{"id":341482,"date":"2026-03-22T00:51:27","date_gmt":"2026-03-22T00:51:27","guid":{"rendered":"https:\/\/www.newsbeep.com\/nz\/341482\/"},"modified":"2026-03-22T00:51:27","modified_gmt":"2026-03-22T00:51:27","slug":"worse-than-2008-resilience","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/nz\/341482\/","title":{"rendered":"Worse than 2008? – resilience"},"content":{"rendered":"

Several commentators have remarked that the United States\u2019 war on Iran carries echoes of 2008<\/a>. I\u2019ll argue here that a potential financial crash this year could actually be much worse.<\/p>\n

The Global Financial Crisis (GFC) of 2008 was the biggest economic crunch since the Great Depression. Unemployment surged, topping 10 percent in the US. Global stocks lost trillions of dollars in value. Major brokerage houses collapsed. The US auto industry only survived thanks to enormous government bailouts. How could another crash top that?<\/p>\n

Consider the causes. The 2008 Great Recession resulted from a confluence of three factors:<\/p>\n

Failed US wars in the Middle East, in that instance against Iraq and Afghanistan. Many economists argue the Iraq and Afghanistan Wars contributed to the GFC<\/a> by fueling massive American budget deficits and worsening trade imbalances, and by creating a \u201ccapital flow bonanza\u201d that triggered the US credit boom. While not the sole cause, the war compounded the vulnerability of the US economy.<\/p>\n

Soaring oil prices, following the plateauing of world conventional oil production in 2005. Oil demand continued to rise but the global supply of oil did not follow suit. On July 11, 2008, crude prices hit $147 per barrel, their all-time high. Since the economy runs on energy and oil is the world\u2019s most important energy source<\/a>, oil prices have a way of impacting all industries. Financial markets crashed three months after the oil-price peak.<\/p>\n

A bursting financial bubble inflated by subprime mortgages in the US and financial derivatives traded worldwide. The mortgage bubble<\/a> involved\u00a0$1.3 trillion to $1.5 trillion\u00a0in high-risk loans issued during the 2000\u20132006 housing boom.\u00a0It was a house of cards waiting to tumble.<\/p>\n

The resulting unwinding of debt and derivatives came within a hair\u2019s breadth of turning into a massive bank run and general economic collapse. Governments (led by the US) bailed out industries and banks, lowered interest rates to zero, purchased large tranches of financial securities, and instituted enormous fiscal stimulus programs and tax cuts. Even with these rapid and maximum-scale efforts totaling hundreds of billions of dollars, the GFC led to widespread housing foreclosures, a near-40-percent downturn in the S&P 500, and a substantial increase in the poverty rate.<\/p>\n

\"\"<\/p>\n

Now consider the following:<\/p>\n

Today\u2019s AI financial bubble is four times bigger<\/a> than the subprime mortgage bubble of 2008 and 17 times bigger than the dot-com bubble of 2000.\u00a0<\/p>\n

The Iran war, though so far not involving US ground troops, could possibly end up being more problematic than the Iraq invasion of 2003, if only from the standpoint of flows of energy and international trade. The war is likely to result in real oil shortages<\/a> and prices potentially even higher<\/a> than those seen in 2008.\u00a0 Additionally, more of the Middle East is now involved in hostilities, and oil and gas production and shipment infrastructure is being damaged or destroyed<\/a>, thereby undermining the long-term economic prospects of the region, as well as destabilizing its politics. No one knows how this will end.\u00a0<\/p>\n

For the US economy, warning signs were already flashing<\/a> before the war: stubbornly high inflation, a bad jobs picture, and worsening consumer sentiment were indicators of a looming recession.\u00a0<\/p>\n

The final factor can be stated as a question: Would today\u2019s US Treasury head be as successful at averting financial doom as was Henry Paulson in 2008? Then, the US was able to enlist government and business leaders from the world\u2019s key countries cooperate in fashioning a collective survival strategy. Would current US Treasury Secretary Scott Bessent have similar success, given the recent global collapse of trust in US leadership<\/a>?<\/p>\n

In view of the possibly catastrophic consequences of the attack on Iran, many people wonder what motives could have justified it. Logan McMillen argues in Foreign Policy in Focus<\/a> that the so-called \u201cDonroe Doctrine\u201d intends to freeze China out of the Western Hemisphere and to deprive it of cheap energy:<\/p>\n

\u201cThe strategy is entirely zero-sum. By turning the Middle East and the Caribbean into militarized chokepoints, the United States is\u00a0suffocating China\u2019s independent oil supply lines<\/a>, starving its industrial capacity while guaranteeing temporary windfall profits for Western supermajors. Concurrently, from the\u00a0lithium flats of Bolivia<\/a>\u00a0to the\u00a0ports of Peru<\/a>, Washington is deploying right-wing proxies and military coercion to systematically dispossess Chinese capital in Latin America, re-colonizing the Andes to secure the supply chains of the twenty-first century.\u201d<\/p>\n

Other commentators see the war as being spearheaded by members of the Christian Zionist movement<\/a>, which desires a fulfillment of biblical prophecies of the battle of Armageddon and the return of Jesus.\u00a0<\/p>\n

Even if McMillen\u2019s analysis is sound and there is an arguably rational motive behind the war, that doesn\u2019t mean the campaign will go according to plan or that it will achieve its aims. Many analysts see it already careening off the rails<\/a>.<\/p>\n

It\u2019s too late to prevent the inflation of an AI bubble or to advise against a US attack on Tehran. At this point, the most we can do is to hope for a quick end to the war and for some improvisational brilliance among the world\u2019s leaders of government and finance.\u00a0<\/p>\n

Meanwhile, it would be smart to make whatever preparations you can. For folks in the northern hemisphere, it\u2019s time to start planning this spring\u2019s food garden. You might want to plant a few more rows of beans than you do most years, so you have enough to share with neighbors.<\/p>\n

Featured image via Adobe Stock.<\/p>\n","protected":false},"excerpt":{"rendered":"Several commentators have remarked that the United States\u2019 war on Iran carries echoes of 2008. I\u2019ll argue here…\n","protected":false},"author":2,"featured_media":341483,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[138,219,111,139,69],"class_list":["post-341482","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy","tag-new-zealand","tag-newzealand","tag-nz"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/341482","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=341482"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/341482\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/341483"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=341482"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=341482"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=341482"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}