Thread: The effects of a US / Iran war or terrorism on a shaky economy?

I would guess any company that depends on oil would go directly to bankruptcy (ie airlines) green technology developer companies would see skyrocket their shares...

Anyway, without getting too political about this, I can't see any more war on terrorism in the near future...

Speaking strictly from a U.S. perspective (I imagine there are non-U.S. folks reading this), most economists are predicting slowing growth in 2008 (~1.8 - 2%), with inflation potentially on an inflection point.

So, I could imagine any major political or economic crisis could easily swing the pendulum towards recession and have major impact on the local (U.S.) and potentially the world-wide economy.

One question I am just wondering from a purely economic standpoint is why do they need to issue debt to fund the war? I mean U.S. military spending is at most 4% of GDP right now. Is the Federal government not giving enough money to the military to fund the war, thus having to take on debt or something?

Originally Posted by WheelsRCool

One question I am just wondering from a purely economic standpoint is why do they need to issue debt to fund the war? I mean U.S. military spending is at most 4% of GDP right now. Is the Federal government not giving enough money to the military to fund the war, thus having to take on debt or something?

in very basic terms: tax revenues are not enough to pay for operating expenses of the US federal government, so bonds are issued to cover shortfalls.

The Fed gov't is giving a lot of money to the military to fund the war and yes, the Fed is taking on debt in the form of bonds/treasuries.

Originally Posted by randallg99

in very basic terms: tax revenues are not enough to pay for operating expenses of the US federal government, so bonds are issued to cover shortfalls.

The Fed gov't is giving a lot of money to the military to fund the war and yes, the Fed is taking on debt in the form of bonds/treasuries.

The gov't used bonds to finance WWI like crazy. I believe something like 2/3 of the financing for the war was done through bonds. Of course, income taxes weren't nearly as high in those days...

Hey...school can come in handy!

Originally Posted by Stevenh

I'm just curious as to what some more seasoned investors think the results of this would be. Considering our economy's current situation do you think going to war with Iran or another 9/11 in 2008 would be enough to send our markets tumbling? On a macro level I imagine that the amount of debt we would have to issue to fund another war would lead to a further decrease in the value of the dollar and $100 barrels of oil would seem cheap. What area of the market do you think would be hit the hardest and which areas (if any) do you think could benefit?

I am going to sound like a wise ass when I say this but I trade reality in the present. I use the information at hand to make sound trading decisions based on risk/reward ratios. Simply put, I trade for capital appreciation. I can't allow my mind to wonder to all the "what-ifs" in the world. This would hurt my trading results based on pure human nature (the longing to discuss possibilities that may or may not happen and are completely unimportant at this time because they aren't happening).

Trading results suffer big time the minute an investor starts mixing reality with perception (perceived beliefs on a potential situation).

I don’t think about a war with Iran. I trade the charts (with fundamental support) and they will tell me long before the news breaks if something fishy is going on in the world. Someone always knows and they trade well before the general public and this can be observed through simple market analysis using only price and volume.

The Fed gov't is giving a lot of money to the military to fund the war and yes, the Fed is taking on debt in the form of bonds/treasuries.[/quote]

It may seem like the government is funding a lot of money on the war but think about this.

- there are people in the military who receive WIC
- there are facilities on many military posts that are shut down due to the war (libraries, gyms, swimming pools, etc)
- people in the military use out of pocket money for items they need to work with each and every day
- WWII cost the US about $3,115 billion dollars vs $379 billion dollars for the current wars, Afghanistan and Iraq (2006 figures)
- where would the US be today without the brave men and women who fought in the American revolution? WWI? WWII?
- what would Korea be like if the US didn't get involved? Germany? Japan?
Just something to think about...