So I just saw a pointer to this letter by Laurie Garrett, a first hand dispatch from the World Economic Forum in Davos. She says she didn’t intend the letter for public consumption, but I don’t really care at this point since everybody already knows about it. In it she says that the muckety-mucks who run this planet already believe that the world economy is really on the rocks, and that a protracted conflict with Iraq could accelerate the downward spiral that we can’t seem to pull out of. What if that’s true?
Is there any sort of rational economic risk-reward analysis going on behind the scenes with the Bush administration? The word nobody dares speak above a whisper is deflation. I can tell you right now that just about anybody who works in the IT industry already understands the implications of deflation — as far as I know salaries simply aren’t going up for anybody if they work in IT these days. The bottom line with deflation is that every bit of debt you have suddenly becomes more expensive. Alan Greenspan has spent his entire career fighting inflation, but for Joe Consumer, inflation really isn’t so bad. It makes your credit card debt relatively cheaper to pay off, effectively lowers your mortgage, and generally makes life easier for people in debtor countries like the United States. Deflation has the opposite effect.
I admit that I’ve left out all but the most basic economic considerations from my analysis of whether or not we ought to start a war with Iraq. I know that the war is going to cost us hundreds of billions of dollars (at a time when nearly every state in America is in a major deficit situation), and the Bush administration won’t even cop to that. What if the war aggravates lots of the negative trends that are already keeping the economy in the dumps? For anybody who’s trying to make it in the current economy, things are already looking grim. It’s bad enough that our reputation around the world is at stake, is the global economy worth risking so that we can go to war with Iraq? The bottom line here is that we’ve gone 12 years since Desert Storm and let Saddam Hussein simmer. The same people who are now urging us to war let him off the hook back then. If finishing the job means dealing a mortal blow to the world economy, then mightn’t we consider holding out with the inspections just a bit longer?