A Multi-Front War's Impact on US Economy Leads Again to Recession

PARADIGM COVER-UP?:  TO WHAT DEGREE WAS the NEED TO COVER-UP BAD GOVERNMENTAL WAR BUDGET MANAGEMENT Been Responsible in PART for the FINANCIAL SCANDAL &  BUBBLES THIS DECADE?

By  Kevin A. Stoda

Readers need to connect these dots, so they present this analysis in teach-ins.

Earlier in January of 2008, Dr. Paul Krugman (this year's Nobel Laureate inn Economics) began the year by claiming, "One thing I get asked fairly often is whether the Iraq war is responsible for our economic difficulties. The answer (with slight qualifications) is no. Just to be clear: I yield to nobody in my outrage over the way we were lied into a disastrous, unnecessary war. But economics isn't a morality play, in which evil deeds are always punished and good deeds rewarded"

Was the Nobel Laureate correct?

In order to answer this question, let's look back over the past 10 months (or even over the past 8 years) and discover if there aren't good clues that the current global recession has, in fact, been significantly adversely affected by the U.S. federal governments strategy of the past 8 years-(a) wagewar,(b) under utilize the tax system, (c) privatize the military and (d) spend-spend-spend system.

Let's us consider these four points. 

First, the price of oil began to rise in the run-up to the Gulf War in 2002 and continued to rise through mid-2008.  During this time, American borrowers had to pay higher fuel costs--money that could have been used to pay off (or to pay down) their mortgages.  Is there a possible connection with the greatest financial crises of the last 70 years?

Yes, there is.

Second, the federal government refused to raise taxes (or to sell & raise specific war bonds) for the three-front wars on terror between 2001 and 2008. 

This double-failure meant that potentially the government's borrowing significantly increased substantially over the past 8 years (as did the printing of money--even electronic money--which is normally inflationary).  This federal borrowing then would normally have led to inflation in the USA, which would have likely dampened the level of borrowing across the board in the USA over the past 6 to 8 years. 

However, the Bush Administration and the federal reserve sought to counteract all the negative potential increases in interest on borrowing in the USA by intentionally lowering the federal lending rate-now to record low levels. This war-cover-up policy created an even greater disincentive to save than was the case decades ago.

Didn't this attempt to cover-up inflation--in fact help create the biggest Real Estate bubble in decades? Borrowers for both homes and cars went wild borrowing, even as the country continued dancing year-after-year on the edge of recession?

I think, "Yes".

Krugman did, in fact, share last January the following caveat to his overall rejection of blaming war in leading to an American (and then global recession):

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