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The cost of war

The attack from Iran to Israel yesterday was not a surprise. Intelligence services warned about it and both Israel and the US were somehow prepared for it. An action like the one we saw yestartsay, is of little value when the surprise effect is eliminated, so one has to wonder if there were other motives; The cost of defending the attack was calculated at $1Bn for the night. In the chart below you can see three lines: the green line is the annualized Social security spending in the US, the red line is the interest expense for US debt and the blue line is defense spending also annualized. With wars such as Ukraine and the Middle East, the blue line will go up, and in order to finance war costs, the red line will go up higher as well since it will be financed by debt, and Treasury yields are going up. Around $9Tn treasuries will mature within next year, and these actions will have an impact on the budget deficit and the cost of financing that deficit. In many ways, the cost of war is high.

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