Trump is clutching at straws and the world knows it

The Trump administration is hallucinating again. The United States’ “economic D-Day” against Iran will exhaust political consent in Washington for this ill-conceived war long before it forces Iran’s Revolutionary Guard to capitulate.

It draws out the spectacle of Donald Trump’s aimless flailing in a region that neither he nor his close advisers begin to understand, further convulsing the global energy, food and commodity markets and further eviscerating US strategic credibility.

The plan to mount the “single greatest financial offensive ever marshalled against an adversary” requires also mobilising China, Russia, India, Turkey, a resentful Europe and the world’s major financial centres in a joint campaign to throttle Iran, a country that has already learned to live with 2200 separate US sanctions.

The US Treasury could plausibly have pulled off such a feat 10 to 15 years ago, when it was able to crush nations by the “boa constrictor” method, using all the tools of the world’s dollarised financial system. But that supremacy relied on a tight-knit phalanx of democratic allies – or what we used to call the West. Such a world no longer exists, and China cannot be pushed around any longer .

US Treasury Secretary Scott Bessent has threatened the economic obliteration of any country that declines to enlist as foot soldiers in America’s quarrel.

“If you insist on doing business with them – either transferring money, buying their oil, doing seaborne ship transport – the US government will put its full might and force toward enforcing against you,” he said.

Such hubris is courting fate for a nation that depends on constant inflows of capital from these same countries to fund its twin deficits and that already has to pay punitive interest rates to sell its bonds.

The US Treasury made a Faustian pact by issuing so much short-term debt. The trap is closing. Bessent must roll over or fund almost $US6 trillion ($8.4 trillion) every three months in a hostile market. The budget deficit was $US432 billion for the single month of July, up 48 per cent from the year before.

Trump has a solution for this and a warning for any bond investor who declines to feed his appetite. “We have many types of intervention. The ultimate intervention is our military. And if we have to use that, we will,” he said.

Does he intend to parachute the 101st Airborne into London’s Canary Wharf and Singapore’s harbour district to cart off pension fund managers in shackles for interrogation at Guantanamo?

It is normal to dial up pressure by starting with economic sanctions before escalating to killing people. Everybody can see that Trump is doing it the other way round because killing has comprehensively failed.

The world can see that the US is overstretched, lacks sufficient military power to enforce its will, has exhausted two-thirds of its Patriot interceptors and “virtually all” its surface-to-surface (ATACMS) missiles, and has denuded its defences in the Far East. It can see that the US lacks the stomach for a full ground invasion of Iran and anything short of that is whistling in the wind.

Iran can see all of this too.