Popular Economics Weekly

“So it looks as if the worst and the dumbest are not just at the top of the political leadership. They’re not just on the diplomacy and strategic policymaking end, but even in the cutting edge of the military. And it’s terrifying. America as we knew it may just not exist, even in our military forces.” Paul Krugman

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Nobel Laureate economist Paul Krugman is concerned about our military because it doesn’t look like President Trump will settle the Iran War any time soon, and Dr. Krugman is fearing the results could be catastrophic for the world economy.

And Nuriel Rubini, another economist, predicted in a recent CNBC interview that Donald Trump would escalate the war on Iran and thereby risk “1970s stagflation.” Dr. Rubini isn’t infallible. He is known for falsely predicting many ‘doomsday’ scenarios, but he did predict the Great Recession.

The U.S. was seemingly caught by surprise over the extensive damage that has already been done on Gulf refineries and U.S. Military bases in the area and almost 200 American casualties killed or wounded.

A JP Morgan commodities analyst Natasha Kaneva with co-authors Artem Fakhretdinov and Lyuba Savinova cited by MarketWatch is predicting trouble ahead if the war is escalated. “Much like during the pandemic, the shock unfolds sequentially rather than simultaneously — a rolling supply disruption moving westward, dictated by shipping times and buffered unevenly by regional inventories.”

Such disruptions are already occurring because so many petroleum products that originate in the Gulf must be transported by ship, and stockpiles are already depleted. In the first three weeks of March, Kaneva discovered a fall of 155 million barrels, mainly triggered by a 211 mbpd drop in oil in transit.

What would another “1970’s stagflation” look like that occurred once before because of another oil embargo—by OPEC—and resulted in multiple recessions? The rising prices of gas, fertilizers, and natural gas are already boosting inflation from the Strait of Hormuz blockade. Stagnating growth is sure to follow, since consumers will save more, consume less, which is the classical response to such conditions.

So why then would Trump even attempt it? He seems to believe the U.S. military could pull off another Venezuela—perhaps by quickly capturing Kharg Island, Iran’s oil shipping hub, and closing the Strait of Hormuz.

That brings us back to Professor Krugman’s prognosis on American military capabilities. “There’s no question that the U.S. has unchallenged superiority in all of the conventional aspects of warfare. There’s no Iranian Air Force for, you know, there’s no Iranian Navy in any conventional sense. Unfortunately, it’s not that kind of war. The failure to have a prepared response to the modern world of drones and inferior powers which nonetheless have the ability to do a lot of damage, has been a bit of a shock.”

But Trump doesn’t seem to be listening to anyone on the economy, either. In giving a recent “A plus plus-plus-plus-plus-plus” grade on the U.S. economy in a recent interview with Politico cited by The Guardian, Trump is living in a fantasy world while he drives the U.S. economy into a possible recession.

The University of Michigan sentiment survey on how consumers currently think about our economy hit a new low in March. “Consumer sentiment fell back 6% this month to its lowest level since December 2025. Declines were seen across age and political party. Consumers with middle and higher incomes and stock wealth, buffeted by both escalating gas prices and volatile financial markets in the wake of the Iran conflict, exhibited particularly large drops in sentiment,” said survey Director Joanne Hsu

Hsu also said year-ahead inflation expectations climbed from 3.4% in February to 3.8% this month, the largest one-month increase since April 2025.

What if our military has been fighting the wrong war? What if Iran has the capability that Ukraine has shown with its drone technology, though vastly smaller than Russia’s military?

The lessons from Vietnam, Iraq, and Afghanistan have already been forgotten if President Trump does escalate another Gulf War; by the “worst and dumbest.”

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen