The Iran Economic Shock Is Coming: How to Protect Yourself
The Looming Economic Crisis
The US and Israel have invaded Iran,
and the Strait of Hormuz—a crucial chokepoint for the world’s oil
and gas—has been blocked.
Regardless of how long the blockade lasts,
there will be an enormous increase in the price of energy, oil, and gas.
This will have a direct knock-on effect on the prices of pretty
much everything else, most notably food and fertilizer.
The Impact on Interest Rates and Borrowing
This energy shock will drive up inflation.
In response, financial markets expect central banks worldwide
to reverse their recent rate-cutting cycles and start hiking interest rates.
This means:
- Mortgage rates will increase.
- The cost of government borrowing will go up.
When combined with low economic growth
and high existing debt, increased borrowing costs will
severely restrict governments’ ability to spend money
to support consumers during this crisis,
potentially leading to further austerity.
How This Affects Ordinary People
The prices most likely to surge are energy and food.
Since energy and food represent a significantly larger percentage
of spending for poorer families compared to wealthy individuals,
this crisis will disproportionately hit the poorest the hardest.
Heating your home, running your car, and feeding your family
are all going to become notably more expensive.
The Flaw in Government Price Caps
Governments will face immense pressure to protect citizens
by capping energy prices, subsidizing energy,
or reducing energy taxes.
However, this repeats the economic mistakes made during
the COVID-19 pandemic.
When a government borrows or prints money
to keep energy prices artificially low,
that money goes directly to the wealthy owners
of the energy resources.
This results in:
- A massive decrease in government wealth.
- A massive increase in the wealth of the richest.
- Increased overall inequality.
Furthermore, capping prices ignores the reality of physical resources.
There is fundamentally less oil and gas available,
meaning someone has to reduce their usage.
A sensible approach would target wasteful usage (like private jets),
but subsidizing costs just transfers the financial loss
to the government while failing to manage
the actual resource shortage.
The Illusion of Domestic Energy Production
Investing in domestic energy production is often touted
as a defense mechanism, but it is an incomplete strategy.
The US is the world’s largest oil producer thanks to fracking,
yet the cost of living for average Americans will still rise.
This is because the production facilities are not owned
by the American people or the government;
they are owned by extremely wealthy individuals
who will sell the oil to the highest bidder globally.
Having energy in your backyard does not protect you
if you do not actually own it.
How to Truly Protect Yourself: Wealth Distribution
During this crisis, wealthy individuals who own broad portfolios
of assets—including commodities like oil—will profit massively.
The only true way to protect yourself from
an energy price crisis is to own the net energy and resources.
Historically, Western governments protected their citizens
because the governments themselves owned significant resources,
such as housing, energy production, and water.
However, over the past few decades,
there has been a massive collapse in government wealth
as assets were sold off or debt was accumulated.
Because your government no longer owns the wealth,
it can no longer protect you.
Wealth distribution is fundamentally about the ownership of resources.
The Ultimate Solution: Taxing the Wealthy
With the working classes, the middle classes,
and governments having lost their assets to the ultra-rich over
the last few decades, populations are fundamentally insecure.
You cannot simply go back in time to buy oil,
and taking on debt to speculate now is highly risky.
To protect yourself, your family, and your community
from future economic crises, you must push for systemic change.
The only way to reverse the steady flow of assets away from
ordinary people and back into public hands
is to force governments to build a tax system capable
of taxing the wealthiest individuals at fairer rates.
Tax is the only mechanism left to reclaim national resources
and restore economic security.
