Jeffrey Sachs on how the wars against Russia and Iran are accelerating Western economic decline
Glenn Diesen interviews economist and professor Jeffrey Sachs on the economic and geopolitical consequences of US and Western policy toward Russia and Iran.
Summary
Glenn Diesen interviews Jeffrey Sachs on August 24th, 2026, discussing how the wars against Russia and Iran — and the broader hegemonic mindset driving them — are accelerating economic decline in the United States and Europe. Sachs argues that oil prices have surged from the mid-$60s to the $90s per barrel following the February 28th US-Israeli attack on Iran, with potentially far higher prices ahead, while direct war costs will run into the hundreds of billions. He contends that Treasury Secretary Scott Bessent is unqualified and operating as an enforcer of economic coercion rather than a steward of the American economy, and that his announcement of "economic D-Day" against Iran is being met with open mockery even in the Financial Times. Sachs warns that the US is sitting atop a massive financial bubble driven by AI stock valuations that are historically out of line with any norm, and that this bubble is likely to burst as China matches and undercuts American technology open-source. He identifies three possible futures: catastrophic world war, a European awakening that leads to a negotiated peace, or — most likely — the West paralyzing itself while the rest of the world moves forward.
Key Takeaways
FULL TRANSCRIPT
Introduction and the economic cost of the wars against Russia and Iran
Glenn Diesen: Hi everyone and welcome back. Today is August 24th, 2026, and we have the great pleasure of being joined by Professor Jeffrey Sachs. Let me first thank you for coming back on the program. I've been wanting to ask you — we know that the United States and Europe are already burdened with troubled economies and a weakening financial system. I wanted to ask to what extent the wars, primarily against Russia and Iran — which has now widened, of course — are accelerating this economic decline of the West.
Jeffrey Sachs: The wars and the mindset behind them are definitely leading to a kind of economic dead end that neither the United States nor Europe appreciates or really understands what they're getting into. Europe sees it more immediately because Europe is clearly in an economic crisis right now. The United States is still somehow in a bubble floating above the immediate economic crisis, but it's in no better shape in the longer term.
The wars themselves have direct consequences. Oil prices went from the mid-$60s per barrel before the February 28th attack on Iran by the United States and Israel to somewhere in the $90s today for the Brent benchmark. Those prices could go much higher. That signals a great difficulty for the whole world economy — even for oil-exporting countries, which use oil in their own production and are therefore facing great threats in agriculture, in soaring fertilizer prices, soaring prices for petrol at the gas pump, for electricity, for all parts of the economy and the household sector. The scarcity created by the war — cutting off the Strait of Hormuz, reducing production in the oil-rich Middle East — has very serious immediate consequences.
The war is extremely costly. How costly it is in direct outlays is much debated, but it's certainly going to run into the high tens of billions and probably the hundreds of billions of dollars for the United States alone, not to mention the catastrophic damage being incurred in the fighting in the region. So the direct consequences of the war are very serious.
But the mindset I referred to is even more serious. The reason we're in these wars is basically because the United States and Europe are determined to maintain their hegemonic prerogatives. For centuries, the West — mainly the empires of Europe, and from the late 19th century the United States — judged that they effectively run the world. Mr. Bessent, our Treasury Secretary, who is a sheer vulgarian, the worst imaginable that we've ever had, basically says in the Financial Times today: we run the world. We determine who does what. We determine who trades. We will destroy whichever countries we want. That's the mindset.
That mindset is at work in Ukraine. It's at work in the genocide in Gaza. It's at work in the war against Iran. It was at work in the kidnapping and confiscation of Venezuela's oil revenues earlier this year. The mindset is: we run the world. Yes, it's a little bit nasty because there are these pesky wannabe challengers like Russia, Iran, or China that don't want us to run the world — but effectively we run the world and we're going to tell the world what to do.
That mindset is so outdated, so absurd, so delusional that it drives a set of policies — not only the war, but trade measures, protectionism, and so forth — that are leading the West not only into relative decline as these other places rise, but perhaps serious absolute decline at some point. All of the claims made for hegemony and all of the overreach are leading to a buildup of burdens fiscally, in terms of debt, in terms of claims on trade, in terms of cutting off economic linkages around the world — including now the trade war between the United States and Canada, for God's sake, which was launched just two days ago. I think that will put both Europe and the United States into very serious economic crisis in the coming years.
Again, Europe is in a crisis right now. The United States is in what I would regard as a massive financial bubble due to the AI valuations and the stock market, which keep things afloat for the moment. But it's a bubble that I think is going to burst.
Europe's failure of strategic independence
Glenn Diesen: It's kind of strange — the commitment to this hegemonic mindset — because for so long the Europeans, or the EU, had the objective of pursuing strategic autonomy, of having more independence from the US. You would think that with the rise of all these other centers of power, the EU has the possibility to diversify its foreign partnerships as a path towards having more autonomy. But instead they appear quite panicked about the traditional relationship with the US falling apart — no economic model, no geopolitical model. So many now look with optimism toward military Keynesianism and what I guess they call the geopolitical EU. Do you see any future in this, or is it a temporary solution? I find it — and I often point out I'm a European — very difficult to understand the strategic thinking.
Jeffrey Sachs: Europe is making the greatest blunders of all. The fundamental blunder is that Europe believes that eventually the US will come around, be its best friend, and that together they will ride off into the sunset as the world hegemon. So Europe is dreaming of the past, with a crop of politicians who are either those cultivated by the US for decades — because it was very hard to rise in Europe as a truly independent voice — or those who are, as you say, just scared of the Russian bear and have thrown everything in their lot with the United States, even though the US is now, in practical dealings, much more of an enemy of Europe than Russia would ever be. Russia is actually a European power and has natural affinities to normal relations with Europe, if Europe would understand that.
We've never seen a period of such incoherent and weak leadership. I puzzle because I know some of the leaders. I've known the Prime Minister of Norway for decades. I don't understand what he says or believes now in Norway's interest. It's all NATO from morning till night. It's all pro-Trump, all pro-United States. How can this be, from such an intelligent individual, someone I've liked for a long time? It makes no sense.
What about Poland? I dealt with Poland for a long time at an intensive level, helping them in their economic transformation in the 1990s. They're Russophobic to the core over several centuries — yes, but get over it and understand your realities. The Baltics are even worse. What's the puzzle of Europe is frankly the core of Europe. Germany has reverted to militarism. France is under the weakest and most incoherent leadership in modern times. Italy doesn't even act as a major strategic thinker in all of this. So there's no core in Europe guiding it in a sensible direction. The frontline states to Russia are one and all purely Russophobic and have no sense of the wider world at all.
And when a brave politician stands up and tries to say, "Could we get our act together?" — like Pedro Sánchez of Spain, whom I admire very much — immediately the US deep state turns the screws on, and suddenly his wife is under investigation for corruption, his political advisers are suddenly under investigation. These are games. This is not some serious independent judicial process. These are games played by the American CIA, by the deep state, against politicians who step out of line.
But the point is Europe should understand this. It's 450 million people. Europe's interests are completely different from the United States. Europe lives with Russia, so it needs to understand that Europe actually thrived after 1991 with the economic relationship between Western Europe and Russia. The facts are overwhelming that the United States feared the deepening relations between Germany and Russia and viewed it as a strategic matter to make sure those relations did not warm up too much, because that would leave the United States out in the cold. Why don't the European leaders understand this most basic reality? Why don't they understand that their home is actually in Eurasia — the giant landmass that connects them with China? To follow the US lead in some anti-China rant and rhetoric is absurd. Every leading European business understands that. But in Brussels, they don't.
I understand my own country better. The United States is just throwing everything into the ultimate failure of being the hegemon. It felt at the end of the Cold War that it was confirmed in that role as the indisputable world leader. All of this was hubris to the nth degree. These people don't get out and actually see the world or understand what's happening. They certainly had no understanding of China — a remarkable civilization that rebounded after a little more than a century of imperial depredation starting from Europe, the United States, and Japan. They didn't understand China's recovery to its normal place in the world, seen from a world-historical perspective. And now they're flailing around: "Hey, we're supposed to be number one. We're launching economic D-Day. We tell countries what to do. We bomb Iran to the stone age if we want." These people are so foolish, so ignorant, that they're driving the United States in the longer term into the ditch or over the cliff the same way.
Europe knew better — that's what's surprising to me. European leaders, if you canvassed them in 2000 or 2005 or on the first day of the Bucharest NATO summit in 2008, understood what was happening. The United States is trying to drive them into conflict with Russia. This isn't good for Europe. Europe wants Nord Stream. Europe wants the economic connections with Russia. They knew all of this. I knew these leaders. We talked about this.
Now you don't hear a word about it. And if you say what I'm saying or what you say, you're branded as a Putin apologist, as saying something bizarre. But what we say every day, Glenn, was said by Merkel up to the first day of the NATO Bucharest summit: "This US approach is going to lead us to war." Your prime minister today knew how dangerous this approach was back in 2008. I spoke to these leaders. They understood Europe was different from the United States. They thought the war in Iraq was a disaster made on propaganda and lies — which it was. French leaders said no, we're not going to do this. German leaders said we're not going to do this. You had Schröder, you had Kohl, you had Merkel up to a point — a European line. Now what do we have? Nothing. Incoherence. And the result is a growing economic crisis and a growing geopolitical crisis, because honest to God, Europe is almost deliberately talking itself into open warfare now. Total suicide.
Glenn Diesen: I always find it interesting how this shift ended up happening, because as you said, what you're saying now was common sense. You had — the Wikileaks files showed as well — the French ambassador, the German ambassador warning that this could push Ukraine into civil war, that it does not have support from the public, that the Russians might intervene. The next US CIA director, Burns, put this in writing. And you heard the same rhetoric from state leaders — and suddenly now it's treated as crazy talk or Russian propaganda.
The JCPOA, Iran, and European silence
Jeffrey Sachs: I would say the same with Iran. The European leaders knew in the early 2010s that we could negotiate peacefully with Iran. The European leaders pressed for the Joint Comprehensive Plan of Action, the JCPOA, which became a treaty between Iran and the P5 countries of the Security Council plus Germany. European leaders understood all of this and wanted the United States to engage in diplomacy, and they cheered Obama when he did.
So what's incredible, Glenn, is that when the United States ripped up this agreement brazenly in 2018, the Europeans said nothing. The European leaders didn't say, "What is the United States doing? We continue. Iran is in compliance with the International Atomic Energy Agency. This is unjustified." European leaders just went silent, bowing down to daddy — as Mark Rutte has memorably called him.
The European leaders were absolutely unwilling to speak a word of the truth. They have known the United States broke the agreements, not Iran. The JCPOA would have stopped what Iran said it didn't want anyway — any potential towards nuclear arms, which by fatwa Iran had already ruled out. It did not want to create a mess in its own region with that. The European leaders knew this. But when the United States reverted to this attempt to crush Iran — first economically, then by bombs, and then in the economic D-Day launched today by Bessent — where are the European leaders? Where is one of them, other than Pedro Sánchez, saying to the United States: "Are you kidding?" Not one of them.
But I'll tell you one thing that's interesting. If readers look at the Financial Times today and can get behind the paywall to read Scott Bessent's absurd column, look at the comment section. It's quite stunning. Generally the Financial Times comment section is pretty jingoistic, pretty hardline. This day it is mockery of the United States, mockery of Bessent, mockery of the economic D-Day. It's not even saying it's wrong or misguided — it's sheer mockery. "Bessent, go back to your hedge fund. You're in way over your head. You're completely incompetent. Scotty boy, you don't know what you're doing." One after another.
So it's an absurdity. But where is one European leader standing up and saying, "No, the United States cannot announce an economic D-Day to crush another country, because that's illegal, it doesn't work, and it will bring the whole world economy into further disarray"? I'm waiting for one European leader. How about your prime minister — the Norwegian prime minister, a very rational man? Why doesn't he stand up and say, "No, we don't talk this way. We don't operate this way in the international scene, because that will actually bring us to doom"? So far I haven't heard one leader. But I take some solace in the comment section of the Financial Times. Maybe that's a little bit of relief.
Glenn Diesen: I often speak with Colonel Lawrence Wilkerson, who reflects on his time in the White House and explains how they worked very hard to push the right European leaders into position, and whoever would speak against Washington or grow a spine would be removed fairly quickly. They had a big system working with political incentives, NGOs, think tanks. But regarding Bessent —
Jeffrey Sachs: Just to say, by the way — I asked a prime minister of one of the major countries back in 2023: "The Ukraine war is absurd, it's a dead end. Why don't you say something in Washington?" And he said to me, "Jeffrey, they treat us like children in Washington." Then we were in a room and suddenly the meeting started, so I didn't get a follow-up. But I have thought ever since — three years onward — how could a leader of a major country of Europe allow himself and his colleagues to be treated as children, and take that as an explanation for why you don't speak up in Washington? It's stuck with me very painfully. But I think it is basically what we see right now.
I was going to mention — I think we may have discussed it — the day that Iran was attacked, there was an emergency UN Security Council meeting in which the Iranians, the Chinese, the Russians, among others, asked me to testify. The British were in the chair. They ruled me out of order. So I was not allowed to testify that day. But I sat in the chamber.
And the day that the US and Israel bombed Iran, every one of the European ambassadors — the French, the British, the Greek, others — attacked Iran. "How dare you do this? How dare you strike back at Bahrain?" Not one of them had the gumption to say that a blatant war of aggression and the assassination of the leadership of a country of nearly 100 million people — and a religious leader at that — is not part of our international law. And this was in the chamber of the UN Security Council.
So we're in this absolutely remarkable parallel universe where we do not hear an honest utterance by the European political leaders or by the United States. We know that every utterance is not only irrational and maybe farcical, but is a lie on top of it.
Glenn Diesen: I wish that, now that the hegemonic era is coming to an end, our leaders would have been able to exit a bit more gracefully and transition into some more stable multipolar system where they at least preserve the rules of international law, international finance, and trade. But it appears that everything is being burned down upon their exit, which is kind of my concern.
Three possible futures for the West
Jeffrey Sachs: There are several ways things can unfold. One is complete disaster — a World War. It's not impossible. Some say it's already started. We have the psychologically most unstable leadership in the United States that we've ever had in our history, and the fewest real checks and balances that we've ever had. So that's one possibility.
A second possibility — though it's not happening — is that one or two European leaders in major countries wake up and say, "We have to do something different." It's probably not going to happen under the current personalities of Von der Leyen, Merz, and Macron, but maybe in a year there's different leadership and they say, "Come on, this is not the way. We don't actually want to go to war. We don't want to be nuked. We understand the deeper history of this conflict, which shows that there is a mutually satisfactory way out based on Ukraine's neutrality" — which was the available solution for more than 30 years, the one that was on the table for more than 30 years, and the one that the US rejected during this whole period.
A third possibility, which I regard as perhaps most likely, is that we avoid the worst of world war, we don't have any kind of European renaissance — which I deeply hope for — but that the rest of the world, the so-called emerging and developing economies, the EMDEs, which is 85% of the world population — including China, India, Russia, Brazil, the BRICS countries, the African Union countries, the 54 nations with 1.5 billion people — that that part of the world, the non-hegemonic part, the world that was subject to Western hegemony for 250 or 300 years, goes on peacefully. What happens is the West — ungracefully, undignifiedly, embarrassingly, revoltingly, sadly, unnecessarily — paralyzes itself and protections itself into stagnation or decline, but the rest of the world goes forward.
I think that is really a possible scenario, and it's a kind of more hopeful, rather practical scenario. It's not the optimum. The optimum is Europe wakes up, the United States wakes up out of its 30-some year delusion, and we actually get on with multipolarity and with decency and peace — because not one of these wars in any sense had the slightest merit, or was even difficult to avoid or difficult to stop. That's true of every single one of the wars raging right now.
Glenn Diesen: I think at some point change will be forced upon the Europeans, because you can only have energy so expensive, so much de-industrialization, so much more debt coming on. Meanwhile, if you look in other parts of the world, they're having robotic Olympics now in China. The contrast is becoming so great that you can't keep this going for so long. At some point reality has to inform your policies.
I want to ask about Bessent, because you mentioned him before. He recently stated that he can't understand why oil prices are going up — he made this comment after Trump announced the economic D-Day against Iran, which would essentially shut down all energy in that part of the world. And his response to the $40 trillion debt the USA is now in is not cutting costs but that the US will grow its way out of this. It doesn't give a lot of room for confidence or competency, for that matter.
I was wondering where you see all of this headed, because you can say higher oil prices mean the US can make some more money, but if the Gulf states are going into deep problems or any other allies and they have to start selling US bonds, things can go south very quickly. That made me think about what Trump said — that he would intervene in the bond market and included the military as an instrument. I really wanted to know what he meant by that, and where is this going, because I feel like things are being put into motion which are beyond their control now.
Bessent, the financial bubble, and the dollar's future
Jeffrey Sachs: First, with Bessent. Bessent is a hedge fund manager whose claim to fame was the attack on the British pound. He is not in any remote way qualified to guide a $30 trillion economy. He shows no interest whatsoever and no knowledge whatsoever of the US economy — certainly of the real economy, where people work, how they live, what the economic needs are. He is by far the weakest Secretary of the Treasury in modern history. He's there as an enforcer — a gangster mentality — to enforce Trump's thuggery. His main rhetoric since becoming Treasury Secretary is which economies he will destroy: how to make an economic D-Day, how to break the Iranian currency, how to crash the Venezuelan economy. He's an enforcer, a kind of gangster. He may know a little bit about that, but I don't see any awareness, knowledge, or — I may emphasize — interest in the actual American economy: jobs, productivity, well-being of the American people, cost of living, or anything like that.
As I say, at least he's become an object of mirth and derision in the financial community, if you read the comments of the Financial Times today — not of fear and trembling, not of indignation or support, but of derision. Nothing else. One derisive comment after another.
Now, when it comes to the more general situation of the US in all of this, there are several underlying realities we should keep in mind to try to add up the overall picture.
First, the US economy itself is a bifurcated economy. There is a cutting-edge high-tech AI digital economy which commands vast market valuations and induces a lot of capital investment in data centers and so forth. And then there is the rest of the US economy. The manufacturing sector, which Trump featured so much in his claims about what he would rebuild, has lost around 80,000 jobs since Trump came into office. There's no life there. The US auto industry is basically going into senescence because it's an old internal combustion engine industry in the age of electric vehicles, and it will survive — if it survives — only based on sheer protectionism. So the economy has some dynamic cutting edge, no doubt, but it has a vast part that does not function at all well. The infrastructure is broken down. The rail system barely functions anymore, at least for passenger rail. The lives of average Americans are very difficult and being squeezed more — not difficult on a global scale, but difficult relative to their expectations and even to their recent past. Nothing that the Trump administration is doing has any positive bearing on any of that reality for the majority of Americans.
Second, fiscal policy. We have been in the era of tax cuts since the 1980s. Ronald Reagan, 46 years ago, showed that it was politically successful to promise tax cuts. Since that time, both parties have basically been on a tax-cut binge. This has led to a US debt which is now $40 trillion, well above 100% of GDP. The part that's publicly owned rather than intragovernmental is at about 100% of GDP, and the interest costs are rising because interest rates are rising.
Third, the rest of the world understands this. So they are diversifying out of the US dollar and out of dollar foreign exchange reserves. Our interest rates are rising. Our 30-year bond rates, which have reached about 5.3 percentage points, are now at a high for the last 20 years, and those interest rates will continue to rise.
Final point: the stock market has soared in the last 10 years basically on the AI valuations — the so-called Magnificent Seven. The US stock market valuation is around 240% of US GDP. That's not impossible if the US were to have super-fast future growth and huge profits and all the rest, but it is historically completely out of line with any kind of historical norm. To my mind, it adds up to a mega financial bubble.
One more point: this massive AI valuation — which is like the dot-com bubble we had before and other bubbles we had before — is not only out of line with historical norms but is predicated on the idea that it's America's Magnificent Seven that will rule the world. Whereas I was just in China two weeks ago. Sorry, boys, but China is matching you and advancing you in most areas, and doing it open-source and undercutting you. There was a story yesterday about how Anthropic, with its excellent version five models, can't get customers now because they're turning to free open-weight Chinese models.
All of this, Glenn, to my mind, points to a massive financial revaluation sometime in the next few years — a very serious one, a very serious retrenchment. That could come in a long period of stock market decline or it could come in a crash, depending. But one of the things Trump has done is to stoke the bubble. He's basically a bubble maker. He's a showman. He wants the whole government apparatus to raise financial wealth — that's his metric. He wants the Fed to do that. He wants Bessent to do that through these bizarre Treasury interventions in the bond market. He wants to do that through his showmanship and his bravado. A lot of the bravado that "we run the world" is basically the bravado to underpin a financial bubble. As that bravado is increasingly met with derision in the rest of the world, the United States is setting itself up for a massive financial reversal, and it won't be pretty.
Glenn Diesen: Just very briefly — I see that Scott Bessent has also made the comment that Venezuela will now sell its oil in dollars, that after the Iran war the Iranians will also be forced to sell their oil in dollars, and that even Russia after the war will likely return to selling in dollars. None of this — well, except for Venezuela — appears to be going to play out.
Jeffrey Sachs: By the way, I'm a monetary economist — that's my training and my practice for 46 years. That claim is absurd, because there's nothing that keeps the world stuck to the dollar. And that's increasingly true because the technology, the means of alternative payment systems, the actual implementation of alternative payment systems like the Chinese interbank payment system, CIPS, absolutely mean that what Bessent says is preposterous. That's just another point — they're talking their bubble, and the bubble's going to burst.
Glenn Diesen: Well, thank you so much for taking the time. I know you've been away for a while and you have a lot of full days ahead of you. So thank you for the time.
Jeffrey Sachs: Great to be with you. Thanks so much.