Recession: With or Without War?

My recent glimmer of optimism about possibly avoiding war with Iran was snuffed in a recent article by Gary North. First he summarizes "the good news" -- "there is going to be an international recession, rising corporate bankruptcies, bank failures, and retrenchment by consumers because they can no longer pay the rising cost of energy [and food]."

Then he repeats his earlier warning that if Israel attacks Iran, the economic news will rapidly get worse. (The head of OPEC recently warned global oil prices would be "unlimited" in case of a war.)

North says all signs point to an upcoming Israeli air strike on suspected Iranian nuclear production facilities. Decision-makers in the US and Western Europe have not made it clear that they will impose significant negative sanctions on Israel after an attack on Iran; therefore, they have given Israel an "implied green light" concerning an attack. Since the Israelis perceive Iranian nuclear weapons as a threat to their survival, they are likely to attack.

Absence such sanctions, the only thing stopping Israel is the perception that the aftermath of their attack would be the negative fallout of the collapse of the Western economy that buys Israeli goods. He suggests you include this very real possibility in your financial planning. So do I.

The Huffington Post ran a guide to understanding the two bipartisan resolutions that Congress will probably vote on this week. These are tantamount to declaring war on Iran, threatening naval and air blockade if Iran doesn't adhere to American wishes. These resolutions "are based on factual errors, exaggerations, half-truths, and even outright lies." Even though the effort may seem insignificant, you should still contact your Representative and Senators to register your opposition to these resolutions.

Meanwhile, the Federal Reserve Bank has lost all credibility around the world. The IMF will soon begin an audit of the US financial system, releasing a report by 2010. Soon the criminal, deceptive financial practices that have flourished in the 27 years since Richard Nixon repudiated the last vestiges of the gold standard will be laid bare for all to see.

I see more dire financial forecasts than I can possibly list. If you still believe the spinmeisters from the Fed and Treasury and the talking heads in the financial press that we're about to turn the corner financially, you need to read more. Richard Daughty ("The Mogambo Guru") says "Banks are Suffering from their Own Stupidity." And so will we. The Boston Globe reports that 401(k)s and IRA are eroding in value due to soaring energy prices and the meltdown in financial stocks.

The Inflation Fuse Has Been Lit, says analyst Larry Edelson. The famed Aden Sisters point out the the boom in gold, silver and commodities foretold massive global inflation, and that it should be with us for some time to come.

If you haven't yet bought any gold or silver and moved out of stocks and bonds, do it now. Even in the traditional summer slump, gold is up almost $100 from its recent low. I'd advise staying away from any of the gold or silver ETFs, though. I've seen persuasive evidence that they are likely being used not only to suppress the price of the metals through short-selling, but also may not have the actual reserves they claim to have. Take delivery. Jim Sinclair even suggests you take physical delivery of the stock shares you plan to hold. The likely breakdown in the financial system could tie up your shares for years, IF you are even able to get them.

Unlike previous inflations, global competition for wages on anything that is transportable, has capped most wages. Layoffs and slack demand may even be driving wages down. Rising prices for food, fuel and other necessities, coupled with steady or falling wages and unemployment, can only make the recession deeper.

Historically, all empires end. The US empire is no exception. The indications are everywhere. In Jeff Foxworthy's style, here's a handy list of 36 signs the US empire is crumbling.

On a lighter note, be sure to take a few moments to savor these spectacular photos of Antarctic icebergs. God's world is beautiful. We shouldn't mess it up.