The increasingly expensive effort in Afghanistan could spin into a Vietnam-style mess, which is why a financial web site is paying attention to it. History suggests that if the U. S. stays at peace, the economy will trend upwards without inflation. A little war will be insignificant to the giant U. S. economy, but another Iraq-style war will be meaningful. It will distort production to armaments and raise the inflation level while crowding out important spending, such as on health care. Consider U. S. increasing counter-narcotics efforts in Afghanistan from the L. A. Times, which begins:
The U.S. government is deploying dozens of Drug Enforcement Administration agents to Afghanistan in a new kind of "surge," targeting trafficking networks that officials say are increasingly fueling the Taliban insurgency and corrupting the Afghan government.
The move to dramatically expand a second front is seen as the latest acknowledgment in Washington that security in Afghanistan cannot be won with military force alone. . .
The Obama Administration should directly inform the American people what its strategy and objectives are in Afghanistan. What would prevent an escalation from mimicking LBJ's in 1965, though he posed as the peace candidate in the 1964 election? It's a large leap from preventing another 9/11 - the original reason to send troops to Afghanistan in 2001 or capturing UBL- from intervening in the drug trade in one of the poorest countries in Asia. We need to know the exit strategy, what an acceptable result is, what the U. S. does if the pitiful Kabul "government" does not step up to the plate, and the like.
The future of your investments will turn on matters that are not now on the front page. Everyone and his/her brother/sister "knows" that the "recession" has either ended (Merrill Lynch and others) or is ending soon (ECRI and almost everyone else) or soon enough (Roubini). You cannot make a dime investing thusly. If you believe that all these guys are wrong and the economy will keep shrinking well into next year, you can make a fortune shorting stocks and not getting jerked out of your bear positions on the up-move(s). I propose that a less risky way to conserve and increase your net worth is to follow the issues that are not on the front burner.
Watch the Af-Pak region. The more it looks like a quagmire into which the U. S. gets sucked, the more you should sell all Treasury securities other than shot-term bills and instead buy gold, oil and the other stuff that worked when Viet Nam and Iraq were hot enough to matter. If things go our way, then tend to invest in the opposite direction.
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