How will Fighting in Iran affect Metals?

I git that… however Interest is #4 on that hierarchy at 1T, with low interest rates. I was decently paid throughout my career, paying in deeply (the maximum) for the ‘entitlements’ of SS 1.6T and Medicare 1.9T I paid for and deserve them. Military is being pushed for 1.5T… up from 1T.

I understand why gold is high, and why other nations are looking to gold as a reserve currency. I am not so sure a long term continuance of support for the bond market will be there. China is amassing gold beyond what is reported. Separate banking clearings outside of the Swift / Fed system is arising. Is it possible we have our Western financial heads in the sand? Are we becoming a closed echo chamber of the shrinking Western World?

We all need to remember, albeit we are a major economy, that there are other major economies in the world. China is number 2.

These comments have nothing to do with politics, rather I am probing the financial underpinnings driving gold and silver prices.

 

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I asked ChatGPT what percentage of the U.S. national debt is based on (1) wars and (2) broader military spending. I got 20 and 40 percent, respectively (roughly). So military spending has made up a large percentage - certainly not all - of the national debt*. Also, I'm not so sure military spending or wars can be thought as one-offs - it requires continuous feeding to replenish stocks and equipment, and provide manpower throughout the world; and often there's an occupation long after the war is over. But at the same time, I recognize that this show of force gives the U.S. dollar global reserve currency status, which is why American men can seem attractive to foreign women when traveling abroad - ha, I'll stop while I'm here.

*If you had invested in Lockheed Martin (the top U.S. weapons manufacturer) over the last few decades, you'd have made a lot. Then again, this might conflict with the ethics of some - I myself would not feel great about this.

 

The U.S has technology to keep the strait open, this should be a top priority, I paid almost $4.00 a gallon on my wifes car this morning nearly a .50 cent jump in two days !! and as war continues prices are only going to get worse. if it takes putting boots on the ground so be it.

 

I hope this can be resolved quickly. To be fair, some of my predictions have been spectacularly wrong. I'm buying more PMs as I write - loading up on Mercury dimes right now. I don't want the American people or anyone else to suffer. We'll wait and see.

 

Whose boots should go on the ground, exactly, to save you fifty cents a gallon on gas?

 

I wonder if we should inverse the age requirement pyramid: let the 18-21 yo boots-on-the ground people work our industries, farms, and our open jobs; let 40-50 yo people who have families and life experience, run the businesses and the government (rethink this oldest average government in US history), and let the big-mouth 70-80 yo’s running all the governments go out and live their words by being the boots on the ground.

I am 67… just my thoughts to improve precious metal prices…

 

Lean to up for hedge assets and down for stocks because of the 3-day weekend.

 

Most of that is from WW II which had decades to compound.

The cost of the Korean conflict offers a good example. It's still costing us $$$ but it's a fraction of what it cost in 1951.

Back then it was about 10% of GDP by itself. Today, it's 0.0001%. If any spending or entitlement programs show that decline over time, please let me know.

Studies and Wall Street sell-side analysts have shown that the returns on invested capital are HIGHER for non-defense projects than military projects. I haven't seen it updated since the 1990's but it still might be the case.

The notion that military projects -- where you have to eat cost overruns as oppose to pass them onto your buyer (Uncle Sam) -- are super-lucrative is a fiction believed by people who never studied the issue or understand ROIC or ROE.

 

Right now there appears to be disagreement at high levels as to whether and when the tankers can be escorted through the Strait of Hormuz, according to CNBC. I have a feeling U.S. ships will be very vulnerable, and if traffic is to reach pre-blockade levels, providing escorts will be a logistical nightmare and potentially infeasible. This makes me think the war was not very well-planned and was rather begun impulsively. Because Iran appears unwilling to budge as it seems clear the goal is regime-change - and potentially death or imprisonment for the leadership - this leads me to believe there will be boots on the ground. I'm not sure the Kurdish fighters - if they join - will be sufficient to topple the regime. However, without oil revenues and with a blockade, I'm guessing Iran faces the possibility of total collapse. I'm not sure how much willpower the people have to defend their leaders. It seems to me this whole thing was a roll of the dice in a high-stakes game. We know Iran has been preparing for this. Again, all of this bodes well for precious metals.

 

Yeah, their won't be any boots on the ground, definitely not US. Maybe IDF. The conventional style of was fighting has passed, we can now run everything from an Xbox controller. We are ramping up production of 1-way drones, 30,00 a pop compared to 30 Mil for the Reapers. Iran's air force and navy have been nearly obliterated. It won't be long and Ships will be escorted thru the straits.
And as far as the money goes Wars have always made money, not the opposite.

 

With all due respect, this looks like the optimism expressed by the U.S. government while the Vietnam War raged. If fighting is done via drones, as you say, that actually equalizes the war, since Iran has plenty of drones - they were even selling them to Russia in their war against Ukraine. I just don't see how ships can feel safe going through the strait - there must be innumerable hidden missile systems aiming right now at the empty water. Like I said before, I for one would not want to take the chance of going through that strait - even the U.S. Navy would be vulnerable, and I think CNBC pointed out some war planners are nixing the idea. I think if Iran continues to rain missiles on Israel and U.S. bases, there will be no choice but to put boots on the ground. This is now a high-stakes game, because the Midterms are coming up, Americans are stretched financially, the world is also stretched, and there's not much of an appetite domestically (including in this forum) for this. Now I hope my analysis is faulty and that you are right, because we all stand to benefit if this gets resolved as soon as possible. I just don't think there was much strategic thinking here.

 

Inconceivable!

 

There's another factor here. If the U.S. has been aiding the Ukraine and weakening Russia by sharing intelligence and technology with Ukrainians in their war, it follows that Russia will be doing the same thing in Iran. This means Iran will have access to Russian intelligence and technology. We now have Russian involvement.

 

Glad to see this thread isn't devolving into politics.

 

Impulsively starting wars never ends well.

 

Well, at least nobody's started swinging.

Or at least none of the punches have landed. Or something.

 

This war is the reason why oil is heading to $100 - and could go much higher. I've tried to limit my commentary to geopolitics or geostrategy, but I'd be willing to stop at this point. Right now my posts are filled with conjecture. I'll try to tone it down and take a break.

 

SO much to add in response, I thought we were having a war talk not politics. It is difficult to say that Iran is going to be a huge force thru the straits when their technology is child's play compared to what we have hit them with. Starlink is a heck of a tool when used on the battlefield. Over the past couple of days Lazers have been used to obliterate drones and missiles.
On a side note, the US just bought 1000KG of Gold from Venezuela. Somewhere around 35,000 ounces.

 

Yeah, I meant to start a bullion thread about that. Not sure what to make of it.

One metric ton of gold is about 1% of typical daily exchange trading volume, if my quick googling is telling me the truth. One percent of one day's volume.

 

However, a very interesting indicator…