Trump is more Jimmy Carter than Herbert Hoover
Trump is more Jimmy Carter than Herbert Hoover
Jeremy WarnerWed, June 24, 2026 at 5:30 AM UTC
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Donald Trump has been talking up the prospects of peace for months to keep oil prices down - Getty Images
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Donald Trump was a good deal more candid than we have come to expect from this otherwise most vainglorious of US presidents in announcing last week's memorandum of understanding with Iran.
Far from gloating over "mission accomplished" – it is hard to see it as anything other than a ragged retreat – Trump said that he didn't want to be remembered as another Herbert Hoover, the US president who presided over the stock market crash of 1929 and the subsequent Great Depression.
For reasons I'll outline below, there's actually a reasonable chance that the latest ceasefire might lead to a durable peace in the Middle East – the outcome that more or less everyone of sound mind wishes to see – but that's not the primary reason Trump has settled.
Rather, he was motivated by the possibility of "economic catastrophe". On the sidelines of the G7 Summit in Évian last week, Trump said: "If you kept this going, that could have happened. But all I know is, every time we talked about the possibility of peace, the stock market shot up like a rocket ship."
Trump has been trying to keep the lid on oil prices by constantly talking up the prospect of peace ever since the conflict began last February, and on this he has largely succeeded.
The price of crude never got anywhere near the $200 a barrel some analysts were warning of when the Strait of Hormuz was first closed to shipping. But had the White House gone all in, it might well have done.
America's Strategic Petroleum Reserve is down to just four weeks' supply, Trump admitted. It's a similar picture in other "high-income economies". A massive energy crunch was approaching fast. The global economy quite literally couldn't afford to keep the conflict going.
I can't speak for a major stock-market correction. That might happen anyway, such is the size of the current AI-investment boom and the stock-market mania it has generated.
There are also other signs of top-of-the-market froth, not least trouble in the explosive growth of private equity and credit. Furthermore, there is the spectacle of a US economy sustained not just by the humongous size of AI investment spending, but also by ongoing fiscal deficits of 6pc-plus. This presumably cannot go on forever, yet Trump appears disinclined to do anything about them.
All the same, a repeat of the Great Depression would actually have been quite unlikely, even if the conflict had continued and the world had run out of oil.
This is not just because the economy has become notably less sensitive to oil shocks – as the wars both in Ukraine and Iran have proved – but also because it has to be assumed that the same catastrophic mistakes in central bank policy making that were at the root of the Great Depression would not be repeated.
A bad recession and/or rolling series of fiscal crises would be eminently possible if the oil price were allowed to spiral out of control, but a prolonged depression? One assumes policymakers have learnt from past mistakes.
Looking back on what happened under Hoover, first we had a sharp tightening in monetary policy from the US Federal Reserve to cool the speculative frenzy in the stock market, and then a crippling series of runs in the banking system which the Fed failed to mitigate as a lender of last resort.
Credit and wider money supply are reckoned to have contracted by a third in the following banking bust. Similar errors of policy were mirrored in Europe.
One assumes this is not going to happen again, notwithstanding comments from Kevin Warsh, the new chairman at the Fed, that he wants to substantially reduce the size of the central bank's balance sheet. I imagine he'll be forced into doing the reverse if it comes to it.
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What is more, the banking system is relatively well capitalised after the recent traumas of the financial crisis, and is easily capable of withstanding a prolonged recession. Memories are not so short that the firewalls have been entirely dismantled.
As for Trump's "defeat", a must-read piece in the latest edition of Foreign Affairs by two American academics of Iranian descent, Narges Bajoghli and Vali Nasr, presents a more nuanced view of what's just happened.
"Rather than breaking Iran, the crucible of war has transformed it in unanticipated ways," they observe. The "regime" admittedly remains unbowed and appears even to have been strengthened by Trump's war. In that sense, Trump has paradoxically saved the regime, the very reverse of what he'd intended.
Yet Iran's political hierarchy has also been significantly changed by the experience. The old theocratic leadership, if not entirely gone, has been eclipsed by a new generation of more secular technocrats drawn from the ranks of the Islamic Revolutionary Guard.
In some respects, they are even more hardline and intolerant than the last lot. But they also appear to be more pragmatic and outward-looking. Some even draw parallels with the relatively successful form of authoritarian, Islamic nationalism championed in Turkey by Recep Tayyip Erdoğan.
Unlike Turkey, there is obviously no question of Iran ever becoming a part of Nato; that really would be a turnaround of gobsmacking proportions.
Istanbul, the seat of Turkish commercial power, has also always had a strong association with Europe in a way Tehran never has.
But in its quest for regional domination, Tehran may finally have come to realise that the old ways don't work, and could therefore be more open to accommodation with the West than at any time since the Islamic revolution in 1979.
After eliminating Ali Khamenei, the supreme leader, in his initial bombing campaign, Trump was relatively early in sensing this change. Here, finally, were people he could do business with, was his gut feeling.
This narrative is of course still very early in its formation. There remains every possibility of it going belly up. But it does put a slightly more positive spin on events than the tale of abject American humiliation we see regularly trotted out in mainstream news channels.
In any case, I doubt Trump will go down in history as another Hoover. Another Jimmy Carter, perhaps. But not Hoover. The American economy is altogether less fragile than it was back in 1929, despite the parallels of a speculative stock market bubble.
The wider economy has got a momentum all of its own, and is not about to be knocked off course by an apparent climbdown in the Gulf.
In the end, Benjamin Netanyahu – having badly misled Trump about the vulnerability of the Iranian regime – will do what he's told, and the region will return to an uneasy calm.
Most damaged by the misadventure of the past four months are the other oil-producing nations of the Gulf. The world has been forced to find ways of living without Gulf oil. Return to the ex anteseems unlikely. As the International Energy Agency observes, today's oil supply famine is about to turn into tomorrow's glut.
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Source: “AOL Money”
