Ancient societies understood this danger. Their rulers canceled personal and agrarian debts, liberated bond servants, and restored pledged land because they knew that unchecked creditor power would destroy the economic base of the state. Western civilization rejected that safeguard. From Rome through the medieval fiscal state, creditors gained the power to finance wars, shape taxation, and place entire populations behind public debts.

That history explains the present divide. The United States and Europe have allowed finance to govern political policy and create wealth through asset inflation, monopoly rents, and debt claims. China, by keeping credit creation largely in public hands, has retained the capacity to direct finance toward infrastructure and industrial development.

In this conversation with Glenn Diesen, I trace how debt, war, and banking became inseparable—and why the West’s financial order is approaching an endgame it can no longer postpone.

Transcript

August 20, 2026

Glenn Diesen: Welcome back everyone. Professor Michael Hudson joins us today and I would recommend that everyone follows his work as well as his own website, and I’ve left a link in the description. So it’s great to see you again.

Michael Hudson: It’s good to be back here.

Glenn Diesen: Well, you obviously have written a lot of important books, especially on political economy. And in books such as The Collapse of Antiquity, you address the history of finance as well.

And well, I wanted to discuss some of this history with you today because I feel it’s extremely important to appreciate this history, as the current financial crisis appears to be speeding up and the entire financial system evidently is not sustainable and it appears that we may be heading towards a cliff.

Throughout history, people have always tended to assume that the current status quo is permanent, even though it always proves to be temporary. So I thought [if we] get the history, we can understand some of the changes as well as the continuity in this system and also the alternatives.

So again, that was my main thought: if we can take a step back and look at this history and get a better appreciation for where we are now. And I guess a very broad question would [be], what is it that we can learn about the current system by looking back? Or what do you see as being the constants—for example, the oligarchic tendencies in the financial system? How do you see this?

Michael Hudson: Well, most of my work for the last 50 years has been writing a history of debt and banking.

It was clear already at the end of the 1970s that the Global South countries were running a debt crisis, that almost all of the Western economies were having what was called “a business cycle” being something much more than a business cycle. Every recovery took place at a higher and higher debt level. And it was obvious that this was becoming unsustainable.

And I wanted to see how it began. And that’s why I spent a long time, for 25 years heading a Harvard group, writing the economic history of Mesopotamia and Egypt and Israel—the ancient Middle East, now called West Asia—and seeing what made the West so different from everything that went before.

And I think the best way to frame the answer to your question is that today’s rhetoric—political rhetoric and financial rhetoric—juxtaposes the United States and Europe as democracies against China and other countries that are not part of the U.S. alliance that are called “autocracies.” And what they mean by autocracy is a mixed economy, which used to be, by the 19th century, called socialism.

Government investment in basic infrastructure, its subsidized rate, government antitrust or anti-monopoly laws to prevent monopoly rents—the whole 19th century drive by industrial capitalism in Europe and the United States to tax away economic rent, to tax away land rent as the natural tax base, to prevent monopoly rent from developing, and ultimately to make money and credit itself a public utility. All of this was what financial capitalism wanted to do to lower its own cost of living, cost of doing business, the [whole] cost structure, and to be more efficient.

Well, the way to be more efficient was to prevent the privatization of natural monopolies like railroads and communications that you’re seeing in the wake of Thatcherite England. And it really turns out that the U.S. definition of autocracy is any role for government that is to the right of what Margaret Thatcher and Ronald Reagan did in the 1980s.

So I looked at what made the West distinct from what went before. And it wasn’t democracy. Aristotle wrote a study of constitutions throughout the world that he knew about and said that all constitutions called themselves democracies, but they actually were autocracies. And that was part of the problem.

And the whole West has really been historically unique—as it claims to be—from what went before—the Bronze Age societies that were primarily Asian societies from Mesopotamia and Egypt, all the way to China. And the distinguishing feature of the whole takeoff of economic civilization for the first 3,000 years was having a central ruler.

Historians are not sure how to characterize these rulers. They call it “divine kingship” in Mesopotamia and Egypt or “emperors” in the Confucianism that governed China.

And the role of the central authority—the king, the temple, or the emperor—was to maintain popular prosperity. And that’s supposed to be what democracy is all about.

Well, the West believes that democracy is achieved through the ballot box—by people voting. But if you look at the constitutions of early Rome and Greece, the constitutions concentrated all the political power in the hands of the aristocracy—the landowners and the creditors. And you could vote, but whoever you voted for would be the oligarchy who became increasingly predatory, driving the rest of the population into debt.

And it was really the debt dynamics that ended up destroying the Roman Empire that had absorbed classical antiquity. And the same debt dynamics occur today.

Yet, what you find in the first few thousand years of civilization—and that’s what my book on And Forgive Them Their Debts is all about, and my Harvard studies and the articles that I have in Temples of Enterprise—the whole idea that made the takeoff of civilization and the entirety of Asia—again, from Mesopotamia to Egypt to China—so different, was the recognition that the great destabilizing force was the growth of debt growing faster than the economy to pay it.

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And that was the basic political guideline of all rulers. And what they saw—and what ancient literature, all the way down through Aristotle and Plato, was all about—was this tendency of debt to grow faster than the ability to pay. And when that happens, debtors tend to fall into clientage and bondage or even slavery and serfdom to the creditors.

And that’s what happened to the West. And that same dynamic of debt polarization occurs today.

Well, what made Asian development so different, and what makes the development of China and its takeoff so different from Western financial policy today, is the fact that it prevented a financial oligarchy from developing.

And when I went to school in the ’50s at the University of Chicago, one of the main books we had to read was Plato’s Republic. And the whole theme of Plato’s Republic is [how it starts—by] Socrates saying, suppose that you borrowed a weapon from a very hostile person. And if you give him the weapon back, he’s going to use it to kill people and do something bad. Is it right that you have to pay him?

Well, that was his takeoff for saying, “Well, what if you owe debts to a predatory oligarchy and they use the money that you pay them to indebt other people and reduce them to clientage?” And after a long discussion, Socrates said the solution—what we were told translated as a philosopher king.

Well, it wasn’t a philosopher king at all. What Socrates said is, “How are you going to cope with the main economic problem of our time: money-love? Wealth addiction. That money and wealth are a kind of economic and social power, and that’s addictive. So how are we going to avoid that?”

And Socrates said the solution is to have a ruler that doesn’t have financial wealth, that doesn’t have property, and so hasn’t become a money addict as [of] yet. Well, of course, that didn’t happen, as we all know. Well, how did antiquity stop this?

The whole principle of all of the literature we have, from Mesopotamia to Egypt to China, said the role of a ruler—whatever we call him—is to maintain economic balance and to keep the people prosperous and not unhappy. You want to prevent exploitation. You want to prevent people falling into clientage to their creditors and running away because we need the population for our army and to build our walls and to build all of our public infrastructure.

So the common denominator in all of the West Asian rulers was a debt cancellation. And all the way from Sumer and Babylonia, [from] Hammurabi, all the way down through the Jewish jubilee year of Leviticus 25, the wording was exactly the same. [It would happen when there were] new rulers, or on some periodic basis, or when there was a drought or a flood that prevented crops from being cultivated.

Well, that’s just exactly what’s occurring in the Western economies today. And you’ve had this steady buildup of debt from the end of World War II on, and that’s really the crisis that we’re seeing today.

The debts really are beyond the ability to be paid without impoverishing the rest of the economy. And it’s as if you’re imposing an IMF austerity plan not only on the Global South countries, as was the case with most IMF borrowers, but on the developed industrial nations themselves. That’s the problem we’re in.

And when you look at China’s takeoff, what makes China so exempt from all of this? China has kept money and credit creation in the hands of the government, the People’s Bank of China. It never has had an independent financial class that plays the role that Western banks play—financing corporate takeovers, lending to buy property, buying assets instead of investing in factories and machinery and tangible capital formation.

The whole role of what finance lends for in the Western economies has been largely unproductive. It creates financial wealth by debt leveraging, by lending people money to buy real estate or stocks or bonds whose prices are billed up by creating more and more money to buy more real estate and more stocks and bonds at higher prices. And that’s why almost all of the growth in the U.S. economy since 2009 has been financial in character. [It] hasn’t taken the form of industrial tangible investment. [It] hasn’t taken the form of rising living standards for labor as a whole, much less for the middle class. All of this financial wealth has been concentrated in the hands of the wealthiest 10% of the population, especially the wealthiest 1%, as I think we’ve discussed before.

And what has made the more successful economies ever since this start of historical records 5,000 years ago? What’s made societies and economies successful is avoiding this financial polarization and making wealth financially in the form of debt claims on debtors, the creditor wealth or property ownership, stocks, bonds, [and] real estate. [Real estate] is a claim on renters, a claim on debtors. It’s economic rent.

And if you look at Adam Smith, John Stuart Mill, Marx himself—the whole 19th century doctrine of industrial capitalism tried to solve this problem by essentially saying, “Well, we want to make sure that all of the money is created to increase the ability to pay the debts and make a profit on it, with the profits being reinvested in more long-term research, development, and tangible capital formation, more factories, more hiring.” That was the whole doctrine of classical economics. And the whole world seemed to be going in that direction until World War I.

And World War I changed everything. The peace settlement of German reparations and inter-Ally debts was all pro-credit—a system of pro-creditor relations—and it ended up not only impoverishing Germany [but] many of the European countries. Britain had the Great General Strike in 1926. France had its own hyperinflation.

So after World War II, the United States was pretty much in charge of designing how the post-war economy would be run and structured. And it said, “Okay, no reparations this time. No inter-ally debts. But we’re going to have pro-creditor rules again.”

And there was a whole debate between the American negotiators and John Maynard Keynes. [And Keynes was] saying, “Well, if you don’t want the post-war economy to end up looking like Europe’s economy did after World War I, you’ve got to have some way of wiping out the debts of countries that run a constant balance-of-payments deficit through their trade deficit and through owing more and more money to pay the foreign debts that they’ve taken on to finance these deficits. You’ve got to write down the debts of these countries, and you need a new international bank to have the power to write down the debt claims of countries that continually run a surplus, like the United States, and to wipe out the debts of countries that run a deficit,” as Britain was expected to do. And Keynes worked for the British Treasury.

Well, the Americans turned it down, and instead of Keynes’ bancor or his bank, they had the International Monetary Fund that imposes creditor-oriented rules and austerity on debtor countries.

And by the late 1990s [and] early 2000s, you had countries trying to avoid having to go to the IMF like the plague because they knew that imposing an austerity program does not enable you really to pay off the debts at all. It cripples the economy. It diverts your income away from new capital investment and means of production and agriculture, industry, transportation, and infrastructure to pay creditors and is therefore destructive.

Well, what was only subjected on the Global South countries in times past is now being subjected on the U.S. and European economies. And they’re being impoverished by the same dynamic.

So all of a sudden, we’re in the same age-old dynamic that has occurred again and again and again as debts grow faster than the ability to pay and have to be written down. And if you don’t write down the debts to the ability of your citizens, the labor force—and now even the companies and the government—to the ability to pay, you’re going to have the same kind of stagnation that you saw in the 1920s.

And the problem that Keynes pointed out was not only does this debt overhead impoverish the debtors, but the money that is paid to the creditor country—like the United States—is used simply to make money financially. And it’s used to fuel a stock market boom. And that ends in a crash that wipes out the creditors just as well.

There’s been a lot of research on, “Well, how did these post-war arrangements begin?” Well, an example is the Franco-Prussian War settlement of 1871. That was when Germany insisted that France pay reparations for losing the war, and it moved to gold, and Germany adopted the gold standard. That was when the gold standard really was spread from Britain, [which] had adopted it early in the 19th century, to [other countries].

Well, Germany adopted it [and] forced other countries to pay in gold. Germany’s market became very prosperous and ended up in a railroad and stock market bubble that then crashed itself.

So the buildup of debt not only destroys wealth in the debtor countries, but in the creditor countries themselves. That’s the situation we’re in today. The U.S. and European economies that have been financialized have been using this wealth just to make loans to make more money financially. And in fact, that’s what most bank lending has been for. And the only way that the United States has been able to support itself financially is essentially by lending debtors the money to pay the interest.

Well, this didn’t work in the 16th and 17th centuries, and it always ends up in a Ponzi scheme. And that’s basically the problem the whole West is facing today. That’s sort of a long answer to your question, but that’s the big historical frame that you and I have talked about.

Glenn Diesen: Well, you said it’s now reaching an end. What are the mechanisms, I guess, that are making this all come to an end? What will the, I guess, consequences look like if there is no elimination of debt? If, as you said, it hurts the debtors, but it also essentially eventually wipes out the creditors as well.

Michael Hudson: Well, 40% of the American population, according to the Federal Reserve, doesn’t have any savings at all. They’re living from paycheck to paycheck. And the result is that they’re living off their credit cards. And the credit card interest starts at 19%, and the penalty rates are even higher and push the actual interest rate to over 30%.

And that means that the consumer debt just to borrow money to make ends meet—just for basic subsistence survival—this debt doubles every three years. But wage levels haven’t, and wages haven’t.

And so having to pay these debts has forced consumer spending in the United States for most of the population to be scaled back. And the Fed reports that half of the increase in consumer spending has all been by the wealthiest 10% of the population, and it’s luxury goods—imports of Italian fashions, cars, and yachts and things like that.

But the domestic market for wage earners [has] shrunk because they can’t afford to spend the income that they get after paying their taxes and their health insurance and their debt service to the credit card companies [and] to the banks for their mortgages or automobile loans. They don’t have enough to buy the products that are produced by American and foreign industries.

Glenn Diesen: I also wanted to ask about what you’ve written about, the relationship between war and modern banking, because this is also quite an interesting and I would say relevant link.

Michael Hudson: Well, I have a book that will be published in a month or two on this: the history of how international banking developed from the Crusades to World War I. And what I found is something unique.

It was the church itself, the Roman Church, that created international banking and sponsored the international banks, thereby reversing all of the Christian anti-usury teachings. And Rome essentially tried to inaugurate a religious and political fight against countries that resisted its control. And the crusades began already before the formal crusades by fighting against Germany, and later fighting against France.

The crusades were against other Western Christian countries that resisted Roman control. Well, the problem for Rome and the papacy was they didn’t have all that much money to hire troops. They didn’t have an army, as Stalin quipped about the popes after World War II. What were they to do?

They [the Roman church] recruited Norman warlords beginning in the 11th century, such as William the Conqueror of England—he was a warlord. They said, “We will back you and sanctify your rule if you conquer England and pledge feudal fealty to us and promise to pay us tribute in the form of Peter’s pence and other tribute, and to let our church appoint bishops throughout your realm.” Bishops were in charge of the church financing, and the church was the largest landowner and rent recipient throughout Europe. William agreed and essentially [was] made king by making Britain a fiefdom of Rome.

Well, just a decade or so before, Rome had made the same contract—and we have copies of the contract that I discuss in my book—with the warlord who conquered southern Italy and Sicily. [The Roman church said], “We’ll make you king of Sicily. Robert Guiscard, we’ll back your king. You have to sign fealty to us. You will obey our direction, and we will appoint the bishops [and] the right of investiture for your bishops in control of the church finances in your territory.”

And that’s how they were kings. Well, by the end of the 11th century, other realms of Europe began to oppose this. And so there were two popes. And the Roman pope, as opposed to a German-backed pope, tried to say, “Well, let’s help support Byzantium. The Byzantine Empire is threatened by Turkish invasion. Let’s save it. Let’s save Jerusalem from the Muslims.”

And so through a great public relations victory, they organized the kings of all the European countries to go fight. And the actual aim was to conquer Constantinople and the Byzantine Empire. They looted Jerusalem first when they went there. And Jerusalem didn’t need protection from the Muslims for the Christians, because the Muslims permitted Christian churches and had no anti-Christianity at all.

And by the 13th century, the Crusaders looted Constantinople itself and essentially tried to absorb it into the Roman church. The Eastern bishoprics opposed all of this. And so you had the split between the Roman Church and Eastern Orthodox Christianity of the four of the five major bishoprics: Constantinople and Antioch and Jerusalem and Alexandria. They all sort of resisted all of this.

So the Roman church—it’s called the imperial papacy—said, “Well, we’re going to have to still fight Germany and other countries that are resisting our control. So, how are we going to get the money?”

Well, the Norman warlords had an army, but they didn’t have the money to wage war. So, it was the Vatican that supported North Italian bankers and bankers just over the Alps, the Cahorsins, just over in Cahors. And the papal legates would bring bank contracts to kings, such as King John’s son, Henry III of England, and said, “We’ll make your son the king of Sicily, because the Germans and the Byzantine church have dominated the cities in Sicily and South Italy. Will you do it?”

Well, there was a whole fight of the barons who’d already opposed King John for trying to tax them in 1215. The Magna Carta was a fight by the barons against the kings levying taxes to go to war, and the taxes essentially would have been funded by borrowing—by banks. The pope excommunicated the barons who were backing the Magna Carta on the grounds that they were trying to block interest-bearing debt they made to the king.

Well, 50 years later, you had the same [situation]. You had the barons fight against Henry III, who was trying to levy taxes to obey the popes. And again, the new pope—the pope at that time—excommunicated the leaders of the civil war opposing all of this. And [he] essentially sanctified debt and opposed the opponents of debt and just inverted all of Christian anti-usury doctrine in order to create an international banking class [of] North Italians and other international bankers, to make loans to kings that Rome supported in fighting the religious political war against other European countries and ultimately against the Byzantine Empire itself.

And the church had already begun in the 11th century to solve a problem that the popes wrote a whole strategy about. And the strategy was: if we have the right to rule over secular kingdoms, we have to make the governments of these kingdoms an arm of the Roman church. How do we do that?

We do it financially. We do it by taking control of their fiscal policy. And the fiscal policy is basically determined by the church in the first hand. And secondly, [we do it] by having kings pledge loyalty to follow the fiscal policy that we support to get tribute from these kingdoms in order to pay the armies of the warlords, mainly the Normans, who we’ve hired to fight our wars.

So you had for the next few centuries the development of international banking that was very different from antiquity. What made all of this international banking different from everything that went before anywhere in the world was that before, there wasn’t really banking, even in classical antiquity.

Although there was a financial oligarchy, it was considered an anti-social act to make money by usury. There was no distinction between usury and interest. Any charging of interest was called usury. And to make money by mercantile activities [was] recognized as being very exploitive.

So the leading aristocratic families all delegated all of their financial operations to their freedmen or slaves or someone outside of themselves, externally. You had cities, whole towns like Puteoli, where you had freedmen acting as bankers for the wealthy. But you had no banking class. And most of the lending was either for mercantile trade or just consumer usury, especially to wealthy members of the aristocracy that wanted to support their luxurious living conditions, but also [to] the poor that needed money to get by.

Well, what happened during the Crusades and on, Europe was completely different. Although many of the bankers’ families had made their money through trade financing, they didn’t make it by money lending. And when they began to make loans, it wasn’t to the poor and it wasn’t to other merchants. It was to kings to wage the wars to conquer other realms.

And after the Crusades ended at the end of the 13th century, the church no longer was really in control of all this, but the international banking and the kings—the secular kings—achieved independence from Rome, especially the French king Philip IV. [He] appointed the pope that moved the papacy to Avignon, France, away from Rome after Philip captured Pope Boniface VIII and replaced him. You had the kings themselves take over and they remained dependent on these international banks to lend them the money to fight wars, especially between England and France. That was most of the wars, but you also had other realms and new warlords and kings all borrowing money to fight.

So you had money being lent not to the poor, but to the wealthiest sectors of society—to the kings and to the church. And later, as you had individual cities lending money, paying the kings to achieve their own communal independence, like Florence or Genoa or Venice—they’re independent—you had these local parliamentary or communal states becoming the prototype for modern governments. And the advantage of Florence, for instance, was [that it was] unlike royal budgets.

Kings couldn’t afford to [and] had real difficulty paying their foreign debts to these bankers because all they had was their own royal domain and they were blocked from taxing the economy as a whole because their aristocracy—the barons—wouldn’t go along with it. So they kept defaulting. In England, they kept pledging and losing the royal jewels over and over again.

Well, in Florence and other city-states—especially in the cities that became the Dutch Republic—you had the ability of these communes to tax the entire population and essentially to act as collection agents for the bankers, saying that, “Well, if you lend to the kings of France or Spain or Austria, they’re going to keep defaulting because they can’t raise the money to pay you. But we can pledge the wealth of all our citizens as collateral and tax everyone. And we’ll put payment of our foreign borrowings that we need to make to go to war to defend ourselves against the autocratic Catholic kings. We’ll act as collection agents for you.”

And historians call these the birth of the fiscal state—a state that is governed above all by its fiscal policy that is dominated by the banking class itself. And so you had the banks—the international bankers—essentially take over this supranational, European-wide control of governments that the Roman church had put in place in the 11th and 12th and 13th centuries. All of this was secularized in the hands of bankers and the fiscal states that were able to run up debts far beyond what royal autocracies were able to do.

Glenn Diesen: Well, just, I guess, a last question. What are the lessons of this? Because we can kind of see where we’re headed now. Based on this past, how would you, essentially, advise any structural changes? Because obviously the status quo won’t last for much longer.

Michael Hudson: Well, you have a situation today where the financial class pretty much is in charge of political policy [and] lawmaking, especially in the United States, since the Citizens United ruling by the Supreme Court has said, well, corporations can have PACs—can finance the election campaigns of politicians running for office in the primaries and the general election that pledge themselves to represent the economic interests of their financial backers.

And so you’ve essentially privatized the political voting process in the United States and turned it over to the wealthiest—the billionaire class. Not only creditors, but now you have Silicon Valley, you have the oil industry, you have all of the special interests—the monopolies, the financial interests, the very interests that industrial capitalism in the 19th century tried to get rid of to lower the cost of producing goods and services and to help industrialize and become a more competitive economy. All of that has been replaced by the very classes that industrial capitalism sought to phase out.

Industrial capitalism was revolutionary. It wanted to free economies from the landlord class that it inherited from feudal times, from the monopolies that had been created by international bankers to help kings raise the money that could not be controlled by parliament to pay their war debts that they’d taken on. [Industrial capitalism wanted] to essentially industrialize banking and make banking serve the industrial capital formation, as was happening in Germany, in central Europe in the late 19th century, in contrast to England, where the banking was much more short-term and mercantile than part of a national development strategy.

Well, what you’re having today is essentially a financial oligarchy taking control of politics. And just as Socrates warned, [and] as Aristotle described money lust, their interest is in enacting laws that serve their own search for yet more money-wealth financially, instead of trying to develop society’s production while increasing the standard of living of the labor force and increasing tangible capital investment.

The West, led by the United States, is deindustrializing. Well, China’s not deindustrializing. And the reason for this deindustrialization is financialization. Instead of having industrial capitalism, as all of the classical economists expected in the 19th century, what we have is finance capitalism that creates wealth financially, not industrially.

And in fact, the financial wealth accumulation by indebting the economy at large tends to impoverish it and polarize it and deindustrialize it and therefore make it less competitive as compared to countries or economies like China that are following basically the same classical economics that the 19th century—Adam Smith, John Stuart Mill, Marx, and the American economists—all developed to prevent a financial oligarchy from writing laws in its own interest at the expense of the industrial and agricultural economy at large.

So that’s the big picture. And the books that I’ve written about antiquity and the feudal period and the transition to modern fiscal states explain all of this, and it’s all the same basic principles that come out.

You need a central authority to oversee the financial system and make sure that money and credit is created to fund tangible capital investment in the means of production, to provide public infrastructure, to support the basic needs of the labor force. And by making health care, education, all sorts of other basic needs—subsidized transportation, subsidized communications—inexpensive, you make your economy less expensive for employers to hire to make a profit because the expenses of labor are not simply paid for out of labor’s wages, but by the public subsidy of all of this that the industrial employer class doesn’t have to pay. That was the strategy of industrial capitalism, and that was what classical economics was all about.

And that’s the main reason that the academic curriculum in the United States no longer discusses the history of economic thought, because that thought is the antithesis to Margaret Thatcher, Ronald Reagan, Milton Friedman, and the whole Chicago school of anti-government, pro-rentier economies.

And so I think when you have this broad perspective, you see that what’s happening today, as I said, has happened again and again throughout history, and that dynamic is always the same:

Glenn Diesen: Yeah, one should not just look at democracy as putting up the ballot boxes, but rather, yeah, preventing this transfer of power to the oligarchy. But yeah, I always want to thank you for taking time. Do you think, well, do you have any other thoughts or?

Michael Hudson: Well, we could go another hour. Sure. I could go into much greater detail for all of this. I mean, what’s going to be the future of the dollar? That’s something that you and I have talked about.

The governments themselves are debtors in this new system. There was no government debt, basically, in previous times. This is the first time that governments have run into debt, really. The post-crusading economies—the takeoff of international banking has led governments to [be in] debt not only to their own creditors, but to international bankers. And right now, despite the fact that the United States supports pro-creditor rules for the International Monetary Fund—and against its own labor and industry, the debts have to be paid.

The government says, “Well, you know, there’s no way that we can pay all of our U.S. government bonds and other debts that we’ve issued. Why don’t you just use these government IOUs as your money? And this money isn’t to be actually cashed in, you know, for gold. There’s nothing really beyond it because we’re just spending our balance-of-payments deficits for war spending, for foreign investment. We’re just spending it into the economy, and ‘it’s our dollar, but your problem,’ ” as [former] Texas Governor [and then Treasury Secretary] John Connally put it right after the United States stopped converting the dollar into gold.

Well, other countries see this, and so almost all of the growth in international reserves has taken the form of gold and foreign currencies and even cryptocurrency instead of U.S. government IOUs. And the European Union now has more of its monetary reserves in gold than in U.S. dollars.

Well, how is the United States going to respond to all this? And this is where we get into the political dimension that you and I have talked about. Well, Trump is trying to impose tribute on Europe’s economy and other economies by his tax policies that say, “Well, you’re going to have to pay for access to the American market. You’re going to have to pay heavy tariffs. You’re going to have to give us all sorts of givebacks.”

He [Trump] stated that he wants Europe to pay for all of the military costs of that overhead that, in the past, America has paid. And European fiscal policy has now basically turned into a branch of NATO in terms of its tax policy. Same thing in the Middle East. Trump has said, “I want the OPEC countries to pay for all of the cost of our war there.”

And that’s the fight. That’s why there’s been a breakdown in the oil trade that’s leading to probably an international depression by the end of this year.

When Trump says, “Well, we can’t let Iran take control of trade in the Strait of Hormuz and charge tariffs and fees or transit fees. I, Donald Trump, want to take 20% of OPEC’s oil trade as payment for the war that we’re paying [for] to defend it.”

Well, you’re now having the Persian Gulf countries saying, “Wait a minute, you’re not defending us because if you attack Iran through us, then Iran’s going to attack our oil production and close us down. Your military bases that you have here that you’re paying for and the war you’re paying for is not protecting us. It’s already destroyed a lot of our oil production. It’s stopped our oil trade.”

This is the impasse that you’re seeing between the United States and the Persian Gulf countries. And Iran’s position is: well, if the United States blocks our exports of oil, there’s not going to be any oil being exported from the Persian Gulf. And Iran is saying, “Well, it’s now up to foreign countries. It’s up to Europe and Asia, that consume this oil, that need all of this oil for their own economies. What are they going to do to stop Trump’s oil war against us?”

That’s shaping the whole issue now. And a lot of this is framed in terms of America’s foreign debt. Are other countries going to continue to hold their debt in U.S. Treasury bonds and IOUs that are to fund this war that has ended up stopping the oil trade and is threatening to push Europe and Asia into economic depression as 25% of the world’s oil trade, and fertilizer trade and helium and the related trade is all cut back.

That’s the crisis that you have today. And it’s a different kind of a crisis, a debt crisis that we’ve had before. But that’s basically the context.

Glenn Diesen: Well, as always, thank you so much. It’s always educational. And I will again recommend that the viewers go and look at your website and follow your work, both the written work as well as the videos you post there, which are excellent. And thank you so much.

Michael Hudson: Well, it’s good to be here. I know what I’ve been saying is very academic, but that’s the only way of providing a historical perspective [for] all of this, which is what you asked me to do for today.

Transcription and Diarization: https://scripthub.dev/
Editing: Madison
Review: ced

https://michael-hudson.com/2026/08/the-debt-system-that-ate-the-west/

American officials are remarkably straightforward in describing their strategy to maintain U.S. imperial power. “Dollar dominance is essential,” Treasury Secretary Scott Bessent stated on June 24, 2026 in a television interview. The reason why the United States imposed trade and financial sanctions on Venezuela, he explained, was that it was “selling discounted oil to China and not getting dollars.” A country that did not price oil in dollars and invest the proceeds in dollar accounts was a threat to the U.S. ability to maintain the dollar’s central role in the world’s financial system, the main source of American affluence.

The U.S. wars against Venezuela, Russia and Iran have aimed at forcing them to price their oil exports in dollars and, just as important, invest the proceeds in U.S. financial markets or use them to purchase American products. Since the U.S. invasion and kidnapping of President Nicolás Maduro on January 3, Bessent pointed out, “[t]he new Venezuela is invoicing in dollars that are coming back onto (sic) the dollar system. … And now, the dollar is going to be the centerpiece of their trade.” Trump bragged in a January 7 Truth Social post that “Venezuela is going to be purchasing ONLY American Made Products with the money they receive from our new Oil Deal. These purchases will include, among other things, American Agricultural Products, and American Made Medicines, Medical Devices, and Equipment to improve Venezuela’s Electric Grid and Energy Facilities. In other words, Venezuela is committing to doing business with the United States of America as their principal partner.”

That same day President Trump said that he had charged the Treasury account in which Venezuela’s oil export income was kept with reparations to reimburse the United States for the military costs involved in kidnapping Maduro and overseeing a regime change. Indeed, he bragged that he had recovered these costs “28 times,” thereby “making a lot of money” on the “48 minutes to win that war.” A Financial Times report has calculated that based on historic price patterns, the value of the oil that Venezuela had “shipped since January … to be over $13 billion,” yet the Venezuelan government website “to track the revenue from US-run oil sales … has only one entry – a transfer of $300 million in March.” This is only 2½% of Venezuela’s exports kept by the U.S. occupiers since the regime change.

The terms imposed on Venezuela provide a model for U.S. plans for Iran, Bessant announced in his interview. “We’re seeing in the Iranian negotiations, the Iranians will be invoicing in dollars.” One week earlier, on June 17, President Trump had signed a Memorandum of Understanding with Iran, promising that the United States would start returning some of the over $100 billion in savings that the United States and its allies had confiscated. (A payment of $12 billion was widely cited.) But making use of the U.S. bait-and-switch privilege, Bessent explained that any return of funds was to be subject to U.S. oversight. His Treasury Department would have “people sitting in Doha overseeing that, how the money is allocated, and a very large percent of it will go to buy U.S. foodstuffs and medicines. So we will be recycling the money back into U.S. products, but it will be overseen by Treasury.” This conditionality overrides Iran’s freedom of choice.

Bessant went so far as to anticipate that “when the Russia-Ukraine conflict ends, … Russia will want to come back in the dollar system,” despite having suffered the EU’s confiscation of $300 billion of its deposits in the Eurobank clearing system. The deciding factor would be U.S. military power and trade sanctions forcing Iran and Russia to capitulate to Venezuela-type terms of surrender. “I think we should not be shy about flexing where we have advantages and where we have advantages, share with our allies and push back … on those who are not aligned with us.”

Venezuela was not given any choice. It was invaded and its president imprisoned in solitary confinement in America. Its oil production was seized and its revenues were confiscated. A Department of Energy Fact Sheet provided the details of U.S. plans to spend the tributary payments that can be extracted from Venezuela, presumably a model hoped to be imposed on Iran and Russia:

The United States government has begun marketing Venezuelan crude oil in the global marketplace for the benefit of the United States, Venezuela, and our allies. …
All proceeds from the sale of Venezuelan crude oil and oil products will first settle in U.S. controlled accounts at globally recognized banks …
These funds will be disbursed for the benefit of the American people and the Venezuelan people at the discretion of the U.S. government.
The only oil transported in and out of Venezuela will be through legitimate and authorized channels consistent with U.S. law and national security.

These predatory policy dictates serve as a warning to the rest of the world of the need to act together for mutual protection from U.S. coercion.

Bessant paid the usual lip service in claiming that the breadth and liquidity of U.S. capital markets would lead foreign countries to want to remain in the dollar-based financial system. But that isn’t why Venezuela is now using the dollar, and it is unlikely that either Iran or Russia will be willing to take the risk of using it again.

U.S. war to defeat Iran and confiscate its oil revenue

Locking in control over OPEC countries and drawing them into its own economy has long been a U.S. objective. When the 1973 war between Egypt and Israel led Saudi Arabia and other OPEC countries to impose an oil embargo against the United States and other supporters of Israel, President Richard Nixon “seriously contemplated using military force to seize oil fields in the Middle East during the Arab oil embargo … if tensions between Israel and its Arab neighbors continued to escalate after the October 1973 Mideast war or the oil embargo did not abate.” [Joe: fn earlier DC articles on this.]

Later in the 1970s, Richard Perle and other Zionists associated with Democratic Senator Henry Jackson’s hawkish circle organized a symbiotic relationship with Israel to back it as a proxy army against OPEC countries and their Muslim neighbors. This relationship steadily increased to the point where General Wesley Clark criticized it as resulting in a Zionist hijacking of U.S. policy, writing that in 2001 a Pentagon officer showed him a plan to conquer seven Muslim countries in five years, starting with Iraq and proceeding to Syria, Lebanon, Libya, Somalia and Sudan, with Iran being the ultimate prize.

Already in Trump’s first administration he had criticized America’s spending on foreign wars, yet dreamed of being a great empire builder himself. He simply hoped to make America’s wars affordable by forcing other countries to bear the cost of U.S. military bases on their territory. He especially focused on the Arab OPEC countries. In April 2018 he stated that they were “immensely wealthy” yet “wouldn’t last a week” without U.S. protection, and therefore should pay for it. And in a September 20, 2018 posting on Twitter he followed up by proposing to make OPEC oil exporters pay the cost of U.S. arms spending and military bases in their countries. These countries, he pointed out, “would not be safe for very long without us, and yet they continue to push for higher and higher oil prices!” On September 25 he stated outright that “they must contribute … to military protection.” In his present second administration he has used a similar rationale for withdrawing U.S. troops and financial support from NATO Europe.

Trump launched his 2025 war against Iran on June 13 with a surprise attack on Iranian nuclear sites and military defenses. Iran’s counterattack shocked the U.S. military by destroying the large U.S. air base in Qatar and other U.S. bases in the region. Iran also devastated Israel’s port of Haifa and other major targets, and bombed oil and gas production facilities in the Arab OPEC countries from whose U.S. bases attacks had been launched.

The war lasted for twelve days. By June 24 it was clear that Israel would be destroyed if Iran continued to bomb it, and Qatar mediated a ceasefire. But fighting continued on a low level as the United States and Israel violated the ceasefire from the outset. The United States rebuilt its military presence by December, and on January 22, 2026, Trump announced that an armada led by the U.S. aircraft carrier USS Abraham Lincoln was on its way to the Persian Gulf.

The ships arrived on January 26, causing Saudi Arabia to worry that it would suffer fresh damage if it let U.S. bombers use its military bases for a renewed attack on Iran. On January 27, “Crown Prince Mohammed bin Salman [MBS] told Iranian President Masoud Pezeshkian that Riyadh will not allow its airspace or territory to be used for military actions against Tehran,” hoping to resolve matters by negotiation.

But on February 28 the United States and Israel launched a new wave of attacks that became a 40-day campaign, whose first aim was to force a regime change in Iran. Israeli airstrikes assassinated Supreme Leader Ali Khamenei and other senior Iranian officials. A repetitive U.S. attack killed 120 children and another 36 civilians at the Minab school, and bombing the Lamerd sports hall in southern Iran killed members of a women’s volleyball team. Ignoring or ignorant of the experience of populations rallying to support their leaders in the face of civilian bombings such as those during World War II by Britian and the United States against Hamburg and Dresden and the German bombings of London, the U.S. evidently hoped to make the Iranian population desperate enough to stop the bombing of its civilians by putting a pro-U.S. government in place.

A Kurdish attack was to have been coordinated with a U.S.-sponsored color revolution, using some 6,000 Starlink terminals linked to Musk’s satellite system. Bypassing the internet, they were immune from Iran’s ability to simply turn it off to prevent such mobilization plans. But there was no Kurdish attack, and Iran was able to disrupt Starlink and use military signal detection to track down the Starlink terminals, arrest their operators and close down the bank accounts that had funded them.

Iran then devastated U.S. military bases throughout the region, and struck Haifa and other Israeli sites. Oil production facilities, refineries, fuel depots, ports and American private investments were hit, especially in the Emirates, which were the most active supporters of the U.S. attacks. On March 1, Iran bombed Amazon’s Web Services cloud data centers in Bahrain and Abu Dhabi (the UAE’s largest emirate), and an Oracle center in Dubai. On March 2 and again on March 18 and 19 it destroyed Qatar’s LNG production facilities, which accounted for a third of the world’s helium trade.

Matters escalated further on March 27, when Iran launched missiles and drones against Israel, and also hit the large U.S. Prince Sultan Air Base in Saudi Arabia, wounding at least 17 American personnel. The U.S. and Israeli military bombed numerous targets in Iran, focusing on its nuclear facilities. That led Iran to announce on March 31 that it would “target American companies, including Microsoft, Google, Apple, Meta, Oracle, Intel, HP, IBM, Cisco, Dell, Palantir and Nvidia.” And when the Oil War later heated up, Iran destroyed Amazon’s remaining data centers in Bahrain on July 21 and 24.

Iran’s almost daily retaliation and closure of the Strait of Hormuz shut down the region’s oil exports, threatening to create a worldwide crisis by cutting off some 20% of the world’s oil trade. That prospect led Trump to press for a ceasefire on April 8. Iran’s Supreme National Security Council announced that “The enemy, in its unjust, illegal, and criminal war against the Iranian nation, has suffered an undeniable, historic, and crushing defeat.” But on April 13 the U.S. negotiators interpreted the ceasefire agreement’s wording to imply an Iranian surrender. Trump imposed a naval blockade on all shipping to and from Iranian ports, including its loading station on Kharg Island in the Strait of Hormuz.

Iran announced on April 17 that it would open the Strait as part of an Israel-Lebanon ceasefire agreement. But the U.S. blockade of Iranian trade continued, leading Iran to close the Strait the next day, explaining that if it could not export its own oil, it would close down the entire Strait for everyone. The Gulf’s oil exports and also its imports of food and other supplies thus remained cut off. Tankers and other ships were trapped for months.

Oil exporters and importers both were confronted with a choice between sitting by and permitting the United States to consolidate its control over the world’s oil trade and the dollarized financial system to weaponize in its own interest, or support Iran’s interest in freeing trade in its oil (and that of other West Asian producers) from U.S. trade and financial sanctions.

The Saudis block U.S. plans to renew its war on Iran

On May 3, Trump responded to the politically unpopular rise in U.S. gasoline prices by announcing Operation Project Freedom to send warships to guide tankers through the Strait of Hormuz. Iran and Saudi Arabia saw this as a U.S. plan to resume bombing Iran, prompting Iran to counterattack against the region’s countries hosting U.S. military bases. But Saudi Arabia refused to let the U.S. military use its air space or airports. As a recent Saudi article explains:

Saudi Arabia suspended US military authority to operate from Prince Sultan Air Base, grounded all 43 American warplanes stationed there, and closed Saudi national airspace to Operation Project Freedom within hours of President Trump announcing the operation on social media on May 3, 2026. The announcement came without prior consultation with Riyadh, Kuwait City, or any Gulf partner …

The article describes Saudi Arabia’s rationale for the grounding as defensive. Having spent years repairing Sunni-Shia tensions with Tehran, it wanted to avoid “becoming the launchpad for another major regional war.” Iran’s March 27 attack on its Prince Sultan Air Base had demonstrated that hosting U.S. combat operations turned Saudi territory into a target, whose U.S. defenses were ineffective against Iran’s missiles.

Closing Saudi air space grounded planes for four days, “the first time any country hosting US forces has physically stopped an active American military operation on its own soil in the post-Cold War period.” Trump phoned the Crown Prince MBS on a daily basis trying to persuade him to reopen the runways. Failing to succeed, Trump threatened on May 7 to cut off U.S. support for the Patriot PAC-3 and THAAD air-defense interceptors that the Saudis had bought to protect themselves from Iranian or other foreign attack. On May 8, Saudi Arabia reversed its closure of U.S. bases.

To mollify Trump, MBS agreed on May 13 to buy $142 billion of U.S. arms – the largest single arms purchase agreement in U.S. history. That gave Trump something to brag about, but the fact that U.S. production capacity for these weapons is so limited means that actual delivery and payment for these sales will be stretched out over many years.

Iran’s counterattacks force Trump to recognize the failure of U.S. attack plans

The war came to a head on June 11. Iran retaliated against U.S. air strikes and blockade of its oil exports by tightening its closure of the Strait of Hormuz and launching drone attacks on Bahrain and other Gulf sheikdoms to show that contrary to the U.S. promise that its military bases would protect Arab host countries from attack, these bases had made them targets. The Emirates, which had taken the strongest anti-Iranian position and tied their fortunes most closely to the U.S. economy, suffered the heaviest damage.

The United States had announced already in January that it would withdraw from its military bases in the region by yearend, relying instead on bases in Israel and the Indian Ocean. Trump resorted to making large threats to convince Iran to capitulate, and Bessent warned that when the United States conquered Iran, the Treasury would confiscate its oil production and deposit the export proceeds in a U.S. bank account, just as it had done in the cases of Iraq and Venezuela. It would debit Iran for all the damage that America claims the country “inflicts on our allies in the Gulf … with funds extracted from Iranian Accounts.” And upon defeating Iran, he threatened, “Any tolls paid to the Persian Gulf Strait Authority [PGSA] will be offset by funds extracted from their accounts. Every attack Iran launches will only deepen the economic and financial consequences it faces.”

The United States played for time as it tried to negotiate a ceasefire. Rising gasoline prices were cutting into consumer budgets turning voters against the war. Opinion polls showed a steady decline in Trump’s approval rating and rising opposition to his war. He repeatedly voiced his fear that he might go down in history with a reputation like that of President Herbert Hoover for presiding over a depression.

An Iranian oil cutoff could be made up for a few months by releasing oil from the National Petroleum Reserve, but if the Persian Gulf trade were not soon resumed there would be a supply crisis. Despite the United States being a net oil exporter, it needs to import substantial crude oil from abroad, especially the heavy or “sour” oil (from 0.5% to 2% sulfur) that is obtained mainly from Saudi Arabia. U.S. oil fields produce mainly “sweet” low-sulfur oil, but U.S. refineries require this heavier foreign oil to produce diesel fuel for trucks and ships, and kerosene for aircraft. Airlines throughout the world were cutting back their flight schedules and raising ticket prices to reflect the higher fuel costs. And domestic trucking relying on diesel fuel threatened to be interrupted, causing production shutdowns and work stoppages.

While wanting a ceasefire to mitigate the threats of economic collapse and domestic popular opposition to rising gasoline prices, Trump repeatedly stated his hope that his military could conquer Iran and grab its oil to restore normalcy. Iran saw its own advantage in using a ceasefire to rebuild its economy and defenses. Both sides therefore were willing to negotiate a ceasefire to prepare for a later battle.

The ambiguous and deceptive June 17 Memorandum of Understanding.

The two sides reached an agreement in principle on June 12, and a Memorandum of Understanding (MoU) between the United States and Iran was signed electronically on June 17 by President Trump (visiting in Versailles at a G7 meeting), Iran’s President Masoud Pezeshkian and the Pakistani mediator. Its 14 paragraphs seemed to grant the key demands that Iran had been making all along, headed by its insistence on a return of its savings that the United States and its allies had confiscated (Paragraph 11), Iranian administration of traffic through the Strait of Hormuz (Paragraph 5), removal of the U.S. naval blockade of Iran and of U.S. forces from its proximity (Paragraph 4), a waiver of oil sanctions (Paragraph 10) and an Israeli ceasefire and withdrawal from Lebanon (Paragraph 1).

The MoU’s penultimate Paragraph 13 sought to prevent Trump from using the red herring of Iran allegedly seeking an atom-bomb as a deal-breaker by stipulating that: “After signing this MoU, and subject to the beginning of the implementation of paragraphs 1, 4, 5, 10 and 11 of this MoU and the continuing implementation of these measures, the Islamic Republic of Iran and the United States of America will start negotiations regarding the final Deal exclusively on the other paragraphs,” including Paragraph 8 reaffirming that Iran “shall not procure or develop nuclear weapons.”

While Iranian officials declared the MoU to be a victory, U.S. hard-liners in Congress and the press accused Trump of giving in to Iran’s demands. But it would be an Iranian victory only if the United States intended to comply with the MOU’s terms, and its diplomacy is known for being non-agreement capable. U.S. officials interpreted the MoU’s terms much more narrowly than Iran had understood them. Before the MoU’s official signing, on June 12, Vice President J. D. Vance characterized the negotiations from the U.S. perspective as ones in as one in which “We fundamentally have all the cards here. We don’t have to give the Iranians anything if they don’t make the commitments that we want long term on the nuclear program.” Trump and other U.S. officials would keep citing this U.S. demand and Iran’s alleged attempts to build an atom bomb as a red-herring excuse to delay any compliance with the MoU until such time – indefinitely in the future – that Iran would dismantle all nuclear research, even for medical and other civilian uses.

During the ensuing month it became clear that Trump never intended to meet the terms of the MoU but was aiming all along to impose U.S. control over the Strait of Hormuz (and indeed all of the Persian Gulf economies). The United States failed to return any of Iran’s savings, and its navy had been working since April to circumvent Iran’s control of the Strait by steering shipping to sail closely within Oman’s territorial waters under its own arrangements, not those of Iran.

The MoU’s Paragraph 1 called for “the immediate and permanent termination of military operations on all fronts, including in Lebanon.” But the United States made no serious effort to stop Israel’s bombing and ground offensive against the mainly Shia population in the south. Its army moved up to the Litani River, which Israel’s first prime minister, David Ben-Gurion, had advocated should be the northern border of Greater Israel.

Iran could have complained at any time that the continuing Israeli attacks on Lebanon invalidated the ceasefire, but at least it was able to export its oil (mainly to China), rebuild its monetary reserves and recover from the U.S. and Israeli military destruction. And for Trump, gasoline prices retreated and the stock market boomed, enabling him to claim that his war against Iran was not creating the inflation and economic squeeze that critics had forecast. But for the MoU itself, the United States made little follow-through on Paragraphs 1, 4, 5, 10 and 11, the five conditions cited as being the key to the ceasefire. It did cease attacking Iran and lifted its naval blockade, temporarily waiving its oil sanctions against Iran to enable it to export its own oil through the Strait of Hormuz. But there was no return of any Iranian savings held in the Emirates or elsewhere, nor any hint of a plan to provide funding to rebuild Iran. And Trump repeatedly threatened to use devastating force against Iran if it did not agree to the narrow U.S. reading of the MoU’s terms.

Trump’s plan to conquer Iran and seize its and other OPEC oil revenue

Already in President Trump’s first administration he had spoken of shifting the cost of U.S. military spending onto local countries hosting U.S. bases. So it is not surprising that he soon pressed for the United States to administer trade through the Strait of Hormuz to enable it to charge tolls to reimburse itself for the military costs of U.S. protection against Iran, denying Iran any power to impose tolls or indeed to receive any return of its savings from countries that wanted to keep these funds as reparations for themselves.

Trump also revived his demand that the Arab OPEC countries should pay the United States for the costs of waging its war on Iran, singling out Saudi Arabia. This was the same argument that he had been making regarding NATO and Asian countries that hosted U.S. military bases. That aim shaped his approach to the MoU’s stated terms.

For Iran, the ceasefire was to start with a show of good faith by U.S. allies beginning to return to Iran some payment on the $100 billion in foreign deposits that U.S. officials had directed their allies to confiscate:

11. The United States of America undertakes to make fully available for use the frozen or restricted funds and assets of the Islamic Republic of Iran upon the implementation of this MoU. The United States of America and the Islamic Republic of Iran will mutually agree on the procedures related to the release of these funds during the negotiations. Such funds, either retained in the original account or transferred, shall be made fully usable for payment to any ultimate beneficiary designated by the Central Bank of the Islamic Republic of Iran. The United States of America undertakes to issue all necessary licenses and authorizations accordingly.

The sum of $12 billion was widely discussed, and later $6 billion, but Abu Dhabi rejected Iran’s claim for payment, and Bahrain also refused to release any Iranian deposits, keeping them as reparations for the damage that Iran had caused by retaliating to the U.S. attacks and their own active aggression. There was some talk of just $3 billion being released by Qatar, but nothing came of it. The United States made no effort to obtain payment for Iran, and Trump added his own aggressive condition (described below) that any such payment would have to be spent entirely in the United States.

The problem confronting Iran is the same as that faced by Russia, whose $300 billion of deposits in the EU’s Euroclear system in Brussels was seized in February 2022. EU officials are now seeking to turn this money over to Ukraine as reparations for Russian’s special military operation to protect the Russian-speaking Donbas from Ukrainian ethnic cleansing attacks against their civilian population and infrastructure. The EU plan was for Ukraine to use this money to keep attacking Russia and its oil and refinery production. The U.S. stance toward seizing Iran’s oil and national savings thus was quite similar to its plans for Russia, as Bessent had made clear in his interview cited at the start of this paper.

In a June 20 bluster three days after signing the MoU, Trump repeated his hope to make OPEC pay the United States for all its military costs of acting as the region’s peacekeeper and indeed to make the United States the party that would be imposing tolls on trade through the Strait of Hormuz instead of Iran being permitted to impose such tolls or even administrative fees:

Trump then stated that any of Iran’s confiscated savings that might be released to it would be subject to conditions that would deprive it of sovereignty over how to spend the funds. “The Money and/or Sanctions that the U.S. Treasury is releasing goes into escrow, controlled by the U.S.A., and will be used for the purchase of food and medical supplies, exclusively from the United States, including Corn, Wheat, and Soybeans from our great American Farmers.” This is precisely the way that Trump had appropriated Venezuela’s oil export earnings for U.S. use.

Not only were Iran’s savings not being returned – or to be returned with a loss of sovereignty – there was no hint of the plan to provide funding to rebuild Iran as contemplated by the MOU’s Paragraph 6. It called for the United States to work with its Arab OPEC allies to arrange at least $300 billion to rebuild Iran, not just from the 2025-2026 warfare but from the 46-year economic devastation caused by the U.S.-backed trade and financial sanctions imposed since the Shah was overthrown in 1979.

The failure by the United States and its allies to return any of Iran’s confiscated savings showed that the only way that Iran could obtain payment for these savings (and for reparations) was to levy toll fees on shipping through the Strait of Hormuz as part of the administration that Paragraph 5 granted it, but Trump was now claiming to deny Iran even that.

Iran’s plan to charge transit fees on shipping through the Strait of Hormuz

Iran planned to use its privilege of administering transit through the waterway as a step to prepare the path to charge transport tolls when the 60-day ceasefire period was up. But the U.S. negotiators interpreted Paragraph 5 of the MoU so narrowly as to nullify Iranian authority. Its wording required Iran to “make arrangements using its best efforts for the safe passage of commercial vessels, with no charge for 60 days only, from the Persian Gulf to the Sea of Oman, and vice versa.” There was no mention of any role for the United States to play.

Iran viewed the wording as putting it in charge of shipping arrangements for the entire Strait of Hormuz – “from the Persian Gulf to the Sea of Oman.” This normally would include procedures requiring ships to register their ownership, destination and cargo, and to keep their radio transponders turned on to confirm their position and route. But Trump rejected all such arrangements, insisting that there must not be any charge for oversight procedures. And as mentioned above, since April the U.S. Navy had been guiding ships through Oman’s territorial waters on the southern side of the Strait of Hormuz opposite Iran, “under a quiet arrangement with commercial tankers [that] turned off their transponders to avoid detection by Iran as they crossed the Strait of Hormuz.” This circumvented Iranian authority, evidently in preparation for the United States to claim that Iran’s authority under Paragraph 5 did not apply to Oman’s territorial waters.

This legalistic U.S. view, together with its navy rehearsing by guiding ships closely along Oman’s coast, showed that the United States never intended to give Iran meaningful control of traffic through the Strait. And just as the U.S. Navy had been killing fishermen in Venezuelan waters, it was soon bombing Iranian fishing boats and other craft, with no warning or attempt to question or inspect them, merely on the suspicion that they might possibly belong to Iran’s military and threaten this shipping.

At issue was who would control trade through Hormuz beyond the 60-day ceasefire and hence be in charge of imposing the tolls that now seem inevitable. Iran would use them to rebuild its economy. Trump had announced his hope to take them as payment to reimburse America for the cost of its military presence in the region, past, present and future.

Charging access fees for ships was an ancient Persian privilege before the Gulf was taken over by European colonial powers. Turkey levies tolls on trade through the Bosporus, as do Egypt and Panama on their canals. But U.S. officials argued that Iranian tolls would conflict with the UN Convention on the Law of the Sea (UNCLOS) defining international waters as toll-free. Iran points out that it has not ratified that convention and considers itself not bound by the relevant part of it, notwithstanding Oman being a signatory.

Iran claims that America’s unprovoked attacks in violation of international law have made the UNCLOS rules for toll-free trade anachronistic. It therefore claims the right, “in accordance with established principles and rules of international law,” to prevent “the transit of vessels belonging to or associated with the aggressor parties and those participating in their acts of aggression.”

The war correspondent Elijah Magnier has summarized Iran’s argument that international law permits states bordering the seas to take appropriate steps to protect themselves: “From the Iranian point of view, the US-Israeli war changed the legal, military and political environment of the Strait. Washington and Israel used force against Iran without legitimate international authorisation, militarised the surrounding waters, threatened Iranian sovereignty, and then expected maritime traffic to continue as if nothing had happened.”

The U.S. war on Iran thus calls for a higher law than UNCLOS, which the U.S. Navy has made a dead letter in any case by wantonly killing Venezuelan (and Columbian) fishermen without any attempt to identify them, inspect their boats or to take them prisoner and without any cause except to claim that they might perhaps be carrying drugs. NATO countries have attacked Russian oil tankers in the Baltic and elsewhere in the U.S.-backed attempt to block all trade in oil not under its control.

From Iran’s perspective, Magnier followed up his logic, the U.S. aim for the MoU was simply to secure a “pause to recover its military position, refill its strategic oil reserve, weaken Iran’s leverage in Lebanon, reassert control over Hormuz, and then return to pressure from a stronger position without fully lifting sanctions or releasing Iran’s frozen assets … and exclud[ing it] from the management of the Strait that borders its own coastline.”

In attempting to prevent Iranian control of the Strait, the United States is defending Oman’s administrative control over its territorial waters. Paragraph 5 of the MoU does stipulate that

Omani officials announced their opposition to Iran charging a transport fee based on the tonnage and valuation of the oil being shipped, but have acknowledged that some transit charges seem inevitable for insurance, protection and basic administration to maintain the waterway.

What makes Paragraph 5 so important is the conflict between two opposing objectives. On the one hand is Iran’s administration of transit through the Strait of Hormuz with the aim of obtaining reparations for the property destroyed by the unprovoked U.S. and Israeli bombings (and indeed for its confiscated savings and the damage caused by the 46 years of trade and financial sanctions against it). On the other hand is the broader U.S. global objective of control of the oil trade and dollarization, subordinating both Iranian and Arab OPEC interests to this objective which is at the root of its Oil War.

In view of the legalistic problems and inevitable delays in trying to collect reparations from the United States and Israel, Iran intended to use its control of the Strait to re-impose transit fees after the MoU’s 60-day transition period. Iran has estimated that its tolls would yield $40 billion a year. The charges would be an expense for its neighboring OPEC countries to pay out of their export income, perhaps by raising their oil prices, in which case the cost would be borne by oil-importing countries, in effect for not having acted to stop America’s attacks on Iran and blockage of its trade.

At issue on the broadest international level is whether the United States will control OPEC’s oil trade and dollarize it for its own financial benefit (and specifically for its military spending), or whether Iran (and Russia and other countries) will be free to control and sell their oil and keep their sales revenue in currencies and financial markets of their own choice to promote their own national development.

For Iran, there will be Persian Gulf oil exports either for all or for none, open oil trade for everyone or no trade at all. Control of the Strait gives it this power.

Trump’s plan to cover the costs of his war by America imposing its own tolls

The MoU’s first U.S.-ceasefire violation occurred on June 25 after Trump claimed that Iran had no right to interfere with ships it had not authorized to sail close to Oman. Iran launched a drone strike against a ship that had followed that route. The United States attacked Iran, and both sides traded fire for two days.

Reviewing U.S. “provocations designed to challenge Iran’s authority,” Larry Johnson explains that: “On July 6-7, Iran struck at least three commercial vessels in/near the Strait of Hormuz who tried to circumvent the PGSA [Persian Gulf Strait Authority] protocols.” The United States responded by launching “attacks on Iranian positions along the Strait of Hormuz. Iran responded by launching attacks on US targets in Kuwait and Bahrain,” which had participated in the attack.

Iran’s stated aim of obtaining $40 billion annually from tolls on the Strait of Hormuz provided Trump with the opportunity he had been waiting for to make Arab OPEC countries bear the cost of his war with Iran. In a July 13 Truth Social post he announced a renewed blockade against Iran and said all other vessels passing through the Strait of Hormuz must pay the United States a 20% toll on the value of their cargos. The United States, not Iran, was to be the recipient of shipping tolls, while Iran itself was to be blockaded to prevent its own exportation of oil through the Strait from Kharg Island and other depots:

The Hormuz Strait is OPEN, and will remain OPEN, with or without Iran. We are reinstating the THE IRANIAN BLOCKADE, so named because it is only stopping Iran’s ships or customers from entering or leaving. All other countries will have fair and open use of the Strait.

The U.S.A. will be, from this point forward, known as “THE GUARDIAN OF THE HORMUZ STRAIT,” but as such, and as a matter of FAIRNESS, will be reimbursed, at the rate of 20% on all cargo shipped, for any and all costs necessary to do the job of providing safety and security to this very volatile section of the World. The process and formation will begin immediately.

Iran’s Foreign Minister Abbas Araghchi announced that Trump was “absolutely right” to reject the idea that UNCLOS forbid any such charges. Insisting on Iran’s right to levy such tolls on ships using the Strait, he was glad to grant that “Whoever provides secure and safe passage of commercial vessels through the Strait of Hormuz should be compensated for this service.” He pointed out that “Iran has always been the GUARDIAN of the Strait and will remain so FOREVER. 20% is of course too much. We will be fair,” charging nowhere near the rate of about $15 per barrel that Trump wanted.

Trump’s plan was for the U.S. military to defeat Iran and force a reopening of the Strait in exchange for a promise by the Arab monarchies to invest or spend hundreds of billions of dollars of their export proceeds in the United States. His deal-making maneuvering confirmed that he never had intended to let Iran put in place procedures to administer trade through the Strait of Hormuz that would have formed the basis for Iran to extract tolls or charge any other fees on which Trump had set his sights – and that he never intended to help arrange with Arab OPEC countries to return any of the $100 billion in Iranian savings that had been confiscated. The fighting resumed on July 18, and as it heated up on July 24, Trump announced in a 5 AM Truth Social post that “until further notice, from this point forth, any and all damages done to Ships, Cargo, or anything related thereto, will be paid for by Iranian Money that the United States has in its possession, and controls.” And of course there would be no $300 billion investment in rebuilding the economy of an Iran not under U.S. control.

Trump’s dream had been to repeat in Iran the victory that he claims to have achieved in Venezuela. He would install a client regime that would pay compensation to the United States for the cost of its military weaponry and related efforts involved in the U.S. attack. Iran was left to conclude that the MoU had all been a charade, enabling Trump to gain time to reorganize his military plans and tighten his alliances with the Sunni rulers. On July 19 it formally suspended the MoU as a result of the U.S. violations of its terms.

The choice confronting OPEC countries: to ally with the United States or Iran

Iran’s alternative to U.S. hegemony goes far beyond driving America’s military bases out of the region. These bases already have been destroyed, and their role has been moved to the Indian Ocean and Italy. The remaining relationship that Iran finds it necessary to end is the reliance of Arab oil producers on U.S. financial markets and business partnerships. This economic symbiosis has tied them to the United States and its policy dictates dating back to the 1974 “petrodollar” agreements to recycle their oil-export revenues to U.S. bond and stock markets and to purchase U.S. arms.

This recycling already has slowed down in recent years as OPEC countries embarked on enormous capital investment to create luxury real estate and related projects at home. The Emirates created a world airline and made themselves a major international flight-capital center and even a sports center for international events. And the AI revolution’s demand for electricity to power its data centers has led Bahrain and other Persian Gulf countries to host such AI centers for Amazon, Google, Meta, Microsoft and other U.S. information technology companies that have moved their operations to where energy is more readily available than the United States.

Trump has sought to intensify these mutual investment linkages by locking Persian Gulf monarchies into support for his war against Iran by offering leading U.S. technology in computer chips for the Emirates and nuclear reactors and uranium refinement for Saudi Arabia. In exchange for the Emirates promising to invest $1.4 trillion in the United States, he removed “limits on large U.S. companies including Microsoft and OpenAI that have planned data centers in the country. … The greater chip access could be worth billions of dollars” for “coveted artificial-intelligence chips after aiding America in recent months by carrying out dozens of airstrikes against Iran.” Understanding that countries’ hearts and political ties tend to follow where their money is, Iran’s IRGC (Islamic Revolutionary Guards Corps) announced that: “We will raze to the ground the most valuable assets of American companies in all countries that host US bases.”

Trump’s bargaining to secure a tighter alliance with Saudi Arabia escalated on July 22 when the U.S. Department of Energy approved joint U.S. investment with it to build its own nuclear reactor and refine its own uranium – precisely what Trump had insisted that Iran could not do, claiming that any enrichment is inherently military. He tried to assuage Israeli protests the next day by insisting that Saudi Arabia would have to join the Abraham Accords recognizing Israel. But official Saudi policy insists that no such accord can be signed without a Palestinian state being created. That of course is no longer feasible, given the genocide and property destruction that has occurred in occupied Palestine.

Saudi officials protested that no such condition was included in the contract signed between the Ministries of Energy of both countries. Trump’s proclivity for resetting contracts reminded the world of what has made the United States the world’s “exceptional nation.” It is immune from the world’s rules of conduct regarding official agreements.

Iran’s response in the face of Trump’s attempt to lock its Sunni neighbors into an alliance for mutual military support is to break their linkages with the U.S. economy and its associated foreign policy. The long-term Iranian argument is that the fortunes of these countries can grow most rapidly and securely by supporting Iran’s principle of open trade in oil and the sovereign right to invest the proceeds wherever they wish.

The Oil War is existential for the United States as well as for Iran

Trump’s Oil War is as existential for U.S. hegemony as it is for Iran’s survival against Trump’s threats to destroy it and impose a client regime along similar lines to what he claims to have achieved in his victory over Venezuela. For the United States the Oil War against Iran – and Russia and Venezuela – was not a war of choice. It was a desperate move to maintain its world oil monopoly as a chokepoint, hoping that this could enable it to remain a global rentier economy obtaining from abroad the affluence that it no longer is producing at home.

Toward this end the United States treats countries as enemies if they assert their sovereignty and refrain from joining its sanctions against countries whose policies conflict with U.S. dominance and weaponization of the world’s oil trade and dollarization of its monetary relations. Sovereignty for other countries is viewed as a threat to America’s own national economic security, its debt-leveraged stock- and bond-market wealth and the financial tribute that enables it to impose coercive military and political power.

The aggressive U.S. actions against Russia, China and Iran for asserting their own sovereignty has driven these countries together and accelerated their common efforts to create an alternative basis for their trade and monetary relations. Their efforts are catalyzing a global fracture that has been long in the making, but which only today has the critical mass that countries have needed to achieve independence from U.S. control.

The economic protection that China, Russia and Iran are offering to the rest of the world is based on an alternative payments system to avoid dependency on the U.S. dollar, which has been turned into a chokepoint posing the risk of asset seizure such as Russia and Iran have suffered. International savings and monetary systems need different financial system and operating philosophy than those of the austerity programs of the IMF and privatization policies of the World Bank that U.S. diplomacy created in 1945 under its own control and serving its dominant creditor and export power at that time. The potential for creating a New International Economic Order (to use the phrase popular in the 1970s) with its call for a multipolar body of international law and organizations not subject to U.S. veto, obstruction and control is what makes today’s U.S. Oil War against Iran, Russia and Venezuela civilizational in scope.

The creation of an alternative system enabling mutual gains from trade and financial relations and replacing the current U.S. win-lose extractive tributary system would be an existential challenge to U.S. affluence. That is why U.S. diplomacy is fighting against any such alternative system, and why, for the rest of the world, the U.S. policy imposed on Venezuela at the start of 2026 threatens to be imposed on Iran, Russia and other countries if they do not join together to support the principle of their national economic sovereignty for all and organize political and military protection to prevent the U.S. weaponization of world relations.

The world already is faced with having to suffer the deepest depression since the 1930s as a result of America’s Oil War interrupting the global trade in oil, fertilizer and related commodities. That collateral damage is the price that is to be paid for not having already acted against the regime of U.S.-sponsored trade and financial sanctions aimed at harming countries that do not join its increasingly predatory foreign relations.

The current international rules and global administration have been hijacked by America’s narrow and nationalistic meddling and violation of the sovereignty of other nations. Seeing that there are no international vehicles with the present power to impose reparations on the United States and its allies, Iran’s imposition of tolls on Persian Gulf oil trade is its only foreseeable way of recovering damages – not directly from the United States or its allied attackers but from the world’s oil consumers.

One of the great challenges is to create an enforcement power against lawbreakers of UN rules. Only such means of enforcement can ensure genuine national sovereignty and rules for open international trade and investment. Protection of national sovereignty was considered to be a guiding principle of civilization and its law of nations from the Westphalian peace of 1648 through the United Nations Charter. That principle is being blocked by America’s insistence on being permitted to act as “the exceptional nation” not bound by the rules of international law. Its demand for veto power and its covert bureaucratic maneuvering in any international organization that it joins has blocked the effective functioning of the United Nations and other global institutions. A systemic restructuring of these institutions, including a reconstituted international court of justice, is thus needed to end subservience to what has become a threat to the principles of civilization.

The leading requirements of a reformed international order would include rules to protect seaborne trade from U.S. attempts to create choke points, and inter-governmental rules to achieve what Keynes sought to ensure in his 1944 proposals as an alternative to the IMF backed by U.S. planners. What is needed are rules and arrangements to prevent debt dependency and impoverishment by imposing anti-government and anti-labor privatization and monetary austerity such as are currently imposed by the IMF and related U.S. foreign policy. The initial stage of such arrangements no doubt will be based on a combination of gold and foreign-currency swaps, with a new kind of international bank creating its own electronic balance-sheet claims and obligations among creditor and debtor countries.

The next report will review how the consequences of today’s U.S. Oil War and the world depression that it has made inevitable are likely to be as broad in scale as the ending of European monarchies after World War I and of British and other European overt colonialism after World War II without freeing economies from financial debt and trade dependency encouraged by the U.S. supported world order at that time.

Addendum

On July 31, 2026 the Moon of Alabama website published the following news selections documenting just how extreme U.S. moves to monopolize control of the Strait of Hormuz and also to impose financial sanctions intended to confiscate and injure Iran will be. These plans stand as a warning to other countries having the temerity to exercise their own sovereignty independent of U.S. policy:

“A Qatari tanker passing taking the Iranian channel through the Strait of Hormuz was a quite hopeful development for energy markets. The first Qatari LNG shipment in three weeks has successfully passed through the Strait of Hormuz along an Iranian-designated route with Tehran’s authorization, Fars news agency reported.

“Three weeks ago, following a US violation of a memorandum of understanding, Tehran mandated that all maritime traffic through the Strait require Iranian approval.

Fars said that the Qatari tanker presented clear identification data and adhered to the Iranian-designated route, allowing it to sail smoothly through the waterway. … The U.S. though, despite being an ‘ally’ of Qatar and Pakistan, did not like the precedence … The U.S. has blocked a Qatari LNG tanker from continuing to Pakistan simply because it used the Iran-designated safe corridor, and not the US-backed one. In consequence the Strait is again closed.”

Another citation describes how, “In response to repeated inquiries, we would like to reiterate that due to continued aggressive actions of U.S. forces in the region, passage through the #Strait_of_Hormuz is not feasible.

Once stability is restored, all requests will be reviewed and permits issued progressively.
– “The IRGC announces it targeted a convoy of tankers being escorted by the U.S. Navy through the Strait of Hormuz. Two of the violating tankers were struck, and four others turned around immediately. The convoy attempted to use the illegal route near Omani waters this morning. The IRGC says Iran continues to exercise full authority over the Strait of Hormuz, and that no vessel may pass without permission from the Persian Gulf Strait Authority.”

Iranintl published a statement, “US searching worldwide for Iran-linked assets.”
“Scott Bessent said Friday that the United States was searching worldwide for assets linked to Iran’s government, adding that recovered funds would go to Iranians and Americans harmed by Tehran. ‘It has been a privilege to be a part of, as we’ve gone from Epic Fury to economic fury, to constrict, on your orders, the Iranian regime’s financial tentacles all around the world,’ Bessent said during the televised Cabinet meeting at Camp David.” “On your orders, we are searching for their assets all around the world,” he added.

Photo by Joel Henry on Unsplash

The central point is that constitutional design has rarely been neutral. The rules governing representation, voting, public finance, taxation and legal rights often reflected the interests of those with property and financial power. Rather than treating founding documents as purely democratic achievements, Professor Hudson asks how they helped organize control over land, resources, money and political decision-making. This is the “airbrushing” at issue: the removal of class conflict, creditor-debtor tensions and material interests from the public story.

This perspective is useful because it reframes constitutional history as an economic question, not only a legal or patriotic one. It suggests that if we want to understand today’s housing, debt and inequality crises, we need to look at the older institutional choices that normalized private capture of public value. The point is not simply that founding figures were flawed, because stunning revelation, humans had interests. The sharper point is that political systems can be designed to protect wealth while describing themselves as freedom.

Nima Alkhorshid: Hi everybody. Today is Thursday, June 4, 2026, and our dear friends Richard Wolff and Michael Hudson are here with us. Welcome back, Michael. I want to start with a clip of Robert Kagan in his last interview. He’s talking about the situation that Donald Trump is in the Middle East. And I know that you know Robert Kagan, and for our audience, he’s a hardcore neocon who was advocating for this war against Iran and in the Middle East, the Great War, to defeat Iran. But he’s right now, his assessment of what’s going on is not in favor of what Donald Trump is talking about. Here’s what he said.

Robert Kagan (clip): Clearly see now what the future looks like. Iran is in control of the strait. There seems to be no prospect the United States is going to be able to open the strait by military force. Trump clearly doesn’t want to do that. Which means the strait will be open, but under new management. It’ll be under Iranian management, which means they will control who gets in and who gets out, how quickly, and at what price, because they’re certainly going to charge for it eventually.

And this gives Iran enormous leverage in the region and in the world. And we’re already seeing that leverage playing out today with the crisis in Lebanon and how Trump is handling that. I don’t see any particular options. I think we have already lost this war. It’s just a question of when do we acknowledge it. Trump, of course, doesn’t want to acknowledge it at all, which is why we’re sort of in this stasis, sort of paralysis right now.

But I don’t see any options for the United States. This mistake, unfortunately, is going to be a lasting mistake with lasting strategic consequences. Well, it means that the power relationship in the region will shift dramatically. I mean, before the war began, Israel was by far the strongest power in the region. Iran was decimated, weak, isolated. After the war, with Iran in control of the Strait, Iran is going to be calling the shots.

You’ll see the Gulf states cutting deals with Iran. They’ve already begun to do so. And you’ll see Iran exercising influence over Israel’s behavior, as it is doing right now in Lebanon. Iran wanted an end to Israel’s bombing of Beirut. They demanded it, and Trump called up Bibi Netanyahu and told him to cut it out. That’s the future. Israel is going to find itself tremendously isolated. Iran is going to be in a position to have leverage over countries as far away as Japan and Korea, who are, of course, utterly dependent on access to the energy supplies of the Gulf, which Iran will be able to control that access.

Nima Alkhorshid: Richard, coming to you, do you see any sort of connection between what he’s talking about, Robert Kagan is talking about, and what Donald Trump is trying to say to us? Because in the minds of those people who are running the administration, they don’t feel this way. They feel totally different. They’re winning the war and they want to stay there. That’s why, you know, in the last two days, we had confrontation between the United States and Iran because of these sort of mindset, because the blockade is still there. And you remember, Donald Trump announced that the blockade, he’s going to lift the blockade. The blockade is still there. That’s why we have some sort of, I would say, important escalations between the two sides. What is your understanding of what’s going on?

Richard Wolff: Well, I think the key to your clip is the word control. When you talk to a neocon like that, and he talks like that, what he is bemoaning, what he is so upset about, is the loss of control. He said it. The control is now not what it was. Paraphrase, it’s not under U.S. control. It has moved to, quote, new management, Iranian control. That is an outstanding, impossible horror for Mr. Kagan. That’s the problem. The rest of what he says there is cheap nonsense.

For example, it was a mistake. What are you talking about? What kind of mentality is that? You have a world historical shift of things and you attribute it to a mistake. Mistakes are made all the time. When they have the consequence of this, then you have to ask the question, which he can’t ask. Why the mistake? Why did this happen? And the answer is: you’re an empire losing control. That’s what’s going on now. It’s been going on slowly for years. Now it’s speeding up. Iran was always powerful. Now it’s clear how much power. Why? Because the whole world has shifted. Iran isn’t anymore Iran.

It’s Iran with Russia and China and the BRICS. That’s a whole new story. If Mr. Kagan weren’t lost in his ideological blinders, he would be able to talk in some intelligent way. He can’t imagine it. And by the way, Mr. Trump the other day did exactly the same. He said, the Iranians want to control the Strait of Hormuz, and no one’s going to control it. No one is going to control it. Euphemism. You’re controlling it. You always have, you big faker.

You’re pretending now that it’s upsetting because someone else, and then he gives it away. He says, no one will control it. We’re going to keep our eye on it. Okay. Nobody should be fooled. He wants to have some control. And he doesn’t want to understand. He can’t have it. This is a fundamental momentary recognition, very constrained, very minimalist, a momentary recognition of what we’ve been talking about, you, me, and Michael, for a long time, which is a decline of an empire. That’s what this is. An empire just lost a very important passageway, which is now under someone else’s control.

And these people are all astonished and would like to imagine that it was just a mistake, which they could learn from and then avoid in the future. No, Jack, not a mistake. One of these traps that are declining empire waltzes its way into. Here he has to forget that they’ve been doing this kind of intervention, including a year ago in the same country, the same two people, and it didn’t have quite the result.

They couldn’t learn last year. When they had to stop the war after 12 days and had not achieved their goals, they couldn’t see it then either, and they can’t see it now. The only difference is now clearly, Iran, even if it doesn’t want to, is showing the rest of the world the organization of the world is changing. Last point. He can see, because this is what he cares about most, he can see that this is going to have enormous consequences.

But again, he thinks it has to do with this war. No, it doesn’t. This has to do with the declining empire. It has to do with the fact that sooner or later, every country on earth, not just the Gulf States, is recalibrating. The world has changed. The United States and Western Europe have split apart. Neither of them is the power they once were. Russia and China are emerging as the new ones, and they’re all going to, of course, they’re going to cut new deals. But so is Latin America. So are Mexico and Canada. It’s already going on. Is this all a big mistake? Stop. This is the mentality of Americans who need not to see what’s happening to them.

Michael Hudson: When Richard talks about a declining empire, what he means is that the failure of what we’ve been discussing for an entire year now: that the U.S. international strategy, as spelled out in the National Security Strategy Report, has been based on control of the world’s oil trade. And the control means the ability to cut other countries off from access to oil to run their factories and heat their homes and make petrochemicals and make fertilizer out of it.

So that means of control, that the United States does not feel secure unless it can control other countries to the point of being able to create chaos for them if they do not agree to U.S. foreign policy and the kind of agreements that Trump imposed upon them with his tariffs a year ago. That if they want access to the American market, he said, instead of being turned off with chaos, they have to impose sanctions against other countries exporting oil. Russia, Iran, and at that time, Venezuela.

Well, the whole strategy of the United States is control by being able to cut off the world’s oil trade, the food trade for countries that need food, and now the internet and artificial intelligence monopoly. So, the United States is not going to simply give up this. It’s almost as if Kagan is saying, you know, we’ve got to realize that we’ve failed. It’s as if he’s throwing down a challenge to Trump and saying, What are you going to do about it? You know, are you going to let it happen?

Well, today, the stock market is way up because Donald Trump said he’s not going to fight and attack Iran. He promises not to, if Iran does not kill any American personnel. Well, you already have seen what’s been happening in the last two days. The United States is going to chip away salami-style at trying to block Iranians’ ability to control the Strait of Hormuz. It’s already done it. It’s told tankers: turn off your transponders, you know, try to just sneak through. Iran has been blocking this.

And the U.S. military knows that if Iran tries to say, who’s trying to sneak through with a tanker, then they use radar. And if they use radar, then the Americans are going to zero in and say, uh-huh, let’s bomb where the radar is coming from to prevent Iran from doing that. I don’t see any way of settling this whole conflict peacefully. You can’t do it by negotiation because Trump doesn’t have anything to negotiate, and he doesn’t control what the U.S. Congress would have to agree to, which is probably nothing.

And he doesn’t control what Israel would do, which is probably nothing. So, this can only be settled on the battlefield in one way or another. And a number of people, guests that you’ve had, have expected war two weeks ago. They expected war this weekend. They’re expecting war next weekend. They can just see that the United States is continuing to probe in a way that is going to force some sort of Iranian response.

Well, China is trying to defer it from responding because it doesn’t want Iran to respond by not only wiping out American military bases, but the emirates and countries that are letting American airplanes use their airports, their airspace, to attack Iran. All of this is probably going to end up happening as it might have happened earlier this year.

It might have happened last year in 2025 when Iran had Israel on the ropes and could have attacked. One way or another, I think that situation is going to build up again. And because America literally has said we do not feel secure unless we can prevent any other countries from getting oil. And that’s exactly what Iran has achieved in its own power. It says if the United States controls your oil supply by isolating Russia, us, seizing Venezuela’s oil, then you’re going to be at the mercy of American foreign policy.

Well, we’re going to preempt all of this. We’re going to close off the oil supply to you. And unfortunately, this close-off is going to take years to rebuild. It is going to create a world depression.

But our aim in closing off the supply of oil through the Strait of Hormuz is going to be: we want to have all of you protect us and create a world of free trade in oil, where you can trade with us for oil, you can trade with Russia and oil, and maybe even free Venezuela for trade in oil. But so the question is: somebody is going to control the world oil supply. Is it going to be the United States or Iran? That’s really what it all comes down to. The United States is not going to go quietly, and that probably means that there will be an interruption of oil trade.

Exactly what the United States has tried to achieve to threaten other countries. Iran is not doing this as a threat. It’s doing it as self-protection of its own ability to trade in oil and rejoin the group of oil-exporting countries in freedom. The United States is still going to try to block its tankers. It’s seizing Iranian tankers, disabling them from anything. Of course, Iran is going to respond by, it seems to have already attacked some ship. At least there’s some reports of that. It will attack some American military bases where the attacks on it are coming from. There are going to be Americans killed, and so we’re going to be right back where we were before.

Richard Wolff: Yeah, let me add, there’s another way of looking at this, which takes the point another way. In the United States, it has been common for many years to refer to the security of the United States as if it requires controlling the whole world. I mean, stop and take a step back with me. That is craziness. What kind of craziness is it? It’s the craziness of somebody who thought that the world was under the control of the United States and the Soviet Union, and then the Soviet Union went away, and so now it’s only controlled by the United States. This is childish. The world is never under the control of any empire. That’s why the world is still here, and all the empires are gone. That should have been a clue as to which is more profound. Okay.

In the American mentality, you have to control everywhere in the world because, and this, look what they’re giving away, because every place in the world, no matter how far away, and I don’t just mean in geography, but I mean in wealth, in military power, in global reach, no matter how distant, how unimportant, you could have developing there, some kind of economic or political movement, and that would eventually threaten the United States, and so we go in and hit them in advance.

What are you doing in Vietnam? What are you doing in Afghanistan? What are you doing with poor Mr. Maduro and his wife asleep in there? What are you doing? Answer. We are taking the steps necessary for our security. Oh, you mean in the event that maybe one day Vietnam might be in a position to threaten yeah, we can’t let North control South Vietnam. We can’t let that happen. We can’t let the Iranians be. They might one day have a nuclear weapon. Well, here by the way, and that’s another issue. What is that about? Everyone knows Israel has nuclear weapons. Therefore, why shouldn’t Iran have nuclear?

What is this? The United States has decided that an ally, Israel, can and should have nuclear weapons. But Iran shouldn’t. That’s the behavior of a global empire, that kind of determination. Let me make it clear to everybody watching. The day Iran wants a nuclear weapon, it will turn to Russia and China, who have them, and ask, or North Korea, and get them. And that will be a decision made over there, not here. Because that’s the way it now is. Why not? The empire can’t do it.

But the initial craziness is that little move that allows the logic, which in the popular lingo goes like this: it’s better we fight them over there rather than fighting them over here. Oh, the whole world then becomes a logical place to attack and fight anywhere and everywhere any conceivable line of development might eventually lead to something. No, this is not the way the world works 99% of the time. And the reason is simple and it’s relevant now. There is another way. You admit you can’t control the whole world. You never could.

That’s why you fight so many wars at such cost of life and treasure and lost opportunities. In economics, we have a concept, very simple-minded, as most economic concepts are. It’s called opportunity cost. That the cost of any use of any resource is all the other things you can’t do if you use it in this particular way. That’s the opportunity cost. What was the opportunity cost of the military that we have maintained? We don’t dare ask those questions.

They’re a taboo because you’re trying to control everything. The alternative is you understand that the world is a process of negotiated compromise. You don’t control it. You’re working to reach an agreement so you don’t destroy each other. What you are doing is choosing, Mr. Kagan, you are choosing the path of trying and you’re upset that you made a mistake. No, sweetie pie, mistake is the least of your problems. You’re trying to hold on to something that’s disappearing underneath you. Israel is a desperate country which has just now been confronted with the fact that its desperation has just gotten much, much worse. Why?

Because like the United States, it chose military. Security means controlling every Arab country around it, every Muslim country around it. But of course, that’s a hopeless, endless task. It can’t be done. Now it can’t be done even with military force. Now it can’t be done even with the Israeli military backstopped by the American military, which is what they have. Now the American military can’t do it. They’ve run out. They’re either come to terms with their neighbors or they will disappear and somewhere they know it. And their crazed behavior in Gaza and now in Lebanon doesn’t solve the problem at all.

But it is a lack of recognition that there is an alternative here. And that is the kind of diplomacy trying to develop, if not a League of Nations, if not a United Nations, then some other mechanism to prevent this from happening. And the United States is not going to do that. No longer able to rule the world, making America first by means of a rules-based international order, they throw away the rules and now they’re going to do it directly. Same mistake. The problem isn’t how. The problem is misunderstanding the situation you’re actually in.

Michael Hudson: Richard’s made a number of points that I’d like to discuss in sequence. He’s correctly said American policy is based on control. He’s just called it crazy.

Well, preparing, just reading the news today, I invented a new word, based on sociopathology. And I call it geopathology. Geopathology is like sociopathology, which is not only a lack of empathy, but a lack of empathy with other countries, other people, leads you to be abusive. And geopathology is an attempt to structure a world in an abusive way.

That’s what the doctrine of control is. We’re dealing with what will be, in retrospect, a pathological relationship really between the West and the other countries that goes back a few hundred years. The means of control for many years was by Britain free trade imperialism. That’s what it was called. If you can have free trade and convince other countries to depend on Britain as the workshop of the world, and they’ll provide our food and raw materials in an unequal exchange, they’ll run deeper and deeper trade deficits with us.

They’ll have to finance them from borrowing from us, and their trade dependency will be turned into financial dependency, debt dependency. And if they try to respond, well, we’ve already established military dependency by having the British Navy and the military bases all throughout the world.

Well, that’s what British colonialism in the 18th century was all about. It’s what Britain’s free trade theory and trade imperialism was in the 19th century. And it’s the way in which the United States restructured the world economy after World War II, subject to free trade and a creditor-based international financial system based on the U.S. dollar. And you’ve essentially turned this into an overall detailed means of controlling the world by trade, controlling trade in essentials, including oil and raw materials, by the way, under U.S. investments and investors that control the raw materials producers of the many global south and other countries. Just the opposite of what was advocated for by industrial capitalism early on.

You’ve had a pathological relationship that other countries somehow have to respond to if they’re going to save themselves. Well, the enabling, one of the ways in which this control is used is to control the way in which you think about international relations and you think about economics. The myth is that all countries have been gaining by a U.S.-centered trade system that America calls free trade, but those rules America is immune from. It’s really a U.S.-centered trade and a U.S.-centered financial system. It’s the opposite of multipolarity and mutual aid.

And so, in back of geopathology, you have ecopathology, a pathological economic idea of how an economy develops. And the whole U.S. neoliberal strategy and concept of how economies work that underlie this foreign policy of control goes way back to Friedrich Hayek, Margaret Thatcher, Milton Friedman in the 1980s.

Imagine if they had gone back in history and started the beginning of civilization saying, well, you know, let’s base civilization on these free market principles instead of mutual aid, instead of the kind of mutual support and fairness and equity that you have with a concern for other people, then civilization never would have taken off. Well, we’ve reached a point today where the international economy cannot take off without escaping from this pathological behavior that is indeed crazy, and that requires a critical mass, a size that countries never had the alternative before. And right now, they’re having the basis for such an alternative in the emergence of China, Russia, and now Iran.

And I think Iran’s policy is forcing other countries to consider this alternative and say, of course, there’s always going to be countries who are dependent on certain raw materials, on credit, on technology. But this does not have to be exploitative. If it’s exploitative internationally, then the solution is self-sufficiency to become sovereign and in control of your own fate. I think that’s where probably civilization is moving towards. And that is what makes this fight that’s going on in Iran a civilizational question, as Kagan and the neocons have said all along in their fight against civilization.

Richard Wolff: You know, Nima, let’s be real clear what Michael has just said. It might be much more efficient in terms of the relationship between the output you get and the inputs that go in it to have a world divided.

But our inability to work that out because of the dominant position of the United States is turning the United States and every place else into self-sufficiency, which is enormously inefficient. And the reason, the reason is not because human beings can’t understand the difference between efficient and inefficient.

They can, but they can’t work out a non-imperialistic way of doing it. That’s their problem. And so they’re going to forego all kinds of wealth and resources. And that’s going to hang on to the inequality between the center and the periphery that we have been talking about for generations now. Instead of overcoming it, we’re cementing it by this turning inward to self-sufficiency. That’s the kind of absurd irony we have now. And let me give a concrete example, even if it ruffles some feathers.

Michael and I were both part of a generation of economists who went to graduate school and studied the field at a time when the most exciting subfield of economics that attracted most of the students, myself included, was called economic development. We’re talking about the period after World War II is over when the exciting thing is: look at all those poor countries in Asia, Africa, and Latin America. They need to become not poor. They’re desperate to become modern, middle income, able to give their people a proper health system, a proper school system, and a proper life, like we already have.

And we’re going to help them. So people like me were trained to help them. Many of my fellow students ended up working in the United Nations or all over the world, helping them. Here’s the problem: we didn’t help them. We ended up, without understanding it, cementing them in a subordinate position. How do we know that? Because that’s where they are now. They haven’t developed. They remain very poor, and the gap between them and the rich countries, if anything, is worse.

With one big exception, China. Why is it important? None of us went to China. Nobody did. China was a taboo place in those years. The United States didn’t recognize China. From 1949, when Mao wins until the 1970s, and Nixon and Kissinger go there, they’re not recognized. Nobody does anything with them. They don’t get the benefits of all of us trained economic development specialists.

End result: they did much better. All the people we helped didn’t do as well as the Chinese who went and did it on their own. You know, that’s a problem. If you understand that, you have to ask the question: what in the world went on here? If you ask people like Mr. Kagan, he’ll tell you there were some mistakes made. Again, this is trivial and silly. We can’t help them because we’re busy maintaining and running an empire. That’s what most American businesses are busy doing.

And that completely outweighs what you tell them, tell people like us in the university. So, of course, we could not succeed. The governments that brought us in could not succeed. The government, which was a pariah, that was kept out of the system, that was hampered in every conceivable way, including by military bases and all the rest, outperformed us and does so year in and year out, as if to mock the very system.

Sooner or later, here’s the final punchline: all of the countries, all of them in Asia, Africa, and Latin America, are going to understand what I just said and are going to realize they need to switch over from the dying empire that never gave them a chance to the new one, where, hopefully, they will have one. That’s the problem of the United States. If it doesn’t understand that, it will be making one mistake after another year in and year out.

Michael Hudson: I’m glad that Richard mentioned so many people of our generation who studied economics focused on development. I worked for the United Nations for three years in the 1970s with the United Nations Institute for Training and Research. And what I found very quickly was that there was one group of these development economists studied how do we prevent development from occurring in a way that does not favor the United States.

Well, the World Bank was the leader in fighting against development. They published a report called Partners in Development that I reviewed, and I included that in my book, Superimperialism, called Partners in Backwardness. The World Bank made sure that there would be no loans for any country that was using its agriculture to produce its own food and thereby compete with American agriculture. I wrote my master’s dissertation and had a whole chapter in superimperialism on how every economic country review by the World Bank said you have to have essentially what the United States did under Franklin Roosevelt with the Agricultural Adjustment Act.

You have to protect family farming. You have to develop public marketing services, public agricultural extension services to provide seed. You have to develop trade relations and support food dependency. Every actual behavior of the World Bank was to prevent exactly this because it would not reflect American national security.

That’s why the heads of the World Bank were heads of the military, starting with John J. McCloy, the first president, and peaking with Robert McNamara, Secretary of Defense. The whole perversion of development theory to dovetail into U.S. national security of control sort of perverted the whole idea of development to saying development means you let American corporations come in and buy control of your oil, mining, forests, and other raw materials, and you have to privatize your public utilities and public infrastructure.

And that’s how you develop. You let American financial companies and firms come in and develop. The whole idea of development economics was hijacked. And at the United Nations, when I made these points, the bankers who were funding the Club of Rome, Agnelli, I think, and some others, insisted that they would pull out all funding for UNITAR if they didn’t fire me. So I mean, this was quite explicit at the time. The whole idea of the Club of Rome, there’s too much population of non-white people in the world, of less developed countries.

That is inefficient. That’s not how developed you have to have population control. And the irony is that it was the Catholic Church that popularized most of my criticism of the World Bank in what became liberation theology. And my first books were published by the Catholic Church on this precisely because of attacking this population theory that was part of the distortion of the whole development economics that essentially led to that subject no longer being of much interest to today’s economic students.

Nima Alkhorshid: Richard, do you think that with what we’ve said so far, do you think that Donald Trump finally would understand that this is the end? He has to do something about it, withdrawing from the war in Ukraine, withdrawing from the war in the Middle East, or maybe, because there are people arguing that maybe the off-ramp for Donald Trump would be a new conflict, a new war against Cuba. This is a recipe, in my opinion, for disaster if they go that, you know, they bring the war to Cuba instead of, you know, to say, oh, we won against Iran, we’re going to get a new victory in Latin America.

The government, we’re going to topple the government there, we’re going to put someone there that is in our favor, the same they did in Venezuela. Do you think he’s going to understand the limits of the U.S. Empire or he’s going to expand this conflict without putting an end? He didn’t put an end to the war in Ukraine. He started a new war in the Middle East. Right now, instead of getting out of these two, opening up a new front for the United States. What is your understanding of that?

Richard Wolff: I would love to see in him or his government any recognition of the kinds of things we’ve been talking about on this program. I don’t see it. I just, I try, I look, but I don’t see it. In my judgment, the reason, excuse me, they did what they did with Maduro and Venezuela is because they could not do more. Venezuela is too late.

There’s too much of an opposition inside Venezuela. If you take over and install a literal colonial regime, which many in his government would like to do, you are going to be fighting a guerrilla war in that country forever. And it’s going to have lots of sympathizers in all of the countries around Venezuela where they can hide, where they can recoup. This is very dangerous. And the same problem attaches to Cuba, except they’re an island, so you don’t have that problem. And that’s a big plus for the United States.

But a big minus is you have half a century of a different way of thinking, a half a century in which the United States has been portrayed as precisely the evil external force that an attack on them now would prove, would verify.

You are therefore going to have an enormous problem with the people of Cuba for years into the future. What are you going to do? And I’m not even talking about a mass of refugees, which is another problem. Where will they go? Who are they? Are they the old pro-Castro Cubans? Do you really want a million of them in Mexico now or in Central America? You have enormous problems. Now, you can wave all that away and have a nice moment where you win something and you defeat somebody and you bomb Havana or you bomb Caracas.

But for the whole world, this is again what? A superpower fighting a war against a small, poor country. That’s the truth, and that’s exactly how it will be seen. This is not going to help you. And if it looks like you’re doing it, whether you are or not, whether it looks like you’re doing it to compensate for losing in Ukraine and losing in Iran, well, though, it only makes it worse. You’ve got, again, I don’t mean to harp on it, but it is the situation.

Either you come to a different way of being in the world, or you’re going to have one after another of these situations. After all, let’s do a little history. Cuba and Venezuela became left-wing in reaction to American colonialism.

That’s why they, you know, Castro overthrew Batista. Batista was the agent of the United States, converting Cuba into a place where you grew sugar and you had gambling and prostitution close to Florida because Florida didn’t allow it. And in Venezuela, you had, you know, an exploitative system for 100 years. The revolutions in those countries that brought Castro to power or Chavez, Hugo Chavez to power, they already represent something that has gotten much stronger since then.

You’re going to fight them forever? You think you’re not going to provoke another revolution? Think again. And if you can’t manage two wars, really? You want to start a third or a fourth one? Yes, it’s in your own neighborhood, but the world isn’t separated the way it once was. Chinese are busy all over Latin America, in every major port, in every major country.

The Chinese have become an important player in the Brazilian economy for over 10 years, which is well known if you study Brazil. They now operate the biggest port on the Pacific coast of Latin America. That’s the underlying reality, which Michael and I as economists keep having to face. China’s economic importance grows bigger and faster than the United States every year for the last 35 years, this year being no exception. It becomes more and more strong relative to the United States, which is as blind to the implications of this as it has always been. Even now, it claims we need to pivot to China.

No, no, you said you needed to understand what China was accomplishing 5, 10, 15, 20, 25, 30 years ago, and ask yourself, what might that mean? Then you might have taken the steps to work something out. Instead, you just try to hamper the Chinese, teaching them they better be careful. Why do you think China has much larger strategic oil reserves in their country than we do in ours? Why do you think that happened? By the way, it’s protecting them now against the high prices. It’s protecting them now against the Strait of Hormuz being closed. They have taken all the steps, just like Iran did, to be prepared for what they are now doing. It’s not a mistake of the United States. It’s a willful refusal to see the end of the empire.

Michael Hudson: Well, what Richard’s described posing is how do we get from here to there? How do we get to an alternative future? Well, I’ve said before that this war in Iran is in many ways like World War III. And I didn’t mean that all the countries are going to be fighting militarily, but in its consequences. The consequence of World War I was to transform the whole political order. It got rid of kingship. At least the kings of Europe were removed from the Tsar to the Kaiser. And other kings were reduced to purely ceremonial order. The aristocracies were reduced. Political transformation occurred, economic transformation.

Well, today, I think the results of this fight between who is going to what will the character of the world oil trade be? Will it be weaponized in the hands of the United States to create chaos in other countries? Or will it be the kind of real open trade where Iran is able to trade with other countries? Russia is able to export oil to other countries.

And maybe Venezuela can be rescued and get control of the revenues from its oil exports away from Miami and Donald Trump into Caracas. These are the questions that really are there. And all of this requires what’s truly a new international economic order. And that phrase was used in the 1970s. Everyone was talking about the new international economic order, but it couldn’t take off because the United States still had a stranglehold on the economy. It had veto power, and every international organization that it joined as a condition for its joining us.

Well, this is the first time that countries are saying, well, if we maintain the United Nations with American veto power, then it will never have any means of enforcement. If we maintain the IMF and the World Bank as an operational philosophy of neoliberal American dominance and essentially imperialism, then we need a new IMF and World Bank. We need a new monetary system. That was one of the results of World War I and World War II. It entrenched the dollar and creditor-oriented rules on the world economy.

Well, the new international economic order today means we’ve got to alleviate the debt overhead of global south countries, as we’ve talked about, as they’re facing what are they going to do to pay the higher prices for their oil and fertilizer if they also have to pay their foreign debts. All of this is going to require a whole international restructuring of the economic order. And that’s what I think we’ve been trying. Your site with us is one of the few that’s been discussing how this is going to be developing over the next few years.

Nima Alkhorshid: Richard, do you want to add something before signing off?

Richard Wolff: No, I think my points that I wanted to make, which were occasioned by that very interesting clip you chose of Kagan, people, if I’m not mistaken, his wife is Victoria Nuland, who is famous for having taken major steps to produce the catastrophe in Ukraine, which she now leads the charge with him and the others to blame Russia in order that it be understood that everything they did was beautiful and vanilla and was destroyed by the evil other. That way of thinking, that childish, petulant meanness of the dying empire should be understood and recognized for what it is.

Michael Hudson: All under Obama, and this is not just Trump and Republicans. This is Obama, Hillary, and the Democratic Party as well. I wouldn’t want us to miss a bipartisan character of all of that.

Richard Wolff: Absolutely. Let me underscore that by reminding everyone that it wasn’t so long ago in our last presidential election, less than two years ago, that all the three candidates, Trump, Biden, and then Kamala Harris, none of them at any moment, had anything to say about a declining empire or what it might mean that we react to that and think about that and develop a strategy for that.

Oh, no. Instead, we do the same lame cheerleading that substitutes for facing our problems. We are the greatest country in the world. Remember, Mrs. Clinton couldn’t understand Mr. Trump’s Make America Great Again. Why? She said, we are already great. There you have it. The right-winger going backwards, who at least touches the theme, we’re not as great as we once were. And the Democrat coming back and saying, oh, yes, we are. This is beyond stupid. It’s right up there with the war is a mistake. Oh, yes. Oh, yes. That’s when you can’t explain anything. Then it’s a mistake.

Michael Hudson: Well, sociopathology is not self-curing, and neither is ecopathology or geopathology. It has to be isolated. Yeah.

Nima Alkhorshid: Thank you, thank you, thank you so much for being with us today, Richard and Michael. And see you next week. Bye-bye.

Richard Wolff: Bye-bye.

Transcription and Diarization: https://scripthub.dev/ Editing & Review: ced

Image by Pexels from Pixabay

America’s 2025 National Security Strategy calls for gaining control of the world’s oil trade. Toward this end, Donald Trump’s Oil War aims at depriving Iran, Iraq and its neighboring OPEC countries of their sovereignty over whom they may sell their oil to, just as he has done to Venezuela. There is no remorse for the collateral damage being caused by the disruption in energy trade that is plunging most of the world’s economies into depression.

Such reckless (and wreckful) behavior conforms to the letter of what psychologists call a sociopath. The Mayo Clinic applies this term to “a person [who] consistently shows no regard for right and wrong and ignores the rights and feelings of others. People with antisocial personality disorder tend to purposely make others angry or upset and manipulate or treat others harshly or with cruel indifference. They lack remorse or do not regret their behavior.” To cap matters, “people with antisocial personality disorder [who] often violate the law, becoming criminals. They may lie, behave violently or impulsively …” This diagnosis can readily be applied to any nation aspiring to empire by conquest. But U.S. foreign policy has carried it to new extremes.

Just as sociopaths lack a sense of right and wrong (and fight against any such moral values constraining their abusive behavior), U.S. diplomats have rejected the United Nations Charter’s body of international laws of war that ban attacks on civilians. American weaponry and missile guidance systems are serving religious and ethnic genocide from Ukraine to the Middle East as Ukrainian, Israeli and various Wahabi al-Qaeda client armies have been recruited to serve as America’s foreign legions.

Trump’s impulsive, aggressive and manipulative demands accompanied by bullying violence violate the most fundamental laws of international behavior that formerly were considered to be the essence of civilization. The UN Charter’s rule not to interfere with the sovereignty of foreign countries is the legacy of Europe’s 1648 Treaty of Westphalia that ended its Thirty Years’ War. The United States has overthrown foreign governments and tried to bring about regime change from Russia to Iran by bombing civilians, especially young students and doctors, schools and hospitals, in the hope that such terrorism will lead populations to replace their governments with U.S. client oligarchies to stop the bombings that have become the hallmark of U.S. policy.

U.S. diplomacy also violates the international maritime law, bombing fishing boats from Venezuela and Columbia in Latin America to the Strait of Hormuz and Persian gulf, without warning or probable cause simply to demonstrate its immunity from the constraint of international law and the inability of the United Nations or any other international body to prevent piracy and murder on the seas.

Insisting that other countries obey its own sanctions aimed at isolated Russian oil production., the United States has destroyed Libya and grabbed Iraq’s oil production and taken control of its revenue, refusing Iraqi government demands for the United States to leave. It has likewise seized control of Venezuela and devoted all its oil-export proceeds to U.S. accounts in Miami under the Trump Administration’s direct control.

Trump’s behavior has gone seamlessly to the U.S. presidency from his background as a notoriously cheating real estate developer, lying and breaking contracts with his suppliers, bankers and labor, and treating fines and penalties simply as a cost of doing business, not to mention his predatory behavior toward women. There is almost a natural kinship between his former life and his present political role. Much as U.S. foreign policy seeks to block countries from having their own sovereignty and self-reliance, today’s financial and real estate magnates in the One Percent class, along with the ambitious politicians they recruit to gain control of U.S. policy, are reducing a widening swath of the U.S. population to debt dependency and the insecurity of living paycheck to paycheck.

U.S. strategists fear (and bullies are cowards) that foreign independence from U.S. control of trade in oil, information technology and automatic intelligence would enable them to resist the demands of America’s abusive imperial power. The creditor class, monopolists and other members of the rentier One Percent share a similar fear that the U.S. government might enact and apply laws that would limit their concentration of financial power and monopolization of wealth at the expense of the increasingly indebted 99 Percent being forced more deeply into debt (and debt arrears) just to make ends meet.

Similar drives for power characterize the CEOs and CFOs of today’s largest corporations, as well as gangsters, religious cult leaders and many politicians pursuing their respective ambitions. Sociopathic self-indulgence is celebrated as the driving force of progress, “free” of public checks and balances to permit economic polarization and the kind of self-destructive decadence that brought down the Roman Empire.

A vocabulary to describe today’s global fracture and its civilizational war

We need an appropriate vocabulary to describe these phenomena, and also to characterize their attempt at self-justification by promoting today’s neoliberal ideology. I suggest the following two words:

Geopathology: the abusive conduct of international relations in an exploitative manner that injures and victimizes other countries by imposing a unilateral double standard of behavior. All imperialism aspiring to empire building is characterized by such geopathology.

Econopathology: the doctrine to defend the absence of social empathy. Its core is today’s libertarian “greed is good” individualism advocating unlimited self-interest and rejecting any government constraint or regulation to protect the basic social principle of reciprocity and mutual aid that provided the foundation for civilization’s takeoff.

Early civilization could not have evolved if Margaret Thatcher, Milton Friedman, Frederick Hayek and Alan Greenspan had managed to send themselves back in a time machine and arrive as gods from the future offering to enlighten chieftains, priesthoods and the kings of Mesopotamia, Egypt and China. Civilization never could have taken off if it had taken their advice. There would have been no protection of their subjects against falling into debt bondage, losing their land tenure. Such a takeoff would have gone directly from incipient civilization to an economic polarization and subjugation to a narrow oligarchy lording it over the population and fighting to prevent any alternative attempts at takeoffs by protecting personal liberty and widespread self-support as a precondition for progress.

Only a system of mutual aid and protection of personal self-sufficiency for the citizenry could have enabled archaic low-surplus economies to survive. They could not afford the luxury of inequality and deprivation of the population’s liberty and land tenure rights. And by the same token, today’s economies require some public authority empowered to prevent economic and physical aggression from leading to predatory oligarchies. Most have been financial in character and have sought to monopolize the land.

Greek philosophy realized the need to protect society against the pathological behavior that was an inherent result of money-addiction. All wealth, especially in monetary form, was recognized as being addictive, leading to behavior that injured others, and accordingly was regarded as asocial and frowned upon. Usurious creditors assigned such “dirty” activities to their slaves or freedmen to avoid being shunned in polite company. Rules for basic reciprocity and respect for the human rights of others acted to constrain the kind of behavior that today’s financialized and neoliberalized Western societies have lost. Money addiction plays no role in today’s utilitarian economic theory, or in the principles of law or political philosophy. Business school students are taught that their task as corporate managers should be to maximize capital gains for their stockholders and pursuing profits to pay dividends toward this end by cutting costs and conquering markets ruthlessly, as if all the ensuing exploitation and destruction is creative.

The common denominator between geopathology and econopathology is their denial of freedom and self-direction for other countries and people. Viewing foreign sovereignty and self-reliance as enabling other countries the ability to resist U.S. diplomacy views such sovereignty as threatening the U.S. security of maintaining its tributary empire. And like geopathology, econopathology aims to reduce other individuals to the dependent status of clients, debtors, renters, and ultimately to serfdom.

Wealth and power addiction are natural drives, but societies through the ages have sought to socialize. them Socrates found the ideal to be a wise central authority to keep this drive in check. That social protection against oligarchy was seen to be equally natural as a precondition for societies to avoid polarization and stagnation. But as Aristotle observed, democracies tend to evolve into oligarchies, that then to make themselves hereditary rentier aristocracies. And such nations seek to “free” kindred oligarchies from the constraints of public regulation (e.g., as Trump supports the libertarian Javier Milei in Argentina), and to prevent any such regulations from being applied on an international scale.

How can today’s economies cope with geopathology and its econopathology?

Sociopathology is not self-curing. Neither is econopathology nor geopathology. Ancient societies had cities of refuge to which such sociopaths and other lawbreakers were exiled, at least temporarily until such time as they became socialized and learned to regret and feel remorse for their behavior.

Today’s U.S. foreign policy has spent the past eighty years since 1945 putting in place a body of neoliberal anti-government doctrine and its anti-socialist rhetoric rejecting all ideas of diplomatic and domestic economic reform. The challenge confronting today’s Global Majority is to create an alternative multipolar system of international institutions and alliances based on the principles of mutual aid and tolerance for each other’s autonomy that always has been the ostensible ideal.

Creating such an alternative requires an alternative doctrine to that of neoliberalism, and also re-creating the basic laws governing international relations. What makes this possible today is that for the first time since 1945, a critical mass of countries now exists to establish new institutions to protect their autonomy and sovereignty.

Photo by Mauro Lima on Unsplash

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