Will the Dollar be a Casualty of the Iran War?

By Ron Paul

​President Trump’s unconstitutional and unjust war against Iran is setting back his “affordability” agenda. The war has caused a big rise in gasoline prices. Among the related concerns is the hindering of the movement of oil through the Strait of Hormuz, the only available passage for ships to transport oil from the Persian Gulf.

The increased costs will do more than raise prices at the pump. An increase in gas prices brings increased transportation costs that will be passed along to consumers. Prices of a variety of goods, including food, will increase.

No wonder Energy Secretary Chris Wright, White House Chief of Staff Susan Wiles, and other Trump administration officials are frantically working to develop policies to lower gas prices. One possibility under consideration is deploying US troops to try to ensure ships can pass through the Strait of Hormuz. This could turn into a permanent deployment of US troops.

According to the Center for Strategic and International Studies, the US government is spending about 891.4 million dollars a day on the Iran War. These costs are likely to increase as the war drags on and the US increases its military presence, possibly even putting boots on the ground in Iran.

According to numerous media reports, the Trump administration is preparing a 50 billion dollars “supplemental” funding request for the Iran War. This request will soon be sent to Congress. This funding would be added on top of the defense budget.

The supplemental bill is likely to pass with overwhelming bipartisan support. The Trump administration’s 50 billion dollars price tag is a floor, not a ceiling. Senators and Representatives will seek to add their spending priorities to this “must pass” legislation, while corporate lobbyists are no doubt already preparing “wish lists” to present to lawmakers.

The costs of the Iran War will further increase the already over 38 trillion dollars and rising national debt. The rate of increases will be greater as long as the government is spending almost a billion dollars a day, or more, on a regime change war in Iran.

The costs of this war will put added pressure on the Federal Reserve to keep interest rates low and increase its purchase of Treasury bonds in order to monetize the federal debt. The pressure on the Fed will also increase as other countries reduce their purchase of US debt. These reductions will be motivated by concerns over the economic instability caused by the US government’s out of control spending and by resentment over the US government’s hyper-interventionist foreign policy. These factors could also accelerate the increasing rejection of the dollar’s world reserve currency status. A loss of the reserve currency status will cause a dollar crisis, leading to an economic crash worse than the Great Depression.

This crash will likely result in the end of the welfare-warfare-fiat money system. Whether this system is replaced by an even more authoritarian one or by a system of limited government and much more freedom depends on whether those of us who know the truth do our best to spread the message that the key to peace and prosperity is a system of free markets, limited government, individual liberty, and peaceful relations and free trade with all nations.