I’ll be very brief, both because we have very incomplete info on this and because I don’t like to veer too far from my political-economy lane. But one theme of this Substack is to track a point I made at its inception: incompetent leadership has stark consequences.
If what we’re hearing about the negotiations to end the war is correct, then everyone from policymakers to pundits to voters—especially voters—must ask the questions “What was that for? What did thousands of people die for? Why did the global economy have to undergo a massive disruption, elevating prices and interest rates? Why did the US have to further lower its international stature by not only getting dragged into this war, but by not winning it in any recognizable way?”
The answer cannot be regime change or, at least based on what we know, any thwarting of Iran’s nuclear aspirations. From the New York Times on Sunday:
Publicly, both the American and Iranian officials emphasized the concessions they hoped to secure. Mr. Trump said the deal would reopen the Strait of Hormuz, a vital waterway for oil and gas supplies, which Iran has effectively blockaded during the conflict, spurring a surge in global energy prices.
The Iranian officials said the deal Tehran had agreed to would reopen the Strait of Hormuz without any tolls; lift the U.S. naval blockade on Iran; stop the fighting on all fronts, including between Israel and Hezbollah, the Iran-backed armed group, in Lebanon; and release $25 billion in Iranian assets frozen overseas.
Also, this: “The future of Iran’s nuclear program, part of Mr. Trump’s case for launching the war, was unclear.” Summarizing conflicting reports, it appears that they’re going to table the issue for 60-90 days.
If this information is correct, then one narrow point that’s interesting to me is an answer to “why now?” might very well be the bond market. Back in April of last year, when bond yields spiked in response to Trump’s “Liberation Day” tariffs, he quickly backed off. I suspect the recent spike in bond yields is in the mix here as well.
But the real developing story here is that we may be looking at a deal that basically trades reopening the Strait—returning it to pre-war conditions—for economic sanctions relief and the end of our naval blockade.
If that’s even roughly correct, then this whole debacle must not be allowed to fade into the rearview mirror. It must be held up as the deeply costly blunder that it was, one whose accountability extends well past Trump, on to his Congressional enablers.
Stay tuned for further analysis. I’ll also be watching out for evidence of insider trading, which seems to accompany such developments these days. The depth of the incompetence is only matched by the depth of the corruption.
Jared Bernstein is a former chair of the White House Council of Economic Advisers under President Joe Biden. He is a senior fellow at the Council on Budget and Policy Priorities. Please consider subscribing to his Substack, from which this is reprinted with permission.
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