Hi Hawkmoon; Re war, inflation and the economy.
Re: "War is inflationary, not recessionary. It is what actually shocked the US economy out of its post-depression malaise in 1939."
I think the real problem with the economy is that too many people, myself included, are saving more money than usual. That means I'm spending less, and that hurts the economy. War does solve this problem, but it does it by putting money into the hands of people who spend it, rather than the hands of people who "hoard" it. But the way that war does this is by giving jobs to the unemployed. They get jobs either directly in the military, or they work in the massive industry required.
Unfortunately, Iraq isn't enough of an enemy to provide significant increases in employment. Iraq is not Germany, and Saddam is not Hitler.
I fully expect to see the inflation, but that was built into the system long before the WTC attack. The US has been running a massive trade deficit for years, and eventually that money has to come back to the country. In the past, such massive flows of money have been associated with inflation (i.e. the late 70s). The most inflationary thing that could happen to us would be a (partial) replacement of the dollar with the Euro as the world's reserve currency.
The Vietnam war itself is a good example of the relation between inflation, unemployment and the economy. The inflation was mild during the war, and only peaked years after it was over. And as a war, Vietnam was a hell of a lot bigger than Iraq could ever (I hope) grow to be.
-- Carl |
