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One War Away From Economic Meltdown

November 24th, 2009

The economic metrics are truly surreal. The Dow Jones and other equity indices are soaring to the skies, while Wall Street boasts about its executive bonuses, which are at record levels. Amid the obvious creation of a new asset bubble, courtesy of the U.S. Federal Reserve and other central banks, coinciding with a return to megalomaniacal arrogance by the titans of finance, the real economy continues to plummet, despite claims that many economies have retuned to positive GDP growth. But with unemployment at record levels and continuing to grow, it is clear to many that the so-called economic recovery is based on a facade of fragility. It may take only one major international crisis to collapse the global financial house of cards.

In case you have not noticed, Iran is going full steam ahead with its opaque and ambitious nuclear program. Israel has continued to hint that time is running our for a peaceful resolution  of the controversy over the Iranian nuclear program, which it suspects is a covert atomic weapons program, aimed ultimately at them. However, the rhetoric from Israel has been toned down somewhat of late. That, in my opinion, is not a good sign. While the Israelis were loudly engaging in military manoeuvres suggestive of preparations for an attack on Iran, it was clear that this was a psychological game, aimed at putting pressure on Tehran and the international community. It is when the Israelis become quiet over what their military is preparing for that the world may be about to experience a surprise Israeli attack on the Iranian nuclear facilities. This would clearly spark a regional conflict, which will likely involve the United States, which now has military forces deployed on two different frontiers with Iran.

A regional conflict in the Middle East, beginning with a military exchange between Iran and Israel, could be the kiss of death for the global economy. Imagine another interminable conflict in that volatile region, with the major chokepoint for oil exports from the Persian Gulf to the primary industrial economies, the Strait of Hormuz, being interdicted by Iranian missiles. Oil prices would soar beyond their historic highs, sending the current false economic recovery into an authentic global depression.

The world may be just a single regional war short of a full-throated economic meltdown, and that fearsome war may be coming to a theatre near you, sooner than anyone can imagine.


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