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FOX Business host Larry Kudlow discusses the impact the Middle East conflict has on inflation on ‘Kudlow.’<\/p>\n
We all know that crude oil and gasoline prices have jumped up as a result of the Iran war. And to me, it\u2019s a small price to pay for a small bump up in energy costs in order to defeat the barbaric terrorist regime in Iran, and literally change the course of history. Yet economists are still trying to figure out what, if any, impact there will be on inflation and output.<\/p>\n
I\u2019ve seen recession scenarios, inflation scenarios, stagflation, you name it, it\u2019s all out there. And I\u2019ve seen lots of comparisons with the oil shock of the 1970s and the early 1990s. Maybe even the Russia shock of 2022. Let me counsel caution, though, in relying on these past episodes to forecast the future. For one thing, this oil shock looks to be very brief. To quote President Trump “the war will be over very soon, because there\u2019s practically nothing left to target.”<\/p>\n
When it\u2019s all said and done, this war might last only four to five weeks, not enough duration to really have any significant impact on the economy. You might see a whiff of energy inflation in the March CPI number, but people are going to look through it. It won\u2019t last. Actually, the exchange value of the dollar has gone up, not down. And unlike the 1970s, there\u2019s no supply shock, because most of our oil is now produced in America and Canada. In fact, the most important thing to remember is how much more oil we produce today than we did way back then. “Drill, baby, drill.” Pure genius from Mr. Trump.<\/p>\n
Israeli Special Ops veteran Aaron Cohen breaks down President Donald Trump\u2019s \u2018uncertain warfare\u2019 strategy against Iran, detailing how U.S. pressure and the Navy\u2019s Fifth Fleet presence are rattling Iranian leaders on \u2018Kudlow.\u2019<\/p>\n
Oil production in the 1970s remained under 10 million barrels a day. Today it\u2019s nearly 14 million. And we don\u2019t have wage and price controls today, or long lines at the pump, because of Trumpian deregulation. So we don\u2019t actually have supply shortages today, we don\u2019t really need Middle Eastern oil, although we are subjected to world oil prices. Gasoline is up about 50 cents a gallon. Big deal. Yes, temporarily that will slightly cut into middle-class wallets and pocketbooks, but it\u2019s also important to remember that as oil producers, the higher price actually benefits parts of the population. It\u2019s not all one-sided lost consumer disposable income anymore.<\/p>\n
Now here\u2019s another point, interest rates have not changed significantly. In prior oil shocks, it seemed like rising inflation drove up interest rates, which in turn drove down the economy. The 10-year treasury has hovered just around 4 percent, slightly above. And the 30-year mortgage has stayed around 6 percent. So, we haven\u2019t had a real oil supply shock. We haven\u2019t had a real interest rate shock. And it is likely that energy prices will fall below prewar levels.<\/p>\n
Therefore, Mr. Trump\u2019s One, Big, Beautiful Bill with tax cuts, deregulation, and “drill, baby, drill,” will continue to provide tailwinds for the economy once this war is over. And for investors, I say look through the temporary disruption.<\/p>\n
Mr. Trump\u2019s Operation Epic Fury is changing the course of the Middle East and the rest of the world toward freedom. And freedom in the Middle East and everywhere else will bring greater prosperity. So for investors, look through the war and see the enormous prosperity that lies on the other side.<\/p>\n
#LARRY #KUDLOW #advice #investors #war #prosperity #lies #side<\/p>\n","protected":false},"excerpt":{"rendered":"
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