Iran, the Strait of Hormuz, De-dollarization, and the Global Economic Crisis
Date: 24 June 2026 (Wednesday)
South South Dialogue on Sustainability
Host: Professor Lau Kin Chi (Lingnan University and Global University for Sustainability, Hong Kong, China)
Guest Speaker: Michael Hudson
Transcript
Opening and Framing
Lau Kin Chi: Both the U.S. and Iran said they have won the war, and so what do you think about these two proclamations ? Who do you think won the war?
1. Who Won the War?
Michael Hudson: Obviously there are two different wars. What is Donald Trump fighting ? Donald Trump's war is to make money for himself, and he makes money by essentially manipulating the stock market prices. In the morning he'll say there's going to be peace, we've all reached an agreement. And once he makes that, his people will buy stocks forward and they'll buy options to buy stocks. The stock market will soar. He'll make a killing, then he'll sell it. Then the next day he'll say, well, I'm sorry, the negotiations have fallen apart. We're going to bomb Iran. But before he says that, he will have sold the stock market short. And that means he's bet that prices will go down. He makes a killing on that.
And the stock market trackers have found out that just before maybe 15 minutes, half an hour, before Trump makes a statement saying there's going to be peace, there's going to be war, there's all of a sudden a huge wave of bets on whether stock-market prices will go up or down. And Trump and his family and the coterie of people around him all make money in the stock market. They realize that the war that I think you're talking about, the war of will America conquer Iran or not ? Or will Iran emerge with its own sovereignty ? Well, obviously, Iran has achieved everything it wanted. The United States, in military terms, has not achieved anything it wanted. In fact, the whole world now sees that the American military is a paper tiger, to use Mao's phrase, that the missile defenses don't work. The bombs succeed in penetrating Iran's defenses.
The airplanes are unable to fly over Iranian territory without being shot down. Just last night, a few hours ago, an American plane flew over Iran, saying, let's see what's happened. And Iran, the pilot had to bail out when he said, oh my god, what's happened ? There are a whole mass of drones flying in a formation that looked like jellyfish, and they're all coming at me. I've got to bail out. They're shooting me down." And he bailed out of the airplane. So, the American munitions don't work. Secondly, the whole premise of the American war in West Asia, in the Persian Gulf, has been, and all over the world, is we're going to put our military bases all over the world to protect you from communism.
Or what's the same thing, we're going to protect you from the threat to us that your country may seek sovereignty to do what it wants in its own self-interest, and that's a threat to our national security, which can only be achieved by causing insecurity from you. But at any rate, we're here to protect your government from Iranian terrorism, Russian terrorism, Chinese terrorism. Anything that does not follow American foreign policy is terrorist. So, in Israel, we can bomb you and commit genocide. But if the Palestinians fight back, they're a terrorist. And if Hezbollah fights back, or if any Palestinian or Arab group or Islamic group that is supported by Iran fights back, Iran is a terrorist group, not ours. We are always on the defensive.
And what we're defending ourselves against in Israel and what Europe is defending itself against is that when Europe attacks Russia and Ukraine by sending missiles to try to bomb St. Petersburg and Moscow, and begins to attack civilians in Donetsk and Luhansk, and Russia mounts a special military operation in February 2022 to protect the population, that's called an attack on Europe. It is an attack on Europe's attempt to attack and defeat Russia and refight World War II. So, when the Palestinian population fights back and shoots the Israeli troops that are trying to bomb it and shoot it, that fighting back is called terrorism. And all of this is being fought out as the United States realizes that not only has it lost the military war, but it's also, there's a threat of what happens when somebody loses a war. Well, normally they have to pay reparations.
And so, the United States and Israel are, and now the United Arab Emirates are making a preemptive move to try to prevent any kind of United Nations or court award of reparations to Iran and to Palestine, the Palestinians, for the attack on them. And so yesterday, the Emirates said, we are going to insist on reparations for the fact that when American aircraft took off from airfields in our territory, Iran bombed these airfields and bombed us. We need reparations for this. Donald Trump, two days ago and again yesterday, said we need to take control of all of Iran's revenues and half the revenues of all of the oil exports, once we conquer Iran, are going to be paid to the United States to reimburse us for the costs of having to attack Iran.
And the other half is going to go to our allies, whom Iran has also attacked by defending itself. And our main ally, of course, is Israel. So, Iran is not really to get any of the oil export proceeds. In other words, what Trump has said, his plan for victory, and I believe he's lost the war, and I don't think there's a chance of it, but Trump has said, here is what victory would be if we are to win. We will conquer Iran, take control of all of its oil revenues. Because all these revenues, just as in the case of Iraq and Venezuela, will be paid into a U.S. Dollar account. And this dollar account will be spent on behalf of Iran to pay the reparations to the United States for the cost we have to incur in defeating it.
Iran made us pay these costs by defending itself. That's what makes Iran a terrorist. Defending yourself means a terrorist in American vocabulary. And the other half of the oil revenues will go to our loyal ally, Israel, that you attack to defend yourself against the Israeli airplanes and bombs that were coming to bomb you. So if you look at who won in terms of how Donald Trump has defined the war, America has lost totally, but it's not only lost in Iran, it's all over the world. These military bases, somewhere between 750 and 800 military bases, were supposed to be protecting other countries, and America's made other countries pay to host these military bases. Well, the pretense was that these bases were protecting their governments from whomever, revolution or whoever the United States didn't like, especially their own leaders.
So that if they have a, if suppose some countries were to elect somebody like Mohamed Mosaddeh was way back in 1953, America would protect them against that. Obviously, this has led other countries to think, not only do we not get anything except a threat by these military bases, but now, since American aircraft and armed forces and military are taking off from these bases to attack other countries, other countries are attacking these bases and are attacking us. So, all of a sudden, what the Americans pretended to be providing national military security for other countries has been insecure. That's why it bombed the Emirates, because the Emirates and Saudi Arabia also had military bases there. This is the same problem that Russia is confronting in Latvia and Estonia.
Missiles are being fired or on the way over Latvian airspace and Russia is now deciding what are we going to do. Well at a certain point if under international law a missile comes over another country's airspace to attack your country that country is guilty of attacking you and the country under attack by these missiles has the right, under international law, to counterattack. Well, the United States tries to confuse it again, and confuses a counterattack as if it suddenly begins the whole attack. That's the whole pretense that America's making in court. Well, it's obvious that when it comes to actually trying to decide who attacked whom, who was reparations for whom, the Americans and the European allies, Japan, etc., are all going to tie things up year after year after year.
It's the tactic called lawfare in the United States. Delay, delay, delay. Charles Dickens wrote a great book about a court case that went years and years and years until everybody sort of went broke paying the lawyers for all of this. Well, Iran realizes this and that says, okay, we understand, we know what the American legal strategy is going to be, so instead of going through court to get reparations, we're going to charge fees, transit fees, for ships that go through the Strait of Hormuz. And we're going to get repayments that way. So essentially what Iran says is, well, we're not going to be able to get reparations from the United States because it didn't pay reparations to Vietnam after bombing it.
It didn't pay reparations to Afghanistan or to Libya after destroying it. It didn't pay reparations, has not paid reparations to Iraq, whose oil America is still stealing and is selling for dollars, controlled by the United States. It doesn't pay any. America has not won a single war since World War II. Vietnam, Iraq, Afghanistan, Libya, Syria, hasn't won a single one. It just walked away. It didn't say we've been defeated, it just walked away leaving anarchy in its place and a devastated government that has let itself be the battlefield for America's War against the rest of the world to try to maintain the control of the world that it can only achieve militarily now because it can no longer achieve the economic and financial domination that it enjoyed after World War II in 1945.
Well, the result is that by no measure has the United States won. America refuses to say that it's been defeated, so it seems to be a standoff. And so what Iran is saying is, well, we cannot collect from the United States or Israel or the Emirates that have attacked us, because even if the United Nations votes and says we're the attacked power and we have defeated the United States, the war is over, but now comes time for reparations, we know we can't get any from the United States. So, what we're going to do, the whole rest of the world, the oil importing countries, are going to pay. Why is that fair ? Because you're innocent bystanders. Well, not so innocent. We're not paying and we're charging you because what you did not do was to stop the United States and to stop Israel from attacking us.
And we are going to continue to collect the revenues from the oil exports of any oil that goes through the Strait of Hormuz and the Persian Gulf generally. All the oil is going to go to enable us to rebuild our economy from the attacks by America, Israel, and the Emirates that the rest of the world did nothing to avoid. You didn't impose sanctions on the United States and Israel and the Emirates for attacking us. You didn't stop selling oil to Israel as Turkey has sold Azerbaijani oil to Israel. You didn't stop your economic purchases from Israel or your investment in Israel.
So, as long as you are part of this trade and economic coalition and is part of the group that has attacked us, well, it's going to, you're going to have to pay higher prices for oil because you've created this situation by not creating a world order and giving the United Nations some means of military enforcement, peace, when a country is under attack. If there is no mechanism in the world to prevent us from being under attack after we hold off the attack, after the attackers say, the United States say, well, we're going to do in Iran just what we did in Afghanistan. And Iraq, we're going to walk away and leave all the injuries there. We're not going to do anything.
Well, this is against rules of the world order. It's up to you, the rest of the world, to put in place some mechanism to enforce some kind of international law and not just say, well, gee, we don't like what the United States in Israel did, genocide is wrong, killing civilians is wrong, bombing schools and shooting children especially is wrong, but what are we going to do about it ? Well, it's the job of other countries in the world to think of what they can come up with to do. This may require creating a United Nations that will be free of the American and NATO and American satellite vetoes, and this new United Nations, with the same principles that the United Nations Charter had in 1945, will now have an authorization for its own military power and the economic power to nations that attack other nations in violation of international law to impose sanctions on them.
And in this case, what the world needs is the ability of the global majority to impose trade and financial sanctions on the United States, Emirates, and Western Europe for its attacks on Russia, other countries that try to disturb the world peace. Does that answer your question?
Ashley Dayman: Yes.
Michael Hudson: I'm trying to expand the question, what is the war we're talking about ? The war we're talking about is a world war. It's the United States versus the whole rest of the world saying, we're going to control you. Is the United States going to control the world ? The war is still on. The war is going to go on. So, you can't say who won the war. The battle was won by Iran. But the war is going on.
2. The Strait of Hormuz and the Global Economic Shock
Ashley Dayman: Well, part of the war has been the closure of the Strait of Hormuz for a long period of time. What do you see the economic effects of the war are going to be globally, both for America, Western nations, also for global south or global majority countries?
Michael Hudson: Well, as I've been saying on the interviews that I've been doing on Nima's Dialogue Works show, on other sites that are reprinted on my website, michael-hudson.com, the effect of the war already has been causing a depression this year. However, this depression is going to be the most serious world depression since the 1930s, and in contrast to the 1930s being caused by financial factors, by the international debts owed by the reparations debt owed by Germany to the Allies, to pay the inter-Allied debts owed to the United States for arms that the United States sold before, in contrast to merely a financial depression, this depression is caused by technical, real production factors. The oil will not be able to be resumed in any major quantity for the rest of the entire year at least.
And what is that going to mean is that world oil prices are going to go up so high that industries throughout the world cannot afford to conduct business and make a profit. Plastics companies, chemical companies cannot obtain the naphtha, an oil derivative to make plastics. The agriculture cannot obtain the fertilizer that's made from liquefied natural gas and other gas exports and urea to fertilize the soil, and the planting seasons already finished in the United States already, but there's no fertilizer available. One of the greatest shortages is the combination of diesel fuel and aircraft fuel. So, there are not enough aviation distillates like kerosene type of oil. There's not enough aircraft fuel to enable airlines to fly and make a profit on marginal routes, like small cities.
So, there's been a huge cutback in air travel and the number of airlines and airplanes that are flying, and the prices are going way up. But especially troublesome is the diesel fuel problem. Diesel is used for trucks, basically, and shipping. And same thing for oil, for ships as well, for transportation uses diesel, and the diesel fuel is in particularly short supply. And to make things worse, diesel is also used in the generators that the information technology companies, the IT companies, are using as the backup generators for all of the computer chip systems that they're putting in place to do this artificial-intelligence system they put together. And the contracts they have with the suppliers call for them to have priority over the trucks, basically, and the other users of fuel.
So, you're having not only a price rise of diesel fuel and aircraft fuel and oil and sulfur that's used in mining, made from oil, but you're having an outright unavailability of these products. And that means a break in the production chain. If production requires many different inputs and you have just one input that's missing, then the whole production line must be shut down. That's the condition that not only the U.S. Economy is in, but the European economy especially, and many of the Asian economies, And, of course, the squeeze felt worst of all in the global South countries, in Africa and South America. Imagine when they cannot get diesel fuel because the wealthy industrial nations have a preference and they're going to hoard and monopolize the diesel fuel, the airplane fuel, the chemicals, the fertilizer, all for themselves, and there will be a huge squeeze on the global South countries.
And that squeeze is going to require huge shutdowns. There's going to be a decline in their food production. What are they going to do ? Food prices are going to go up throughout the world because people have to eat. And that's one of the most important things. Well, what are they going to do ? And obviously, countries are going to have to choose what we are going to use our foreign reserves for ? We don't have many foreign reserves because we've been forced by the United States to follow the International Monetary Fund planning that has really kept us constantly broke, constantly dependent on the United States and Western Europe, so the reserves, we're going to have to decide, do we use them for oil?
Do we buy electricity to light our homes and heat our homes with gas and power our factories so that we can produce and drive our trucks and our cars with gasoline. That's one of the things that we have to use our foreign exchange for. But now we're going to have to import food and medicine for the disease. Well, okay, that also is an urgent thing. What really shouldn't be so urgent for us is paying all of the foreign debts that are falling due this year. All of these debts are dollar debts. We can't just do what America does. We can't simply just, these debts are not in our own currency, and we can't just print the pesos or escudos or whatever lira, whatever currency there is, and throw them onto the world market.
We have to somehow sell our currency for dollars. There's going to be a very sharp depreciation in the exchange rate. This has already hurt East Asia especially. Japan, Korea, other Asian countries are all seeing their currencies go down against the dollar. And that means that as oil prices and prices for everything that's denominated in dollars go up, the price rise in their own currency that go down is rising even more. This is exactly the situation that Germany was in in the 1920s, when the only way that it could pay reparations was just to keep printing Deutsche Marks, throwing them onto the foreign exchange market until you had a hyperinflation as the exchange rates failed. You're going to see in Asia a repeat of the Asian crisis of 1998, when there was another squeeze, only a fraction of the seriousness that we have today.
What is Asia going to do to save itself from the price decline in its currencies that's going to enable vulture investors from the United States and Europe from coming in and saying, well, we're going to do now what we did almost 30 years ago. We're going to buy up your industry, and your land, and your real estate, and your infrastructure, and your hotels, and sites that we want at much lower prices for the dollars, and there's going to be a transfer of property from you debtor countries to us, from you countries with declining exchange rates because you have to import your oil and can't get it, and you have to import your food. Well, you'll have to pay by selling out your own and losing your national sovereignty to us as a result.
Well, what are the Asian countries going to do to protect themselves against this ? This is the dynamic that is in place, and if you look at the 1920s and all of the debates over what are the limits on how much money a country can pay other countries and not have a decline in their currency that is going to cause economic crisis and political crisis and anarchy. That's going to be the question to study. Unfortunately, this This history of the 1920s, the financial history, is not taught in universities, and Asia countries in particular have sent their students to the United States to study economics where their education did not include any study of this history. I've described it both in my book, Super Imperialism, and my book on Trade, Development, and Foreign Debt, which is my history of discussions about international financial theory, both of these are translated and published in Chinese and are used at textbooks throughout China.
So at least the Chinese are able to read them. Super Imperialism is translated into Japanese long ago, and my other books are available in English. So it's not hard to understand the perspective that I'm describing, but it's just not repeated in the mainstream media, many of which are controlled by Americans or foreign investors and are trying to depict the international problem as if everything is going to go back to normal. It can't go back to normal. It's going to be, what is normal in a state of crisis ? We're entering a normal crisis, It's not normal economics as usual. There are very clear things that happen in a crisis, and it's a collapse. And there have been many examples of this collapse.
Again, the 1920s is the big example to look at that led to the whole discussion and the debates between John Maynard Keynes and Harold Moulton in the United States saying Germany cannot afford to pay the reparations, and the monetarists, the hardliners, the sort of Chicago school theorists that say any country can pay for anything. It just has to lower the wages by enough. It has to shrink the money supply enough and cause a deep enough depression. And if you have depression, that'll help you repay. Well, that's just nonsense, but that's what passes on economics. That's the kind of thing that the Nobel Prize has been given for exactly that. According to that view, the way to get rich is to impoverish your labor force and get rid of government and sell off the government infrastructure to foreigners.
That's what mainstream economics is all about, and it's what has turned academic economics That is what mainstream economics is all about, and it is what has turned academic economics into a junk science.
3. Oil Prices, Currency Depreciation, and the Illusion of Normalization
Lau Kin Chi: Yes, Michael, I think this is very important. On the surface, Brent oil prices have returned to the pre-war level of about $75, after rising to around $138 in March. This creates the impression that things are returning to normal. But, as you have explained, transport and supply conditions have not returned to pre-war levels. There is also the depreciation of Asian currencies: the Korean won has fallen by more than 2 percent and the Japanese yen by almost 2 percent, while China's exchange rate has remained broadly stable. Even if the international dollar price of oil appears to fall, countries with depreciating currencies must still pay more for oil. Beyond this exchange-rate effect, is there also manipulation or maneuvering in oil markets designed to create a sense of normalization?
Michael Hudson: All the economists that I talk to are just amazed at how blind the markets are. The impression is that markets look forward and anybody who's looking forward can tell that in three weeks to one month. In one month, oil prices for all different kinds of oil that I've mentioned, from oil to diesel to urea, everything made from oil, is going to go way up, doubling, probably at least. Everybody knows that. The question is, why are the oil prices not going up already ? And that's because the way in which commodity markets are organized is their very short term. They're looking at what's going to happen tomorrow, and what's going to happen the next day. That's why Trump and his associates, his insiders, have been able to make such a killing in the market by knowing what they're going to do. What is Trump going to say?
Is he going to say we're going to bomb Iran ? Markets go down, oil prices go up, or there's going to be peace, everything's going back to normal. Markets go back up, prices go down. And all of the timeframe of financial investors is one day, two days, maybe one week. It's not looking forward to four weeks ahead. So if you're looking four weeks ahead, not only is there going to be a huge price rise, there's going to be a huge stock market plunge, and there are going to be a lot of financial defaults and bankruptcies of major firms because if they can't obtain the oil to produce at a price that enables them to make a profit, they'll stop producing. There's going to be unemployment from the United States to Western Europe to much of Asia.
China is immune because China takes a long-term view and China says, okay, we don't have a speculative market here. Our economy is not based on how to make money quickly by betting which way our price is going to go in the next 24 hours or the next week. We're looking at where they're going to go in a year or 10 years. And it's obvious that where they're going to go in a year is towards a disaster. And so, China had already protected itself by accumulating large oil reserves and stopping the exportation of oil and urea and all sorts of other raw materials that are going to be up in price and are going to be in world shortage. So, it's looked ahead, but the Western countries don't have that mentality.
Western countries live in the short run, and that ends up making them the losers. So, there are the economic losers, and because this war that we've been talking about earlier in the show, the war that's taking place is more than a war being fought in the military sphere. Right now, the war is being waged in the economic and financial sphere, and that's going to be who determines who's going to, what parts of the world, what countries and what economies and what economic system is going to win out. Well, it's obvious to me what kind of economic system will win out, and that's not the financial system that the United States and Europe and the neoliberal West have, it's going to be the industrial socialist position.
It's going to be the idea that governments should themselves make money and finance public utility, and you should create credit and money to finance tangible investment to raise productivity and living standards. That's what makes China so different from the West and that's why the United States looks at China as the number one enemy. It's not really simply racist that the Americans don't like the Chinese. Obviously there is a lot of racism here but what is making the Americans so racist in their anti-Chinese behavior is that China's economic system is so much more successful than the America's neoliberal system put in place in the 1980s by Margaret Thatcher, Ronald Reagan, and all the neoliberals, that it's going to win out.
And if other countries say, we want our economy to be structured in the same way that China is, we want to protect our industry and our agriculture and to subsidize our industrial self-reliance and self-sufficiency so that we won't have to be forced into an import crisis because we neglected to grow our own food supply, we neglected to have our own key industries to become independent. We neglected to keep natural monopolies as public utilities. That was the whole strategy that made the United States rich in the 19th century, that made Germany rich in the 19th century, Britain wealthy in the late 18th to the 19th century. Century, all the European countries were protectionist and had mixed economies with an active government sector alongside the private sector.
The government's been dismantled in the West since the 1980s, whereas what China has done is reinvent the wheel. It's following the very same policies today that the United States followed in the 19th that European industrial countries followed. Other countries are still following the Thatcher, Reagan neoliberal strategy that began in the 1980s and has ended up making the whole economy look like Germany's economy today. Just look at the German economy. That's the result of the Cold War, its neoliberalism. Look at the English economy. They keep changing prime ministers It's as if somehow you can change the prime minister instead of changing the economy. The whole economy is still very neoliberal, and Britain has essentially dismantled the whole public health, public housing, the whole idea of managing banking and credit to promote its industry and to keep housing prices low.
So, all of this was dismantled by Margaret Thatcher and Tony Blair. The Labour Party was even more right-wing than the Conservative Party in imposing neoliberalism. They took the public transport system, and they privatized it for the bus system, for railways. The buses stopped going on routes that didn't pay. The health system really stopped all sorts of medical treatments that they thought were more expensive than the human beings deserved to receive, the cost of keeping them alive. All of this was a disaster for their countries.
And yet there was no alternative because the neoliberals, essentially backed by the financial sector controlled the wealth in the country, and it's the wealthiest classes in every country that tend to control the government, unless you have a socialist government to prevent a financial oligarchy from developing and carving up the government, privatizing everything, and turn railroads and bus lines and housing and transport systems and communication systems to serve the economy as a whole, as opposed to just becoming monopolies.
4. Is a Stock-Market Crash Coming?
Lau Kin Chi: So, Michael, do you anticipate a stock market crash?
Michael Hudson: It's more like, right now, it'll probably be a slow crash. There's a reluctance of stock market investors to realize that the entire run-up of Western economies for 80 years, from 1945 to 2025, all of that has come to an end. And they think that somehow this trend can be projected into the future. But it's all at an end. There's a hesitancy to realize that the problem is structural. And many of the stocks are held by pension funds, because in the United States, instead of paying pensions out of the public budget on a pay-as-you-go basis, many pensions have been shifted into prefunded arrangements. The labor force in America pre-saved to pay for its social security by investing in the stock market.
And this was all created, it was called pension fund socialism or pension fund capitalism, where you impose very heavy taxes on labor, 15% of the paychecks. You take the money and you invest it in the stock market and create a stock market boom for the stock market holders and the 10% of the American stock population owns almost 90% of all the stocks. So essentially use pension funds to push up stock prices and capital gains and financial fortunes for the 10% and especially for the 1% where most of the wealth is concentrated. So, the whole idea of pensions, of the linkage between the stock market and pension funds and mutual funds. Families have been told, well, you'd better save for your retirement, buy stocks.
Well, these families are going to, they're going to say, well, what do we do ? Do we buy stocks and bonds ? They're going to just keep holding on. It'll be the insiders who know very well that they set up the stock and the bond market as a way to, and the real estate market, as a way to make capital gains, price gains for themselves, asset price gains, rising real estate prices, rising bond prices, rising stock prices, they realize the game's over. They will sell out. And already the large investors that I know have already sold out of the stock market. They put their money in government bonds because at least they want to keep the principal safe. They're not trying to make a profit anymore.
They're not trying to make a capital gain in the stock and bond market. They're just trying to save themselves from the loss that is going to occur as the stock market goes down and down and down, and at a certain point, companies are going to go bankrupt and default. And that is going to be a break in the chain of payments that is going to cause a sudden crash. Well, that's how crashes work. You never know when the break in the chain of payments will be. It could be in a transport company that can't pay. It could be an airline, as you've seen the airlines go broke. You've already seen that happen in the last few months. You've seen cities may go broke again, real estate companies, and especially private capital companies that have borrowed maybe 90% of the money from other corporations.
You've had private capital companies come in, buy a going corporation, and then say, how do we make money off this ? Well, they begin to lay off the labor force. They sell off property and pay themselves. They crapify the economy. These are new words that the American vocabulary develops to describe what's happening in the American economy. Crapification and shitification, these are all new words, along with weaponization. You weaponize foreign trade. That's another, that was sort of the word of the year last year for American foreign policy that introduces new words into the English language. So, you're having a total, just a total squeeze. And of course, the crashes and the breaks in the chain of payment and the bankruptcies are going to be most serious in countries that cannot simply print their own currency to pay their foreign debts, like the United States.
It'll be most serious in the Global South, Europe, and the Asian countries.
5. Dollar Hegemony and De-dollarization
Ashley Dayman: What are the implications of what's happened in the Persian Gulf for the dollar standard, dollar hegemony and de-dollarization?
Michael Hudson: Well, other countries, since the United States has been confiscating other countries' currency. They like the Iran's savings and like the U.S. Allies in Europe, the Euroclear Bank has confiscated 300 billion of Russia's savings. Trump himself a week ago said, you know, this money that Iran is asking back, it's not American money that it's asking for. Its own money seized its bank accounts. You know, if we don't give it back, countries are going to be afraid to save their money in the U.S. Dollar. Okay, he understands de-dollarization, and that's exactly what the effect is going to be. Other countries realize that if the United States says, we're gearing up for war with China.
If you don't break relations with China and stop importing from it and agree to import from us instead, we're going to grab all of your gold and foreign exchange reserves, just like we told the Bank of England to grab Venezuela's gold, just like we grabbed Iraq's foreign exchange reserves, just like we grabbed all of Libya's foreign exchange reserves and gold. Whatever happened to Libya's gold ? Nobody knows. What happened to Iraq's gold ? Nobody knows. So, countries are now all asking for the gold back. Many countries have left their gold in either London or the New York Federal Reserve basement in order to use this gold as collateral for borrowing or because they may have to buy or sell it in the London gold market, which is the key gold market in the world.
Well, all of a sudden they realize we'd better keep this gold in our own countries. European countries especially are asking for all their gold back, and just as countries are asking for their own gold, they're moving out of the U.S. Dollar to say If we act in our own self-interest and decide, we're going to decide who we trade with. We're going to decide whether we buy from China or from the United States. We're going to decide what countries we have good trade and relations with, and the United States says, no, you can't decide. You have to follow what we say or we'll impose sanctions to prevent you from buying oil or gas from Russia, for instance, to prevent you from buying oil or gas from Iran or any products that Iran or Russia or anyone or Cuba or in the past Venezuela, any country that we don't like, you have to agree to sanction it so that we can control that country.
And in order to control Russia, China, and Iran, we have to control you. And so, you have to let us control you and who you trade with and what currency you trade in and where you save your international reserves. Do you save it by buying U.S. government bonds or U.S. stocks and bonds or do you save it by buying gold, or each other's currencies, or the Chinese currency. De-dollarization means other countries asserting their own sovereignty to decide whom they want to trade with, in what currencies, and where they're going to keep all of their money. One of Iran's conditions is that the fees and tolls charged for passage through the Strait of Hormuz be denominated in currencies other than dollars.
The details are being decided on a day-to-day basis. Trump keeps saying there's going to be free trade, and Iran can see the handwriting on the wall. As I've said, its statement is, from now on, and forever from now on, we're going to have the same situation that we have Before, Britain conquered us in the 16th century and prevented us from charging excess fees and tolls for the Strait of Hormuz. We are from now on going to control Hormuz with Oman right across the strait, and we are going to charge the tolls on all the oil that passes through to reimburse ourselves for the damage that the United States, Israel, and the Emirates have done to our economy. Trump is, there's a lot of pressure on Iran for a 60-day period before Iran officially takes the tolls.
So, Iran is saying, all right, we're not going to charge a toll, but we're going to charge a service fee. You're going to need our guarantee of telling you just where you can steer your tankers and your ships to avoid the mines that we may or may not have put there. And if you don't want your ships to blow up, you'd better hire us for a fee to guide you through. So, they're using a different vocabulary to describe what kind of tolls they're taking in all of this. This is sort of an unfolding thing. The United States has said, all right, we're letting for 60 days Iran take money in dollars, and we're not going to grab money for 60 days.
Well, I'm sure that Iran says, ha ha, they've promised again and again not to do things and they break their word. So they're going to be very careful about using dollars because Trump can change his mind at any point. And his, you know, his great, his fortune was made by the art of breaking the deal. That's how he made his fortune in the U.S. real-estate market, by cheating people. And so, Iran is being very careful. Most of its export, its oil, is being sent to China because it knows that the United States, number one, has promised not to bomb Iran's tankers or to grab it and pirate and seize the oil. And Trump himself said, well, we're pirates now. We can seize Iran's oil.
Well, but Iran understands politically that if it sells this oil to China, this is going to give China an interest in saying, well, we're going to help protect this Iranian tanker. And if America tries to board the tanker and steal the oil that Iran was selling to us, we're going to retaliate, well, they haven't said just what they'll do. But I don't think America is not prepared to have a military showdown with China over trying to seize and confiscate the oil that China has ordered and paid for to Iran. So, Iran is naturally taking its return in the form of Chinese currency, as many other countries are. So, de-dollarization means you're trying to avoid a situation of letting the United States just confiscate your money, as it's been doing right and left for Iran, Venezuela, Russia, anyone else, Libya, Iraq, anyone else that it is able to grab the money from. America has become a pirate state.
6. Debt Moratorium and Debt Cancellation in the Global South
Sit Tsui Jade Margaret: Apart from de-dollarization, I remember you also promote debt cancellation. So now, at that moment, in what ways can the Global South adopt debt cancellation?
Michael Hudson: Well, they're in the strongest position to do it together. They can say that the United States has created a crisis in world oil and food prices, and that crisis has prevented us from being able to use the dollars to pay our foreign debts that are denominated in U.S. Dollars. So we are declaring a moratorium on debt payments for the duration of this crisis, or however long our inability to pay our dollar debts lasts, we are going to have to put our own national interests first and use our scarce foreign exchange reserves to save our economy from collapsing, to be able to heat the homes, let people drive cars and trucks, let our businesses operate their machinery and factories so that they won't have to close down and cause huge unemployment.
So, they have to act together and say there's a financial crisis caused by the United States. This is just like the Latin American debt bomb of the 1982 that went through the rest of the 1980s that ultimately led to the Brady Bonds writing down the debts. In reality, while the Global South countries are saying the moratorium is on, they're preparing a logic for saying these debts are odious debts. On this site, we had Eric Toussaint and me describe the concept of odious debts, several years ago. Eric is right now editing the interview that we did on this, and I'm going to be sending that to Lau Kin Chi to publish shortly so that we can outline the whole logic for why these debts are bad loans.
Everyone calls them bad debts, as if it's the problem of the debtor they cannot pay. But in this case, they're bad loans. The loans were made by the International Monetary Fund without making any calculation of how other countries are supposed to be able to pay the debts. And they say, oh, well, I guess you can't pay. You'll have to sell off your infrastructure, your railroads, your water system, your land to American investors. I think other countries are going to say that world is over. We're having a new international economic order, and the whole principles of neoliberalism that guided the IMF and the World Bank and American foreign policies are at an end. That world has ended, and we're now aiming at developing our own economies for the first time.
7. BRICS and the Search for an Alternative Financial Order
Sit Tsui Jade Margaret: Many leftist intellectuals criticize BRICS for not yet building a new global financial framework. What is your view?
Michael Hudson: Well, the BRICS have no real identity. It's a bell-shaped curve from you have military dictatorships all the way to progressive social democratic countries. The BRICS don't have their own currency because in order to have a BRICS currency, you'd have to have a BRICS government, and there is no such thing as a BRICS government that has all the countries decide what to do. So, what you have emerging is a spontaneous alliance. And what has made de-dollarization and an alternative to neoliberalism possible is, for the first time, other countries have a critical mass so that they don't need reliance on the U.S. economy anymore. The major, most powerful country is, of course, China, and it's joined by Russia as the oil exporter and raw materials exporter and grain exporter, and now Iran. So, you have three countries.
China, Russia, and Iran are describing rules that they are going to follow. Other countries can join these rules. They won't join the countries as officially BRICS policy because there are many BRICS countries that won't join. India is going to say, our loyalty is with America and Israel, we're not going to join. And other countries under U.S. Control, in Latin America, if they say, you know, we're going to follow the lead of China, Russia, and Iran, governments will be attacked and their leaders will be assassinated. That's the American policy, regime change. You kill the leaders, thinking that that will leave the economy without anyone to execute the policy. So, it will be the countries that are in the strongest position to join this group of self-sufficient economies are going to cluster around China, Russia, and Iran, and this is going to be mainly their neighboring Asian countries, primarily.
And they may be joined by African countries that join. That's why the United States and Israel and France are backing al-Qaeda terrorists to try to take over and fight in Sudan. The Emirates are especially financing terrorists in Sudan. The Emirates are now joining Israel and the United States as what he describes as a terrorist state, and quite frankly I don't expect the Emirates to survive after a few years. I think they're playing such an abhorrent role in foreign policy that Iran and other countries will not permit it to survive, especially because of the heavy American investment in its information technology there that locks it into reliance on the United States. So, you're going to have this fighting in Africa, and probably there will be some South American countries, centered on Brazil probably, that try to fight back and join this alliance. So, we're talking about an informal alliance. Forget the BRICS.
There's too much disparity among their governments and their economic philosophy to have a common policy. The common policy will be that the institutions that are developed as an alternative to the IMF, the World Bank, and the United Nations itself by the alliance, the Asian alliance that I'm talking about. Other countries can choose which group do you want to follow. Do you want to follow the decline of the West, America, Western Europe, Japan, and America's satellite, Philippines, and Australia, America's satellites there, or do you want to be part of the growing part of the world economy ? You can make a choice. What do you want ? That's going to be basically what happens, and it'll start informally and gradually formalize itself.
8. The Federal Reserve, Interest Rates, and the Financial Crisis
Ashley Dayman: Michael, what do you think of the new Fed chair and what do you think the Federal Reserve, what do you expect it will be doing to deal with the economic crisis that you see or that is with us now ? And what do you think of the new chair?
Michael Hudson: That's very interesting. The new head, Warsh, has pointed to something that is very technical and that may be too technical for me to get into now. Now, in the last few years, the Federal Reserve has been just printing electronic money to finance the budget deficits that the military budget of a trillion and a half dollars now and the tax cuts of the Trump administration have caused. Well, what the Federal Reserve does is use its electronic money to buy government bonds from the banking system, pumping money into the banking system, just like it did during the zero-interest rate policy, the ZIRP policy, after 2009. Warsh has said the same thing that Treasury Secretary Scott Bessent has said, and I discussed him in our last interview, I think, what he said.
And we have to roll back the Federal Reserve's investment in government bonds and leave it to the private sector. Well, this is going to push up interest rates to a rate that makes it impossible for most families to afford to buy new housing because the mortgage, the interest on their mortgage is going to be so high that it's less expensive to actually rent the apartment, or they're just going to continue to live with their parents. That's what's happening today. So, there's going to be a tightening of credit, and this tightening of credit is going to prevent private capital from buying out other firms. The private capital companies are going to just make one last looting of the companies they've bought and leave them bankrupt shells, and you're going to have the final stage of financialization: mass bankruptcy, insolvency, and unemployment.
And so, you're going to have, essentially, the U.S. Economy is going to be closed. That's what Warsh and Bessent have committed themselves to. I don't think Trump understands this because he doesn't understand monetary policy.
9. U.S. Domestic Politics and Possible Concessions to Iran
Lau Kin Chi: Given that the U.S. Always goes back on its pledges, and even now with the memo, then Trump is already going back on his words and saying that we are not putting one cent into the reparations, etc. Do you think this time, because of the pressure domestically, well, running up to the midterm elections, do you think that domestic pressure from the people or from the general population will force, will compel to make some real concessions to Iran?
Michael Hudson: No, it doesn't matter what the voters want because their choice is between two parties that have exactly the same position. The Democrats are even more pro-war than Trump. The Democrats are criticizing Trump for trying to, for them, making concessions to Iran. They're saying Trump shouldn't do anything, you know, our loyalty is to Israel, our financial campaigns are paid by AIPAC (American Israel Public Affairs Committee) and by the Zionists, our salaries and our, not our salaries, but our campaign funding that enables us to buy TV time is all paid for by the Zionists who want us to support war against Iran and to support Israel. So, you have a dual loyalty, and right now, in the last two days in America, Donald Trump has proposed new election registration laws for what's coming up in November that tightens just who can vote.
He wants to prevent immigrants from voting, or all sorts of, he wants to prevent people in democratic districts from voting, basically, and has said that, well, he can always declare a war emergency just the day before there's voting. He can decide to bomb Iran and say, well, there's a war emergency, we have to suspend the elections. And even if he holds the elections, there's no difference at all in policy, except there's even more pro-war policy from the Democrats than there is from the Republicans now. So, there's no hope that the American public opinion and the political process is going to have any effect on either the Senate or the House of Representatives or the president and his gang of cabinet ministers. I wonder if Anita or Alice would like to ask any question.
10. The U.S.-Iran Memorandum and Israel's Role
Alice Chan: This memorandum is between the U.S. and Iran. Israel is not a party to it. So, why would people expect it to work, and why do people take it seriously?
Michael Hudson: They take it seriously because, on paper, the principles set out in the memorandum lock in everything that Iran had wanted to achieve. And this essentially acknowledges in print, officially, by the United States that Iran has won its sovereignty and the United States was unable to conquer it, and that Iran has the right, after 60 days, to establish the tolls that it had been charging in the past. So, basically, the memorandum established this 60-day waiting period that demonstrates to the whole world that followed our promises, it's the United States and Israel that have broken the promise. And Israel says that it will not sign any agreements, but Israel is a satellite of the United States. All the bombs Israel dropped on Iran were American bombs.
Israel is supported by the United States, so the United States could stop Israel at any time. All it would take was a telephone call from Trump to Netanyahu saying, 'Stop fighting in Lebanon.' Yet Netanyahu did not stop. So, it doesn't matter that Israel isn't a signatory. Afghanistan isn't a signatory. Singapore isn't a signatory. They're not players in this. It's the United States that is the decider in all of this. Europe is not a signatory. The U.S. Satellites are not. But it's obviously the fight is between the United States and Iran. But it wants to demonstrate, especially in alliance with China and Russia, that it is not the aggressor, that the deal breaker that has led to the closing down of the oil trade that is intensifying the world depression that the whole rest of the world is going to be suffering from is the United States' violation of this, and the Israeli violation with the full compliance of the United States.
When Trump criticizes Netanyahu, this is only for public show. He looks at the public opinion polls in the United States. The American public has turned against the war in Iran. They're turning against Israel. So, Trump wants to say, hey, I told Netanyahu not to attack, but of course his entire cabinet is Zionist. He's a Zionist. It's as if he were saying in a separate call, Bibi, just ignore what I'm saying. That's only for public consumption. I'm sure the Israelis look at that as saying, okay, he's saying that because he doesn't want to be unpopular with the American public, but we know that he's really okaying everything that Israel is doing in Lebanon. So, that's all, it's all a theater, it's all a pretense, and Iran is just, the memorandum, in his view, makes it very clear who is the law-abiding party and who is the law-breaking party.
And it's giving Iran 60 days to provide oil to rebuild its own foreign exchange reserves and begin to rebuild its economy and create more missiles so that when the ultimate fight between Iran and Israel occurs, it will be "kaboom!"
11. Cuba: Market Opening and the Risk of U.S. Attack
Ashley Dayman: Is there an increased risk that the United States might attack Cuba militarily or try to overthrow its government ? What do you think of Cuba's recent policy changes and attempts to open further to the market in order to avoid a U.S. attack?
Michael Hudson: Well, it's trying to, it's doing what its leaders think is necessary to survive. It knows that America has the military ability to hurt it and to use sanctions to destroy its economy. America could kill Cuba with kindness. It could essentially give Cuba so much support and trade and investment that Cuba would be happy to have an alliance with the United States. But that's not how the United States thinks, because there's so many old Batista fascists that have come to America, like Rubio and his family, that hate the current regime, that there really isn't going to be any attempt for America to make a mutual gain agreement with Cuba. It can only be, we win, you lose, and Cuba's just trying to do what it can to survive.
So, I assume that whatever they do, they don't feel that they have a better alternative than what they're doing. I haven't been there in recent years, so I haven't been talking to them.
Lau Kin Chi: But do you think the U.S. Threat of attacking Cuba is quite real?
Michael Hudson: Yes, certainly. That would divert attention from what's happening in Iran. And there will be some stage, maybe a false flag attack, a pretense that Cuba is somehow attacking the United States or doing something, and the United States will say, we're retaliating. America, as an aggressor, always pretends to be the injured party that is only retaliating against an attack on itself. So, but yes, of course, there's a real threat. That's why Cuba is so worried right now and feels that it has to give some concessions to defer this attack.
12. Gaza, the West Bank, and the Logic of Collective Punishment
Lau Kin Chi: At the same time, the genocide in Gaza continues.
Michael Hudson: Yes. It will continue until, as leading Israeli politicians have said, there are no more Palestinians. They invoke the biblical figure of Amalek and say that the Lord commanded them to kill all of Amalek. Trump and Kushner still want to turn Gaza into a tourist attraction. Israel is also accelerating its campaign in the West Bank and in southern Lebanon. This is a class war, a racist war, and a religious war, tied to a millennialist evangelical worldview.
Ashley Dayman: I have heard that Israel has been deliberately killing children in order to prevent the emergence of a next generation.
Michael Hudson: You have heard that from the leaders themselves. They have said, in effect: we are killing the children because, when they grow up, they will be so angry about what we have done that they will want to kill us, and that makes them terrorists. We have killed their parents, killed the people they know, and destroyed their homes, so they will be angry with us. If they try to protect themselves, their self-defense is then defined as an attack on us; therefore, killing them is presented as our own self-defense. It is also intended to demoralize the population. The United States pioneered this approach. The United States, like Ukraine, has focused on bombing schools and hospitals and killing doctors, reporters, and especially children, on the theory that this will make the population so unhappy that it will surrender and demand regime change.
The expectation is that people will remove their current leaders and install leaders friendly to the United States in the hope that the killing will stop. But killing children does not make people demand an American-aligned leader. It makes them see the conflict as existential, rally around their government, and fight back against the attempt to control their economy and the international oil trade through control of Persian Gulf exports.
Closing
Kin Chi: Thank you, Michael. This has been very helpful. We will prepare the transcript and the videos, and we will be in touch again in two or three weeks to see how events have developed. Please take very good care.
Michael Hudson: I am sure something is going to happen. Thank you.
Participants: Thank you. Goodbye, everyone.
Photo by Wolfgang Hasselmann on Unsplash