{"id":4726,"date":"2026-08-14T11:37:17","date_gmt":"2026-08-14T11:37:17","guid":{"rendered":"https:\/\/nextaddressamerica.com\/?p=4726"},"modified":"2026-08-14T11:37:17","modified_gmt":"2026-08-14T11:37:17","slug":"trumps-inflation-time-bomb-is-about-to-go-off-nobel-economist","status":"publish","type":"post","link":"https:\/\/nextaddressamerica.com\/?p=4726","title":{"rendered":"Trump\u2019s inflation time bomb is about to go off: Nobel economist"},"content":{"rendered":"
\n

On Thursday, Nobel Prize-winning economist Paul Krugman warned that President Donald Trump has set a ticking inflationary time bomb that is about to explode. According to Krugman, while the very worst of the economic shocks caused by the war with Iran have so far been held at bay, the evidence suggests that is about to change. <\/p>\n

Read more Psychologist explains America\u2019s raging obsession with \u2018Doomsday scenarios\u2019<\/a><\/p>\n

As Krugman explains<\/u>, \u201cTrump is not a well man. He is, unfortunately, also President, which means that we all pay a price for his inability to accept reality. Notably, while he insists that he has \u2018total control over the Strait of Hormuz,\u2019 shipments of oil through the Strait will remain minimal unless Trump can find a way to smuggle oil out in catering carts \u2014 or until he makes a deal with Iran. And we won\u2019t have such a deal until he faces up to the reality that he lost his war of choice. The Hormuz closure means, in turn, that oil prices \u2014 which briefly fell most of the way back to prewar levels on hopes that a deal was really coming \u2014 will remain high for the foreseeable future.\u201d<\/p>\n

But as Krugman points out, the fact that oil prices aren\u2019t even higher than they are now has puzzled many. While they\u2019re still elevated, they\u2019re down from their peak earlier in the war, and while the price has been marching back up recently, it\u2019s still \u201conly\u201d $25 above pre-war levels. According to Krugman, however, oil prices are actually higher than they seem, and this becomes clear if you look at the right numbers. <\/p>\n

\u201cSo,\u201d writes Krugman, \u201cwhat do I mean by looking at the right numbers? Nobody burns crude oil directly. Instead, they burn products refined from crude, mainly gasoline and diesel. And these prices, after falling for a while on fake news of peace, are back most of the way to their recent peaks.\u201d Here Krugman notes the example of diesel prices, which have nearly reached the point of their early-war high. <\/p>\n

Read more New court battle reveals Trump\u2019s slush fund far from dead: expert<\/a><\/p>\n

According to Krugman, the difference between the cost of a barrel of crude and that of the products refined from that barrel is known as the \u201ccrack spread,\u201d and since the beginning of the war, that spread has \u201cexploded,\u201d rising by roughly $35 per barrel. That\u2019s outpacing the cost increase of the barrels themselves. That results in a total cost increase of roughly $60 per barrel, \u201cputting it in the range of middle of the road predictions of what would happen as a result of a long-term Hormuz closure.\u201d<\/p>\n

Krugman explains that the crack spread has widened due to a combination of the closure of Hormuz and the Russia-Ukraine war, which have diminished global refining capacity. \u201cThe shortage of refining capacity has, in turn, held crude prices down,\u201d writes Krugman. \u201cBuyers aren\u2019t willing to pay extremely high prices for crude oil they can\u2019t refine. Or to put it a different but equivalent way, the cutoff of oil shipments through the Strait of Hormuz in effect required a large rise in global oil prices to ration demand, but much of that rationing has taken place through a rise in the crack spread rather than a rise in crude oil prices.\u201d<\/p>\n

The wider economic impact of this, asserts Krugman, is inflation, which has so far been kept relatively low. But inflation \u201cis set to rise again in next month\u2019s data. And everyone can see that gasoline is back above $4 and diesel back above $5.\u201d<\/p>\n

Read more \u2018Reckless\u2019 Trump putting himself and troops in danger: ex-Army commander<\/a><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Nobel Prize-winning economist Paul Krugman warned that President Donald Trump has set a ticking inflationary time bomb that is about to explode.<\/p>\n","protected":false},"author":1,"featured_media":3393,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":["post-4726","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"yoast_head":"\nTrump\u2019s inflation time bomb is about to go off: Nobel economist - Next Address America<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/nextaddressamerica.com\/?p=4726\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Trump\u2019s inflation time bomb is about to go off: Nobel economist - 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