It appears that the war in Iran is having a massive impact on not only oil but also on stocks, bonds, supply chains, and expectations for the immediate future.

As the war continues to widen the economic impacts are also growing with each energy site bombed and ship sunk.

Stocks, bonds, commodities (not oil or natural gas) are all under pressure. Even assets that generally soar during times of uncertainty like gold and silver are taking large hits.

To many it may seem counterintuitive that so-called safe-haven assets like bonds and gold in particular would be struggling in a situation that historically would see bonds rallying and gold surging.

I believe there are a few explanations that will shed light on our current circumstances.

There is an enormous amount of leverage in our “markets” and when there is leverage (loans taken out to invest) and things start to go south on your trade there is a person called a margin clerk that will make a call for more money to back your loan or they will sell your assets to satisfy the loan.

This, in my opinion, is what is happening particularly with gold and silver. I have written many times in the past that the only way I thought we could see a downturn as we are currently seeing was in this situation where markets are falling and margin calls are causing not only falling assets to be sold but also other assets that provide the needed liquidity.

I should also mention that there is likely substantial margin in silver in particular but also somewhat in gold. Also, when assets are sold, the sold assets settle in US dollars, creating a sugar high that will last until the selling stops. This is also short-term negative for prices as they are measured in dollars. Notice I said PRICE because the VALUE is not impacted.

Since the USA and Israel have started this war, I believe that this will just add to our dollar’s demise. There was already substantial distancing from the dollar by central banks and mostly sanctioned countries but after seeing that we have weaponized the dollar and are obviously willing to do almost anything to force our will on others MANY others will be following. In addition, we are already the most indebted nation that has ever existed (of course our “leaders” count debt as growth) and we have gone over $39 TRILLION that they admit to while leaving out the rest of the iceberg- like WARS, VA benefits, SS promises, Medicare payments, etc. What are they REALLY on the hook for and when will that final snowflake fall to cause the avalanche? I saw that the Pentagon has requested an additional $200 BILLION just for this. To show just how much purchasing power our dollar has already lost keep this in mind. We paid $40 BILLION from 1942-1945 to fight World War 2 with a total global engagement from one end of the world to the next. In a month we need $200 Billion to fight Iran.

In the recent past the stocks being sold after settling in dollars would normally have been put into bonds. This would lead to lower rates and higher bond prices. The fact that the opposite is taking place is making it obvious that the USA is no longer looked at as a safe haven, but more as a risky asset. I believe that the more mayhem we cause will lead to even our closest allies to distance themselves. The Fed has admitted to purchasing $40 BILLION per month of treasuries (my guess is that it is actually FAR More). This is not because there is robust demand for our debt. It is to keep rates from spiking higher as they would be doing if the Fed were not out there buying it all. In all examples from history- when you reach this point the currency is doomed.

We cannot fund current spending without conjuring up cash to pretend we can, we cannot pay the interest without conjuring up cash, we cannot fight a war without conjuring up cash and we cannot retire maturing debt without conjuring up cash to pay it off. It is only a matter of time until our currency has little, if any purchasing power left. Bullying our fellow human beings will only lead to a hastening of our demise.

While I believe our “leaders” will do all they can to manipulate “markets” and public opinion the damage has been done. They can manipulate PRICES to give the illusion of prosperity but that does not necessarily create any corresponding VALUE. In fact, it will just lead to a harder landing when their interventions do not work anymore.

I believe that we are EXTREMELY near the time when people will realize that money is NOT the answer. We are about to find out real soon that central banks can conjure up untold TRILLIONS in paper and computer blips, but they cannot print up oil, gas, fertilizer, food, water, lumber, critical minerals, electricity, etc. I believe we are about to find out just how worthless these people are in a situation where resources are scarce. Of course, since they have conjured up untold TRILLIONS, we can expect that PRICES will be Far higher than they would have been in a true capitalistic economy vs. this managed mess we have now.

As a matter of fact, I can almost guarantee that without the central banks the wars would be FAR more few, and far between because without the fake cash they would have to tax the masses and only real conflicts would be fought- not these excursions to separate those who have assets that we want from them. It is amazing that all the wars are about energy, food, water, and HARD ASSETS but are paid for with cash from nowhere with no value.

At the end of the day, all that will likely be left are the commodity inputs and finished products that people need. Just think if we were to actually WORK and develop our own natural resources (which we happen to be richly blessed with) how much better our lives would be than trying to steal everyone else’s wealth for our benefit. This is not new. This has been going on for centuries and it is time for it to STOP.

Be Prepared!

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