A Note On War And Prosperity

Having your cake and eating it too. An old adage, but one that seems to have to be retaught every generation or so.

While that sentiment dates back nearly 500 years; it seems that Dick Cheney, George Bush, and Alan Greenspan never learned the lesson. Unlike any other War policy in US history, the Iraq War policy attempted to achieve the simultaneous objectives of achieving War-time economic growth without the necessity of individual sacrifice.

Cheney and Bush were the architects of the war policy, and Greenspan helped to ensure that no one (except the volunteer army) would have to lift a finger or pay a dime. He just borrowed like crazy, kept interest rates near zero, and turned our money into worthless paper.

Pretending to live in the prosperity of peace time while fighting a war, has come with dire consequences; both in lives lost and what is likely to be a prolonged recession.

Recessions do not always need to follow wars, but in this case it was inevitable. Since Bush and Cheney were determined to fight the war without raising taxes; the US has funded this debacle with debt. Intense borrowing increases the money supply and inevitably leads to inflation. (Forget the statistics, if you don't believe me take a look at what has happened to housing costs, health care, oil, and other raw materials during the last 5 years.)

In order to stem the tide of inflation, the strict monetary policy usually employed by the Fed (raising rates and constricting the growth of the money supply) usually causes a recession. In this case, since inflation seems to be continuing unabated, we might get the double whammy of inflation AND a recession. That's called stagflation and it is not pretty. Rising prices and a sagging economy-- the worst of both worlds.

Stagflation has occurred once in modern history--during the Carter Administration, and oil was the culprit. What irony! It is precisely the fear of a return to stagflation that has driven American foreign policy for the last 30 years: securing and guaranteeing access to cheap oil. It is that exact foreign policy (the pursuit of cheap oil) that has led us back to the precipice of stagflation.

You can't make this stuff up.