Sunday, May 13, 2012

Why War Can't Lead The United States Out of the Next Depression

There are many reasons actually but I will only go over a few common sense reasons that are often neglected by war mongers.

In WW2 Germany had developed such advanced technology that it renovated the United States in many ways such as jet travel, computing, and even led to being the 1st to the moon thanks to Nazi scientist acquired in project Paperclip. So yeah sure there was some benefits to acquiring technology from nazi scientist and in essence war. Only one problem the Middle East region isn't exactly a center of renaissance and in many areas these people are literally like tribal cave people.

Remember there's a cost to war and I don't mean just the loss of lives but an actual material cost that someone has to pay for and in this case it's the U.S. citizen. In 2008 the figure for the Iraq war/conflict was at $3trillion (USD) which does not include other cost such as compensating disabled veterans. Bush administration 2003 estimated projections were 50-60 billion - much less than the actual multi-trillion's being spent.

While at war the U.S. military not only spends a great deal of money on ammo but it dramatically increases the amount of oil consumed by the nation. We could only imagine what the price of oil would be if there had been no war but we know that the price would not have risen so rapidly without the conflict. We can also conclude that the federal debt would be less and the economic crisis would be less severe.

If there's ever a perfect example of inflation it is the ammo used in war. Take for example a bomb. There's a great cost to create a bomb but the bomb has one task and it is to explode. After it explodes nothing is recovered in financial terms - it's like taking money and burning it in the fireplace or more simply put: pure inflation.

More inflation Oil Cost... Before the Iraq war the price of oil was $25 a barrel. Then came the war, soaring oil, and a price per barrel that became 4x as much. The current cost of oil as I write this is $95 USD per barrel and gasoline cost in many states are up to $4 a gallon - even after the barrel price has slid. The price could come down but the chances of it going to per-crisis levels are slim to none. More war will surely make the price go even higher because of not just more military usage but fear and the possibility of supply disruptions. Remember - the Middle East region controls much of the worlds oil. Oil is the life blood of an industrial nation.

In WW2 the U.S. was a major producer/exporter of oil and there was still easy oil but then came the energy crisis of the 70's and 80's just after the U.S. became an oil importer. Cartels formed to control oil such as OPEC and it was then the U.S. had a situation on it's hand with energy because of excessive consumption / reliance on easy oil. The U.S. went from being a thriving society that exported oil and produced more than enough to support itself to becoming a nation being highly dependent on a resource controlled by foreign sources that don't particularly like America or the American Way.

Also throw into the big picture that the depression already happened during WW2 so there was only one way to go - up. In fact one can say any number of things could have led the U.S. out of the 1929 depression but it is generally attributed to wining WW2. Back then the U.S. even sold the Germans petroleum products in WW2 I kid you not.

But today the scenario is entirely different. The U.S. was not in a depression prior to these Middle Eastern conflicts. Nor does the country export oil - IN FACT it gets oil from the very region it's fighting. So while the war is over "terrorist" the U.S. is giving a premium price for crude oil to what is considered a terrorist region. In fact when you look at the current conflict compared to WW2 the scenario is completely backwards.

Those that say war will led the United States out of a depression/recession are using flawed logic and haven't done their homework much less understand any lessons from history. Neo-con's and Holy Crusaders will always find some good reason for war.

If we had clever leaders (or should I say rational) they would develop free energy / readily available alternatives to oil domestically and take profit out of the picture for foreign countries that are pretty much our enemy. In fact if you google: a sick graph Iraq war cost... there's a very interesting website with a graph that shows if the U.S. would have just spent money on Solar Farms / alternative energy it would make the country nearly 100% independent on foreign energy instead of spending money on war. Force is not always the answer and many times it's the wrong choice of actions. Unfortunately (for us all since we are all along for the ride) the U.S. does not have the brightest or rational leadership. For them it's a matter of controlling their interest and ties with the big oil ring.
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By Neal Vanderstelt
Forex Market Analyst
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