Thursday, January 12, 2012

Another point about drifting toward a visible war on Iran …

If President Obama wants to get re-elected, preventing such a war will do him a lot more good than kowtowing to the Israel lobby. Consider this from Jared Bernstein.

* A $10 increase in the cost of oil leads to about 25 cents more per gallon at the pump. 
*Every extra penny at the pump takes around a billion dollars from disposable income for other consumption.   
*That same $10 increase, if sustained for a year, shaves about 0.25 basis points (one-quarter of a percentage point) off of real GDP growth.
*Adding rules of thumb, for each percentage point that real GDP grows below trend, with trend around 2.5%, the unemployment rate goes up a half a percentage point.

How would Iran respond to further threats on its economy or attacks on its facilities? Most likely by disrupting or cutting back on the availability of the most valuable resource it has controls. This isn't highbrow game theory; it is just common sense.

A cutback in world oil supply would raise prices which would stall or crash the U.S. economy. That would probably get us Mitt Romney as President and he has pretty much vowed that he'll attack Iran rather let that country develop a nuclear weapon. Not a good result for either the United States or Iran, but one which the power players seem determined to edge up to.

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