Consequences of a US War against Iraq
by Randy Buss
January 22, 2003
 

Although the thoughts and ideas herein have been "on the drawing board" over the last week or two, it was indeed a timely and fortunate coincidence to have recently read the excellent article from Dr. Joseph Douglass, Jr. "War in the Middle East : If it comes, Get Ready for the Worst"

Therein, Mr. Douglass has truly put forth a solid body of text about not only the possible financial and infrastructure consequences of an USA-Iraq war but also expounds upon how this has come about during the last four decades, including its nature, history and participants.

As stated in that paper, the potential for disaster within the boundaries of the USA is high especially taking into account the considerable amount of unknown variables :

- length of armed conflict

? summer heat

? wear & tear on equipment

? financial cost per day

? no 3rd party to finance or offset that cost (as did Kuwait in 1991)

? number of deaths and casualties on USA /Coalition side

? number of collateral / civilian deaths on Iraq side

- unknown defensive capabilities of Iraq

- unknown offensive capabilities of Iraq (Biological, chemical, other)

- Who are Iraq's true allies despite political rhetoric stating otherwise?

- What if sleeper terrorist cells within USA were to launch simultaneous attacks inside USA boundaries ?

- Where are any sleeper cells within the USA borders and what are they capable of ?

- etc.

Has true and accurate assessment been done in Washington of all these variables ? What were to happen if other rogue states saw a timely opportunity to pull off other attacks just as the USA is bogged down in the Middle East ? China attack Taiwan / North & South Korea / etc. What if in fact, these states all are in conspiring together in a loose coalition amongst themselves against the USA. Let there be no doubt - all have greater geo-political ambitions - Russia, China, Arab states, etc.
I can't stop thinking about Nazi Germany's belief that the taking of Stalingrad, on the steppes of the Volga river, would be nothing more than a summer offensive and they'd be all back home in time for Christmas. A combination of arrogance and logistical failure led the 6th Army to complete devastation.

Millions were killed, starved and froze. Combat was hand-to-hand in amongst the houses. Finally, the german army was surrounded in a pincher movement and capitualted. Most of those taken captive never returned alive. This is not to say that from a material or logistic standpoint these two conflicts are equal or compareable, but from a psychological standpoint the tones eminating from the western press seems to be that the conflict will be a matter of days or, at most, weeks. The truth is, nobody can know this in advance, especially given the unknown variables stated above.

One of the caveats of each individual must at this time be : forward planning. Both physically and financially. Running through worst-case scenarios and asking that famous Hewlett-Packard question "What if …". This is especially true for the citizens of conflicting parties. However, during a recent visit to the USA, a friend of mine from Europe casually stated to me, that according to what he could hear, the Americans seemed only to ask three (3) or four (4) questions in most conversations. These are :

a. Should I get that car with 0% financing or wait a bit longer ?

b. Where shall we go for dinner this evening ?

c. Who's winning the basketball / football / hockey / baseball game ?
(multiple choice allowed)

d. Whaddya think, should we re-finance our house and plow the 2nd mortgage into tech stocks or mutual funds ?

Earth to americans…earth to americans…wake up…are you there? Do you read me? USA may be going to war with Iraq, and potentially other nations and or terrorist organisations and the common public seems to be absolute clueless. It seems that the collective memory of the public (majority thereof) goes back to about the crash of 1987 and that's it. No Vietnam. No Korean War. No 1970s inflation. No oil embargo. Nothing. Complete apathy, or at least, to a large degree.

This is exactly what is scaring me. And hence my appeal to each reader :

What are your strategies to protect your finances, to protect your family, to protect your assets ?
This is not a scare-mongering exercise - I truly mean that the immediate and follow-on consequences of this potential war could indeed be devastating to the ill-prepared.

Are you in a position to profit from or be devastated by the following ? Just some things one might want to consider :

1. US Dollar would likely drop drastically further above and beyond the fundamentals currently weighing it down (see USDX chart)

2. US Government would increase drastically the national debt in a prolonged war (see 1)

3. Federal Reserve would likely increase M3 dramatically (see 1)

4. As James Sinclair and others have repeatedly pointed out, the inverse relationship between Gold and US dollar, hence Gold, over a longer Middle East conflagration, would rise dramatically as a safe-haven / keeper of value

5. Depending on length, other precious metals could rise markedly, e.g. silver / platinum

6. Other major currencies would continue to well advance, if not hurriedly, on the US dollar

7. Oil could well explode in price simply on the fear factor alone, despite OPEC promises of a steady flow (they also have no knowldege of the final outcome)

8. Would one be wise to sell ones hard US dollar assets (real-estate) and re-invest in other advancing currencies or into precious metals or both ? Especially before the dollar is 1.20 Euro and not 1.06. or while Gold is 358/oz and not 450/oz. or higher ?

9. Sell the house now at bubble prices - invest in other currencies or precious metals - buy the castle or mansion or whatever you like later at the some relative cost

10. Would one be wise to take a 2nd mortgage on the house equity and directly invest into those items mentioned above ?

11. Wasn't it Rothschild who said "Buy when there's blood in the streets.." That's exactly what could happen, in all seriousness. Depending on the length, this is a strategy not to be poo-pooed.

12. Most governments are tired of the US dollar especially when they're to be holding worthless paper in their vaults and Central Banks. (see 1,4)

13. If you live outside the US, get a loan in US dollars at a low interest rate and immediately invest / buy precious metals, Euros, etc. before the rates go ballistic. You will make well above your loan rate on the return. That is money in your pocket with minimal risk.

14. and the list could just go on…

Dear reader, the points are quite obvious and/or make common sense. But as we all know, common sense is not all too common. That listed above is simply an inexhaustive list of ideas which one might want to consider for asset protection or profit, especially for those holding fistfulls of US dollars and/or living in the USA. Of course the fallout from a long-term war with Iraq would surely be worldwide, especially, and in large part, due to the dovetailing of economies and currencies. That being said, the currency and commodity traders may well indeed have a busy time ahead…

Protect yourself, your family and your assets. Formulate a strategy, weigh the risks and act decisively.

© Randy Buss
January 22, 2003
Randy Buss, BSc Engineering, is an independent project manager for international projects.
Contactable on : rabuss@attglobal.net