Geopolitical Lies Fuel Financial Bubble w/ Jeffrey Sachs

Jeffrey Sachs joins the hosts to argue that the West is living through a double crisis with a single cause: the United States and the core Western alliance that ran the world for two centuries no longer run it, and American foreign policy remains deeply programmed to protect a hegemony that no longer exists. In his telling the resulting angst manifests as compulsory grandiosity — Ukraine winning, Iran defeated, China about to collapse — and as a geopolitical bubble that has stoked a financial bubble: establishment net worths and the AI-era valuations of 'seven magnificent US companies' now depend on keeping both alive, and stoking bubbles is not a safe business. Europe's bizarre self-harm over Russian energy is read not as mere obedience to Washington but as an imperial mentality that outlived the empires — Britain donning the imperial mantle and heading to Kiev the moment a mayor becomes prime minister. Multipolarity itself he calls benign or beneficial, a positive-sum world in the spirit of Adam Smith against the zero-sum mindset of the Anglo-Saxon establishment. The episode's centerpiece is Sachs's on-air reading of Foreign Affairs — 'the psychological journal of the American strategic class' — specifically the September/October lead essay by Kurt Campbell on how alliances survive. He walks its five futures (Hobbesian multipolarity, spheres of influence with US retreat to the Western Hemisphere, a great-power concert dismissed in two sentences, partial Chinese preeminence, and allied scale against China) and delivers the verdict: this is precisely the logic of World War I, the logic of walking into war. Beside it he sets Scott Bessent's FT op-ed declaring 'economic D-Day' — from a man he calls a low-life hedge-fund guy whose claim to fame is shorting currencies — and reports that even the notoriously jingoistic FT comment section answered with derision: 'Scotty boy, go back to your hedge funds.' Mercouris supplies the historical rhyme: the one simple cause of 1914 was Britain's relative decline and its refusal of displacement — and Britain, the richest power in the world in 1914, was a US dependency by 1945; where megalomania goes, paranoia follows. From there Sachs builds the counter-case. July 1914 stood in a glory age — Keynes's tea-in-bed, passport-free world of 1910 — and the war had no deep reason, only a tick-tock narrative; today's reasons for an anti-China alliance are weaker still. China is not Kaiser Wilhelm: no war in 46 years, one overseas base at Djibouti against America's roughly 750 in 80 countries. The Shanghai Cooperation Organisation meeting in Bishkek — 42% of world population, 34% of output at purchasing-power parity, against the G7's 9% and 28% — marks a re-forming Eurasia that wants peace and trade, while the whole Western alliance is perhaps 12% of humanity. On Iran: the turbaned-mullahs cartoon against a 5,000-year civilization; on the dollar: economic statecraft enlarged after 2001 into payment-system enforcement — the $300 billion confiscation, extraterritorial bank threats — which fails, he argues, precisely because non-dollar settlement is mechanically easy, as Trump's 'if you don't use the dollar, we'll destroy you' tacitly concedes. The close is conditional. No entirely benign soft landing exists with debt at 100% of GDP, 6-7% deficits and a record Buffett ratio — a correction is coming, though a cyclical contraction could be modest; every great crisis (1914, the Depression, 2008's Lehman afternoon) was a choice, and rational policy-making avoids the rest. The grounds for hope are the publics, who want normalcy — disgusted with the war in Iran, uninterested in wars with Russia or China, moving with Carlson, Greene and Massie against Trump's betrayal — against the imponderables of counted ballots, the deep state and Five Eyes policy-making. Trump is ignorant and unstable but presidents don't run much; the bad news is it's in the CIA's control. Walking into World War I territory again 'would be so insane, and nobody wants it.'

1. The double crisis — of the United States and of the West — has one essential cause: the powers that ran the world for two centuries no longer do, and the loss is a crisis of power, not a crisis for the world.

2. American policy across parties, media and day-to-day decisions remains programmed to protect a hegemony that no longer exists — the 'sole superpower' operating system outliving the unipolar moment.

3. The geopolitical bubble has stoked a financial bubble: establishment valuations and the Magnificent Seven's multi-trillion AI story now depend on the West-is-dominant narrative staying alive.

4. The Foreign Affairs five-futures essay — cooperation dismissed, China's preeminence feared, allied scale against Beijing preferred — reproduces 'precisely the logic of World War I.'

5. Even the FT's jingoistic comment section met Bessent's economic-D-Day op-ed with derision — 'Scotty boy, go back to your hedge funds' — mockery from inside the hegemonic class itself.

6. China is not Kaiser Wilhelm: no war in 46 years and arguably one overseas base, against roughly 750 US bases in 80 countries — the hegemony contest is delusional rhetoric or paranoia.

7. The SCO meeting in Bishkek already outranks the G7 — 42% of world population and 34% of output at purchasing-power parity against 9% and 28% — while the whole Western alliance is perhaps 12% of humanity.

8. Dollar weaponization has a mechanical answer: non-dollar settlement is not hard, China, Iran and Russia have figured it out, and Iran's financial unrest is the lag's legacy — threatening people to make them use the dollar means it is already over.

9. The publics of Europe and America want normalcy — disgusted with the Iran war, uninterested in wars with Russia or China — and that unhappiness, not institutional virtue, is the biggest hope against the next 1914.

• Q

  Is the thread of today's crises really a single thread running back to Washington?

  Alexander Mercouris asked01:44
  A

  Jeffrey Sachs answered

  Sachs frames the moment as a double crisis: a crisis of the United States and a crisis of the West. The core of the US alliance ran the world for two centuries and no longer does — a crisis for them, not for the world, not for our living standards: a crisis of power. The US declared itself sole superpower after 1991 and is programmed — in foreign policy, politics, media — to protect a hegemony that no longer exists. Europe's behavior he finds stranger: it cut itself off from the energy that fueled its economy, and 80 years after losing its empires still has an imperial mentality — a mayor turned prime minister puts on the imperial mantle and heads to Kiev. Multipolarity itself is benign: China's rise is good for living standards, Russia's return good for the world; the zero-sum mindset is the problem, not the facts. The political class answers with angst: grandiosity, no admission of weakness, almost nothing truthful in any government word. The geopolitical bubble has stoked a financial bubble — valuations depend on keeping both alive (Bessent's open hand, Trump's rhetoric, the seven magnificent companies) — while a public that cannot get a doctor's appointment or afford gasoline is dragged along by a class committing the sunk-cost fallacy.

• Q

  After all the misreporting on Ukraine and Iran, what should we understand about where the world really is?

  Alex Christoforou asked26:57
  A

  Jeffrey Sachs answered

  Sachs returns to July 1914: Europe was in a glorious economic and scientific era — no scarcity driving Britain and Germany apart; Keynes's Economic Consequences of the Peace captures the age. The war puzzles historians: no deep reason — two blocs clashed at industrial scale, each expecting a one-month war. After 1815 the concert of Europe kept a hundred years of peace, broken when Kaiser Wilhelm II dismissed Bismarck and built a fleet to rival Britain. Today's anti-China alliance, he argues, rests on reasons weaker even than 1914's near-zero ones: China is not Kaiser Wilhelm. Since 1949 its foreign-policy logic is 'you messed with us for a century — never again'; its economic logic, 'we don't want to be impoverished.' China has fought no war in 46 years (the last: a one-month Vietnam affair, 1979) and arguably one overseas base (Djibouti), against around 750 US bases in 80 countries. Meanwhile the Shanghai Cooperation Organization meets in Bishkek — ten countries, 42% of world population and 34% of output at purchasing power parity, against the G7's 9% and 28% — and Eurasia wants peace and trade. Russia-China is smart complementarity, not convenience; Europe gave it up. Even Iran's image is a cartoon: Persia was the first great multinational empire 2,500 years ago; its officials carry the gravitas of a 5,000-year-old civilization.

• Q

  Why is Iran's economy in crisis, and what would it take for it to take off?

  Alex Christoforou asked43:18
  A

  Jeffrey Sachs answered

  Part of the story, Sachs says, is so-called economic statecraft — part of the American imperial toolkit since the containment of the 1940s, and tremendously enlarged in the early 2000s, when Washington realized it could use the dollar payment system as the enforcement mechanism, not just blockades of technology and trade. Since then the US has weaponized the dollar: confiscating $300 billion of Russian assets or Venezuelan, Iranian, North Korean assets, and imposing extraterritorial sanctions by threatening banks abroad — do any transaction with Iran and your entire dollar-based business is at risk. That is the basis of the sanctions regime and of the economic D-Day idea. What its authors don't understand is that you don't need dollars to settle international transactions; Sachs has himself mechanically advised countries on starting new currencies. It worked for a while because of inertia, but China, Iran and Russia have figured it out, and BRICS can accelerate it. Trump's direct threat — if you don't use the dollar we'll destroy you — shows the fragility: if you have to threaten, you have already lost. A few technicians from China, Russia and Iran getting together could stabilize Iran's currency; the current financial unrest is the legacy of the lag in moving to non-dollar payments.