Written by Matt Morgan, Editor at The Daily Bell:
No one asked you whether the United States should go to war with Iran. No one asked your neighbor. There was no debate, no declaration, no public accounting of what it would cost or who would pay. There was a decision made in rooms you were not in, by people you did not elect to make it, and now the bill is being assembled, quietly, in the prices you pay for diesel, groceries, and the mortgage you cannot quite afford.
The military operation is already underway. Analysts put the probability of a full ground invasion above 60 percent. Troop deployments are moving. The Pentagon is contracting with defense manufacturers to replenish depleted arsenals. The architecture of a long war is being built in plain sight, financed by the same mechanism that has funded every American military adventure since Vietnam: the national credit card.
War Spending Is Destruction by Design
Debt-funded war spending is not neutral stimulus. It is the most purely destructive form of government expenditure that exists. Every other category of government spending, however wasteful, produces something that can be pointed to a road, a transfer payment, a bureaucrat’s salary that gets spent at a local restaurant. War spending obliterates capital on both sides of the conflict. The bombs, the fuel, the ammunition, the ships: these are real resources, built by real workers, consuming real energy and materials, and their entire function is to destroy other real resources. The economic output is negative by construction. What remains after the shooting stops is a larger debt, a degraded capital stock, and a defense industry that has been very well compensated.
The people who bear the cost of that destruction are not the people who made the decision. This is the essential political economy of modern war, and it operates through a mechanism that is worth understanding precisely because it is designed not to be understood. When the government borrows to fund a war, the new debt is monetized (directly or indirectly) through the financial system. New money enters at the top: defense contractors, their suppliers, the banks that intermediate the bond issuance. These entities receive the money before prices have adjusted to reflect the new supply of dollars. They are made whole, or better than whole, before inflation has done its work. By the time the money filters through to wages and consumer prices, the purchasing power has already been diluted. This is the arithmetic of how newly created money moves through an economy, and war is its most aggressive expression. The household buying groceries and diesel at the end of that chain pays the inflation tax without ever having been consulted about the policy that caused it.
An Insolvent Government Starting a War on Credit
The United States is not in a financial position to be running this experiment. The federal government is functionally insolvent by any honest accounting, and the Federal Reserve is running operating losses of $19 billion annually while sitting on $844 billion in unrealized losses on its bond portfolio. Global government debt has crossed $111 trillion, and the US share of that pile is not shrinking. Against this backdrop, the war is not being funded from savings or surplus, it is being borrowed into existence, at a moment when the borrower is already insolvent and the currency is already under pressure.
The Hormuz Chokepoint
The Strait of Hormuz is where the abstract becomes concrete. Approximately 20 percent of global oil supply transits the Strait, and Iran has begun formalizing a toll-booth regime over that passage. JP Morgan has warned of catastrophic consequences if the flow is interrupted. Even a partial disruption (not a closure, just a sustained squeeze) pushes oil toward and past $100 a barrel. Diesel follows. When diesel moves, everything moves: trucking, agriculture, manufacturing logistics, the cost of every product that travels on a highway or gets planted with a tractor. Gas prices already eclipsed $4 a gallon before the latest escalation, and Wolf Street has noted that $5 diesel would unleash an inflationary psychology the Fed would find politically impossible to address with the rate increases required to actually contain it.
The inflation that follows a Hormuz disruption would not be the gradual, statistical kind that shows up in CPI reports six months later. It would be immediate, visible, and felt hardest by the people who spend the largest share of their income on necessities. A family spending 40 percent of its budget on food, fuel, and rent has no buffer against a supply shock. A defense contractor with a ten-year procurement contract does. The asymmetry is not accidental… it is the structure of how war economies distribute their costs.
There is a moral case against this war that others have made with precision. The Mises Institute has laid it out plainly. The argument here is different and, in some ways, harder to dismiss, because it does not require agreement on foreign policy philosophy. It requires only the ability to read a balance sheet.
National Security as Currency Demolition
A government that is already insolvent, funding a war through debt, during a period of elevated inflation, with a central bank that is itself losing money, while a potential supply shock sits in the Strait of Hormuz that government is not conducting foreign policy. It is conducting a controlled demolition of its own currency and calling it national security. The people who will lose the most are the ones who hold the most dollars and have the fewest assets to hedge with. That is, again, not the people in the room.
The war may or may not achieve its stated objectives. Wars rarely do. What it will achieve, with near certainty, is a larger debt, a weaker dollar, higher prices for necessities, and a defense industry that emerges considerably wealthier than it entered. The distribution of those outcomes (who gets the contracts, who gets the inflation) was determined before the first bomb fell. It always is.