Re: Debate thoughts...Kevin G

Leeroi

registered: 2025.03.01

posts: 60
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"It's such a stretch for you to insinuate that the sluggishness of our economy is tied to our foreign affairs. That's absolutely absurd. Show me some evidence please."

Pardon me, I don't mean to get in the middle of anything here, but why do you think it's a stretch, Kevin? To this small investor, who's seen the market recoil like a school of sardines at the mention of bad news in Iraq, your statement is puzzling. Check out some of the dates on these articles...

http://www.corpwatch.org/news/PND.jsp?articleid=6070

USA: Investors Say War Bad For the Economy

By Jim Lobe
Project Against the Present Danger
March 21, 2003

As the war proceeds in Iraq, debates have already begun over the impact that the war will have on the economy. Perhaps lost amidst this debate is the key question raised by Business Week this week in a lead article headlined "The High Price of Bad Diplomacy."

Citing growing fears about instability and the implications of an open-ended "Bush Doctrine" to fight evil and weapons of mass destruction (WMD) wherever they raise their heads, it noted with characteristic understatement, "It is not a picture conducive to worldwide economic growth and prosperity," citing as an example the long-running economic impact of the Vietnam War on the 1970s U.S. economy.

"It may even get worse than that,"the magazine's editorial page editor Bruce Nussbaum went on. "Chief executives are beginning to worry that globalization may not be compatible with a foreign policy of unilateral pre-emption."

It's about time.

While Bush has moved U.S. soldiers around the world, invented new strategic doctrines, created a whole new cabinet agency, and driven a federal budget that was comfortably in the black just two years ago into a $300 billion, going on $400 billion, hole this year, Wall Street executives have generally reacted with a complacency, verging on a tax-cut-induced giddiness. What concerns have been expressed have been confined mainly to the price and flow of oil and how quickly, after an Iraq attack, the former will go down and the latter will go up.

Private forecasts for investors have been very upbeat, with best-case scenarios forecasting a short war of only a few days, minimal damage to Iraq's oil infrastructure, and no other regional problems. This scenario, or ones like it, appears to be the betting favorite.

Worst-case scenarios, seen as only "10% probability" by "military people" consulted by one institutional investor, call for a longer war, lasting several months, "catastrophic loss of life in Iraq ... that could be a source of further geopolitical uncertainty" and serious damage to that country's oil infrastructure, which could drive up the price of oil to 80 dollars a barrel for several months this year before it returns to 40 dollars a barrel next year.

Such a scenario foresees more damaging impacts that would be felt throughout the economy and might even cost Bush the presidency in 2004, but would not seriously threaten medium to long-term prospects for economic recovery in the United States, according to the Wall Street experts.

But missing from all these analyses, which appear daily on the business pages of U.S. newspapers, has been any serious consideration of the economic consequences of the political strains that Bush's strategic policies are exerting on the post-World War Two multilateral system that underpins, for example, international trade and investment.

'"If Bush and his crew think that there will no economic consequences to the kind of political damage they are wreaking on the multilateral system—be it the [World] Bank, the [International Monetary] Fund, or even NATO—in their drive to be the world's pre-eminent military and political power, then they are truly not of this world," noted one World Bank official Tuesday. "How long will a country used to being unquestioned judge and jury in its own cause accept the judgments of others in its economic life?" asked the conservative Financial Times columnist, Martin Wolf, last week.

This question was already being asked last October in a book by Jeffrey Garten, dean of the Yale School of Management, who also served in a senior post in the Commerce Department under former president Bill Clinton. Garten argued that Bush's "extreme unilateralism" poses a serious challenge to traditional U.S. corporate interests in open markets and the rule of law.

His worst-case scenario was considerably more dire. "The danger is that once the U.S. brazenly departs from international treaties," he wrote, "it invites widespread cynicism about all global agreements and opens the door to other nations flaunting them, too."

With trade tensions with Europe unresolved, a growing Atlantic political chasm over the United Nations, pre-emption, and military force, the tightening of borders and new regulations on money flows, immigration, and transportation since September 11, 2001, the possibility of greater political turmoil in key regions, such as the Middle East, and the example of the world's most powerful state breaking out of the ropes that tied it to an international system of law and institutions, the possibility of a return to trade wars and the 1930s loom much larger than anything found in the business pages or television talk shows.

"America's top CEOs should be figuring out what their collective interests are and how to communicate their views effectively," wrote Garten, noting that they should "at least lean against the wind of highly nationalist, militaristic, unilateral, and pre-emptive policies." If they have been leaning, there is as yet little evidence.

Meanwhile, Bush appears to be going in the opposite direction, and even on economics. Word leaked to the Wall Street Journal that the administration has solicited bids for nearly $1 billion in reconstruction work in Iraq exclusively to four U.S. companies has surprised and angered European and Middle Eastern governments, who see post-war construction contracts and a major role for UN agencies in administering them as a litmus test for Washington's intentions in Iraq and the region. "It will be that much more difficult for the European Union (EU) to cooperate fully and on a large scale—also in the long-term reconstruction process—if events unfold without proper UN cover," said EU Foreign Affairs Commissioner Christopher Patten, who called the bid solicitation "exceptionally maladroit."

Concern about Washington's unilateralist trajectory is mounting in the major multilateral agencies as well, including the Bank, the IMF, the UN Development Program, and the World Trade Organization (WTO), whose chief, Supachai Pantichpakdi, told the New York Times this week that he feared recent U.S. unilateral trade moves and an attack on Iraq would have serious economic consequences. "I can feel the sense of trepidation," he told the Times. "Whatever happens, if the U.S. will maintain the way we use multilateral solutions, it will be highly appreciated."

But that is not the way things are going here. Amid rising anger against France for its opposition to war, top Republican lawmakers called for special labeling requirements on French water and wine and an official boycott of this year's Paris Air Show. Some are even mumbling about withdrawing from the WTO if it does not review some recent rulings that went against Washington.

The current situation is even drawing comparisons with the early 20th century, when European economic integration was almost on a par with today's globalization. It reminds Stephan Richter of the Globalist Research Center of 1913, when then, as now, "major economic players are divided by non-economic issues—and have lost the ability to trust one another."

http://www.fpif.org/commentary/2003/0309quagmire_body.html

Quagmire? What Quagmire?

By Col. Daniel Smith (Ret.) | September 3, 2003

Editor: John Gershman, Interhemispheric Resource Center (IRC)
Editor's Note: This piece was commissioned under the auspices of the Project Against the Present Danger.

Foreign Policy In Focus

In the months leading up to the recent war in Iraq and in its aftermath, Bush administration officials were forced to continually change their rationale for launching the attack to topple Saddam Hussein. Where they have not wavered, and where they have received consistent support from top Pentagon military commanders, is in their insistence that Iraq is not another Vietnam, not a quagmire. The further the U.S. and the world move from the fall of Baghdad on April 9th, the more it seems that the administration is correct: Iraq is not a quagmire. It is really a black hole.

A quagmire is defined in the American Heritage Dictionary as (1) "land with a soft, muddy surface" or (2) "a precarious or difficult situation." In either definition, circumstances are not irreversible. A "soft muddy surface" suggests something more solid somewhere beneath, while "difficult" is not the same as impossible.

But media reports the last week in August have made it very clear that the administration has plunged the U.S. over the lip--what is called the "event horizon"--of the human and financial black hole that is post-war Iraq. The significance of passing the astronomical event horizon is that whatever crosses it, even light, cannot recover or be recovered. It is a one-way trip down a "tunnel" at whose end there is no light, only crushing gravity.

Consider the human costs of the Iraq adventure to date:

The U.S. death toll from all causes since May 1st, the date President Bush declared the end of major combat operations in Iraq, now exceeds the death toll from the three weeks required to seize Baghdad (March 20th-April 9th) and the three weeks thereafter. The 286 U.S. fatalities in the 2003 war is fast approaching the 293 killed in the 1991 Gulf War with Iraq.
The British lost four more soldiers in late August, bringing their post-May 1st losses to twelve. This is nearly one-quarter of the UK's total fatalities since March 20th and doubles total UK fatalities in the 1991 Gulf War. And the British are operating in an area the coalition expected to be very receptive to the occupation authorities.
Not routinely reported are the number of U.S. wounded, who total 1,127 as of September 2nd.
The UN's foreign staff lost 16, killed when its Baghdad headquarters was blown up by a vehicular bomb in August. Other relief and humanitarian workers have also been targets, and one Danish soldier has been killed.
Unreported are the Iraqi dead and wounded from encounters with invading and occupation forces and the series of car bombings in August and early September. And then there are the fatalities caused by inadequate or insufficient public services--electric power, clean water, sanitation--as well as lack of basic security brought on by the wholesale dismissal ("cleansing") of the Iraqi police force, army, and border guards in May. Today, according to the Los Angeles Times, Baghdad has 6,000 policemen, most of whom are in training. Before March 20, the city had 20,000. And today the "army" consists of 1,000 recruits.

The financial aspects of the black hole that is post-war Iraq are astronomical:

The cost of the war itself is estimated at $48 billion, with the Pentagon's ongoing operations costing another $4 billion a month--and no decrease forecast.
Reconstruction costs for just the post-war part of Fiscal Year 2003, which ends September 30, have been estimated at $7.3 billion. The administration refuses to estimate costs for 2004, let alone future years. Independent estimates depend on what is included; for example, the American Academy of Arts and Sciences has a range of between $106-$615 billion over ten years while estimates by Taxpayers for Common Sense run between $114-$465 billion.
The administration had already signaled it would ask Congress for new, substantial Iraq supplemental appropriations in October. Now it says it will need a "few billion more" just to get through September.
L. Paul Bremer III, the head of the Coalition Provisional Authority (CPA), acknowledged that rebuilding Iraq would cost "tens of billions" of dollars and that most of this cost would be paid by U.S. taxpayers. Bremer recently set the cost of providing clean water at $16 billion and reliable electric power at $13 billion. He made no estimate about the cost of rebuilding the oil industry, although he did suggest it might cost $100 billion over the next five years to reconstitute Iraq's "national infrastructure."
In March, even before Baghdad fell, a non-competitive contract to rehabilitate Iraq's oil fields, with an upper limit of $7 billion, was awarded to Vice President Dick Cheney's former employer, Halliburton, by the Army Corps of Engineers. (As of the end of August, Halliburton had already been paid $700 million for oil field work, according to information the Corps provided the Washington Post.) As recently as June, the CPA had said Iraq's oil production would return to pre-war levels by the end of August. In July this slipped to October; now it has slipped to October 2004. Yet as early as March 27, one week after the war began and well before any evaluation of the condition of the oil infrastructure was possible, Deputy Defense Secretary Paul Wolfowitz assured the House Appropriations Committee that oil would be Iraq's self-financing rebuilding engine: "We're dealing with a country that can really finance its own reconstruction, and relatively soon."

Facing an ever-growing black hole from failed oil revenues, the CPA unveiled in late August its latest gambit to revive Iraq's economy: opening the country to outside investment. The U.S.-appointed Iraqi Governing Council, according to the New York Times, reacted very cautiously. Even though it nominally will have the opportunity to review major investment offers, there is concern that traditional industries, rendered relatively inefficient by 23 years of war, sanctions, and under-investment, would quickly be swamped by new factories, throwing more people out of work in a country where unemployment hovers near 60%.

Indeed, food and agriculture, services, and manufacturing are among major segments of the economy not exempted from foreign investment. What the CPA's scheme does exclude are natural resources (including oil), basic services (electricity, water, and sewage) and areas that would remain under CPA control because of "national security" reasons (e.g., "retraining" members of Iraq's former intelligence service, the Mukhabarat, to work for the CPA). Moreover, the CPA's proposal omits any requirement for investors to reinvest their profits in Iraq. This sets up conditions similar to those in post-Soviet Russia when billions of dollars were exported and stashed in foreign banks while the economy plunged.

While foreign investment is generally considered a plus for economic growth, the terms of the CPA plan seem to run counter to recommendations of the Pentagon-appointed review group that visited Iraq in late June to assess conditions. Headed by former Deputy Defense Secretary John Hamre, the panel put economic development as the third of seven priorities (behind public safety and greater Iraqi involvement in reconstruction efforts). Specifically, it recommended:

creating short-term, large-scale public works projects that would absorb sizable numbers of people in the labor pool;
jump-starting a significant number of state-owned enterprises, even those that would not be competitive, because of the great need to produce more job opportunities;
initiating a "massive" micro-credit program, similar to those that have been successful in impoverished, war-ravaged countries, that would open new avenues for economic activity to new players, especially women.

Private foreign investment will not be interested in any of these areas as economic return would be minimal, if any, and not worth the risk given the lack of security in Iraq.

One characteristic of black holes is that they grow in size as they absorb energy from the surrounding cosmos. Iraq has already snuffed out thousands of lives and absorbed tens of billions of dollars. President Bush reiterated that a "substantial commitment of time and resources" still lies ahead.

Yes, Iraq is not a quagmire. But at a time when U.S. budget deficits of $401 billion this year and $480 billion for 2004 are forecast, Iraq looms as an ever-expanding funnel into which human lives, human talent, and monetary resources are being poured, never to be recovered. That, by any measure, defines a veritable black hole.

(Dan Smith <[email protected]> is a military affairs analyst for Foreign Policy in Focus (online at http://www.fpif.org) and a retired U.S. army colonel and senior fellow on Military Affairs at the Friends Committee on National Legislation.)

http://www.theglobalist.com/DBWeb/StoryId.aspx?StoryId=3193

What might happen if oil was priced in euros instead of U.S. dollars?

Globalist Perspective > Global Economy Iraq, the Dollar and the Euro
By Hazel Henderson \| Monday, June 02, 2003

The euro is finally taking its place alongside the U.S. dollar as a new global reserve currency. This has been further enhanced by the euro's recent gains against the dollar. But what would happen to the U.S. economy if OPEC decided to use euros, instead of dollars, to price oil? Hazel Henderson explores the consequences.

WARNING: Image embedded by poster. uturists like me specialize in “what if” scenarios, outside the box thinking and trying to anticipate surprises. In even the best-laid human plans, events rarely unfold as predicted — even by experts.

Blind spots

Mostly, these surprises are the result of “blind spots”, or because experts use different models or specialized approaches and languages — making communication difficult.

As countries diversify into euros, the currency has taken its place alongside the dollar as the world’s other global reserve currency.

One such surprise scenario is rooted in the close relationship between oil, dollars, gold and Europe’s euro currency. Remember back in 1973, OPEC countries quadrupled the price of their oil and tied it to the U.S. dollar.

Over the years, this flooded the world with “petro-dollars”, which were recycled through banks as loans. The U.S. dollar reigned supreme as the world’s de facto reserve currency.

A history of dollars

Everyone wanted to own dollars, which were considered as good as gold (even though, since 1971, dollars cannot be redeemed for gold, after President Nixon shut the gold window).

Gold no longer backs the dollar — or any other currency. All currencies since 1973 are called “fiat” currencies — backed only by the faith markets have in a country’s government and its economic fundamentals.

Volatile markets

Central banks that used to keep gold bars in their vaults have sold much of their precious metal. Now, they try to “manage” their currencies by raising or lowering interest rates, buying and selling them in the open market and other techniques.

A strong euro makes for a more stable world — and takes the burden of the sole reserve currency status off the U.S. dollar.

Gold is still popular for jewelry and as a safe haven. It trades actively on the world’s commodity and futures exchanges, along with platinum, oil, hogs, coffee, sugar — and fiat currencies themselves.

These currency markets, oil and gold markets are very volatile — dependent on the expectations about the future of millions of their investors and speculators.

What drives the markets?

These markets reflect a collective speculation on the future of such items as Iraq, U.S. foreign policy, the Middle East, oil supplies, alternative energy sources and technologies, the rise of China, the expansion of the EU — and the weather.

They all drive today’s global financial markets, including the $1.5 trillion of daily currency trading.

Losing ground

In the past 12 months, the U.S. dollar has lost some 30% of its value against the European euro. The Bush Administration has played up the bright side. The cheaper dollar makes it easier for U.S. exporters to sell abroad.

Many believe that deeper reasons for the U.S. attack on Iraq were its decision in 1999 to require payments for its oil for food program in euros.

The United States needs to increase its exports because it has a whopping trade deficit (currently reading 5.2% of our GDP). Former Treasury Secretary Paul O’Neill dismissed this as “a meaningless concept.”

But global investors and currency speculators take it seriously — along with the bursting of the U.S. stock market bubble, accounting scandals and heavily indebted corporations and consumers.

No surprise

The list goes on, and includes the U.S. savings rate at almost 0%, the increasing budget deficits due to President Bush’s tax cuts and his build-up of military spending, the Iraq war and the new Bush doctrine of preemptive attacks on any country that might threaten our future national security.

In light of all that, global investors started unloading dollars and U.S. assets. No surprises here.

A new global reserve currency

But as countries that formerly held mostly U.S. dollars in their currency reserves begin to diversify into euros, the currency has taken its place alongside the dollar, as the world’s other global reserve currency.

Back in 1973, OPEC countries quadrupled the price of their oil and tied it to the U.S. dollar. The dollar reigned supreme as the world’s de facto reserve currency.

While current data are hard to come by, the euro now accounts for as much as 35% of global trade and reserve holdings. This new reality makes for a more stable world — and takes the unsustainable burden of the sole reserve currency status off the U.S. dollar.

Clearly, with its enormous, open-ended commitments in the global war on terrorism, the U.S. economy cannot at the same time, continue to absorb most of the world’s exports — and remain the locomotive of the world’s economic growth.

An oblivious administration?

This new situation seems a surprise to the Bush Administration. It is still keen on expanding its overseas commitments, re-building Iraq — and offering aid packages to Turkey, Pakistan and other countries whose support is sought. In the meantime, it has passed a $350 billion tax cut package in late May, 2003.

While Mr. Bush tells Americans to continue shopping, traveling and enjoying the American way of life, federal deficits grow, domestic programs are cut — and half of all U.S. states are engulfed in budget crises.

Dropping the other shoe

What happens if global investors continue pulling out of the United States — and the dollar keeps falling? Many market players expect it to fall another 20%. Other countries that have lost money in the dollar’s fall may continue buying more euros.

In the past 12 months, the U.S. dollar has lost some 30% of its value against the European euro.

The other shoe may drop, too. OPEC may decide to officially re-denominate their oil in euros (since most of the organization’s customers are in Europe anyway).

OPEC economists have been considering this “no-brainer” scenario for sound financial reasons — even though they feared U.S. wrath and retaliation.

War speculation

Indeed, many believe that a deeper reason for the U.S. attack on Iraq was its decision in 1999 to require payments for its oil for food program in euros.

The United States — heavily dependent on imported oil — benefits price-wise and in influencing markets through OPEC’s U.S. dollar pricing. Iraq’s dinar will also be replaced by dollars — if the United States has its way.

A major adjustment

Thwarting President Bush’s global dollar diplomacy and its designs on breaking OPEC’s oil pricing power provide additional reasons for OPEC to switch to payments in euros. This would mean that the United States would have to buy euros with dollars before it could buy OPEC oil.

The Bush Administration has played up the bright side. The cheaper dollar makes it easier for U.S. exporters to sell abroad.

The dollar would fall further — and the euro would rise. The U.S. economy would eventually have to adjust to $5-a-gallon gasoline (the average world price).

The bad news would be a deeper U.S. recession, SUV owners would suffer while Toyota and Honda would grab more market-share with their 50-60 mpg hybrid cars.

Good news?

The good news would be that U.S. exports would flourish and that Detroit would accelerate its own fuel-efficient car production. The solar and renewable energy technologies would be fully capitalized as a new sustainability sector of the U.S. economy, providing millions of new jobs.

And the Bush Administration would have to pull back from its over-commitment to the global war on “evil” — and shift its priorities to funding education, homeland security and federal grants to help states fund their new mandates.

Copyright IPS, 2003

http://www.china.org.cn/english/features/60395.htm

http://charleston.net/stories/020503/bus_05street.shtml

http://www.ameinfo.com/news/Detailed/20198.html

Leeroi (view)