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How the Iran War Could Lead to a Crash Worse Than 2008
It’s too late to prevent the inflation of an AI bubble or to advise against a US attack on Tehran. At this point, the most we can do is to hope for a quick end to the war and for some improvisational brilliance among the world’s leaders of government and finance.
Mar 21, 2026
Several commentators have remarked that the United States’ war on Iran carries echoes of 2008. I’ll argue here that a potential financial crash this year could actually be much worse.
The Global Financial Crisis (GFC) of 2008 was the biggest economic crunch since the Great Depression. Unemployment surged, topping 10% in the US. Global stocks lost trillions of dollars in value. Major brokerage houses collapsed. The US auto industry only survived thanks to enormous government bailouts. How could another crash top that?
Consider the causes. The 2008 Great Recession resulted from a confluence of three factors:
- Failed US wars in the Middle East, in that instance against Iraq and Afghanistan. Many economists argue the Iraq and Afghanistan Wars contributed to the GFC by fueling massive American budget deficits and worsening trade imbalances, and by creating a “capital flow bonanza” that triggered the US credit boom. While not the sole cause, the war compounded the vulnerability of the US economy.
- Soaring oil prices, following the plateauing of world conventional oil production in 2005. Oil demand continued to rise but the global supply of oil did not follow suit. On July 11, 2008, crude prices hit $147 per barrel, their all-time high. Since the economy runs on energy and oil is the world’s most important energy source, oil prices have a way of impacting all industries. Financial markets crashed three months after the oil-price peak.
- A bursting financial bubble inflated by subprime mortgages in the US and financial derivatives traded worldwide. The mortgage bubble involved $1.3 trillion to $1.5 trillion in high-risk loans issued during the 2000-2006 housing boom. It was a house of cards waiting to tumble.
The resulting unwinding of debt and derivatives came within a hair’s breadth of turning into a massive bank run and general economic collapse. Governments (led by the US) bailed out industries and banks, lowered interest rates to zero, purchased large tranches of financial securities, and instituted enormous fiscal stimulus programs and tax cuts. Even with these rapid and maximum-scale efforts totaling hundreds of billions of dollars, the GFC led to widespread housing foreclosures, a near-40% downturn in the S&P 500, and a substantial increase in the poverty rate.
Now consider the following:
- Today’s AI financial bubble is four times bigger than the subprime mortgage bubble of 2008 and 17 times bigger than the dot-com bubble of 2000.
- The Iran war, though so far not involving US ground troops, could possibly end up being more problematic than the Iraq invasion of 2003, if only from the standpoint of flows of energy and international trade. The war is likely to result in real oil shortages and prices potentially even higher than those seen in 2008. Additionally, more of the Middle East is now involved in hostilities, and oil and gas production and shipment infrastructure is being damaged or destroyed, thereby undermining the long-term economic prospects of the region, as well as destabilizing its politics. No one knows how this will end.
- For the US economy, warning signs were already flashing before the war: Stubbornly high inflation, a bad jobs picture, and worsening consumer sentiment were indicators of a looming recession.
- The final factor can be stated as a question: Would today’s US Treasury head be as successful at averting financial doom as was Henry Paulson in 2008? Then, the US was able to enlist government and business leaders from the world’s key countries in cooperating to fashion a collective survival strategy. Would current US Treasury Secretary Scott Bessent have similar success, given the recent global collapse of trust in US leadership?
In view of the possibly catastrophic consequences of the attack on Iran, many people wonder what motives could have justified it. Logan McMillen argues in Foreign Policy in Focus that the so-called “Donroe Doctrine” intends to freeze China out of the Western Hemisphere and to deprive it of cheap energy:
The strategy is entirely zero-sum. By turning the Middle East and the Caribbean into militarized chokepoints, the United States is suffocating China’s independent oil supply lines, starving its industrial capacity while guaranteeing temporary windfall profits for Western supermajors. Concurrently, from the lithium flats of Bolivia to the ports of Peru, Washington is deploying right-wing proxies and military coercion to systematically dispossess Chinese capital in Latin America, re-colonizing the Andes to secure the supply chains of the 21st century.
Other commentators see the war as being spearheaded by members of the Christian Zionist movement, which desires a fulfillment of biblical prophecies of the battle of Armageddon and the return of Jesus.
Even if McMillen’s analysis is sound and there is an arguably rational motive behind the war, that doesn’t mean the campaign will go according to plan or that it will achieve its aims. Many analysts see it already careening off the rails.
It’s too late to prevent the inflation of an AI bubble or to advise against a US attack on Tehran. At this point, the most we can do is to hope for a quick end to the war and for some improvisational brilliance among the world’s leaders of government and finance.
Meanwhile, it would be smart to make whatever preparations you can. For folks in the Northern Hemisphere, it’s time to start planning this spring’s food garden. You might want to plant a few more rows of beans than you do most years, so you have enough to share with neighbors.
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When Will the Contented Class Revolt Against Trump?
When will these contented ones collectively start saying, “Enough is enough” and it’s time to say to Donald Trump, “You’re Fired”?
Nov 16, 2025
The reason the famous and prolific Harvard economist, John Kenneth Galbraith, is often referred to as a political economist can be seen in the continuing relevance of his book The Culture of Contentment (1992). His thesis explains in significant part why President Donald Trump’s wrecking of America has not more significantly collapsed his support, now below 39% approval.
In the US, the contented classes hail from both parties. They are not a majority of the population by any means, given that half of all Americans are “poor” or “near poor.” They are a majority of the politically and economically influential people who support policies that maintain their comfort at the expense of the necessities of the “functional underclass” left behind in poverty. The contented classes include the super rich, of course, but also the managerial, professional, and wealthier working classes. In addition, they vote at a higher percentage than the poor.
Before Trump, this contented class, which includes members of Congress, was doing well, so much so that they stood in the way of increasing the federal minimum wage, frozen at $7.25 per hour, or increasing Social Security benefits, frozen for over 40 years. These changes could have been paid for by hiking Social Security taxes on, you guessed it, the contented classes. Despite public opinion polls favoring expanding the social safety net, the contented class wants the status quo of no paid sick leave, no paid family or maternal leave, no subsidized childcare, and no universal paid vacations. Western European countries all have a more robust social safety net than the US.
When you crank in the damage done by Trump and his Trumpsters in Washington, DC, members of the contented classes are largely unaffected. The costs of universally damaging programs cutting preparedness for climate violence, pandemics, huge expansions in the police state against immigrants, and the military-industrial complex are not felt where the contented classes live, work, and raise their families.
Trump’s tyrannies and treacheries; his open flouting of the laws (the establishment likes such flouting to be discreet); and his revolting, foul-mouthed defamations tower over Richard Nixon’s transgressions.
We can make a list of the terrible closedowns or strip-mining of federal agencies’ law enforcement and regulatory initiatives. Very few exclusively impact the contented classes. Some may actually benefit.
Other Trump moves, many of them illegal and unauthorized by Congress, delight these people. They support lower taxes on upper-income people and businesses, large or small. The Internal Revenue Service is now going further with its unauthorized dilutions of the 15% minimum tax on corporate profits. The rising stock market adds to the complacency of the contented classes.
The most cruel and vicious actions by Trump—abolishing the US Agency for International Development, medical, water, food assistance to desperate millions abroad—cuts to Meals on Wheels, Head Start, Medicaid, Supplemental Nutrition Assistance Program (SNAP) impact the masses—tens of millions of them directly and daily. They do not reach the contented class members of our population.
This is not to say that millions of these contented persons do not care what is happening to their fellow citizens. But normative caring is not viscerally feeling the pain and suffering, the anxiety, dread, and fear of losing healthcare coverage; tomorrow’s meal; the brunt of chronic indebtedness; or abandoning the disabled, the sick, and the casualties of the workplace.
Galbraith wrote that living in their contented culture leads to short-term thinking, underinvestment in public goods, and ignoring the widening inequality between the “haves” and the “have-nots.” Inequality also stems from making money from money—a source of wealth denied to people living paycheck to paycheck.
The capture of the Democratic Party by this complacent class has become so pronounced that the blue-collar working-class members have broken away from their unions and parents or grandparents’ devotion to the FDR-like New Deal politics and fallen prey to the rhetorical seduction of the corporatist GOP.
What could Trump do to alienate large portions of this contented class, which Galbraith argues has been the only force that can disrupt the status quo? When will these contented ones collectively start saying, “Enough is enough” and it’s time to say to Donald Trump, “You’re Fired”?
When the following come together—serious recession, serious inflation, with destabilizing (to their businesses) tariff-driven surging prices; a reckless foreign war quagmire; plunging stock markets; daily spreading chaos; and the media-exposed sickening stench of raw corruption flowing from the White House throughout the upper realms of the executive branch—the contented classes should join the resistance to the Trump madness.
Back in 1974, the Republican establishment decided it was time for Richard Nixon to go, despite his having won reelection in 49 of 50 states in 1972, with a 60% approval in the polls. He was not considered “useful” to the power brokers anymore.
Trump’s tyrannies and treacheries; his open flouting of the laws (the establishment likes such flouting to be discreet); and his revolting, foul-mouthed defamations tower over Richard Nixon’s transgressions.
History instructs that latent revulsions and fears by the power elites are often launched onto the public stage by some specific outrage, decadence, or bullying. Stay tuned. With Dictator Donald (he regularly intones, “This is only the beginning”), THE WORST IS YET TO COME.
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GOP Ripped for 'Holding US Economy Hostage' as Nearly Half of States Face Recession
"At a time when costs are rising and tariffs are wreaking havoc on people's pocketbooks, Republicans are doubling down on their agenda of raising healthcare costs on millions of Americans."
Oct 20, 2025
US states accounting for roughly a third of the nation's gross domestic product are currently in recession or on the verge of one as the federal government shutdown enters its fourth week, with congressional Republicans and President Donald Trump refusing to support an extension of key healthcare subsidies that are set to lapse at the end of the year.
A recent analysis by Moody's Analytics chief economist Mark Zandi estimates that 22 states are experiencing an economic downturn or are at serious risk of recession, a nascent crisis fueled by Trump's tariffs, mass deportations, and sweeping attack on the federal workforce—an assault that has intensified since the federal government shut down at the beginning of October.
States currently in or on the brink of recession include Maine, Oregon, Washington, Illinois, and Georgia. Among the states “treading water” are California and New York, according to Zandi, whose analysis was based on figures that predated the government shutdown.
Leor Tal, campaign director at the progressive advocacy coalition Unrig Our Economy, said Monday in response to the analysis that "Republicans in Congress are holding the US economy hostage, and working families are paying the price."
"At a time when costs are rising and tariffs are wreaking havoc on people's pocketbooks, Republicans are doubling down on their agenda of raising healthcare costs on millions of Americans," said Tal. "It's time for congressional Republicans to reopen the government, extend the healthcare tax credits, and start lowering costs for working families."
The shutdown, which Trump has embraced and exploited to advance his far-right agenda, began at a time when the country's economy was already on uneasy footing, with food prices continuing to rise despite the president's campaign promises, GOP Medicaid cuts causing chaos across the nation, and the labor market flashing signs of distress.
With no end to the shutdown in sight, The Associated Press noted Sunday that the "the U.S. Travel Association said the travel economy is expected to lose $1 billion a week as travelers change plans to visit national parks, historic sites, and the nation's capital, where many facilities such as Smithsonian Institution museums and the National Zoo are now closed to visitors."
If the government remains shut down in November, tens of millions of Americans could see cuts to Supplemental Nutrition Assistance Program (SNAP) benefits—which boost the economy while reducing hunger—and other aid.
Meanwhile, even as the Trump administration withholds federal labor market data amid the shutdown, economists say private and state-level figures signal escalating pain for workers that is sure to intensify the longer the closure persists.
"The fingerprints of Trump policy decisions are most clearly found in the distinct rise in federal [unemployment insurance] claims—claims filed specifically by workers laid off from federal agencies," Elise Gould and Joe Fast of the Economic Policy Institute wrote last week. "However, we are also seeing troubling trends in UI claims in regular state programs, particularly in the Washington, DC metropolitan area."
"The shutdown (and potentially the attempted politicization of key government data-collection agencies) could leave policymakers flying blind just as the economy encounters real turbulence," they cautioned.
John Diamond, director of the Center for Public Finance at Rice University's Baker Institute, warned earlier this month that the shutdown "could be a tipping point to recession."
"If it is resolved quickly, the costs will be small," Diamond argued, "but if it drags on, it could send the US economy into a tailspin."
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