long-standing myth of the US as a protector, justifying financial support from NATO and OPEC, is being destroyed. US actions, including threats against Venezuela, Iran, and even Canada, demonstrate that the US itself is the greatest threat to global stability, sponsoring terrorism through its support for Ukraine and Israel.
Michael Hudson argues the 'whole idea of the US as a protector... is destroyed' and that the US 'has become the world's major sponsor of terrorism.'
4Ineffectiveness of US Arms and 'Kill Switches'
US arms, sold to allies as protection, have proven ineffective against Iranian missiles and drones, depleting allied defenses. Furthermore, US-exported military aircraft contain 'kill switches' allowing the US to control or disable them, rendering allies' defense capabilities compromised and dependent.
Iran's missiles and drones 'easily avoided the Israeli and Arab OPEC defenses.' Malaysia's Prime Minister Mahathir discovered US aircraft had 'kill switches' enabling US control.
5US War Financing Drives National Debt and Interest Rates
The US policy of financing wars through borrowed money rather than taxes is leading to an unsustainable increase in national debt (projected to double defense spending in one year) and trillion-dollar deficits. This forces interest rates higher, negatively impacting the stock market and the broader economy, and devaluing assets like gold.
Richard Wolff highlights a proposed $600 billion defense budget increase plus $200 billion for the Iran war, 'virtually doubling your defense expenditures in one year.' He notes the US national debt is $35 trillion and its credit rating has dropped from AAA.
6Iran's Existential Goal: US Withdrawal from the Middle East
Iran's primary war aim is not merely to stop bombings or sanctions, but to force the complete withdrawal of the United States from the Middle East. This ambitious goal stems from their assessment that the US presence itself is the root cause of regional instability and their existential threat.
Richard Wolff states, 'The Iranians... don't say you must stop bombing us... They make that clear. They explain: We want the United States out of the Middle East.'
Bottom Line
The traditional safe haven asset, gold, is crashing during geopolitical turmoil because rising US interest rates, driven by war financing, make non-yielding assets less attractive. This challenges a fundamental investment assumption.
Investors relying on gold as a hedge against global instability may face unexpected losses if interest rates continue to rise due to US debt financing. This signals a more complex and unpredictable financial landscape.
Re-evaluate traditional safe-haven strategies and consider alternative hedges or short-term fixed-income opportunities that benefit from rising interest rates, while monitoring the interplay between geopolitical events and monetary policy.
European and Asian allies are beginning to publicly question their allegiance to the US and NATO, driven by domestic economic pressures (e.g., rising energy costs) and the perceived incompetence or self-serving nature of US foreign policy.
This could lead to a significant realignment of global alliances, weakening NATO and potentially fostering new economic and diplomatic blocs independent of US influence. It signals a rapid acceleration of multipolarity.
Businesses should diversify supply chains and market focus beyond traditional US-aligned economies, exploring opportunities in emerging blocs (e.g., BRICS) and countries seeking greater autonomy. Governments may need to prepare for a more fragmented international political order.
Key Concepts
Dying Empire
The concept that the United States, after a century of rising global dominance, is now in a period of decline where policy mistakes are amplified, and its ability to control international events is diminishing, particularly against rising powers like China and the BRICS alliance.
Cognitive Dissonance in Geopolitics
The phenomenon where decision-makers and the public in a dominant nation ignore or dismiss contradictory evidence and inconvenient truths about their declining power or the negative consequences of their actions, preferring to maintain a comforting but unrealistic narrative.
Lessons
- Re-evaluate investment portfolios for exposure to dollar-denominated assets and consider diversification strategies given the accelerating de-dollarization trend and rising US debt.
- Monitor global energy markets closely, as disruptions in the Strait of Hormuz and shifts in oil supply away from OPEC towards Russia and Iran will continue to impact prices and availability.
- Assess geopolitical risks beyond traditional US-centric narratives, recognizing that US foreign policy itself is increasingly viewed as a source of instability by other nations.
Notable Moments
The host quotes Scott Bessant from the Trump administration discussing a 'break the glass' plan to unsanction Russian and Iranian oil to keep global prices down, framing it as using 'Iranian barrels against the Iranians.'
This highlights the immediate and contradictory nature of US policy, where sanctions are temporarily lifted to mitigate self-inflicted economic damage, demonstrating a reactive rather than strategic approach.
Richard Wolff notes the Supreme Court invalidated US tariffs, jeopardizing the only new revenue source ($150 billion) for the US government, while defense spending is set to double.
This exposes a severe fiscal crisis for the US, where revenue streams are compromised while military expenditures skyrocket, exacerbating national debt and inflationary pressures.
Michael Hudson reveals that Malaysia's Prime Minister Mahathir discovered US-exported sophisticated aircraft had 'kill switches' allowing the US to take control of the planes.
This specific detail profoundly undermines the trust of US allies in American military hardware and its reliability, accelerating the shift away from US arms exports and potentially weakening military alliances.
Richard Wolff discusses the World Health Organization 'seriously considering the possibility of nuclear weapons being deployed in this war,' unofficially expecting Israel to initiate it.
This raises the stakes of the conflict to an unprecedented level, indicating a potential for catastrophic escalation and highlighting the extreme danger of the current geopolitical climate.
Quotes
"We unsanctioned Russian oil... We may unsanction the Iranian oil... In essence, we will be using the Iranian barrels against the Iranians to keep the price down for the next 10 or 14 days as we continue this campaign."
"When you have to resort to that level of noise and incoherent make-believe, you're pretty close to the end because you got very little to lose. The credibility is gone."
"The United States itself is the greatest threat to world stability and it's become the world's major sponsor of terrorism."
"Trump has said it's our war but it's your problem. You remember that Texas Governor Connelly said that when the dollar devalued against gold... he said well it it's our dollar. It's your problem. Well Trump saying it's our war it's your problem."
"America has always been a unique country in the ability to handle the existence of contradictions by pretending that they're not there."
"A major US demand for negotiating a settlement with Iran was to insist that it sell oil and gas only in dollars and to price it in dollars instead of any BRICS or other non-dollar currency."
"We want the United States out of the Middle East."
"If even the opportunists are breaking away from the US, they're the canaries in the coal mine."
Q&A
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