Iran war

[gator1989]

Some of my friends keep telling me the collapse of dollar if a war breaks out between Iran and west/Israel. I wish if someone could tell me how it will effect forex.
thanks

[PaladinFX]

I don't see how an outbreak of hostilities between Israel / Western Nations and Iran could effect the collapse of the US dollar.
If anything, it will result in a strengthening of the US economy, since wars have always been good for business.

Which reasons have your friends given for their assessment?


O.

[PipBandit]

If anything, it will result in a strengthening of the US economy, since wars have always been good for business.

This is a fallacy - most standard economic models would hold that war (or periods of elevated military spending) are not actually good for the economy as a whole. When the government spends a pile of money on the military it diverts resources from productive uses (consumption and investment), slows economic growth ultimately, reduces employment and lowers the standard measures of prosperity generally experienced by citizens of that nation. There can be an initial boost to the economy and jobs in the short-term though virtually all economic models point out that war damages the economy and causes job loss in the medium to long-term.

[PaladinFX]

This is a fallacy - most standard economic models would hold that war (or periods of elevated military spending) are not actually good for the economy as a whole. When the government spends a pile of money on the military it diverts resources from productive uses (consumption and investment), slows economic growth ultimately, reduces employment and lowers the standard measures of prosperity generally experienced by citizens of that nation. There can be an initial boost to the economy and jobs in the short-term though virtually all economic models point out that war damages the economy and causes job loss in the medium to long-term.

This is of course true for a full-scale war, extending over a period of some years.
Putting Iran in its place hardly qualifies though.


O.

[PipBandit]

True that would be pretty brief conventional conflict if it were to come about. Though winning the initial war and then sorting out the mess afterwards a la Iraq are two very different things. Iraq has been a drain on the US economy as a whole.

But to answer the OP if war broke out I would see USD strengthening as risk would be off in a big way. Oil would be up a hefty amount. I don't see US going to war with Iran yet though. Israel might strike first but I'm pretty sure the US is asking / pleading that they don't go that far as the US definitely doesn't want another 10 year occupation just as they're winding up in Iraq and looking to wind up in Afghanistan. Pretty sure Iran doesn't want a war either as that doesn't tie in with the long game they're playing where they want to be recognised as a regional power without being beholden to the US.

This is one of those things that doesn't really need to come on to your forex radar unless the situation changes quite dramatically from the present.

[gator1989]

True that would be pretty brief conventional conflict if it were to come about. Though winning the initial war and then sorting out the mess afterwards a la Iraq are two very different things. Iraq has been a drain on the US economy as a whole.

But to answer the OP if war broke out I would see USD strengthening as risk would be off in a big way. Oil would be up a hefty amount. I don't see US going to war with Iran yet though. Israel might strike first but I'm pretty sure the US is asking / pleading that they don't go that far as the US definitely doesn't want another 10 year occupation just as they're winding up in Iraq and looking to wind up in Afghanistan. Pretty sure Iran doesn't want a war either as that doesn't tie in with the long game they're playing where they want to be recognised as a regional power without being beholden to the US.

This is one of those things that doesn't really need to come on to your forex radar unless the situation changes quite dramatically from the present.

Thank you for your reply, I just want to know one more thing that what is the best you can suggest , Keeping US dollars or GOLD ?

[gator1989]

I don't see how an outbreak of hostilities between Israel / Western Nations and Iran could effect the collapse of the US dollar.
If anything, it will result in a strengthening of the US economy, since wars have always been good for business.

Which reasons have your friends given for their assessment?


O.

If the war goes longer the Oil price also will reach 200$ or above...
So are you ready to pay 8 or 10 dollars for a gallon of gasoline? What do you think that would do to the U.S. economy?
The truth is that every single transaction that we make every single day is influenced by the price of oil. If the price of oil suddenly doubles or triples that would absolutely devastate the already very fragile U.S. economic system.

So this is one of reasons why I am afraid about the Dollar

[PaladinFX]

If the war goes longer the Oil price also will reach 200$ or above...
So are you ready to pay 8 or 10 dollars for a gallon of gasoline? What do you think that would do to the U.S. economy?
The truth is that every single transaction that we make every single day is influenced by the price of oil. If the price of oil suddenly doubles or triples that would absolutely devastate the already very fragile U.S. economic system.

So this is one of reasons why I am afraid about the Dollar

lol, I'm in Germany, so 10 bucks for a gallon of gas is normal for me. (Not that I like being robbed by the oil companies any more than anybody else, but that's the bitter reality here.)

Saudi Arabia and other OPEC countries have already announced (with a big grin ) that they'll be happy to increase their production to balance the shortfall, should Iran really be dumb enough to stop selling oil.

KSA in particular would be more than happy to see Iran's military power destroyed, considering that Iran is the leader of the Shi'ite branch of Muslim faith and the Kingdom of SA leads the Sunn'a branch. And now that the buffer Iraq has been removed from between them, Saudis are quite nervous about the Middle East's most populous country and it's military might.
They'd be extremely pleased to pay through to nose to anybody who volunteers to kick the crap outta Iran, hehe.

O.

[Mr Gone]

Well, if happens like BIn Laden and Ghaddaffi i would buy GBP or USD.

[Buckscoder]

lol, I'm in Germany, so 10 bucks for a gallon of gas is normal for me. (Not that I like being robbed by the oil companies any more than anybody else, but that's the bitter reality here.)

You got not robbed by the oil companies, but by your socialistic political robber system! Or what do you believe why it is 2-3 times higher than in the US? TAX and TAX on TAX my friend!