The precise magnitude of the shock the US economy will face as a result of its war of choice in Iran is difficult to predict, given the array of factors at play. But the US is poorly equipped to weather the likely effects on inflation and interest rates, and financial-sector fragility is a key reason why.
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WASHINGTON, DC – There is no good time for an economy to face an energy- and food-price shock, but some moments are worse than others. And for the United States today – with its strained credit market, stretched equity-price valuations, unsustainable public finances, and inflationary import-tariff policy – now is about as bad as it gets.