The Myth That Won’t Die: ‘War Is Good For The Economy’ – OpEd

April 5, 2026 
MISES
By Carlos Boix




War is the ultimate government intervention. It is the excuse for all kinds of evils to be imposed on the governed. From confiscation through taxes and inflation to restriction of freedom of speech and the redirection and even nationalization of whole industries, nothing increases state power such as war.

As the state is predatory and produces nothing of use, it is the ultimate impoverishing situation. From an ideological point of view, it is even worse, mixing love for one’s culture and homeland with the state itself. It reduces individual’s resistance to loss of liberty and creates in their minds the myth of the protecting government.

There is also another insidious idea that a lot of people hold: That is that war has economic and other benefits, not to certain individuals or groups, but to the community at large. It is worth examining these supposed benefits to show that no, war does not benefit the community, it is just death and destruction.

Economic Stimulus

As with all government stimulus, this is just a redirection of resources. Instead of adapting to current resources, what a war stimulus does is to increase money and credit at unprecedented levels to pay for exorbitant government spending. This just means that real resources are taken from the community in the form of inflation and taxes and spent away on things the community does not want.

It is similar to getting all your savings and any credit you can get and spending it. For a while it appears that you are more affluent, until those resources are spent. Fiscal stimulus causes the same waste of savings and capital which, for a while, look to have stimulated the economy. But this is just spending. Soon there are not enough resources left and reality asserts itself. Once enough resources have been wasted, there are not enough to sustain the party, no matter how much money the government prints. If it continues to print, they create a hyperinflation period. If they stop, we get a recession.

The way the stimulus is done is also important. As it is done through banking credit, the temporal analysis of entrepreneurs is completely altered. A decrease in interest rates makes it look as if there are more resources saved. The problem is that the way entrepreneurs experience this is generally with an increase in demand. Those who do not respond—seeing it as unsustainable—will struggle to meet demand and will lose clients to other businesses and will still be hit hard in the downturn. Hence, most entrepreneurs will have to ride the wave and try to adapt when the crash comes.

This situation does not increase resources or make the community better off, it will waste resources and impede sustainable improvement. Overall, the community will be poorer afterwards. The idea that this kind of stimulus is positive is completely misguided.

Full Employment

When we visited Berlin, we were told the story of Communist Berlin, in which a person was paid to make a note every day of the clocks in Alexanderplatz. This is the problem with the obsession with unemployment. Employment by itself should not matter, but employment on what. If people are exchanging their work for money but not producing goods valued by others, that amounts to wasted resources, money, and labor.

This is the problem with public employment. Instead of a positive, it is a waste of resources. The government necessarily takes resources from the productive sphere—real resources that people demand—and redirects them to uses that people do not demand, such as filling forms, making military uniforms, or making munitions.

So yes, the government could tax or inflate enough to employ everyone in an economy, but that employment would take resources from the community, not add to them. They would just be wasting potential. This kind of use of employment just makes everyone poorer. This is what war full employment looks like.

At the beginning it gives the impression of full employment, but when the war finishes, the subsequent spike in unemployment is not because the government is not spending, but because the community has been depleted of resources.

Technological Advances

The idea that war fosters innovation and advances of technology is contrary to reality. It comes from those eager to justifywar and see positive inventions against an imaginary counterfactual in which these innovations did not happen. Very few compare wartime to peacetime innovations. Those who do have shown that, at best, the rate of innovations is altered but changes little overall, and, at worst, there is a decline in inventiveness.

But here is the catch. This innovation is misallocated. Instead of innovations to better serve the customers, innovation during wartime serves the government and is intended to improve weapons and destructive power. Weapons and destructive power do not improve the quality of life of the people.

By redirecting research mainly to military use, there is a huge opportunity cost that few take into account. If we take the null effect on overall innovation and the focus on military innovation during wartime, we can safely say that wartime produces a reduction in technological advances and improvement of production effectiveness.

Social and Political Change

A typical example of beneficial social change is the entry of women in the workforce, wrongly attributed to the wartime economy during WWII. I say wrongly attributed because if we study labor market changes in countries that did notparticipate in WWII, such as Spain, we can see the same trend of female participation in the labor market. This is just another private social trend that people attribute to government intervention. The reality is that these social changes were already happening and defenders of war attribute them to government and to war itself.

Another counterfactual is the comparison with other wars. Why did WWII change the social status of women but the Franco-Prussian war of the 1870’s did not? Or even earlier wars?

Political change is sometimes presented as a benefit of war. How this is even argued is a mystery, but the idea is that war can topple an oppressive regime and create something better. Recent events show the contrary. Syria, Iraq, and Afghanistan are all examples of wars that have either not caused a regime change or caused a chronic unstable civil war that has made the situation worse for the population.

In those countries in which regimes were, say “benign,” wars created an ideological shift towards more state power, the acceptance of more state intervention, and less individual freedom. Some people consider this a positive but, to me, all these are negative effects. Politically, war only benefits the government.

Conclusion

War has no positive effects. Mises wrote, “What distinguishes man from animals is the insight into the advantages that can be derived from cooperation under the division of labor.” And, “The market economy involves peaceful cooperation. It bursts asunder when the citizens turn into warriors and, instead of exchanging commodities and services, fight one another.”

This new war between the governments of Israel, the US, and Iran will be just like all other wars, negative in all its aspects.

About the author: 

Carlos Boix graduated 2001 as a veterinarian from the Complutense University in Madrid, Spain. He moved to England and worked as a vet for 10 years before moving back to Spain to set his own business and study for a Masters degree. He later sold the business and moved back to the UK where he currently works as a veterinarian. His interests in economics and history started a long time ago and he discovered Austrian Economics and the Mises institute after the 2008 crisis.

Source: This article was published by the Mises Institute

The Mises Institute, founded in 1982, teaches the scholarship of Austrian economics, freedom, and peace. The liberal intellectual tradition of Ludwig von Mises (1881-1973) and Murray N. Rothbard (1926-1995) guides us. Accordingly, the Mises Institute seeks a profound and radical shift in the intellectual climate: away from statism and toward a private property order. The Mises Institute encourages critical historical research, and stands against political correctness.

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The Existential Crisis of Mainstream Economics

Walden Bello

 March 30, 2026

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Shuttered machine shop, Portland, Oregon. Photo: Jeffrey St. Clair.

Had I not read Angus Deaton’s Economics in America: An Immigrant Economist Explores the Land of Inequality, I would not have learned that one of the most devastating blows to the economics profession was delivered by the film Inside Job, which won the Oscar for Best Documentary in 2011. The movie directed by Charles Ferguson tried to explain the 2008 global financial crisis in popular terms, and it succeeded, garnering $7 million in revenues against a budget of $2 million.

Not bad for a documentary, but very bad for economics, some of whose leading lights were caught on camera denying their role in framing policies that triggered the crisis, continuing to espouse the deregulation that brought on the crisis, thinking there was nothing wrong in accepting six-figure consulting fees from Wall Street and promoting policies it favored, engaging in selective amnesia, or lying through their teeth.

In one scene, Glenn Hubbard, former chair of George W. Bush’s Council of Economic Advisers, then dean of Columbia University’s School of Business, gets upset and threatens to end the interview when asked whether as a researcher or policymaker he has disclosed his multiple links to the financial industry. This display of tantrums was, however, not as bad as the response of John Campbell, head of Harvard University’s Economics Department, when asked the same question; he was simply tongue-tied.

Unlike the meteor that killed the dinosaurs, Inside Job did not destroy economics, though in Angus Deaton’s account, “the movie did great harm to the public image of economists who were seen as benefiting mightily from an economy that they were claiming to research in a neutral, scientific way.”

There is probably no one better qualified to discuss the crisis of mainstream economics than Deaton, one of the leading experts on the economics of health and inequality, a former president of American Economic Association, and a Nobel Prize winner. He is about as mainstream as one can get, though of the center-left variety, probably owing to his training at Cambridge, which apparently not only produced spies for the Soviet Union but also economic iconoclasts like John Maynard Keynes.

A Discipline Captured by Special Interests

Deaton does not beat around the bush. The profession brought the calamity on itself because a great many of its members have been bought by powerful interests to produce the research and policy proposals that would benefit them. Though Deaton would be more measured and courteous in the way he would put it, that is essentially the theme that runs through this book. There may be some who really believe that the untrammeled market is the best way to allocate resources, but for most that belief is sweetened by the financial support, in the form of grants and consultancies, of powerful special interests.

Take the case of the minimum wage. Rigorous experiments by a number of well-regarded researchers have produced results that by now should have yielded no opposition to the fact that raising the minimum wage does not create unemployment. But half the profession still believes it does, and there’s no shaking them from this belief, whose main bankroller is the fast-food industry that sees the false doctrine as useful to keep the wages of its hamburger flippers low.

Health care has probably been the key battlefield over social policy over the last two decades in the United States, and no one knows more about the health industry than Deaton, whose Nobel Prize was earned largely by his studies of the relationship among health, poverty, and inequality. The Affordable Care Act, aka Obamacare, was, overall, positive in that it brought insurance coverage to around 20 million formerly uninsured people. But it was a Pyrrhic victory since the best solution to escalating medical costs, the single-payer or public option, was not even allowed to be discussed, and insurance companies were allowed to continue to hawk deceptive policies to an unwary public.

Research and the experience of European countries demonstrate clearly that a single payer national health system would radically reduce costs and would also keep inequality down because all share the risks of ill health and “prevent unequal burdens of sickness to turn into inequalities of earnings.” So, what keeps this seemingly rational solution from being adopted? An unholy alliance among the insurance companies, the medical establishment, Big Pharma, politicians in the pocket of business, and, of course, the legions of economists employed directly by them or paid as academic consultants.

In the United States today, life expectancy is falling as suicides, drug addiction, alcoholism, and heart disease are inexorably on the rise, contrary to the trends in other First World countries. One thing is clear. The terribly expensive and massively inefficient system of politically protected private health system is not equipped to deal with the “deaths of despair” and other manifestations of the health crisis in the richest country in the world.

Meritocracy and Inequality

The crisis of the health system is but one of the trends that have made the United States no longer the land or promise but of inequality. The gaps in earnings, health, and welfare have come to be increasingly caused by unequal opportunities available to those with a college education and those without one. Like Michael Sandel, Deaton argues that meritocracy, which used to be seen as an antidote to inherited income, wealth, and privilege, has instead been turned into a major cause of rising inequality. Those who have benefited from “passing the exam” believe they deserve their privileges because they earned them while seeing those who “failed the exam” as having only themselves to blame.

This sharply rising inequality owing to meritocracy has had destabilizing political consequences, with those without college degrees, who Hilary Clinton famously called the “deplorables,” becoming the angry base for Donald Trump’s “Make America Great Again” movement.

Despite its anti-democratic consequences, there has been no lack of economists who, either out of belief in the market, antipathy to any sort of government intervention, or being bankrolled by wealthy capitalists, can be found to argue that inequality is not a problem, such as Martin Feldstein, chair of Ronald Reagan’s Council of Economic Advisers, and Harvard’s Greg Mankiw.

Likewise, there are still many big-name economists who either deny or downplay the impact of climate change, such as Bjorn Lomborg, Thomas Schelling, Robert Fogel, Douglass North, Jagdish Bhagwati, or Vernon Smith.

A Profession Divided Against Itself

In sum, economics is a profession that is split almost in half along political beliefs, but with one side propped up by the power structure, which makes its views influential but very questionable. One half of economists “are concerned with efficiency and believe in the power of markets to promote it, and are concerned that attempts to interfere with the market will compromise current or future prosperity.” The other half, to which Deaton belongs, are also concerned about efficiency and believe in the power of the market to promote it, but are also concerned about inequality “and are willing to use redistribution to correct the failures of the market, even at the expense of some loss of efficiency.”

But beyond these differences, the whole profession is to be blamed for the central problem of mainstream economics, which is that the discipline has become “unmoored from its proper basis, which is the study of human welfare.” Both conservative and liberal economists, in other words, continue to frame economics the way Lionel Robbins defined it, as the allocation of scarce resources among competing ends, which has rightfully earned the discipline the description of being the dismal science. For both schools, efficiency remains the prime consideration. Rather, the economic problematique should be, according to Deaton, the way his fellow Cambridge economist Keynes defined it: “how to combine three things: economic efficiency, social justice, and individual liberty.”

But there is one other, major problem, which, surprisingly, Deaton fails to see as a problem. Both conservative and liberal economists are fundamentally attached to the value of economic growth because “it makes it possible for everyone to be materially better off.” With economic growth having become a central cause of the climate crisis, it is hard to believe that a sensitive mind like Deaton’s would miss its relevance to the crisis of the profession that he otherwise deals with so brilliantly in this book. But I guess everyone has their blind-spot.

Needed: A Bigger Meteor

It has been some 16 years since Inside Job appeared during the depths of Great Recession, and things have gotten worse for the profession. Deaton concludes that the narrative of mainstream economics is “broken and has been broken for several decades,” and “neither conservative nor progressive economists have a solution.” Saving economics is not going to be simply a matter of theoretical or policy adjustments but a total overhaul, including learning to think like sociologists (something that I, as a sociologist heartily endorse) and “recapturing the philosophical territory that used to be central to economics.”

Deaton is right about the scale of the task needed to make economics relevant to contemporary society, but he is being optimistic or naïve since he is still in a minority of economists who can admit that their discipline is in crisis. Looking back at the last century, I think that the Global Financial Crisis was not strong enough to bring the discipline to its senses and that no less than a much bigger meteor, like  the Great Depression of the 1930s, is needed to cut economics from its servitude to capital.

Walden Bello, a columnist for Foreign Policy in Focus, is the author or co-author of 26 books, the latest of which are Global Battlefields: Memoir of a Legendary Public Intellectual from the Global South (Atlanta: Clarity Press, 2025), Paper Dragons: China and the Next Crash (United Kingdom: Bloomsbury, 2019), and Counterrevolution: The Global Rise of the Far Right (Halifax: Fernwood Press, 2019).

MAGA pins Iran on 'handy fall guy' to avoid blaming Trump: foreign policy expert

A reporter raises a hand to ask a question as U.S. Secretary of State Marco Rubio, U.S. President Donald Trump and Defense Secretary Pete Hegseth attend a cabinet meeting at the White House in Washington, D.C., U.S., July 8, 2025. REUTERS/Kevin Lamarque

Matthew Rozsa

March 23, 2026

ALTERNET

President Donald Trump is solely to blame for America declaring war on Iran, but a distinguished military historian believes many of his supporters are instead blaming a “handy fall guy” — one that has been viciously persecuted throughout history.

“When a nation starts a war for dubious reasons and then suffers the consequences, there is inevitably a search for scapegoats,” military historian Max Boot wrote for The Washington Post on Monday. “Conspiracy theories abound. It happened after World War I, when the favorite villains were ‘merchants of death’ and international bankers. It happened again after the Iraq War, which some blamed on ‘neoconservatives’ and Halliburton, the oil-services giant led by Dick Cheney before he became vice president.

All of these scapegoats — the so-called “merchants of death, “international bankers,” “neoconservatives” and so on — are code words for “Jews,” Boot observed. Now the longtime editorialist opined that this is happening again because of Israel’s alliance with America in Trump’s “foolhardy war against Iran.”

“As so often happens, the Jews — or, if you prefer a polite euphemism, ‘Zionists’ or ‘the Israel lobby’ — make a handy fall guy,” Boot wrote. “What the right-wing fringe once whispered — that this was ‘a war for Israel’ — suddenly burst onto the front pages last week thanks to Joe Kent’s resignation as director of the National Counterterrorism Center. In a blistering public letter, Kent wrote that ‘Iran posed no imminent threat to our nation’ and that ‘we started this war due to pressure from Israel and its powerful American lobby."

Jonathan Sarna, emeritus professor of American Jewish history at Brandeis University and author of “Lincoln and the Jews: A History” and “When General Grant Expelled the Jews,” told AlterNet that he shares Boot’s concerns. To provide historical context, Sarna explained that anti-Semitic conspiracy theories which claim Jews control the world can be linked to an infamous 1903 hoax, one that involved forged documents published in Imperial Russia and called “The Protocols of the Elders of Zion.”


“If you go back to ‘The Protocols of the Elders of Zion’ — the great antisemitic forgery of the turn of the last century — that really began this sense that Jews are all-powerful, that they operate behind the scenes, and that whatever happens is ultimately their fault,” Sarna told AlterNet. “Before then, for centuries, the prevailing view was that Jews were persecuted and lowly because they had killed Christ, and that was what they deserved — they were powerless. That was their punishment. But ‘The Protocols’ flipped that.”

Sarna added that “especially as Jews in modernity have begun to succeed economically, it doesn't much matter what the issue is — whether it is 9/11, which some blame on the Jews, or the crash of 2008, or now the war with Iran. You can predict before it happens that people will blame Jews, because as The Protocols taught people, it's always the Jews. It's the great conspiracy theory. And even many people who have never read The Protocols believe many of the things in it — just as many people have never read Darwin, but they know the word ‘evolution.’ This is simply the latest iteration.”

As Boot pointed out in his editorial, Kent was correct to say Iran posed no imminent threat to the United States. Yet not only is Kent a tainted source (he has white supremacist ties and spread conspiracy theories intended to minimize Trump's attempted coup and the January 6th insurrection), but he ignored that Trump is surrounded by many pro-Arab and pro-oil advisers that emphatically did not want war with Iran. Boot quoted a Foreign Affairs essay by Nate Swanson.


“Trump seems interested, in no particular order, in demonstrating the prowess of the U.S. military, strengthening his negotiating position, showing he was serious when he vowed in a January Truth Social post to protect Iranian protesters, and differentiating his approach from President Barack Obama’s,” Swanson wrote per Boot. Indeed, Trump threatened war against Denmark to conquer Greenland and actually waged an unprovoked war against Venezuela before his attacks against Iran, and neither of those campaigns had anything to do with Israel.

Boot then lamented that “Trump and his aides inadvertently helped foster conspiracy theories about Israel” when Secretary of State Marco Rubio pointed out on March 2 that Israel was going to attack Iran anyway so the U.S. thought it should go along with it.

“The administration then tried to walk this back — and rightly so,” Boot wrote. “It’s absurd to imagine that Netanyahu would have bombed Iran if Trump had told him not to and threatened to withhold military aid if he did.”


Despite the absurdity of blaming the Iran war on “the Jews,” however, Boot predicted this will happen more frequently as the Iran war turns into a quagmire.

“The more the Iran war is blamed on Israel, the more it will do to turn public opinion against the Jewish state,” Boot wrote. “A recent Gallup poll already found that more Americans sympathize more with the Palestinians than the Israelis. According to a YouGov poll, younger Republicans are turning against the Jewish state — a trend that’s doubtless been driven by Israel’s actions in Gaza and the West Bank. Now imagine what will happen if American motorists blame Israel — however unfairly — for the high cost of gasoline.”

Sarna argued that many people with latent anti-Semitic tendencies struggle to apply the same logic to Israelis and the Israeli government that they regularly apply to Americans and the American government.

“I think that for a lot of people, their knowledge of Israel is so limited that it's very difficult for them to engage with it the way we would with any democracy,” Sarna told AlterNet. “But I always remind audiences: I can be critical of President Trump without being un-American. Most people who criticize President Trump or the Republicans would assure you how much they love America and hold a fundamentally positive view of it. It seems to me that it's deeply important for us to do the same with Israel — that is, to make clear that there is a huge difference between disliking the policies of the Prime Minister of Israel and hating Israel itself. If you wouldn't equate criticism of the President with hating America, there is no reason — and indeed it is wrong and wicked — to do so with regard to Israel.”


Boot and Sarna are not the only intellectuals to raise the alarm about rising anti-Semitism. New York Times columnist Michelle Goldberg made a similar argument earlier in March.

“For those who suspect that Israel manipulated America into war, the resignation of Joe Kent, Donald Trump’s director of the National Counterterrorism Center, surely seems like confirmation,” New York Times columnist Michelle Goldberg wrote on Wednesday. She added that Kent’s claims “taps into old antisemitic tropes about occult Jewish control” and is easier to believe for many Americans as Trump bungles the Iran war.

“This conflict, whose timing and purpose Trump barely bothered to explain to the American people, was probably always going to increase anti-Jewish animosity among Americans, especially when Prime Minister Benjamin Netanyahu of Israel gloats that he’s ‘yearned’ for such a war for 40 years,” Goldberg explained. “But the more it drags on, the more I worry about a full-blown American ‘dolchstoßlegende,’ a modern version of the stab-in-the-back myth that German nationalists used to blame Jews for their humiliation in World War I.”

Ironically, despite the argument that Trump waged war against Iran for “the Jews,” Jews have been an overwhelmingly Democratic voting bloc since the late 1920s. For the past century, Jews have consistently voted between 60 and 80 percent Democratic, with the number reaching as high as 90 percent for presidents unusually beloved by Jews (Franklin Roosevelt, Lyndon Johnson) and only falling below 50 percent once (during Jimmy Carter’s losing 1980 campaign). The Democratic candidates running against Trump in 2016, 2020 and 2024 garnered between 66 and 71 percent of the Jewish vote, while Trump only garnered between 24 and 32 percent in those elections. Trump himself denounced Jewish Democratic tendencies in controversial 2019 remarks.


“I think any Jewish people that vote for a Democrat, I think it shows either a total lack of knowledge or great disloyalty,” Trump said at the time, arguing that Republicans are more pro-Israel than Democrats. The president added that “five years ago, the concept of even talking about this . . . of cutting off aid to Israel because of two people that hate Israel and hate Jewish people — I can’t believe we’re even having this conversation. Where has the Democratic Party gone? Where have they gone where they’re defending these two people over the State of Israel?”

Trump's big plan to boost Americans' 401Ks now threatens to sink savings: report

Alexander Willis
March 20, 2026 

RAW STORY

President Donald Trump’s plan to bolster Americans’ 401Ks by expanding access to private market investments is reaching its final stages, but according to Sen. Elizabeth Warren (D-MA) it may have come at the “worst possible moment” — and could end up sinking Americans’ savings, Politico reported Friday.

Trump signed an executive order last August designed to allow working-class Americans to more easily invest in markets not historically available to them through their retirement accounts, notably the private credit market, which involves loans made outside of traditional banks.

The Trump administration is now “planning to roll out” its proposal, though as Warren and others noted, the timing may prove disastrous.

“The roughly $2 trillion private credit industry — a major piece of the broader private markets where risky companies obtain loans from Wall Street firms that fall outside the highly regulated banking system — is facing a reckoning from investors,” Politico reporter Declan Harty wrote for the outlet Friday.

“A string of blow-ups has sparked new concern over the quality of loans underpinning the industry. Investors are pulling their money from credit funds so fast that they’re running into withdrawal limits. And fears of an artificial intelligence upheaval could ripple through the market, since private credit funds have been critical sources of capital for software companies, which are now endangered by AI.”

The factors plaguing the private credit market were described by Danny Moses — investor and predictor of the 2008 housing market crash — as “the perfect storm,” with Moses telling the outlet that the private credit market could very well face an upending equal to what the housing market saw in the 2008 financial crisis.

“They’ll have no choice but to bail out this entire industry if it goes off a cliff,” Moses told Politico. “It will impact retail investors, the banks, certainly private equity and private credit.”

And Amanda Fischer, who up until last year served as the U.S. Securities and Exchange Commission chief of staff, concurred with Moses in that Trump’s plan couldn’t have come at a more dire moment.

“The Trump administration is opening the door for fund managers to dump private debt and equity on retail investors and their 401Ks right at the point when the market is showing the largest signs of strain,” Fischer told Politico.

Some Economic Consequences of the Iran War

Jack Rasmus

 March 20, 2026

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Photograph by Nathaniel St. Clair

As the US-Israel war on Iran enters its third week, the outlines of the economic consequences and fallout of the war have begun to emerge. As the war continues—and by most indicators it appears it will for months longer—the War’s negative impact on the US and world economies will deepen further.

What are some of the economic dimensions for the war’s negative consequences?

First and most obvious is the current oil price shock’s effect on inflation. Not just for US prices, but other countries as well. And not just for goods and services but for asset prices (i.e. stocks, bonds, forex, derivatives, gold, silver, etc.).

Another is the long-term disruption of global supply chains and the volume of global trade.

As inflation rises, central banks, led by the US Federal Reserve, will continue to raise interest rates with a corresponding negative impact on the US and other economies, many of which are already nearly stagnant or are beginning to enter recession. Most heavily impacted will be Europe, the Gulf States, and Middle East energy-dependent countries in East Asia like Japan and South Korea.

Another negative impact will be on global money capital flows—both real investment and financial portfolio asset markets (stocks, bonds, forex, derivatives, etc.).

Then there’s the US budget deficit and national debt. The deficit will now approach $2 trillion a year, for the third straight year. That deficit will drive the national debt to exceed $39 trillion by later this spring and possibly $40 trillion by year end.

The Iran war and its costs converge with a host of other forces driving the deficit and the debt into ever greater crisis: Trump’s escalating war spending (including his plan for $400 billion more for just the Pentagon), the current sharply slowing US real economy (that grew at a mere 0.7% rate in fourth quarter 2025), the present collapse of employment and job creation now underway in the US and Trump’s massive 2025 $5 trillion tax cuts benefiting mostly investors and corporations at the expense of US Treasury tax revenues which is estimated to reduce corporate income tax revenues by $77 billion in 2026.

Not least, the war will accelerate the current fiscal crisis of the American Empire. The costs of Empire now exceed $2.2 trillion a year when all categories of ‘defense’ in the US budget are considered, not just the Pentagon and the US Department of Defense—the latter alone which now exceeds $1.1 trillion a year.

Trump’s war in Iran will exacerbate all these negative economic trends, US and global; and the longer the war continues—which by all indicators it will—the worse the negative economic consequences.

Putting some numbers and facts around the above trends, the picture now beginning to appear in terms of economic consequences of the Iran war is as follows:

Oil Price Shock

Throughout 2025 the price of global crude oil remained at around $60 a barrel. It began to rise in late January 2026 and hit $71 just before the war began Saturday, February 28. Prices initially spiked to $118 the following Monday, March 2, but then settled down below $100 the rest of the first week. On March 9 they were still $98. At the start of the second week, Trump tried to talk down the price by saying the war was “over soon”. His Energy Secretary then posted on the department’s website that US warships had begun escorting tankers through the Hormuz Strait. Oil prices quickly fell to $87. But when the facts revealed the war was not about to end in a week, and that there were no escorts, the Energy Secretary quickly took down the fake claim from the department’s website and oil prices rose again. By Thursday, March 12 they were $101. On March 15, $104. On Monday, March 16 the price of benchmark Brent crude oil hit $106. The price of crude oil will fluctuate day to day with events in the war in the short run but steadily rise over time.

At the retail gasoline level in the US, the Trump administration has continued to underreport the price of gasoline at the pump, after two weeks of war, claiming it has risen only 15 cents a gallon. In fact, the average was closer to 70 cents, according to other official estimates, and in regions like California, more than $1.50/gallon.

Strategic Petroleum Reserve Failure

Trump’s major policy response to address the crude oil supply shock has been to announce the release of 172 million barrels from the US Strategic Petroleum Reserve (SPR). After Biden’s SPR release in 2022, the reserve was never restored. Before Trump’s recent announcement, the SPR held only 412 million barrels or about 60% of its total capacity. That’s to be reduced now by another 172 million barrels. Europe, Japan and other countries have also announced inventory releases, for a global total of around 400 million barrels of extra crude supply for the global market. But neither the 172 or 400 million barrels will have much effect on global and US prices. Here’s why:

The shutdown of the Hormuz Strait results in a 20.3 million barrels a day reduction in total global oil supply, which is about 30% of all seaborne crude oil.

At 20.3 million barrels a day, 400 million additional barrels from the US SPR and global reserves provide for roughly 20 days additional supply to offset the closure of the straits. But 20 days assumes that 20 million barrels from the SPR and other inventories are released to the market immediately on day one. That cannot occur.  There’s a ‘flow rate’ limit of release from the SPR, which is no more than 2 million barrels a day.  That means it will take 200 days—not 20—for the SPR and other sources to reach global oil markets. So global supply is still reduced by 18 million barrels a day due to the Hormuz closure. The SPR release will hardly dent the supply effect of the Hormuz closure and so little to dampen rising global crude prices in the coming weeks. Nor will it affect much the price of US gasoline at the pump, which will also keep rising—as Biden discovered when he released SPR oil back in 2022.

And there are countervailing forces why gasoline at the US retail level will continue to rise.  Whenever there’s a jump in crude oil supply—due to SPR release or other causes—US oil companies simply reduce their output accordingly and/or US drilling companies take a number of their drilling rigs temporarily offline. The result is not a net increase in supply of gasoline, even if there’s an excess of crude oil supply from the SPR.

Moreover, US oil companies control the retail price of gasoline at the pump by manipulating refinery output—not by changes in crude supply. They have purposely not built a new refinery in the US in 50 years! As a result, they can turn off the supply spigot at the pump whenever they want by simply reducing refinery output regardless of crude supply changes. That typically occurs after announcing refinery shutdowns for maintenance, repairs, fires or other such excuses. So forget the politicians’ and media talk about the global price of crude. Oil companies control gasoline prices by controlling the bottleneck of oil refinery operations.

As the war drags on—likely now for weeks if not months—the global price of crude may spike much higher than the current $100 a barrel. The Goldman Sachs bank has forecast the price can potentially rise to $200 a barrel, or more. Not coincidentally, the Iranian government has indicated its target is to push the price to $200.

Global Supply Chain Disruption

The closing of the straits is not only disrupting global crude oil supply but other commodities supply as well.  20% of the world’s natural gas supply also ships through the Hormuz Strait. A significant supply of fertilizer, petrochemicals, plastic packaging, and some metals also passes through the strait. Their supply will be disrupted as well, with various price impacts. The supply of fertilizer may especially have an impact on crop production and food prices in emerging markets in Asia and Africa.

There’s also the matter of the disruption of the supply of shipping containers. A significant supply of containers are locked up now in the Persian Gulf. That will have repercussions on the availability of shipping containers worldwide, creating shortages in places and raising container prices.

US Dollar and Gold

The Iran war and rising oil prices will have a significant impact on the value of the US dollar and, in turn, on the price of Gold. The war and its effects came on the wake of the bubble in Gold prices in 2025, which rose from $1900 an ounce to more than $5000 throughout the year. Conversely, 2025 witnessed a 10% devaluation (price decline) of the US dollar. Both assets, the dollar and gold, have surged as the War erupted, as investors seek safety havens. The gold price surge will now continue. The US dollar recovery will not.

The dollar will resume its decline eventually as demand for dollars to buy oil declines, as 20% of the global supply of oil is taken offline. Investors will shift asset investing more to Gold, continuing to drive up its price. In turn, rising gold price will further depress the value of the US dollar. Thus, in the longer term, the dollar will devalue further by year’s end while gold will rise further.

To try to accelerate the dollar’s decline, Iran has announced policies to hasten the decline in its Demand and thus the value of the dollar. It has announced it will allow tankers to pass through the strait of Hormuz so long as they carry oil that is bought and sold with the Chinese Yuan.

US Inflation

Economists’ estimates are that the US consumer price level will rise by 1.3% points should the price of crude oil remain around $100/ barrel. The US CPI has hovered in the 2.5%-2.9% range. That means the CPI rises to more than 4.0%. But that’s not the full impact of inflation on the consumer. The CPI (or its cousin US price index the PCE) does not include interest rates, which have already begun to spike, impacting auto loans, mortgages, and credit cards. Nor does it fully reflect prices in other categories of purchases that impact consumer budgets. The 1.3% estimate is for the direct cost on energy expenditures, primarily regular gasoline (note that most US car owners buy premium, but the media likes to quote regular). The CPI won’t fully reflect the coming rise in utilities (gas and electric), transport (airlines, trucking, railroad), and food prices as fertilizer and plastic packaging costs rise with global crude prices. Nor does the estimated 1.3% account for consumers’ inflationary expectations almost certainly to rise as well in the coming months.

Financial Asset Price Volatility

Effects on the US dollar and gold have already been noted. But what about other financial assets like stocks, bonds, derivatives, forex, etc.?  The disruption of trade, energy, and money capital flows will likely mean a shift by investors out of certain stocks and bonds and a rise in the cost of derivatives insurance.

More instability in US stock and bond markets is already appearing, and it comes on the wake of a significant correction in February in US financial markets. The S&P 500 and Nasdaq markets have contracted 5-7% since February. The economic uncertainty unleashed by the War will dampen financial asset investment further.

And what about that sector that had driven almost all of the stock price appreciation in 2025—i.e. the tech and AI boom? What will be the impact of $100 or more oil prices on energy costs on the huge investments now underway in Artificial Intelligence,  most of which is targeted for the energy-hungry AI data centers being built out at present? The AI bubble was already showing signs of contraction before the war. Will sustained surging energy prices lead to further AI stock-related instability?

While some asset prices will accelerate further due to the War, others may deflate due to the same. That includes certain stocks and bonds as interest rates rise, emerging market currencies, and, of course, the dollar.

Interest Rates

Another direct consequence of the War is the rise of interest rates in the US. Already 10 and 30-year Treasury bonds have begun to rise since the start of the war two weeks ago.  They will rise further.

The US Federal Reserve will now be even more reluctant to reduce US short-term rates at its next and subsequent meetings, out of concern for rising inflation on the horizon. The Fed cut rates three times last year. Trump opened a war on the Fed to force it to reduce rates further and faster. He needs big cuts in order to have an effect on a US real economy that is weakening fast. He needs lower rates at least six months before the US November 2026 elections. He’s running out of time. Trump just lost a major court case in which he tried to legally force Fed chair, Powell out of office. Given the inflationary pressures generated by the War, the Fed is now less likely to bow to Trump’s pressure and reduce rates. And the longer the war, the less likely the Fed will reduce rates.

US Real Economy

The US real economy enters the War on particularly shaky ground. As previously noted, real US GDP for the fourth quarter of 2025 was a mere 0.7% and for all of 2025 barely 2%.  US job growth for all of 2025 was only 181,000 when 1.2m are needed just to absorb new entrants to the labor force. February’s latest job numbers showed, moreover, a contraction of 92,000 jobs. The US employment sector is already in recession.

Consumer spending has recently also slowed down. That’s 2/3s of US GDP. And the Net exports category of GDP will again worsen due to global trade disruptions. That leaves business investment even more dependent on the AI bubble, as the US government continues to cut social program spending to make way for more war spending.

In short, the war may well push the US economy into a condition of Stagflation—i.e., rising prices amidst declining jobs and slowing GDP.

One should not forget the role that oil price spikes can play in economic recessions. Economists generally overlook the role spiking oil prices played in the 2008-09 Great Recession.  It was in the spring-summer of 2008 that global crude oil prices shot up to $147 a barrel—a record level which helped precipitate the great recession that year. The financial crash of 2008 played a major role in causing the recession, but the oil price explosion that occurred in parallel with the financial crash contributed as well. One should therefore not overlook the potential of price shocks in precipitating recessions, whether 2026 or 2008.

Europe, Russia, Asia and Emerging Economies

European economies are in an even worse condition than the US. Already battered by energy costs of US LNG gas and oil six times higher than former Russian natural gas, Europe’s economies have been hovering around stagnation or mild recession, according to official statistics.  European political elites have exacerbated the conditions by continuing to divert critical money capital for investment in their own economies to Ukraine instead. Now, the Iranian war effects will exacerbate energy cost inflation and slow growth in Europe even further.

Europe gets much of its oil and most of its natural gas from the Gulf states. With that blocked, it will have to buy more from the US—at likely even higher prices. The rising cost of energy may well push the major economies of Europe—Germany, France, UK—over the recession cliff.

The Gulf states economies are in even worse state than Europe’s. Their main money engine of oil and gas is virtually shut down or damaged. It will take months, perhaps years, to restart production and repair damages. Their economies are clearly already contracting sharply.

Asian countries like South Korea and Japan are heavily dependent on Middle East oil and gas. Japan had created a significant stored reserve. But South Korea had not. That country will almost certainly have to start rationing energy use soon.

Then there are those emerging economies that are heavily dependent on the dollar, having ‘dollarized’ their economies. As interest rates rise, the price of the bonds they have issued or hold will decline sharply. Their currencies will decline and their reserves for purchasing critical imports will dry up. Some will have to borrow more again from the IMF. Others cut social spending. They will import less food due to rising prices and their falling currencies. Serious food shortages may occur in these dollarized emerging market economies.

In contrast, Russia is a big winner economically from the Iran war. The surge in the price of crude from $60 to more than $100 a barrel is estimated to result in $150 million a day in additional revenue for Russia.

China benefits as well. While China imports a significant amount of its total oil imports from Iran, it has thus far not been significantly impacted. Iran has reported it continues to export a significant volume of its oil to China. China has developed alternative global sources for its oil imports and has amassed a reserve of oil that reportedly can last five months. In addition, it can always import more from Russia.  Its net assets will rise appreciably with the rising price of gold, which it has been acquiring and storing for years.

Finally, as the war in Iran drags on, there will be a further drift from the use of the dollar to purchase oil and toward alternative currency arrangements now being prepared by the BRICS. The war and its economic dislocations will benefit the BRICS at the expense of the US dollar.

Exodus from the Gulf States

Reports abound of the growing exodus of investors and wealthy local populations from the Gulf states as the war intensifies and Iran continues to bomb their infrastructure and US military bases, from the UAE in the south of the Gulf to Kuwait in the north. As the wealthier population leaves, they take their wealth with them. That means investment projects throughout the region are on hold or even being cancelled. In addition, Western money capital is not entering the region now, and Gulf investors are moving their capital from the region and investing it mostly in Gold and other metals elsewhere. The entire economies of the region are being severely disrupted, in other words, not just the flow of crude oil and natural gas.

US Costs of Empire

A generally overlooked consequence of the Iran war is the effect it will have on an already out-of-control US defense spending and related costs required to maintain the US empire today in general.

The US mainstream media and politicians like the public to think that Pentagon spending represents the total costs of defense in the US budget. That Pentagon spending will now exceed $1 trillion in 2026. But that’s not all the US defense department spends. Its total expenditure is now more than $1.1 trillion. And that doesn’t include other obvious ‘defense’ or ‘war’ expenditures like funding the CIA and intelligence agencies, costs of past wars in veterans benefits, development of nuclear weapons in the Energy Department budget, military aid and assistance to allies, Homeland Security escalating costs, costs for secret new weapons development not indicated in the US budget, and interest payments on the national debt due to defense/war spending’s share of deficits and national debt interest payments.

Nor does the $1.1 trillion authorization for the Pentagon and Defense Dept. include Trump’s 2026 current spending on what’s called ‘Overseas Contingency Operations’ for direct war actions in Venezuela and now Iran. It is estimated that the US has been spending $2 billion a day on the war in Iran. And that probably doesn’t include weapons replacement costs. Deploying three aircraft carrier task forces is not cheap. Committing one-third of US aircraft to the region isn’t either. Nor repairing eventually the damage to the US dozen plus bases in the Gulf and aid for the Gulf states to replace their destroyed air defense systems, the radars of which alone cost $1 billion each.

In short, the tab for the Iran war after 20 days is at least $50 billion in OCO. And if Trump sends in the Marines and tries to have the US Navy escort ships through the Hormuz straits, that tab will rise by tens of billions $US more.

In addition to all that, Trump is calling for an increase of another $400 billion for the Pentagon in the next budget as he obviously plans for more wars.

Conclusions

The longer the war, the greater the costs to the US across multiple dimensions. Moreover, the longer the war, the more likely Iran will ‘win’.

Iran is approaching the war strategically, while the US is doing so tactically. Trump thinks bombing Iran’s infrastructure will force Iranian capitulation. Iran believes if it can keep the Hormuz Strait shut long enough, it can create enough damage to the US and Western economies that Trump will have to ‘declare victory’ regardless of the facts and discontinue the conflict.

Trump started the war in the expectation he could repeat the outcome of Venezuela. His US deep state neocons, US oligarch Zionist campaign contributors, and his friend Netanyahu no doubt convinced him that it was possible—even as senior US military advisors forewarned him it wasn’t.

So now he has a wildcat in a bag and he can’t decide whether to let the cat out or drop the bag and run.

Meanwhile, the US and world economies steadily deteriorate and the November 2026 US elections grow closer and with it, a potential political disaster for his war plans—unless, of course, his plan to somehow overturn or negate the elections proves successful.

Jack Rasmus is author of  ’The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump, Clarity Press, January 2020. He blogs at jackrasmus.com and hosts the weekly radio show, Alternative Visions on the Progressive Radio Network on Fridays at 2pm est. His twitter handle is @drjackrasmus.