"Advice For Malign Crackpots"
by Bill Bonner
Youghal, Ireland - "At the end of the week came disheartening news. Associated Press: "Oil and gas prices rapidly rise as Iran war shows no signs of letting up. The price of oil surged higher and showed no signs of halting its rapid climb a week after the U.S. and Israel launched major attacks on Iran that escalated into a war in the Middle East. Oil prices surpassed $90 a barrel Friday, with American crude settling at $90.90, up 36% from a week ago…"
And more from Associated Press: "Friday’s employment report showed job losses of 92,000 in February. The January and December figures were revised downward, with December swinging to a loss of 17,000 jobs...Without the health care sector, the economy would have shed roughly 202,000 jobs since Trump became president in January 2025."
The economic outlook is worsening. But who can worry about employment and gas prices when we’re in a shooting war? Besides, won’t the war get things moving again?
Alas, one of the oldest and most durable delusions in economics is what Frederic Bastiat called ‘the broken window fallacy.’ It claims that bad things are good things because they animate the economy. Somebody sells a new piece of glass. Somebody puts it in place. Everyone gets paid and the economy booms. Even today, many people believe WWII spending is what ended the Great Depression...and that wars are ‘good for the economy.’
It’s called a ‘fallacy’ because it’s not true. If bad things made a good economy, Iran would now be getting rich. The US and Israel are now breaking a lot of windows. And spending a lot on weapons to do it. In Iran, huge amounts of money and energy will be needed to bury the dead, fix the broken windows, and rebuild bombed out hospitals. And in America, resources that would otherwise be used for normal living expenses are being diverted to paying for bombs, missiles, and aviation fuel. In both countries, capital and labor - earmarked for other things by other people - are shanghaied by the feds and put to a use that only a few malign crackpots want.
The costs pile up with the bodies. Maryland senator, Chris Van Hollen: "Trump is already spending $1 BILLION PER DAY on his illegal regime change war of choice in Iran. Now, he’s going to ask Congress to give him up to $50 BILLION MORE. My vote: hell NO."
But all of this disgraceful brouhaha - the teen-aged corpses...the flattened buildings...the smoke...the planes...the explosions - these ‘costs’ are just the obvious and inevitable wages of war. ‘Second order’ and ‘third order’ effects come later; less predictable and, for the aggressor, often much less welcome.
And they have a way of sneaking up on you. All very well, says Senator John Kennedy, to celebrate America’s great military victories...but… ‘The American people want us to focus on making their life better and making their life more affordable; not getting involved in another endless war in the Middle East that is going to end in failure...This administration somehow found the resources, has found billions of dollars for bombs, but can’t find any money to actually bring down the high cost of living here in the United States of America.’
Marjory Taylor Green adds: ‘Most American taxpayers will never receive a Social Security check because it will be bankrupt by 2033. Most Americans can’t afford health insurance policies because they are so expensive. Most American families cannot financially survive on a single income, and both parents have to work like slaves in order to feed their children and keep a roof over their heads. But the Trump administration has decided that these American taxpayers have to spend $1 billion a day to murder people and their children in a foreign country that none of us have ever met and know nothing about. Incredible MAGA priorities.’
While the ‘gain’ from war may be delusional the costs must still be paid. In the US, they are paid in dollars. So, as the economy shifts to supply war material, it ends up with more dollars...and fewer things people actually want to buy. Prices rise. They are already moving up. Wolf Richter: "Manufacturers reported that the costs of health insurance for employees shot up by 14.2% on average; service firms reported an average increase of 12.9%, according to a report by the New York Fed based on a survey of companies in the New York-Northern New Jersey region.
Manufacturers and service firms both reported that the costs of utilities jumped by about 8.5% on average. About one-fifth of the companies reported increases of 20% or more. “Indeed, sharply rising utilities costs in some areas have been tied to the explosive growth of AI-related data centers,” the report said. The report also showed business insurance costs up by 7.4%...raw materials up 8%...and the average annual for an employee-sponsored family health insurance plan rose to $27,000."
Service firms and manufacturing companies saw similar cost increases. Both had suffered 5% increases in 2024. Then, the service companies overall costs rose 7% in 2025; 8.5% for the manufacturers. Wages, meanwhile, rose only by 3.4%.
Even before the war began, Americans were getting poorer. As expected, Donald Trump is not changing direction...he is just speeding up. But, the first order effects...or even just the second or third order economic effects are merely an unfinished sentence. There are also fourth and fifth order stains...the kind that you can’t wash away in a tide of paper money. Tune in tomorrow."
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