In the face of economic meltdown, pick a fight…
Last year, your editor wrote ‘economic problems will catch up with politics‘. It seems that day may be delayed by warmongering. Nothing like a political enemy to distract from economic malaise.
A nice list of reasons to worry about a war with Iran was sent to our inbox on Tuesday:
From Press TV:
Paul Craig Roberts, Assistant Secretary of the Treasury during Ronald Reagan’s presidency, [said] “The raised level of Washington’s rhetoric and demonization of Iran” is one of the signals pointing to Washington intent of a military strike on Iran. “Only the blind do not see that the US government is preparing to attack Iran … If the missiles aren’t launched, Americans would wake up the next day a bankrupt third world country. If the missiles were launched, few Americans would wake up.”
The US military is preparing a massive military campaign against Iran, sending thousands of American troops, warships and weaponry to Israel.
From Washington’s Blog:
“Should anything happen to Iran, should Iran get drawn into any political or military hardships, this will be a direct threat to our national security,” [said] Dmitry Rogozin, Russia’s deputy prime minister and former envoy to NATO.
A Chinese general has also allegedly said that China would launch World War III if Iran is attacked. While many Americans still believe that our government would not be crazy enough to attack Iran, economic – not national security – considerations may be driving the warmongers.
From Russia Today:
The United States is sponsoring the construction of facilities in Georgia on the threshold of a military conflict in Iran, a member of Georgian opposition movement Public Assembly, Elizbar Javelidze has stated. All in all, about 30 new hospitals and medical centers were opened in the former Soviet republic in December last year. The plan is to build over a hundred more.
From EU Observer:
US senators have warned EU foreign affairs chief Catherine Ashton that Iran’s alleged nuclear weapons programme risks igniting a military confrontation.
From The Australian:
ISRAEL is preparing to shut its nuclear reactor at Dimona, where it makes nuclear weapons, because of the site’s vulnerability in a war with Iran.
What’s rather surprising in all this is the straightforward admission from US Defence Secretary Leon Panetta that Iran isn’t even trying to develop a nuclear weapon. ‘Are they trying to develop a nuclear weapon? No. But we know they are trying to develop a nuclear capability.’
This seems like a rather important thing to take into account. Do they have nuclear weapons? Nope. Are they trying to develop them? Nope. Should we bomb them? Yep.
But try and find that quote from Panetta anywhere in the mainstream press. We couldn’t. In fact, ask the average person whether Iran is trying to develop a nuclear weapon and we reckon 90% would say ‘definitely’.
Anyway, short of getting drafted or shot at, why would Australian investors care about another war? Of course, there is Iran’s important role as an oil exporter. And its proximity to important oil infrastructure. But there’s something else worth noting as well. The last two similar wars triggered impressive rallies in the ASX200 and All Ordinaries
Click here to enlarge
Click here to enlarge
The first thing to jump out at you is the impressive market rally in the Australian indices shortly before the invasions. And then the stable rallies that came after.
Of course, the economic environment was a little different in 2001 and 2003 than it is now. So please don’t go buying stocks because there will be a war. Our point is that you shouldn’t stay out of the market because of the dangers of another conflict. And don’t necessarily sell up when the bombs start falling on Tehran.
Not that there aren’t other reasons to pull your savings out of stocks in the meantime.
Until next week,
Markets and Money Weekend Edition
ALSO THIS WEEK in Markets and Money…
The War Against the Euro
By Dan Denning
The Americans are trying to discredit the euro in order to perpetuate dollar hegemony, so goes the argument. Hmm. It’s possible. It’s also possible that all central bankers and monetary policy makers are singing from the same hymnal. Their answer to the end of the credit bubble is to try and pump it back up with currency debasement. In that case, this is a war of all against all.
My Crystal Ball for the Markets in 2012
By Chris Mayer
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Introducing Mario Draghi… Europe’s Incredible Economic Saviour
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The World Bank has just turned up to the party, telling everyone to go home and sober up. But with the music blaring and the booze flowing, no one is listening. Besides, the party only just started. 2012 is a new year. The ‘January effect’ – which says stocks usually enjoy a rally at the start of the year based on nothing more than blind optimism – is in full swing.
Wikipedia’s Blackout Wednesday: The Time Has Come
By Jeffrey Tucker
The blackout is a choice, and a brilliant one, made by founder Jimmy Wales in consultation with the whole Wikipedia community. It is a protest, a statement, a symbolic warning to the world of what can happen if governments attack the free flow of information.