Wednesday, September 26, 2007

The Next Victim is You?

Check out this article about the war in Iraq.

I'm interested in how this goes because there are a ton of factors to
consider in terms of the economic ramifications with regard to how the
war goes. This morning I learned that the president will be seeking an
additional 50 Billion on top of the 150 Billion already slated for
Iraq for this fiscal year alone.

From a mutual fund perspective, this is quite interesting. I know that
many of the mutual funds that invest heavily in Aerospace and Defense
have done quite well as a result of the Iraq expenditures. In fact, I
know someone who has seen gains of close to 30%. This is amazing stuff
really. But if you are addicted to those gains, its best to keep an
eye on the ball in terms of what is going to happen in Iraq.

It appears that Bush is trying to advise the candidates that there
simply might not be an easy way to flip a switch and be out of Iraq in
2008. If the war continues, it will continue to bloat our national
debt figure. This was just recently increased.

In reality, it is worth considering whether or not this can continue.
As more and more money is spent on these types of programs, the cost
to simply service the debt (that is, the interest) is out of control.
While the economy grows, the hope is that there is more and more money
made so that there is more production to generate tax revenues to pay
the debts incurred by our nation. However, the other hope may be that
we have inflation, since inflation will mean that those dollars that
we owe are actually much cheaper in terms of real goods and services.

Interest rates were just dropped, so this in theory is supposed to
help the economy. However, we've already had a long period of steady
growth. And with the increased inflation that comes with a rate
decrease, the real question is, how much longer can the economy grow?
And if rates aren't increased, will we end up in a hyper-inflationary

And with the likely successor to the presidency being a democrat,
possibly Hillary Clinton and a universal healthcare plan which will
also carry a cost, my impression is that none of these big trends
seem good for anyone's wallet.

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