In the last few days, the danger of expanded war in the Middle
East has greatly increased.
In Northern Iraq, Turkish troops intensified attacks on Kurds,
creating a new danger of intense warfare in this previously largely
peaceful area. Also, just yesterday, the Bush administration
announced major new sanctions against Iran which make war more
likely.
The new U.S. sanctions against Iran include the U.S. freezing
Iranian assets in U.S. banks, blacklisting three Iranian state-owned
banks and companies controlled by the Iranian defense ministry, and
reiterating that the U.S. regards several branches of the Iranian
government — including the Islamic Revolutionary Guard Corps. (IRGC)
and Iran’s elite Quds Force as terrorist organizations responsible
for the deaths of U.S. soldiers through their support of insurgents
in Iraq.
The new U.S. sanctions will make it much more difficult for Iran
to transact business in the U.S., but more importantly make it
unlikely that the U.S. and Iran will peacefully settle their
differences over Iran’s nuclear enrichment program — which the U.S.
insists is a prelude to Iranian nuclear weapons, and which Iran
insists is only for the peaceful production of nuclear energy.
Further sanctions against Iran and U.S. insistence that Iran
abandon all nuclear enrichment programs make a diplomatic settlement
with Iran less likely. That's because Iran’s nuclear program is a
source of national pride (as well as a major investment), and any
Iranian leaders who surrender to the U.S. on this issue would likely
be signing their own political death sentence.
The bottom line is that war with Iran is now much more likely
before Bush leaves office, with enormous effects on world oil and
gold prices, and the U.S. economy.
Here is what I expect if the U.S. continues on the path to war
with Iran:
- Oil will go over $100 a barrel in the next few months, and
over $120 by this coming spring. Gasoline will go over $5 a gallon
nationwide.
- Gold will be $840-$860 an ounce by spring. (It is currently at
about $765.) Silver will be over $16 an ounce.
- The dollar will continue to plunge against strong foreign
currencies, like the Australian and Canadian dollar. Besides
rising commodity prices, a big reason for the continuing dollar
plunge is continuing U.S. monetary inflation, which is the only
realistic way the administration has to pay for ever-increasing
war spending.
- Interest rates will increase substantially and loans will be
harder to get.
- Recession in the U.S. by next summer is highly likely.
- If a shooting war actually breaks out with Iran, look for oil
to quickly go over $150 a barrel ($8 gasoline), and gold over
$1,000 an ounce.
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