Radhika Desai and Michael Hudson, \u2018The Blockade Stage of Trump\u2019s absurdities,\u201d Geopolitical Hour, April 14, 2026.<\/p>\n
<\/iframe><\/p>\n<p><strong>Radhika:<\/strong>\u00a0Hello and welcome to the 59th Geopolitical Economy Hour, the conversation that illuminates the fast-changing political economy and geopolitical economy of our times. I\u2019m Radhika Desai, and you are watching\u00a0<em>Radhika Desai: Geopolitical Economist<\/em>. The mounting absurdity of Trump\u2019s war on Iran has entered a new, even more rarefied phase with the announcement of a blockade on the Persian Gulf and on the Gulf of Oman by the Trump administration. As with all of Trump\u2019s actions, particularly in recent weeks, the rationale is hard to discern. It\u2019s supposed to be a counter to what the administration sees as Iran\u2019s blockade or rather control over the Strait of Hormuz.<\/p>\n<p>But it is an open question whether the United States has the means to impose this blockade and exactly how it is going to ease the supply of oil is anyone\u2019s guess. No wonder the goalposts keep shifting. Initially announced as being a blockade on all traffic, it was then restricted to Iranian ports. All to be enforced by U.S. military assets a thousand miles away. No wonder there are reports emerging of ships, including those linked to Iran, transiting the strait, making the blockade of the United States the laughingstock of the world. No wonder oil prices are not exactly leaping up and no wonder there are further reports emerging of another set of talks being planned between the United States and Iran.<\/p>\n<p>This weekend Trump\u2019s search for an off-ramp in this unwinnable war continues. The absurdity of the war on Iran is of course the latest in a series of absurdities that the Trump administration has inflicted on the United States and on the world. They include shouting at world leaders, tariffs portrayed as liberation, followed by a series of flip-flops, particularly over China that earned Trump the acronym TACO: Trump Always Chickens Out. There was also the 12-day war on Iran, and beginning earlier this year, the stunt in Venezuela, the threats about Greenland, the lectures to Europe and whatnot. While few other things are clear, one thing is Trump has lost control over the wall, over his MAGA base, and most meaningfully over the prospects of his party in the midterm elections in November. Israel is getting more and more unruly, Iran won\u2019t budge, U.S. allies are refusing his demands and requests, and in his desperation, Trump has been reduced to having rows with of all people with the Pope. This makes one recall Stalin\u2019s question: \u201cHow many divisions does the Pope have?\u201d. With me to discuss all this about the present stage of Trump and\u00a0<strong>Netanyahu\u2019s<\/strong>\u00a0war on Iran, its economic impacts and many other things besides is, of course, a favorite and regular of geopolitical economy, our professor Michael Hudson. Michael, welcome.<\/p>\n<p><strong>Michael:<\/strong>\u00a0Well, it\u2019s good to be back. Thanks, Radhika. Well, the stock market\u2019s up this morning, and obviously the trillions of dollars of presumably savvy investors think that Trump\u2019s blockage of this oil trade that you\u2019re talking about is going to be merely temporary and that soon it\u2019s going to force Iran to capitulate so that the world is not going to face an energy crisis leading to an economic winter, which is where you and I have seen that it\u2019s really leading to this. The whole hope of the U.S. investors and their faith in when Donald Trump says Iran is begging for a peace and to negotiate-it\u2019s Trump who was begging for the meeting in Pakistan with the leaders, pretending that there was a negotiation. His idea of a negotiation is to say, \u201cHere are our terms. This is our final offer\u201d. Those were, I think,\u00a0<strong>Vice President Vance\u2019s<\/strong>\u00a0first sentences. When you say, \u201cThis is our final offer,\u201d that\u2019s saying there\u2019s nothing to negotiate. Take it or leave it, are you going to surrender or not?.<\/p>\n<p>Well, obviously the meeting in Pakistan wasn\u2019t to negotiate any modus vivendi. It was simply to buy time for the United States and for Israel to at least try to restock some of their missiles, some of their armaments that have all been used up and to move this almost the entire American naval armada into the Indian Ocean and the Persian Gulf area, thinking that the very threat of these ships is going to frighten Iran into saying, \u201cWell, we don\u2019t want anymore attacks. You\u2019ve won, we surrender\u201d. Well, that\u2019s obviously not what Iran is doing at all. It sees that the United States has put these ships up as sitting ducks for its small boats, its submarines and the rest of its navy, which Donald Trump has said America\u2019s totally destroyed.<\/p>\n<p>So what\u2019s happening? Well, even though the stock market\u2019s up, you\u2019re seeing aluminum prices are soaring today, helium prices already have soared. And the problem is that helium\u2019s used not only in etching computer chips but also in the MRI machinery of hospitals to take pictures of patients and hospitals across the world, I think especially in Indonesia, already have said that they\u2019ve had to cut back all of the medical testing that requires helium for it. And most of all, the stopping of all really all Arab OPEC country\u2019s oil trade is blocking plastic, blocking oil, and oil is used to make fertilizer, it\u2019s used to make chemicals, it\u2019s used to make plastics. And already countries are preparing for this to be a long-term problem and they\u2019re not doing anything about it legally or militarily. Blocking ships, blockading a country is an act of war.<\/p>\n<p>But who are we really doing this war against? It\u2019s as much against the oil-importing countries as it is against Iran because the oil importing countries and the exporting countries that are dependent on OPEC oil are the collateral damage. And the U.S. ignoring of international law reflects what Dick Cheney said during the second Iraq war: \u201cWe create our own reality\u201d. Well, the reality that Trump has created is that he makes the rules and that the American rules-based order is replacing the United Nations international law and the Law of Nations. So what\u2019s happened today is that any attempt to block an incoming ocean-going vessel by the United States as it leaves the Strait of Hormuz can be regarded as a potential act of piracy legally, and it\u2019s a war crime and it would justify armed resistance. And apparently China has already moved some of its ships into the region, so that as Iran sends its tankers of oil to China, China is willing to shoot down any helicopters or ships that try to block.<\/p>\n<p>And that\u2019s the confrontation that\u2019s coming up. Today Russia\u2019s foreign secretary, Lavrov, is in China meeting with President Xi to decide now what\u2019s happening. And President Putin has just yesterday announced that he had a very good meeting with Indonesia to discuss what\u2019s happening. And the reason this is relevant is because Indonesia has just agreed to sell a mercenary army to Saudi Arabia to defend it in case of attack by Iraq. And just to make my context for what\u2019s happening clear, Iraq has said if we\u2019re going to be shut down and sanctioned and attacked by the United States, we\u2019re not going to go down alone. There\u2019s only one defense we have, and that\u2019s to mobilize the whole rest of the world to say that this cessation of the oil trade by the United States, this blocking of it, is your war too. Because if our oil facilities are attacked and our government is attacked, and as Trump says, our civilization itself is attacked, and he\u2019s going to blow up every bridge and every electrical facility in Iran, then we\u2019re going to retaliate against the Arab oil countries that have let the United States use their land as military bases to attack us. And there won\u2019t be any oil for many years. Already Iran has destroyed Qatar\u2019s helium production, which will cost over a billion dollars and five years of construction to put in place. This is drastically cut off, I think 30% of the world\u2019s helium trade, causing the crisis. Iran is willing to say, \u201cIf we go down, you all go down\u201d. So either you\u2019re going to have new rules that are going to make us all able to trade freely and prosper, or the whole world is going to be forced into a depression that the United States is causing.<\/p>\n<p><strong>Radhika:<\/strong>\u00a0Well, I think there\u2019s so many things that you\u2019ve said, Michael, that I want to respond to. But first of all, let me say that this quote you were mentioning about we making reality, it\u2019s worth reviewing it. I just brought it up here. So this is some unnamed Bush administration official was reported by Ron Suskind in the\u00a0<em>New York Times Magazine<\/em>. And so he\u2019s writing a story and he says, the aide said that guys like him, that is Ron Suskind, were in what we call a \u201creality-based community\u201d. This is a quote which he defined as people who believe that solutions emerge from your judicial study of discernible reality. And then he goes on to say, that\u2019s not the way the world works anymore. He continued, \u201cWe are an empire now, and when we act, we create our own reality. And while you are studying that reality judiciously, as you will, we\u2019ll act again and create new realities, which you can then study too. And that\u2019s how things will sort out. We are history\u2019s actors; you, all of you, will be left just to study what we do\u201d.<\/p>\n<p>This is so hubristic already, and this is back in the early 2000s. Whatever little credibility such statements had in the early 2000s, the credibility of such statements is completely in tatters now. The Trump administration, not only, like you said, well first of all, the Trump administration was not able to defeat Iran after a 40-day war. It was not able to achieve any of its objectives, whether it is regime change, whether it is stopping Iran\u2019s nuclear enrichment capabilities, whether it is destroying Iran\u2019s missile launching capabilities, and in the end, the Pakistanis had the wit to give at least Trump the beginnings of an off-ramp. But of course, the Trump administration was not able to take that because essentially if they had come to any kind of deal-and of course remember that Iran went to these negotiations with its own red lines saying even a long list of demands, which included things like compensation, the departure of the United States from the region, control over the\u00a0<strong>Strait of Hormuz<\/strong>. A whole list of 10 demands that Iran was in. Iran has no reason to budge.<\/p>\n<p>So the Trump administration didn\u2019t really get its off-ramp because any sort of agreement respecting these terms would have been seen for what it is, a defeat for the Trump administration. So he hasn\u2019t got his off-ramp. So he continues this completely ridiculous behaviors and no wonder of course. And this blockade-this blockade is complete bluster. What, as you say, China is moving some military assets to the region because the United States is not at the\u00a0<strong>Strait of Hormuz<\/strong>, the United States military assets are about a thousand miles away. What the idea is that if they detect certain vessels that are supposedly have broken the blockade that the United States wishes to impose, then they could be boarded, searched, et cetera, et cetera. But the moment they do that to a vessel of any sizable country-the moment they do that to Chinese vessels, they\u2019ve got an even bigger war on their hands. And I doubt that they are going to have to-I doubt the Trump administration can take that on. They may try, there will be then further destruction and so on.<\/p>\n<p>So anyway, that\u2019s one set of points I wanted to make is that the distance between the hubristic rhetoric and the puny reality of American military capacities is getting wider and wider now. You also said that markets are leaping up and I guess there are two things to say about this. Firstly, Trump has been enjoying his capacity to make markets go up and down. So he says one thing and then the markets crash and then say, \u201cOh no, everything\u2019s fine. We\u2019ve come up with a deal,\u201d whatever the adversary is, and so markets go up again. So like a bit like a kid who\u2019s learned how to play some or the other thing, he\u2019s amazed at the effects that he can have. So that\u2019s part of it. But the other part of it is that Trump is now having to make more and more shocking statements for markets to go down and then to come back up again so that the effectiveness of the sensitivity of the market is diminishing.<\/p>\n<p>That\u2019s another part of it. But, and this is despite the fact, and this is my second point about markets, is that actually, considering that there is so much cash sloshing around in the dollar-denominated system, it has to go somewhere. So some or the other market is going to go up if one market goes down. So to that extent, I think markets doing anything is really not particularly surprising to me. I think that the most important effect of all this will be something I\u2019ve been predicting since the beginning of this Trump administration and the beginning of his tariffs and all that. And I said basically the United States is acting as if its centrality to the world economy is the same as what it was say in 1950. It isn\u2019t. The United States total share of imports is now at about 15% of total world imports. So, it\u2019s not small, but it\u2019s not enormous either. So the rest of the world is increasingly going to learn to live without any contact with the United States, and this is already happening with NATO. Keir Starmer was one of the first European leaders to say, \u201cWe are not joining your war on Iran\u201d. So for this historically American poodle or lapdog of the United States, namely Britain, to come out and say this is really saying something about the state of NATO, isn\u2019t it?.<\/p>\n<p><strong>Michael:<\/strong>\u00a0Well, you\u2019ve made a lot of different points. You focus, you mentioned the difference between rhetoric and reality, and that\u2019s really what it\u2019s all about. The conflict between the United States and Iran is not about nuclear enrichment or the fantasy that Iran is developing an atom bomb. But Trump is just too embarrassed to say it\u2019s really about we want to control Iran\u2019s oil. That\u2019s what we\u2019re after. Just as Trump said, \u201cWhy don\u2019t we grab Iraq\u2019s oil?\u201d. He wants to grab Iran\u2019s oil. He\u2019s said it explicitly. That\u2019s what it\u2019s all about. He needs a polite scare and Netanyahu was providing him with the public relations rhetoric to say, well, just as Netanyahu\u2019s model, Germany\u2019s Goebbels, said the way to get a population on your side is to say that you\u2019re under a threat. So Trump is saying it\u2019s really Iran that\u2019s attacking America. That\u2019s why we have to destroy every bridge and civilization. That\u2019s why we have to kill its leadership. We\u2019re under attack because our national security is not secure unless we can control the whole world\u2019s trade and finance and deny other countries their own security.<\/p>\n<p>That\u2019s the inherent definition of American security is no other country will have security. So the U.S. attempt to control the oil trade is Trump says we\u2019re actually going to come out ahead. He said it may be that we\u2019re not going to be able to conquer Iran, but we\u2019ll blockade it. What we can do is slowly put sanctions on Iran, just like we tried to impose sanctions on Russia, hoping that there would be a regime change and an economic collapse there. So what he\u2019s done is saying, \u201cWell, we\u2019ve gamed it all out\u201d. He said this two days ago, \u201cWe don\u2019t need foreign oil\u201d. Yes, there\u2019s going to be an oil crisis and that oil consumer countries all the way from Western Europe to Japan and Korea are the most oil-dependent countries. And he said, \u201cBut we\u2019re going to come out ahead because the United States is actually going to be the world\u2019s supplier of liquefied natural gas of last resort\u201d. United States will be a gas and oil exporter, and it will end up with the control of the world\u2019s oil trade that is the center of American foreign policy is one of the most vital choke points in the international economy that America controls, and that\u2019s all America has to do to defend its loss of control that it had in the world it created after 1945.<\/p>\n<p>It can cause chaos for other countries. And Trump\u2019s response to everything is, \u201cWell, if we can cause chaos, America\u2019s self-reliant, just as Russia is by the way in energy and other materials, we can come out ahead of other countries\u201d. So it\u2019s going to be your loss. So you other countries, you better back us in supporting our fight against Iran so that we can end up supplying you with oil under our control on our terms, our prices, and our determination of who gets the oil and what they\u2019re going to do with the earnings from all of this oil. Well, that\u2019s basically a declaration of war on the rest of the world. And Iran is calling his bluff. If you want to, if you\u2019re the threat of isolating us, and as I said Iran will then wipe bomb all the oil export facilities from Saudi Arabia to the Arab Emirates, well then the whole world will go without oil.<\/p>\n<p>But what is the rest of the world doing? It\u2019s not doing anything and what it needs-the only defense other countries have against this economic and financial winter caused by a breakdown of oil that will lead to a close-down of many major industries. How will Japan and Korea be able to get the energy to make their computer exports and their automobile exports to pay the $550 billion that Japan has offered to pay the United States in order to keep access to the American market for its exports when it can\u2019t even produce the export?. Same thing with Korea\u2019s $350 billion. What are they going to do? Even the\u00a0<em>Financial Times<\/em>\u00a0has been writing articles on how can Korea accept this abject dependency on the United States when the whole threat is that no matter what, even if it cannot produce the exports to raise this 350 billion, it\u2019s going to just have to give its foreign exchange reserves to the United States as if it\u2019s still an occupied country at war with the United States from the Korean War that began. Just as Japan is, it\u2019s as if it\u2019s still at war with the United States under World War II as an occupied territory. They both have military bases there, and it\u2019s really going to be up to Iran to decide who gets the oil that is going to be passing through the Strait of Hormuz.<\/p>\n<p>That\u2019s been its Trump card to put it for 50 years. Trump is desperate and he is floundering. And he and his secretary of War, Hegseth, have fired apparently all of the generals that warned him that any fight with Iran is going to be a loss for the United States. That\u2019s really the problem. Trump thought that he could treat Iran like Venezuela. He thought he could knock out the regime\u2019s leaders and somehow replace them with leaders more compliant to U.S. demands, and that\u2019s not the case. He also thought that somehow his NATO allies would support him in the Strait of Hormuz. He asked Europe-he apparently he did talk to the generals and they convinced him that if you try to invade the Strait of Hormuz, you\u2019re going to be wiped out by Iran\u2019s defenses. They\u2019re well sought in. They\u2019re just going to kill any kind of attempt at an invasion. So Trump said, \u201cOkay, we don\u2019t want Americans to die\u201d. He asked Europe to send troops and Spain, Italy, and even Britain refused to send troops. And Trump said, \u201cWell, this is breaking up NATO. You weren\u2019t there when we needed you. We want you to die to the last European, just like you want Ukrainians to die to the last Ukrainian to fight Russia. We want you to do the same fighting Iran\u201d.<\/p>\n<p>Well, they refuse to. So, the result is that he\u2019s dead set on leading to the breakdown of oil trade that we\u2019ve talked about and it is-this oil-this is not only an industrial crisis of closing down industries that are dependent on oil. It\u2019s going to be a financial crisis because if companies have to close down their operations because they can\u2019t get enough oil to make the chemicals or to power their factories or governments don\u2019t have enough money to subsidize their homeowners to light and heat their homes, then there\u2019s going to be debt defaults. And these debt defaults, as you and I were speaking about a year ago, are going to spread, including to the United States. That\u2019s what Trump doesn\u2019t see when he says that America\u2019s going to come out on top. The United States is the most highly debt-leveraged economy in the entire world, and just as in 1929, the result of the world financial breakdown of inter-allied debt and German reparations was felt most seriously in the United States leading to the Great Depression here, this is going to happen again. And one element of financial breakdown that we\u2019ve discussed before is how is the global South going to pay for the higher energy prices that it needs as a condition of having its economies function and pay its dollar debts?. It can\u2019t. It will have to politically say, \u201cWe cannot pay the dollar debts because the United States in whose currency our debts are denominated has broken up the oil trade and prevented us from doing this\u201d. You\u2019ll see a moratorium there and this kind of moratorium-there\u2019s no such moratorium for private sector debts among countries. And this is going to be where the whole over-leveraged U.S. economy is threatened by the oil crisis as it becomes worldwide and long term.<\/p>\n<p><strong>Radhika:<\/strong>\u00a0So Michael, you raised some really interesting points about financial issues. And we\u2019ve already discussed earlier that there\u2019s all this money sloshing around in U.S. asset markets, all of which are in bubble territory. And so they-all this money-would like to leave it, but there\u2019s nowhere to go. And of course, rising inflation is creating, as we\u2019ve been arguing for a long time going back to the beginnings of our show in 2023, that increasingly the Federal Reserve finds itself in a bind if it reacts to the inflation by raising interest rates. It incurs the danger of pricking all this everything bubble. And if it doesn\u2019t react, of course inflation is bound to eat away at the dollar\u2019s value, making it less attractive. So these processes, in addition to the debt issues that you are talking about, all of these things are threatening the value of the dollar and the role of the dollar.<\/p>\n<p>Earlier you were talking about what the consequences of a decline in the supply of oil and generally the gumming up of the Strait of Hormuz are. Well, one thing is clearly that more and more Iran basically has said that it will let those vessels pass which will pay it in Yuan, in Renminbi, in Chinese currency. So that, again, this is going to create a pressure towards moving away from the dollar as well. And this is an interesting thing, by the way, speaking of China. I want to talk about that as well. What Trump is doing-the war on Iran-is already having serious economic effects.<\/p>\n<p>But one relatively good thing it\u2019s going to do is it\u2019s going to make all the countries of the world think seriously about moving to non-fossil fuel based energy. And this is where China is going to be the big winner because China\u2019s market-China has already crashed the prices of solar panels and wind turbines and what have you. So China will be-and apparently China has sent a shipload of solar panels to Cuba, which is great. This is exactly what Cuba needs. So I think it should, if it accelerates the transition away from fossil fuels, that will be a good thing-not Trump. What Trump wanted to do-Trump is all for \u201cdrill, baby, drill\u201d and expanding fracking and shale oil and drilling in Alaska and what have you-but he will not get what he wants because in the end, as the world turns away from oil, it\u2019ll become systemically less and less important.<\/p>\n<p>One final point before handing it over to you: this is going to lead to a lot of scarring in the world economy. As you say, these increases in the prices of all sorts of inputs, not just oil, but things like helium that\u2019s important for high-tech products, things like sulfuric acid that\u2019s important for fertilizers. And all of these things-this is going to put a lot of businesses and farms out of business. And it\u2019s very easy to destroy a business; it is not so easy to pick it up again. So that even if oil prices fall in six months\u2019 time, these businesses that have been forced out of business, these farmers who have been forced out of farming, will not find it easy to get back into it. Which means that there will be a permanent reduction in some sources of whatever it is these businesses are producing and food and whatever farmers produce.<\/p>\n<p>So this scarring-the whole world will blame Trump and the United States. And one final point here: it\u2019s finally beginning to sink in that the United States simply cannot be relied on. It doesn\u2019t matter who is the president. Martin Wolf said in the\u00a0<em>Financial Times<\/em>\u00a0a week or two ago-these are almost his words-he said if a country that can elect a man like Trump twice is not to be trusted. So there you go. So it is just going to lead to the displacement of the United States from its position of relative centrality to a position of marginality in the world economy.<\/p>\n<p><strong>Michael:<\/strong>\u00a0Well, I wish we could take one point at a time back and forth. All I can do is deal with one point. And you began by talking about the interest rates and the inflation that is being caused by the rising oil prices. And I want to say something about that. It\u2019s basically junk economics because raising interest rates is not going to lower the international price of oil. It\u2019s not connected at all. And in fact, the problem for the U.S. and for foreign economies is not inflation-it\u2019s deflation of incomes. Because if households have to pay more of their income for electricity and gas to light and heat their homes, they\u2019ll have less money to spend on other goods and services that presumably they\u2019re employed to produce. Demand will go down.<\/p>\n<p>There\u2019s a displacement effect, and this is the same effect that higher interest rates cause in raising the debt service that homeowners have to pay and taking out a mortgage at higher interest rates. And the long-term interest rates are soaring. That has pretty much stopped trade in real estate here in the United States. So the financial managers of the United States have no understanding of money banking and the difference between money and credit and what causes inflation. All they know is if wages go up, then we have to raise prices to cause unemployment so that wages won\u2019t go up and workers are going to have to compete more to get jobs. It\u2019s a knee-jerk.<\/p>\n<p>And if prices go up, that means that somehow investors won\u2019t have enough control of the debt service they receive to buy goods and services. Well, that\u2019s fantasy too-that\u2019s junk economics. Investors don\u2019t buy goods and services. Well, it is true that the top 10% of the population in America accounts for half of all of the increased consumer spending in the United States. But basically, investors use all of their income to buy more investments, to make more loans, to buy more stocks and bonds. And because the whole economy\u2019s been turned into a Ponzi scheme, that\u2019s the only way to avoid debt defaults and to keep the whole fantasy of financial valuations and prices awake.<\/p>\n<p>You did get onto another point-I wish we could just discuss one at a time-but agricultural yields are going to be falling as a result of the lack of fertilizer. Fertilizer doesn\u2019t use sulfuric acid; sulfuric acid is used in mining primarily to leach the basic ores away from what they\u2019re doing. That\u2019s going to be stopping, so causing all sorts of other raw materials prices to go up for purely technological productivity terms. And it\u2019ll cause food prices to go up as the lack of fertilizer reduces agricultural farm yields. So all of this is not a monetary phenomenon, but it has monetary consequences which are not understood by the U.S. and European and other central bankers who were trained in neoliberal economics.<\/p>\n<p><strong>Radhika:<\/strong>\u00a0No, it\u2019s just a small point-I think sulfuric acid is apparently used in fertilizers. It\u2019s basically used in the production of phosphate-based fertilizers. So there you go. I\u2019m not a scientist, but I\u2019m just quoting from something I was reading. But no, coming back to the very serious set of points you raised about interest rates and so on, you\u2019re totally right. The Federal Reserve has historically had only one means to deal with inflation, and that is to raise interest rates to tighten monetary policy in a variety of ways. And that was described by the economist Robert Solow as burning your house in order to roast a pig. That is to say, because raising interest rates-what it does is it doesn\u2019t actually deal with inflation. It causes such a huge recession that eventually the inevitable decline in demand that it will result in will eventually cause inflation to drop. So it\u2019s a bit like killing a patient or making him very ill in order to resolve his or her illness.<\/p>\n<p>And of course, this understanding is based on Milton Friedman\u2019s claim that inflation is always and everywhere a monetary phenomenon. But as you rightly point out, inflation is precisely not a monetary phenomenon. It arises out of the real conditions in which production is taking place, whether there are particular bottlenecks as the Strait of Hormuz is right now-the bottleneck or the choke point of the world. And I think that this tends to lead to rises in inflation. And the best way-I have a very simple way of putting it to my students-I say if inflation is too much money chasing too few goods, there are two ways of resolving this. One is reduce the amount of money, but that tends to have the bad effects that we were just talking about, which is causing recessions. So the alternative is to expand supply. If there are too few goods, why are there too few goods? Produce more goods.<\/p>\n<p>And expanding supply actually does not involve restricting money supply, but rather in fact expanding it in order that production can increase. You just have to be a bit intelligent about it. But what it then amounts to is that in order to really deal with inflation, you need a planned economy, which is rather close to socialism, which is why capitalist societies typically resist it. One final point: one of the reasons why capitalist societies like dealing with inflation by raising interest rates and causing recessions is that, of course, it weakens the power of labor, which is what they always want. So that\u2019s another reason why they favor it.<\/p>\n<p><strong>Michael:<\/strong>\u00a0Well, you made the point that John Law made in the early 1700s about that more money will put more unemployed labor and industry in motion. He was right and Milton Friedman was wrong. But David Ricardo came up with his bullionist theory that for over 250 years has guided the International Monetary Fund and banks throughout the world. If a country\u2019s running a payments deficit and can\u2019t pay its debts, just pay labor less and squeeze the economy and keep lowering labor until it gets so cheap that you can export enough. This is junk economics with a vicious political orientation, as you and I have spoken about over the years.<\/p>\n<p>So the implication of what you\u2019re saying, Radhika, is that not only does the United States not care about creating a financial and economic winter for the rest of the world, it doesn\u2019t have a clue as to how to trace what the effects of its actions are because it has the junk economics that it\u2019s developed. Just really as public relations patter talk to convince the populations that Margaret Thatcher and Ronald Reagan were right in privatizing the economy and just leaving central planning to the commercial banks and the private sector to decide financially who\u2019s going to get the credit and what it\u2019s going to be used for, and just don\u2019t let governments enter the picture at all.<\/p>\n<p>So the whole idea is that this is a war against governments, and what can other countries do to stop this almost nuclear economic winter that\u2019s facing them? There has to be government leadership acting together in concert with each other. There has to be a critical mass of countries, and it looks like these countries are going to be China, Russia, and now Iran. And Iran has become a world power, not by being a big investor economy, not by being a financial power or an industrial power, but it\u2019s been the ideological power to explain the political dynamics that are shaping the whole economic environment that is going to determine the next five years that this financial winter is probably going to take.<\/p>\n<p><strong>Radhika:<\/strong>\u00a0No, this is absolutely right, and I think we let\u2019s briefly survey the economic consequences of this war before closing because we should close soon. But this topic of inflation-we should probably come back to it in a future discussion. It\u2019s a really important one, and there are some fundamental things that we could uncover. But for now, I guess what I want to say mainly about the economic consequences of this war is that you started by saying that not only is the Trump administration willing to impose huge economic costs and an economic winter-as you were saying, economic nuclear winter-on the rest of the world.<\/p>\n<p>But I would complete that sentence slightly differently from the way you did. Not only is he willing to do that to the rest of the world, he\u2019s willing to do that to ordinary American people on whose votes he got elected, whom he promised that he was going to make America great again. Well, he may be making America great again for a tiny sliver of the topmost sections of the American population-the really 0.1% who is benefiting from all that he\u2019s doing. The overwhelming majority of ordinary Americans are not benefiting from it, and that is why his numbers are low.<\/p>\n<p>And as for the rest of the world, I think that the rest of the world is going to find it exceedingly difficult to forgive Trump and forgive the United States for the harm that has been inflicted on the rest of the world, and that consists of some very powerful people. And I think that I would not be surprised if you saw two different things happening as well, which are not so much economic consequences as kind of political economy consequences or geopolitical economy consequences. Number one: no matter what Tsai Ing-wen may say about the belligerent noises she\u2019s been making recently, the reality is that Japan\u2019s economy is deeply intertwined with that of China.<\/p>\n<p>And I think that voices will emerge there too to say that, especially given the way in which the United States is behaving, especially given that Japan can decreasingly rely on any kind of defense umbrella of the United States, that the best policy for Japan is to make friends with China rather than make enemies. And also such voices are also beginning to emerge in Europe vis-a-vis Russia. So I think that we are going to see some very new patterns emerging, and so the historic alignments that have governed for the last so many decades are going to shift very rapidly now.<\/p>\n<p><strong>Michael:<\/strong>\u00a0Well, the question is what are other countries going to do about this coming financial winter? For Japan, it\u2019s announced that if there\u2019s any fighting or invasion between China and Taiwan, it\u2019s going to back Taiwan. It says, \u201cWe want atomic weapons. We didn\u2019t learn-we were bombed in World War II. We want to use atomic weapons against China. Please, America, use our bases to mount atomic weapons so you can try to attack China and force Taiwan\u2019s independence\u201d. This is suicidal, and the moment that there is any attempt by Japan to industrialize, there will be no more Japan-that seems obvious.<\/p>\n<p>The Japanese are willingly committing economic suicide under their rotten Liberal Democratic Party that represents the Yakuza-the gangsters that General MacArthur put in power in 1945 to make armed fighting against the Japanese socialists that were trying to avoid all of this. So Japan now is suffering from the American support of Japanese fascism and the criminal networks after World War II that have controlled Japan ever since. So it\u2019s hard to have sympathy with them. And I can\u2019t even explain Korea\u2019s knuckling under.<\/p>\n<p>What Iran says: \u201cWe will not permit the exportation of oil through the Strait of Hormuz to countries that permit America\u2019s military bases on their lands to attack us\u201d. Well, the big military bases, after Israel, are Japan and Korea. This looks to me like they are going to be-it\u2019s the economic equivalent of fighting to the last Japanese or Korean. Because the United States has asked Korea, \u201cPlease move your shipping industry, one of your most successful industries, to the United States because we can\u2019t make ships anymore\u201d. They\u2019ve asked Japan to move its industries to the United States, and Japan has said, \u201cAll right, we no longer are trying to employ Japanese people\u201d. Just as Korea\u2019s not trying to employ its people-they\u2019re using the wealth accumulated by exports to shift their industry to the United States.<\/p>\n<p>This is abject economic surrender. This is what the United States would like to do to all of the oil-importing countries-that\u2019s the future of the world as the United States sees it. Iran\u2019s point is, well, you countries had better avoid this future for yourself by stopping America from attacking us and trying to pry control of the Strait of Hormuz out of our hands so that it can determine what Arab OPEC countries can exploit oil and to whom at what price. This is what the future\u2019s going to be all about.<\/p>\n<p><strong>Radhika:<\/strong>\u00a0Exactly, and I think you put the tension very well because essentially what we are going to look at is the discrediting of a generation of elites that have ruled Western Europe, Japan, South Korea, et cetera, for generations on the assumption that the United States can be relied on. And as it becomes more and more manifest that this is not true, there will inevitably be pressure to change the direction of policy in a new direction. And I think that this is what we are going to-the birth of these new forces, these new policies will likely be quite difficult, but it will have to happen. The situation is pregnant with these possibilities. So we will have to see how that pans out. But Michael, thank you so much. I hope that you\u2019ll be back again soon because with Trump doing what he\u2019s doing, there\u2019s always more stuff to discuss. Do you have any last things you want to add?<\/p>\n<p><strong>Michael:<\/strong>\u00a0I want to emphasize your last point that you made in the last sentence. The important thing is that America no longer has the role of protecting the rest of the world militarily or its trade. It is now a threat to the world\u2019s military safety and the world\u2019s prosperity that it claimed to justify the whole Cold War to begin with.<\/p>\n<p><strong>Radhika:<\/strong>\u00a0Fantastic. I couldn\u2019t agree with you more. I think this was to some extent always true, but it is manifestly true today. That\u2019s great. Thanks so much, Michael. Thanks to the audience for listening to this. Please like, please subscribe. Please support Radhika Desai Geopolitical Economist channel in whatever way you can. And see you again soon. Bye-bye.<\/p>\n<p>____<br \/>\n<a href=\"https:\/\/michael-hudson.com\/2026\/04\/the-blockade-bluff\/\">https:\/\/michael-hudson.com\/2026\/04\/the-blockade-bluff\/<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Blockade Bluff<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-61200","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/stateofthenation.info\/index.php?rest_route=\/wp\/v2\/posts\/61200","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/stateofthenation.info\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stateofthenation.info\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stateofthenation.info\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/stateofthenation.info\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=61200"}],"version-history":[{"count":1,"href":"https:\/\/stateofthenation.info\/index.php?rest_route=\/wp\/v2\/posts\/61200\/revisions"}],"predecessor-version":[{"id":61201,"href":"https:\/\/stateofthenation.info\/index.php?rest_route=\/wp\/v2\/posts\/61200\/revisions\/61201"}],"wp:attachment":[{"href":"https:\/\/stateofthenation.info\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=61200"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stateofthenation.info\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=61200"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stateofthenation.info\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=61200"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}