The Daily Blast: Krugman: Trump Screwed Himself Badly on Iran—and May Not Even Know It

Now there is a package of meat. It is best to test one of the greatest tests.

“The people who have been in cheese, cheese, cheese, cheese.”

Now on the greatest tests, the number of 18 years, the number of customers and customers in the world has increased the volume of the unit. Only so long the preparation, the number of the actions of the package and the cheese minus action. This is the daily blast from the new Republic, produced and presented by the DSR network. I'm your host, Greg Sargent. This week, Donald Trump rejected a proposal from Iran to reopen the Strait of Hormuz.

This offer would have set aside questions about Iran's nuclear program for now. That may be why Trump rejected it, but there is another possible reason. Accepting that deal wouldn't make him look as if he is winning. Yet this comes as gas and oil prices continue to rise, which isn't making Trump look like a winner either. And partly because of that, Republicans are privately warning that their prospects and the midterms look increasingly dire.

So what now for Trump? Paul Krugman has a great new piece on his sub-stack arguing that Trump simply does not have the cards in the Iran situation, even though he may not know it. So we're talking with Krugman about where all this is going.

Paul, always nice to have you on. Good to be on again.

So Trump rejected that proposal from Iran to reopen the Strait of Hormuz, perhaps in part because it would not address Trump's demand for total termination of Iran's nuclear program. But the New York Times had an extraordinary detail about the Iranian offer, quote, a U.S. official also said that accepting it could appear to deny Mr. Trump a victory, close quote.

“Paul, apparently that's the single most important factor in all of this, right?”

That's what's been holding everything up. For most of us, by about a week into the war, it was obvious that basically America lost, but Trump cannot bring himself to acknowledge that. He's been trying, you know, he's threatening to bomb them back into the stone ages, and he's been threatening war crimes, and he's been imposing counterblockades against the blockade, all of which seems to be because he cannot seem to accept that actually. He screwed up badly. There is no good outcome for the United States here.

All we can do is accept something that actually leaves Iran stronger than it was, but he won't, he won't do it. Well, we just learned that gas prices rose on Tuesday to the highest level in four years. It's well over four dollars a gallon on average, rent crude is over a hundred dollars a barrel again.

“Paul, can you just walk us through the basics of how those developments are tied to the Strait of Hormuz remaining closed?”

Yeah, so before this war, about 15% of the world's oil flowed through that Strait. And it's other stuff too, natural gas, helium, fertilizer, but, you know, right now, let's focus on the oil. So 15% of the world's oil goes through that narrow passageway, which is extremely easy for Iran to block. That 15%, there's really not much of an exit. There's no real way around the Iranian blockade. It's a little bit of stuff can go by pipeline, but not much.

And that's a lot of oil being denied to the world market. And of course, the price of oil has gone way up, but if this continues, he ain't seen nothing yet. Because what the really interesting thing I cited in the sub stack, I cited some numbers from Goldman Sachs, although the price of oil is way up, consumption of oil is only down a little bit. And mostly what's happening is that they're drawing down inventories of oil, that people have oil and storage tanks,

people that oil that was already on tankers is being used up, which is all being happening out of the belief that the Strait will reopen soon. And prices will come down. And as people start to realize that that's not about to happen, which has been happening just over the past couple of days, then the prices have to go much much higher. Basically, the price of oil has to go high enough to inflict enough economic damage that we're about.

We have to somehow rather stop reduce the consumption of oil by another 11 million barrels a day.

Convenient thing is that right now, world oil consumption is about 100 million a day, so that's also about 11 percent.

It's not easy to win yourself off oil in the matter of weeks, which is what we're kind of expecting what has to happen. So this can get much, it's ugly already. You know, it's ugly politically, obviously, for Trump and the Republicans to have gas hitting its highest level in four years, but it's, it's going to get a lot uglier and very soon. Unless Trump swallows his pride and accepts that he actually lost this war. Well, just to clarify what you're saying here, in other words, in order to get the world to demand less oil in keeping with the fact that there's less supply,

the price is really have to go up a lot. I mean, think of it, there's a certain amount of oil available, and which is less than it was. And one way or another, you know, a barrel, you can't burn a barrel of oil, it isn't there. So one way or another, the people have to be induced to burn less oil. And the way we do that, it's a world market, the way we do that, it affect nobody decides on it, but what happens is just that the price of oil.

There's bidding for barrels of oil and the bidding drives the price up until the demand for oil has fallen back in line with the supply.

And the thing, a crucial point again is oil is, it is, you know, to use the jargon, it's inolastic.

It's very hard for people to switch away from oil, you know, give, give us, give me five years and we can all be driving electric cars, but next month we can't. And so, so the prices have to go really, really high to make that big of a dent in oil demand. Right, and so this is where your argument comes in. It's sort of a structural argument about the situation. You wrote that Trump doesn't have the cards in the standoff with Iran precisely because the longer we wait, the harder it gets for the world.

“So I guess the only way out, the only way this can be resolved is in a way that leaves America weaker and leaves Iran stronger.”

Can you explain that? Why is that?

Yeah, I mean, basically, Iran clearly still has the ability to block that straight.

It's, you know, it, they have drones, they have missiles. We, the United States bombed a lot of their sights, but not enough. And these things are really easy to hide. They have speed boats. And, you know, if you want to think of a maximally vulnerable target, a fully loaded oil tanker, you know, you want to hit something with bombs that will go off with a big bang and a lot of flames. It's an oil tanker.

So Iran has the ability to block the straight. And they have every incentive to do that until they feel that they're not facing an existential threat, you know, that the ringing regime. And, and so they really, the straight does not get open until Trump accepts a deal that is sufficiently favorable to the Iranians for them to start letting tankers. Through again. And, you know, by definition, since, you know, the straight was open before the Trump started his war.

Iran is clearly going to want to charge tolls on it. Iran is not going to cancel its nuclear program because, you know, we are hurting too. The United States has a blockade. And that Iran can't export oil. But neither, you know, no, it's a mongable country is now that can't sell oil.

“And they also can't import food, which is kind of probably more important.”

But, but they are prepared to, to, to pay that price.

So in this waiting game, basically they have very, by far, the upper hand.

And, you know, and another, well, another president would not have started this idea or in the first place. But in, in any case, given the situation would say, okay, we need to face reality. I need to face reality. I messed up. And, and I'm not going to get something that looks like victory out of this. But Trump so far won't.

Well, you mentioned that there's pressure on Iran as well. And I want to ask you that, is there a scenario where the pressure on Iran actually does, matter and force them to the table on terms that are more favorable to Trump? I've heard this misive on truth social that where he said Iran has just informed us that they are in a state of collapse. They want us to open the Hormus straight as soon as possible.

Is this just complete bullshit?

“I mean, is there a scenario where the pressure on Iran does sort of force them to the table on terms that would make Trump feel a little more like a winner or whatever the only thing that matters is?”

Yeah, it's one of those things where, you know, if you, is this unadulterated bullshit? No, it's adulterated bullshit. I mean, there's a, there is Iran is hurting. This is, you know, there are economy normally depends overwhelming on selling oil.

Iranians, a lot of economic disruption, maybe even if this goes on long enough, maybe even run away inflation in Iran.

But that is not, you know, this is a, a fanatical, a theocratic regime with that has, which is completely willing to kill its own people to stand power. That is not going to force them to cave. And on the other hand, the whole world economy outside the Persian Gulf is in really looking at very nasty consequences, including the United States. And the political consequences of, I guess, for 18 a gallon oil today and much more than that for diesel, by the way. So there's, there's other things that are hurting even more.

And we, it's very unlikely that the United States is prepared to deal with multiple months of this stuff. And so yeah, it's not, it's not the case that this is all that Iran is hurting us and we aren't hurting Iran. But if you ask who, who is going to have to cry at uncle sooner, it's almost certainly us.

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Well, beyond this one, Mr. One Truth, social, Trump, key, and the other, we're going to see what's going on. And we're going to see what's going on. And we're going to see what's going on. And we're going to see what's going on. And we're going to see what's going on.

And we're going to see what's going on. And we're going to see what's going on. Well, beyond this one, miss of untruth, social, Trump keeps making the opposite argument in the bigger sense. He keeps saying Iran has been totally defeated. And as you mentioned, it's true that Iran's military has been badly degraded.

But Trump also says that time is on his side. He doesn't feel rushed to make a deal at all. He's perfectly happy to wait until Iran submits and gives him his way. That's almost exactly verbatim, what he's saying.

“Paul, I think the temptation is strong to read that as sort of typical Trumpian blaster.”

But it seems plausible to me that he doesn't understand the situation at the most fundamental level. And the sense that he doesn't understand that Iran has some leverage here precisely because he can't accept that thought. He'd be those submissive one and they'd be the dominant one. And that doesn't compute in Trump's brain. Do you think that's plausible that he just doesn't know that he is kind of on the losing end of the situation in some ways?

I think he's a kind of superimposed state where some level he does know, but he can't bring himself to admit it and even to himself. And yeah, I mean, I think part, you know, we got into this mess. He pulled us into this mess in part because he has a completely wrong-headed notion of what war is about. If we have more bombs and we can kill more people, then of course we have the upper hand.

And that has never been wars about.

It's always about ends and means and the ability to inflict pain. And he still seems, he reversed to that over and over again.

“I'm not a young kid and I remember Vietnam and body counts.”

And a lot of what Trump says is reminiscent to the body counts. We have destroyed actually turns out that the US military is that we were much less successful in destroying their missiles and drones than a lot of the claims. But in any case, that is not what it's about. And but it's not Trump just has this, I have the ability to carry on violence. So surely I can't be losing this war. If I can do violence and they can't do equivalent amounts of violence in return,

except the problem is that it's not what they can do to America's military.

Right. And his head, he's always the winner. So he can't be losing.

“Isn't that the, isn't that, that's the basic size?”

Yeah. All of it ties together. I mean, the inability to accept that he lost the 2020 election is part of the same syndrome. You know, a guy who can't admit that he had lost a, lost a presidential election to Joe Biden is not going to be able to admit that he lost a war to the Mueller's of Iran. That seems like a plausible reading. So the times has this other report laying out how Republicans are anxious about the midterms and the factors they cite are the war, gas prices and affordability more generally.

They're describing this with words like bleak.

But it seems like Trump who keeps saying times on a side, as we mentioned, isn't letting that intrude on his calculations either.

And yet Republicans can't push him to change course, because they're not allowed to say he's not in the midst of a glorious triumph.

“Yeah. Paul, what do you make of that dynamic?”

Well, no, the, the, the moral, a moral intellectual emotional collapse of the Republican party is in a way a bigger story than Trump. I mean, yeah, he's, he's a, a world, world class bizarre, dangerous person, but what makes him able to do this is the submissiveness of his party. And yeah, they, they, you know, I, to say, it's mostly I take the stuff, you know, just sort of roll with it, but the, the celebration of a guy who is an absolute disaster at present. I mean, he's, he has led more or less single handedly on his own decision, his own faith in his judgment.

He has led America into one of our worst strategic defeats in our history. We've gone this, you know, tiny military power and Iran, figuring that he could, you know, destroy the regime and stole his people in a few days and he lost the war.

You know, add by his party will never admit that they're busy, just an item that crossed earlier, a couple of hours before we recorded this.

I mean, he's getting ready to put Trump's picture on U.S. passports. You know, this cult of personality around a guy who is objectively, basically art, maybe the biggest loser in the history of U.S. Presidents, it's just amazing. Yeah, just want to clarify that that was a report in the bulwark that about the passports in Trump's face. Can I ask you about the global economy, you mentioned that it's in pretty rough shape right now. The dict's going to happen with the global economy over, I don't know, the next six months to a year.

Well, tell me what's going to happen with the straight of our moves and that makes all the difference in the world. I mean, I don't think the global economy was in dire straits, you know, there were some wobbles, but it wasn't that bad before the war. And if the price of oil stayed where it is right now, then we're talking about a significant but not catastrophic hit to global growth. The trouble is that we really have not the world has not adapted to 15% less oil yet. And so if the straight stays closed, it will have to.

And I tried I did this in a subtext post a few days ago. Um, if your forecast about world oil prices does not lead to a severe economic severe blow to the world economy, your forecast is too low. Because the only there's no scenario in which we get by with 15% less oil that doesn't involve a global recession. So if the straight stays closed one way or another, we will have a global recession. I don't know what oil price that will mean, 150 a barrel, 200 a barrel.

It's it's, you know, I can do some some. Uh, apricot, apricot economic algebra there and try to give you an estimate, but it's it's really it's all over the place, but high enough that we have a global recession.

“Because that's the only way to reduce oil consumption that much fast.”

Right. And that's built into the structural situation that we described earlier, right? And the sense that Iran knows that if the straight remains closed, the global economy could very well go into recession. So that incentivizes them to not give in, right? Yeah, and it's, um, time is very definitely on their side. I mean, we're we're burning through whatever oil was in storage very fast.

And as that happens, the, uh, the situation gets grimmer. And they, you know, they're suffering too, but the time is on their side. It gives them every incentive to hang, hang tough for for something that looks like a victory to them.

You know, he's, for him, everything is about appearance and illusion.

And he's going to goose the markets and try to produce confidence. And he, uh, you know, he's done that now four times. He's gooseed the markets by saying pieces around the corner. Um, and the, the problem for him is that this ends up being about brute physical facts. The oil is there or it's not.

And you can, you can play confidence games for a while, but at a certain point, the reality of

“Are those barrels actually on their way to markets or not?”

Uh, is the story. And, and the Iranians are in control of how that story plays out. Well, maybe you can explain something to all of us. Why do the markets keep going up when he goose us them? Can you explain that dynamic?

It's still something that puzzles me. It seems very obvious that Trump is gooseing the markets. And yet the markets get gooseed. Why? Well, that's, you know, uh, anybody who tries to explain what the stock market in particular

Does is, uh, you know, God knows. Uh, it's, uh, and it's not, it's not, by the way, a good prediction of the future. Uh, my old teacher Paul Samuelson famously said that the market had predicted nine of the last five recessions, right?

“It's, um, so the market is, as God's own psychology, I think we've, we went through a long”

period when anybody who, when optimists, people who bought the dips did very well. And it takes a while to end that psychology. And I think the, uh, you know, the stock market, God knows, uh, the oil futures market is, is, is more sort of tied to concrete events. And yeah, it has, I think the problem with that market is they keep on thinking that

Trump is going to be rational. To every time he says something that sounds like he might be willing to acknowledge reality,

the oil futures drop because people think, oh, so he's finally ready to recognize reality.

And they've done that four times now. Now, I'm not sure it's going to happen again. You know, as certain points you say, well, uh, you know, Lucy and the football analogies seem a little too flippened for this situation. But I think that's really where it is.

A certain point they start, uh, the market stopped doing that, but, you know, so far,

“I think people, to the extent that there's a story is that people keep on people”

on the market, keep on betting that, you know, he can't be that crazy. And that has, that is not a good bet. It seems like a terrible bet. Okay. Just to close this out, Trump may not be winning an Iran, but he's demanding as ballroom.

You made the case that he's obsessing over the ballroom because it's an easy area for him to assert dominance over Republicans and over donors who have to pay tribute to him. I just want to add something to your argument. The ballroom obsessing is clearly a problem for Republicans in the midterms. It's sort of a symbol of how out of touchy as with voters concerns and problems.

But here, again, even the most vulnerable Republicans are required to go out and cautiously declare that the ballroom has to happen and that it would be the greatest accomplishment by any leader in world history. Now, that's a dynamic that's just deeply baffling, but almost sort of weirdly satisfying because their continued hagiography about Trump could screw them, almost more than anyone else.

Yeah, I mean, it's, you know, Marie Antoinette had nothing on Trump. Here we are. People are complaining about gas prices.

There's a war and he's always obsessed with his guilty ballroom.

And yeah, I mean, I think that for him, it's an escape. He fantasizes about giant ballrooms. And for his party, it's a Republican party is it functions as if it was a police state. You know, totalitarian police state, even though, you know, we don't actually live in a totalitarian police state, not yet, but I think if you're a public

politician, first you, if you take on Trump, you think he still has the power to destroy you politically. And also, you're probably afraid a little bit. You know, there's a real defy Trump and legal action will be taking against you. Who knows, maybe even, you know, a magmable show up.

And I think that there's a real element of, of intimidation, both political and to something even physical going on here. And very few, I mean, anyone who had the, the, the, the character to stand up to that has left the Republican party. What's left, you know, what we're left with is the people who are willing to debase

themselves for the sake of Trump. And, and they, it's become a habit with them.

So is there a scenario where Trump accepts something in between what he wants and what

Iran wants? Is there a scenario where Iran makes an offer like that and Trump accepts it and then just declare his victory and goes home? Do you see that as a possibility? Yeah, I mean, at some level, at a certain point that the sheer damage that's being done

“by this closed straight will, I think even Trump will have to at some point acknowledge”

it and face up to it. And what do you, I, I actually think that the substance of what's going to emerge is going to be pretty much what the Iranians are demanding. That I don't see why would they give any significant substance here? But they might be willing to use a invasive clever language to provide something that Trump

at his propaganda machine will, you know, with great effort spin as a victory. I'm not sure how they'll do that.

“But that's, I think the most likely scenario is that it is effectively Iran remains as”

collecting tolls and, and it does not give up its nuclear programming.

And you're basically a Iranian program, a Iranian plan, but the, but that somehow the language

of it makes it sufficiently obscure what's happening that Trump can go out and say, see, we want a great victory. Well, and thinking about Trump's psychology a little more, he could just say, well, I won

“because I'm a winner, so I only can win.”

Yeah, it's, it's, if he has never acknowledged a feat on anything, he never acknowledged

his having been wrong on anything, so he will do that. And the question is only whether they offer him enough cover to do that. And, you know, Iran, they're in this for a lot of reasons and many of them are horrible and crazy, but they're, it's not for ego. So they are willing to probably, a swage Trump's ego as long as they get the substance of a,

of a deal that is overwhelming in their favor. Very plausible outcome. Paul Crogman, thanks so much for coming on. Folks, make sure to check out Paul's Substack. It's just great. It's so informative day in and day out. Paul, thank you so much. Thank you.

of cheese at minus action day.