Net Worth and Chill: The REAL Economic Costs of War with Iran

Episode Summary

In the episode titled "The REAL Economic Costs of War with Iran" from the podcast Net Worth and Chill with Your Rich BFF, host Vivian Tu delves deep into the intricate relationship between geopolitical tensions and personal finances. Released on July 2, 2025, this episode breaks down the multifaceted economic implications of potential military engagements with Iran, offering listeners a comprehensive understanding of how global conflicts can ripple through everyday financial landscapes.

1. Setting the Stage: Current Geopolitical Tensions

Vivian opens the episode by addressing the escalating tensions between the United States and Iran. Highlighting recent military actions, she provides a timeline to contextualize the current situation:

• June 22, 2025: The US launches targeted strikes on three Iranian nuclear facilities in Fordo, Natanz, and Isfahan.
• June 23, 2025: Iran retaliates against US bases in Qatar and Iraq.
• Present Situation: A fragile ceasefire is in place, with both Israel and Iran committing to respect it, contingent on the other's compliance.

Vivian emphasizes the cyclical nature of such conflicts, noting, “This episode really applies to any past war and or any future wars that may occur, because the financials and the ways that you can still be smart with your money are going to stay the same” ([00:00]).

2. Strait of Hormuz: The Vital Oil Chokepoint

A significant portion of the discussion centers around the Strait of Hormuz, a strategic maritime passage controlled partially by Iran. Vivian explains its critical role in global energy supplies:

• Statistics Highlighted:
  • A quarter of the world's oil and 20% of natural gas pass through the Strait.
  • In 2024, an average of 20.3 million barrels of crude oil were exported daily via this route ([03:29]).

Vivian warns that any blockade or disruption in the Strait could lead to worldwide energy price spikes, affecting everything from transportation to utility costs. She succinctly states, “If oil and gas prices go up, the price of everything is going up” ([03:58]).

3. The Expensive Reality of War

Transitioning to the financial burden of military conflicts, Vivian provides a historical perspective on the costs incurred by the United States in recent wars:

• Iraq and Syria (2003-2023): Over $2.89 trillion spent.
• Afghanistan (2001-2019): More than $2 trillion.
• Targeted Strikes: Utilizing B2 stealth bombers valued at approximately $2.1 billion each ([07:15]).

She underscores the unsustainable trajectory of military spending, especially against the backdrop of the US's existing $36.1 trillion debt ([07:45]).

4. Funding War: Where Does the Money Come From?

Vivian breaks down the four primary methods the US government employs to finance wars:

1. Increasing Taxes: More revenue from citizens to fund military efforts.
2. Reducing Non-Military Spending: Cuts in areas like infrastructure, education, and healthcare.
3. Government Borrowing: Issuance of war bonds or U.S. Treasury securities, thereby increasing national debt ([09:30]).
4. Money Creation: Printing more money, which can lead to inflation ([09:45]).

She poignantly remarks, “We are borrowing from our kids. We will be spending money today that our kids pay for in the future” ([12:00]).

5. Economic Implications: Short-term vs. Long-term

Vivian contrasts the immediate economic stimulation provided by defense spending against the long-term detrimental effects:

• Short-term: Increased government spending can boost sectors like manufacturing and technology, similar to the economic boost seen during World War II.
• Long-term: Escalating national debt, opportunity costs from diverted resources, and broader economic disruptions such as constrained supply chains and increased commodity prices ([10:30]).

She cautions against the misconception that war is a viable economic stimulus, asserting, “Peaceful economic development generally offers better prospects for sustainability” ([11:15]).

6. Opportunity Costs: Reallocating Defense Spending

Addressing the hefty $1 trillion annual U.S. military expenditure, Vivian highlights the potential benefits if these funds were redirected:

• Infrastructure: Building new highways and bridges to improve the crumbling infrastructure rated C- by the American Society of Civil Engineers.
• Education: Allocating $351 billion could fund universal pre-K programs, fostering long-term economic growth through better educational outcomes.
• Climate Change Initiatives: Investing in renewable energy transitions.
• Veteran Support: Enhancing benefits and care for veterans, with Brown University estimating a need of $2.2 to $2.5 billion post-9/11 ([13:00]).

Vivian emphasizes, “We are spending, spending, spending…but saving, investing and preparing for our nation's future is also equally as important” ([13:50]).

7. Listener Q&A Highlights

The latter part of the episode features a Q&A session where Vivian addresses listener-submitted questions, providing actionable financial advice amidst geopolitical instability.

a. Military vs. Social Services Funding

Question: Why do we have money for endless war but none for social services? (<[14:34])

Vivian’s Insight: She explains that society's stronger emotional reactions to negative events, like wars, drive substantial funding towards defense over incremental positive investments like education or healthcare. “Putting money towards defense is in theory protecting us from being attacked… whereas public and social services helps to improve educational outcomes and provide resources to the less advantaged” ([14:50]).

b. Investment Strategies During War

Question: What should we do financially in this scenario? Keep cash? Buy gold? Stocks? (<[15:00])

Vivian’s Advice: Adopt a defensive financial strategy:

• Continue Investing: Maintain diversified portfolios that track the broader market.
• Emergency Funds: Increase savings to six to twelve months of living expenses.
• Caution Against Rash Decisions: Avoid pulling out investments or making significant financial changes during uncertainty ([15:20]).

c. Profiteers of War

Question: Who profits from war, especially in unexpected sectors? (<[16:00])

Vivian’s Analysis:

• Defense Contractors: Companies like Lockheed Martin, Raytheon, Boeing, and Northrop Grumman.
• Indirect Beneficiaries: Packaged food manufacturers, uniform producers, and vehicle manufacturers who receive government contracts.
• “If it can be given a government contract… you could profit from war” ([16:20]).

d. Government Funding Methods

Question: Where does the government get the funds when we are already trillions in deficit? (<[17:00])

Vivian’s Breakdown: Reiterates the four funding methods:

1. Increasing Taxes
2. Reducing Non-Military Spending
3. Government Borrowing
4. Money Creation She highlights the burden of interest payments on debt and the intergenerational impact of current spending ([17:30]).

e. Impact on Mortgage Rates

Question: How does this impact mortgage rates? (<[18:00])

Vivian’s Explanation:

• Tariffs and Economic Slowdown: High tariffs can lead to slowed economic growth and rising prices.
• Federal Reserve Policies: The Fed may keep interest rates higher longer to combat inflation, indirectly affecting mortgage rates.
• “Mortgage rates, which are based off of the Fed funds rate… they may stay a little bit higher for a little bit longer” ([18:20]).

f. Safety of Personal Savings During War

Question: Are my savings safe in times of war, or can the country just take money from us to cover the cost of it? (<[19:00])

Vivian’s Response:

• Direct Seizure: The government cannot arbitrarily take or freeze personal assets without due process.
• Indirect Effects: Increased taxes and inflation can erode savings’ purchasing power.
• “Your dollar could feel like it's shriveling up and worth less… because you're paying more in taxes” ([19:30]).

8. Closing Thoughts

Vivian concludes by reiterating the importance of financial preparedness in the face of geopolitical uncertainties. She encourages listeners to stay informed, maintain prudent financial strategies, and consider the broader economic implications of international conflicts. Ending with a poignant lyric from Edwin Starr’s "War", she reinforces the episode’s central theme: “What is it good for? Absolutely nothing” ([21:00]).

Key Takeaways:

• Geopolitical tensions, especially involving critical regions like the Strait of Hormuz, have far-reaching economic consequences.
• War incurs exorbitant costs that exacerbate national debt and divert resources from essential domestic investments.
• Individuals should adopt defensive financial strategies, such as maintaining diversified investments and bolstering emergency funds, during times of conflict.
• Understanding the channels through which war is funded can empower citizens to advocate for more sustainable and beneficial fiscal policies.

Notable Quotes:

• “If oil and gas prices go up, the price of everything is going up.” ([03:58])
• “We are borrowing from our kids. We will be spending money today that our kids pay for in the future.” ([12:00])
• “Peaceful economic development generally offers better prospects for sustainability.” ([11:15])

For more insights and actionable financial advice, be sure to tune into Net Worth and Chill with Your Rich BFF and follow Vivian Tu on social media.