World War II transformed a Depression-ravaged economy into the world's preeminent industrial power in four years. Industrial output doubled, unemployment collapsed from 14.6% in 1940 to 1.2% in 1944, and government spending ballooned from 10% of GDP to over 40%. Equities defied conventional wisdom : the DJIA averaged +15% annually during 1942-45, with standout years of +13.8% in 1943 and +26.6% in 1945, as defense contracts drove extraordinary corporate earnings. The post-war sell-off of -8.1% in 1946 reflected reconversion disruption as defense spending collapsed.

GDP averaged an extraordinary +10.6% annually : the highest sustained growth rate in U.S. history. The Fed held its discount rate at 1.0% throughout, with 10-year yields explicitly pegged at 2.5% in one of the most deliberate instances of yield curve control in American financial history. CPI averaged 5.2% despite extensive price controls, suggesting inflation would have been far higher without wartime measures.

The Korean War was America's first major "limited war" fought under Cold War nuclear constraints. The U.S. entered from relative economic health : unemployment at 5.3% and post-WWII reconversion complete. Equity markets responded positively throughout the conflict, averaging +9.2% annually. The true reward came in 1954, when the DJIA surged +43.96% as the armistice was signed and the Eisenhower administration delivered fiscal discipline and monetary normalization.

CPI jumped 7.9% in 1951 but price controls brought it back to 0.8% by 1953. GDP averaged +6.3% as defense spending quadrupled from $13.7B to $52.8B. The Federal Reserve-Treasury Accord of March 4, 1951, ending the informal yield peg and restoring Fed independence, was the most consequential institutional development of the conflict.

Vietnam is the paradigm case for how an unfinanced, politically divisive war corrodes economic foundations. Fought without a dedicated war tax as President Johnson refused to choose between "guns and butter," the conflict systematically destabilized the postwar Bretton Woods monetary order. The DJIA averaged barely positive returns of +1.3% annually during 1965-72, masking extreme volatility : -18.9% in 1966, then recovery, then -16.6% in 1973 and -27.6% in 1974 as the compounded crises of Nixon Shock, oil embargo, and double-digit inflation struck simultaneously.

Inflation accelerated from 1.3% in 1964 to 11.0% by 1974. Nixon Shock on August 15, 1971 abandoned dollar-gold convertibility, the DXY began free-floating in 1973, and gold surged from $35 to $185/oz by 1975. The 1973-74 OPEC embargo produced a 200%+ oil spike. The Fed Funds Rate rose to 12%+ by 1974 as the Fed belatedly fought inflation. Vietnam's legacy : the fiscal and monetary architecture of the postwar era was permanently dismantled.

Operation Desert Storm was the template for the modern "surgical war" : rapid, decisive, coalition-backed, and with a clearly defined military objective. The S&P 500 fell -6.6% in 1990 as Iraq's invasion sent oil from $17 to over $40/barrel, triggering recession. However, markets rallied +26.3% in 1991 as Operation Desert Storm achieved its objectives in just 100 hours of ground combat. Speed and decisiveness were the key economic variables : uncertainty resolved almost immediately, and markets priced the resolution in real time.

GDP contracted a mild -0.1% in 1991 as the Fed under Greenspan cut rates from 9.2% to 3.5% by 1992. GDP rebounded to +3.6% in 1992, and the combination of peace dividend and loose monetary policy set the stage for the 1990s expansion. Gold rose only +3% : a muted safe-haven response confirming markets viewed the conflict as brief and contained.

The War on Terror encompassing Afghanistan, Iraq, and a sprawling global counterterrorism campaign represents the most fiscally expensive series of conflicts in American history at an estimated $8 trillion total cost. The S&P 500 delivered essentially flat returns over the decade ("The Lost Decade") : the period began with the tech bust, was punctuated by the post-9/11 shock (-13% in 2001, -23% in 2002), recovered strongly in 2003-07, and then collapsed -38.5% in 2008 during the Global Financial Crisis : a compounding of war deficits, housing bubble, and financial deregulation.

Gold began a historic bull market from $260/oz (2001) to $1,895/oz (Sept 6, 2011), while WTI crude rose from $27 to $147/barrel by July 2008. The DXY fell -25% on twin deficits. The Fed's rate cuts to 1.0% by 2003 helped inflate the housing bubble that produced the 2008 crisis (-38.5% S&P). GDP averaged 1.7% annually : the weakest war decade since the 1930s.