World War 3 Not Just Rhetoric: Expect Stock Market Crash and Higher Gold Prices
The winds of World War 3 are blowing in Syria. They have been for some time, in fact. Yet, as Israeli missiles hit and killed 14 Syrian and Iranian troops, as Trump blamed Russia and Iran for an alleged chemical weapons attack on April 8, the howl of those war winds got louder. The sound of a major stock market crash approaches.
In a sense, World War 3 has already started. Syria has been its major battlefield, where a series of regional powers have fought each other by proxy and directly, backed by respective superpower allies, Russia or the United States. The risk now is that the conflict will expand beyond Syria’s borders.
The episode will not only compel the U.S. to stay; Trump will escalate American involvement, adding hot iron under the “Cold War” with Russia. It’s no exaggeration to suggest that the world has reached another as fateful a moment as in 1914 or 1939. We’ve already discussed the impact of these tensions on the U.S. dollar and the gold price. Yet, the stakes, as they often do in a volatile scenario, have spiraled toward a point of no return.
Indeed, apart from being one of the most dangerous international situations in decades, the escalating war of words—and missiles—has significant economic implications. The Moscow stock exchange lost some 11% and the dollar became 3.5% more expensive for Russians to exchange with their ruble.
War Threat Will Accelerate the Bear Market
But, there are risks for the U.S. and other western economies as well. If U.S. Treasury Secretary Steven Mnuchin was not afraid to talk about a trade war between China and the United States, China might be the one to stress this possibility. China has an interest in closer ties to Iran and is a Russian ally.
It will put pressure on the United States and already has the—economic—tools to do it. Wall Street will remain tense and it may find that the threat of a trade war, not just with China, looms wider and could scare off many investors. The era of easy money has ended; a major stock market crash will likely follow.
The trade war has taken shape amid a change of monetary policy. This will further test the stock market and the depth of the bearish sentiment. Yet, if the U.S. and Russia— but also the United Kingdom and France, for that matter—intensify bellicose rhetoric and actions, the very psychology of the market will shift.
The pressure on Russia in the U.K. will force an ever-growing number of the rich Russian “oligarchs” who have invested billions in London to pull out in search of safer “safe boxes.” That will have an impact on the British economy, still struggling to define a role for itself as the Brexit deadline looms.
Good News for the Gold Price and Other Resources
Once again, a chemical weapon attack, this time involving chlorine gas (it was sarin the previous time) or what appears to be such, against civilians could prompt Trump to launch a bigger war against Syria. A war that would target the Syrian regime directly.
There’s good news for those who like investing in resources. The gold price should finally see some support for a surge toward the $1,500-per-ounce level, supported also by a recent exploration decline. Clearly, a major war in the Middle East affecting Russia will give the oil price considerable lift. Consumers will hate it as much as drivers, given the effects it will have on real inflation and the price of most goods, but speculators will be pleased.
They Pull Him Back In
There’s a sensation that Syria, especially for Donald Trump, is a lot like Joey Zasa in the Francis Ford Coppola picture, The Godfather Part III. Like Don Michael Corleone, just when he thought he was out—of Syria—they pull him back in. No sooner did President Trump say the U.S. would be out of Syria “very soon,” an alleged chemical weapon attack struck the last remaining “rebel” bastion near Damascus. (Source: “Trump says US will withdraw from Syria ‘very soon’,” CNN Politics, March 29, 2018.)
Of course, as with all other such cases (from an Colin Powell’s Iraqi weapons of mass destruction (WMD) fabrication at the UN to the Ghouta and Khan Sheikhoun attacks in 2013 and 2017 respectively—not to mention the Sergei Skripal case in March 2018), the evidence to incriminate the guilty is not even flimsy. It’s optional.
It does not matter that, in the middle of March of 2018, Russia’s ministry of defense warned that militants were preparing to launch a “false flag” chemical attack in southern Syria—exactly where the April 8 episode occurred. (Source: “US training Syria militants for false flag chemical attack as basis for airstrikes – Russian MoD,” YouTube, March 17, 2018.)
The chemical outbreak in Douma, the last enclave that Islamic militants were holding, which could spark a major global conflict, is based on flimsy evidence. Russian inspectors have not found any traces of chemical agents, chlorine or others, at the site of the reported attack. Nor have they found victims of such an attack in the area hospitals. (Source: “Syria conflict: Russia says no evidence of Douma chemical attack,” BBC News, April 9, 2018.)
It’s a Provocation, and the Point of No Return Has Passed
In other words, Douma is yet another provocation, which its conspirers used to keep the U.S. and Trump bogged down in Syria. Pro-government forces and Russia have liberated almost all of Syria. Various regional powers—Saudi Arabia is but one—don’t want the U.S. to leave. The Saudis and Israelis are angling for the bigger prize. They want regime change in Iran. They are asking Trump to deliver.
The fact that two Israeli “F-15” jets hit a Syrian airbase housing several Iranian troops in Homs in the early hours of April 9 is a mere reminder of Trump’s assignment. But, there’s nothing “mere” about what they are asking. Many war-wearied Americans voted for Trump because he presented a more insular message than Hillary Clinton’s belligerent tones in international relations.
Trump’s National Security Adviser John Bolton is the last person to urge caution and reason. Bolton, who once had Nikki Haley’s job (a worthy successor…) was a G.W. Bush-era U.S. ambassador to the UN. He rarely met a war he didn’t like and has long called for more, rather than less, U.S. meddling in the Middle East.
Chlorine gas as a pretext for U.S. intervention in Syria is an old trick. President Barack Obama understood the trap and agreed to a diplomatic solution, which saw Syria give up its entire chemical weapon arsenal under international supervision. But Trump set a dangerous precedent in April 2017. He launched an attack, however coordinated it may have been with the Russians to limit damages, against a Syrian airbase. He is now compelled to do more and he claims to have a few doubts about those responsible, the lack of evidence notwithstanding.
Trump blustered about withdrawing from Syria. Yet, the U.S. is being sucked into another conflict of the kind that can be sold to the American public with the “we’re the good guys but the bad ones are forcing us to act” narrative.
It No Longer Matters Who Ordered the Attack
Therefore, it doesn’t matter whether the Syrian government ordered the use of chemical agents against rebel-controlled areas. It seems increasingly clear that they didn’t. Every time Damascus faced such accusations, it was during periods when it was regaining control. Thus, it made no sense.
In the April 8 case, just days earlier, Damascus reached an agreement with Jaysh al-Islam, an al-Qaida/al-Nusra offshoot, most likely backed by Saudi Arabia, to allow its militants and their families safe passage away from the area.
It was yet another sign that Washington, and especially its regional allies, like the Saudis and Israelis, have suffered a massive strategic defeat in Syria. In early April, the presidents of Russia, Iran, and Turkey (Vladimir Putin, Hassan Rouhani, and Recep Tayyip Erdoğan) reached an agreement over spheres of influence or interest in Syria as a first major step to end that war. Clearly, other powers have no interest in wars ending.
They want to drag Washington into the thick of the conflict.
One reason Trump will face pressure to act—despite all evidence suggesting he avoid further involvement in Syria—is because of Turkey. Russia and Iran have pulled Turkey and its army (the second-largest in NATO) into their camp.
Turkey also appears to be ready to buy a sophisticated Russian-built and designed missile defense system. It’s a humiliation the Washington establishment cannot endure. That’s why regardless of whether the chemical attack was staged (it seems beyond doubt now) and who did it, Russia will be held accountable.