The Iran War and Stagflation

A no-growth, or a negative-growth economy is bad enough. It’s really bad.

And a high inflation economy by itself is bad enough. It’s destructive.

But put them together and what have you got?

A seriously bad economic time. Seriously bad.

But put them together and what have you got?

A seriously bad economic time. Seriously bad.

David Stockman. Image by Gage Skidmore.

We call the combination of the two stagflation. Stagflation is bad for stocks. No growth means no gains. And inflation is awful for bonds. Your bonds that pay 4 or 5 percent are guaranteed losers if the inflation rate is 6, 7, 8 percent or much higher.

A great stagflationary debt crisis has arrived. No-growth means high unemployment, while price driven up by high-intensity war mean high inflation. Together they mean bad things for bonds and stocks

President Reagan’s budget director, David Stockman, tracks these things carefully, as you might expect:

Now we are going to get a globe-shaking economic conflagration erupting from the void that was the Persian Gulf commodity fountain. That includes between 20% and 50% of all the basic commodities that drive global GDP, including crude oil, LPGs, LNG, ammonia, urea, sulfur, helium and sundry more….

Needless to say, this ballooning dislocation of daily global commodity flows will have a double whammy effect: It will both cause production and output to fall immediately [Our note: that of course is stagnation] in response to soaring input costs or limited availability—even as it encourages the central banks [here come the inflation part] to “help” by printing more inflationary money.

The Iran War leads to larger fiscal deficits.  Less than one month in, the White House called for a supplemental war appropriation of $200 billion.  Since we do not have the money, that means more Federal Reserve debt monetization, or “money-printing,”, and higher, persistent inflation.

Because stagflation is already here – Washington just cut its reported GDP growth for the fourth quarter of 2025 in half, while producer prices in February, before the oil price shock, annualize at 8 percent – because stagflation is already here, the next question is: Where do informed people turn to protect their families, themselves, and their wealth?

We have only history to guide us.  History’s answer is precious metals.  Is your gold and silver portfolio up to date?  This would be a good time to make sure you are protected from war, crashes, and high inflation.