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To: 10K a day who wrote (128434)	10/10/2001 7:03:26 AM
From: Tom Smith	Read Replies (1) \| Respond to of 436258

prudentbear.com In effect, we may be on the threshold of not just a new kind of war, but also a new type of Cold War, the object of our containment now being radical groups primarily spread across the Islamic world, rather than the Soviet Union and its communist satellites. But a strategy of containment takes time and costs money, lots of it. It also implies a potential rollback of many aspects of economic liberalisation. Although many G-7 governments and multilateral organisations, such as the IMF, have stood firmly against the introduction of capital controls, some governments, notably France and Germany, have long expressed more sympathy for the idea. Perhaps this policy proposal will gain new momentum in the context of a global battle against terrorism, in which global financial controls are viewed as an indispensable means of stopping the covert funding of terrorist operations. The corollary of containment is less globalisation, less scope for business expansion into new emerging markets (and, hence, profits growth), higher risk premiums, and a much greater mobilization of government resources to combat the new threat. Of course this comes at the expense of the private sector, since the choice of "guns" over "butter" ultimately implies a higher burden of taxation even allowing for the short-term expedient of accelerated tax cuts to offset the pre-existing downturn in the economy. Essentially, containment eradicates the promise of a new golden age of globalised prosperity. Our "peace dividend" has just been cancelled, and markets have come nowhere close to factoring in this new reality yet.