What’s behind Japan and the US Treasury intervening to buy Yen? Will Japan join China in dumping US Treasury bonds? Who’ll make up the loss this time? What it means for the US deficit and Fed interest rates.
The AI bubble: more evidence of fragility as competition intensifies internally and from China. How China’s open source Deepseek AI model is destabilizing the AI market. Show concludes with latest on Iran and Ukraine wars: why Trump TACO-ed again and Iran’s deal with Oman to open the strait of Hormuz on its terms. Why the US can’t even get a proxy war going in the region. Finally, what are the facts behind the western media propaganda campaign that Russia’s losing the war in Ukraine.
Dr. Jack Rasmus @drjackrasmus
Jack Rasmus 
Thank you Jack. The economist Michael Hudson believes the world is headed for a global depression. What is your view on this? Can the process start before the end of 2026?
Even if the Hormuz straight opens soon, the damage to production and shipping will take months if not longer to correct themselves. Asian and European businesses are shutting down, not to ever recover. Higher costs everywhere for energy, petroleum and the byproducts are scarce and costing more money.
What about the US AI, stock market and private equity debt, crypto bubbles?
The yen problem can be multiplied by other countries such as S Korea, the euro, etc. Can the US keep using debt to buy the world? Isn’t there a peak?
Thank you
Sheldon Caref
My view is that global financial asset markets are growing increasingly fragile, meaning prone to financial instability events including crashes. I’ve been predicting that since my 2015 book ‘Systemic Fragility in the Global Economy’. But that’s not at all on the immediate term agenda in 2026. I’ve predicted an AI related bubble crash within 12-18 months. The exact mechanism is yet unclear. Probably originating in the tech heavy equity markets, private credit, or even the Repo Treasuries. Meanwhile, the US real economy is much weaker than reported as the latest and recent US jobs numbers show. The Hormuz strait has devastated global energy and commodity markets but, as I’ve recently written, the US energy situation is not as dire as the global, contrary to a lot of views being expressed on the ‘left’. The June MOU was a set up to justify and cover an attack on Iran in the strait which failed. Trump will eventually pull a ‘Nixon’–i.e. bomb the hell out of Iran and then exit, but not until after the US November elections likely. The elections could precipitate a major Constitutional crisis in the US which will heavily and negatively impact the financial markets and real economy. Israel using a nuke on Iran would do the same. These are all indeterminant ‘wildcard’ events. I don’t see the Yen problem being replicated by Korean or Europe currencies. No, there’s a limit to the US debt financing the Empire. China and BRICS are already cutting their buying of US Treasuries. Europe has been filling the gap in recent years but may not continue and events in Japan may lead to it also reducing its buying. If that happens, the Fed won’t be able to finance the escalating US budget deficit, this year certainly well over $2 trillion again. If foreign buyers of Treasuries decline, then US domestic investors must increase purchases. But that will require the Fed raising interest rates to stimulate demand. Higher rates then mean a further dampening of the real economy. The contradictions are multiplying and intensifying. As for the AI bubble again: I don’t see how even the big 7 tech companies can realize a profit within two years or even more given their $3 trillion (2025-27) investment in AI (agents, chips, datacenters, etc.). Too much competition (domestic and China) will drive down prices and profits and in turn stock values for the weakest players. That’s why I say 12-18 months for the bubble to burst. Then we’ll see more clearly the contagion to other markets (private credit, legacy software, Repos, etc.). Meanwhile, inflation will continue to creep up dampening consumer spending and the real economy. AI generated accelerating job losses will continue impacting the same. Fed won’t cut rates until 2027 and then too slowly. I’ve written about 3 scenarios: best case, worst case, likely case in the conclusion to my forthcoming book coming out in September: “Twilight of American Imperialism”, Clarity Press, which I’ll be talking more about in coming Alternative Visions shows.
As the prior comment stated, the implicit question raised by this post is why John Mearsheimer and others were so wrong: I provide an alternative explanation. Mearsheimer claimed that the US/World economy was close to falling off a cliff as the war with Iran drags on. The problem is that Mearsheimer and others were looking at the war entirely from a US/GS 7 perspective, forgetting that Iran has a real need to generate cash and thus entirely missed—-even the possibility—– that Iran would cut an independent deal with Oman. But this blind spot really points to the larger meaning of the defeat by Iran; this is a watershed moment where what was called a Third World country is finally wresting control over its own resources due to a confluence of many events: asymmetric warfare and the industrialization of Russia & China, who are willing to provide support for Iran. This is the worst nightmare coming true for the Deep State. As Vincent Bivens documents in his important book The Jakarta Method, the US Deep State has spent billions and killed millions making sure that there was no Third World alternative to the Neoliberal nightmare. And the reason the Deep State did not want a Third World alternative is not only to exploit Third World resources but sheer, corrupt laziness: it is really hard to produce an AI chip at one one hundreth of the cost of a US AI chip: our corrupt elites want the easy money of say grabbing Venezuela oil or speculating in financial assets which is one of the themes of the posts on this blog.
What has happened in Iran is representative of the Global South in general: it has industrialized and economically developed to a point that it can no longer develop further if kept within the Empire’s rules based order. Not just China and RUssia, who serve as poles for the Global South to economically organized around but much of the Global South itself. Similar to Iran is India, Indonesia, Brazil, Mexico etc. They all want to pursue a more independent economic course. It’s ironic, as they move toward more economic independence, Europe and the Empire’s ‘core’ G6 states move toward more Dependence on the Empire economically. The mentally lightweight US elite guardians of the Empire don’t maneuver with the Global South (and China, Russia) but react with force to try to keep the G20 and beyond within its control. But their own technology has militarily negated their military force, based on 20th century arms of aircraft carriers, 5th gen jets, tanks, etc. (and missile technology that’s old as well). The Empire is in deep trouble. ‘Dual Power’ is emerging institutionally (BRICS). A sure sign of a pre-revolutionary situation. Empire’s in decline often put forward inadequate leadership in crisis periods. Just compare mentally lightweights like Biden and Trump the past decade and their sycophant teams. Overlay on this the deep penetration and influence of a foreign power, Israel, and their US oligarch zionists who have ‘double teamed’ the US State and now control it. That plus the forces of imperial decline plus the poor leadership is almost certain to accelerate the process of imperial decline now underway. The great threat is that, in the process, the lightweights and Zionists will resort to nuclear weapons which I see as inevitable in the US/Israel conflict with Iran. When that happens, the world changes even more rapidly and the Empire decline accelerates still further. In my forthcoming September 2026 book, ‘The Twilight of American Imperialism’, I quantify the economic bases of decline and its impact on failing Practices of Empire and non-performing Institutions of Empire. All the data’s there. The problem with Mearsheimers et. al. is, while they (and the various former US military and CIA analyst commentators) provide excellent short term geopolitical analysis they do not ground all this in the deteriorating finances of Empire. Major Empires like the US implode from within. Not from foreign invasion. Not from lost wars. And the internal implosion has its roots in the financial crisis of Empire always.
The US has lost the war with Iran. All the rest is epilogue. The gulf countries are all desperately seeking other alliances and arrangements for defense as the US retreats from its bases: Not only Oman seeking a deal with Iran but Saudis new defense alliances with Pakistan and Turkiye; Qatar striking a deal with Iran. Kuwait will eventually be absorbed by Iraq. Bahrain 70% Shia will have a domestic revolution and seek an arrangement with Iran like Qatar. The entire gulf region is in flux. The big loser is the US. Israel has him by the political balls and squeeze whenever they need to: Gaza, Lebanon and now in Syria attacking Turkiye forces. Trump will never break with Netanyahu. The war will go on, in a lower key for a while; or maybe a tactical nuke strike which is also possible. Trump doesn’t give a damn about the November elections. He’ll stonewall whatever Dem majority comes out of it. The Dems will impeach him but that’s it. They don’t want him out of office but want to keep an issue for 2028. THe Dems only issue is Trump. That way they don’t have to propose any real solutions. THeir whole strategy since 2020 is just ‘anti-Trump’. They won’t change US imperial foreign policy. THey’re ‘Bibi’s other bitch. And they support Zelensky in Ukraine as well. Both wings of the Corporate Party of America are bankrupt with no solutions to the deepening US crisis and accelerating decline of Empire occurring in parallel.