“I’m so bored. I hate my life.” - Britney Spears

Das Langweilige ist interessant geworden, weil das Interessante angefangen hat langweilig zu werden. – Thomas Mann

"Never for money/always for love" - The Talking Heads

Friday, January 31, 2003

Remora
Prediction fiction

The NYT reports official preliminary figures show fourth quarter growth at 0.7%. Further in the story we come to these two grafs:

Most economists had predicted a weak figure for the fourth quarter, and none interviewed yesterday said they planned to change their forecasts. Though they expect growth to improve slightly this year, it might not be enough to create jobs until the spring or summer.

Many companies hesitate even to bet on a midyear recovery, said Carl T. Camden, president and chief operating officer of Kelly Services, a leading provider of temporary workers. His clients "talk about things turning around in the third quarter," he said, "and then they realize that's the same speech they gave last year"

So, is that what "most economists" had predicted? Wow, somehow we bet those predictions were revised about two weeks ago. Long range, that isn't what most economists were predicting at all. When Business Week did its annual half year business conditions survey in July, 2002, the picture was a lot rosier:


"BusinessWeek's midyear survey of business economists shows that, on average, the forecasters expect real gross domestic product to grow at a healthy, if unspectacular, 3% annual rate during the second and third quarters, with the pace picking up to 3.5% in the first half of 2003 (table)."

Is LI nitpicking? No. The importance of this is that those messages, percolating out into the national subconscious, set the stage for Bush's push-over midterm election. After all, what is there to worry about when the forecasters are showing a pickup? That, in fact, we got a downturn is now going to be written away as, somehow, a bad call. Well, we would like to point out the ideological biases of the bad callers. The professional Pollyannas -- people like James Suriowiecki of New Yorker and the ever erroneous James Glassman of the Washington Post -- have been assuring us that the CEOs are too worried for their own good -- the recovery is just around the corner. Their reasons aren't found in the economy itself, but in a particular, libertarian philosophy -- the same one underlying Bush's Great Giveaway.

In July, while economists were not -- not is the operative word -- within ballpark range of the end of the year's GDP figures, Mr. Surioweicki published a defense of the New Economy paradigm in Wired. It is a rather funny document.. As with all defenders of discredited doctrines, the first order of business is to redefine the semantics of the doctrine to make it work. So, here is how Suriowiecki goes about it:

http://www.wired.com/wired/archive/10.07/Myth_pr.html

"Stephen Roach, chief economist at Morgan Stanley, insists that the US can look forward only to "very subdued growth" until it works off "the bubble-induced excesses of the late 1990s."


Don't count on it. In fact, the overall shallowness of the recession and strong productivity growth during the downturn show that the skeptics are wrong. Call it the myth of the myth of the new economy. The naysayers ignore the economic fundamentals that drove the boom, emphasizing instead the over-the-top rhetorical flourishes - and outrageous stock prices - that accompanied it. Because wild-eyed optimists once said technology would change everything, it must have changed nothing. But if it's 2002 and you're still saying that things aren't fundamentally different than they were a decade ago, you're living in a dream world at least as fantastic as anything a new economy fanatic could conjure. I

n reality, 1995 marked the beginning of a long-lived shift in US economic performance. Productivity growth accelerated due to what economists call secular, rather than cyclical, factors. That is, the pace of productivity growth didn't start rising in 1995 because the business cycle had turned upward. It started rising because crucial aspects of the economy had changed. As a result, today's economy can expand much faster than previously thought possible. Between 1972 and 1995, productivity rose a paltry 1.4 percent a year. Between 1995 and 2000, it rose 2.5 percent a year - an increase of 79 percent. "There has absolutely been a sizable change in the secular growth rate of both labor productivity and total factor productivity," says Harvard economist Dale Jorgenson. Many of the truisms of the boom, it turns out, were true.

Now, what those stats aren't telling you is that they are calculated with the assumption that productivity has to be defined differently -- an assumption that kicked in during the late 90s. That assumption is being tested now. Like a lot of the accounting techniques of the 90s, it isn't looking very good.

Further, the New Economy model implied that this new boom in productivity would create a recession proof economy. That is what the New Economy was all about, in spite of Suriowiecki's smoke screen. And it wasn't just about that for bored pundits -- these were the assumptions that underlay AOL buying Time Warner. Hmm, I wonder how that worked out? And I wonder why Suriowiecki's model sorta forgets the slump in equity value that shows no sign of reversing itself right now. In fact, many of the truisms of the boom turned out to apply to the boom, and the boom only. One of the truisms of the post-boom, though, is certainly true for Suriewiecki -- bs in, bs out. Here, for instance, is the dance he does using the cooked productivity figures:

"Note that information technology's benefits increase over time. If you study the relationship of IT spending to productivity over a single year, you'll find that computers deliver benefits roughly equal to their costs."

That is a perfect New Economy sentence. The metric that you use to measure a firm's performance is no longer anything so plebian as profit and loss. Oh no. It is a 'benefit." And oh, this wonderous benefit -- this rise in productivity due to measuring productivity in a new way that i"incorporates" IT -- why, lo and behold, it equals the cost over a single year. This was the kind of thinking that boosted Yahoo stock to what was it, $300 per share? in 2000.

Behind Suriowiecki's nuttiness is one major fact about the current economy: we are being held up not by IT, but by people buying cars and houses. That's it, folks. There's no magic in the figures. The dream world inhabited by Suriowiecki's skeptics seems to be panning out as the real world, brother. Cooked productivity figures don't compare with 0% financing and the incessant barrage of mortgage offers even LI, who doesn't have a pot to piss in, gets regularly every morning in our email.

Alas, Surowiecki's kind of thinking will be used to justify the disastrous divident tax cut. The pied pipers are still out there, boys and girls.

Wednesday, January 29, 2003

Notes.

We received a nice email from a friend in NY re the previous post. Here it is:

"hi Roger - kind of a sweet post today, if I don't say so myself ....and, ah, evocative; in the sense that your introflashback brought me back to a memory of a moment in Austin in '91: I was sitting in the bar at the union (what the hell was it called?) drinking a beer and "protesting" the gulf war in the same way that all my "political" activity transpired (well, to be sure, very much as I did pretty much everything back then): sitting in a dark room on a sunny day, talking, drinking coffee, smoking, drinking beer, smoking, talking, drinking wine, talking, smoking..... when you happened in and we discussed having the same shameful, horrifying, stultifyingly humiliating realization the night before: that we agreed with Ross Perot - the war is not about oil. Well, were just about to go back to war and it still aint about oil. Trouble is, GW Dauphin and the rest of the cast of characters from '91 might think that it is (well, probably not Colin Powell, he's too focused on the exit strategy to ponder the whys and wherefores). We'll end up just as angry and sad and dumbfounded about the war as we were in '91, and the bullets will fly and the bombs will do what they do, and I will find a dark room on a sunny day and have a beer, alone and silent."

Speaking of exit strategies:
Today, of course, is the day the phone company decided to strike against Limited Inc, depriving us of phone service unless they receive some more of the ready... and of course LI isn't sure there's any ready in the bank. Not to worry, we will be posting from libraries and the like, if we have to... we will fight on the beaches, we will fight on the hills, we will fight in the divorce courts...

The latter is where we will be appearing tomorrow. A friend is divorcing a man who is convinced that LI has carnally known this friend. The man has been dragging said friend -- his ex-wife -- through the nightmare of the legal system in order to extract buckets of the ready. The man seems convinced that the courts are going to reward him for his varied virtues, in spite of the fact that the numbers say otherwise. And that the court will punish LI for our many vices. Drama, that is what we live for on this site, don't you know. Here it is. No wonder lately we are reading Dostoevsky's The Idiot.
Dope

In 1991, I received the call, and went down to U.T., where I found about a thousand people assembled. George Bush had just launched operation Desert Storm. We were assembled to protest the war. I remember running into my friend Emrys. We didn't talk about the war -- we talked about Emrys' dissertation, which at that time occupied his entire social life. Both of us were old enough to have been demonstrating, at this point, since the seventies. I was thirty two, which was a little above the average age of the demonstrators, but not much. The eighties had been full of demonstrations -- divestment, disarmament, Nicaragua -- and almost everyone there knew the drill. Neither Emerys nor I was happy to be there -- demonstrating had long lost its appeal over, say, having a beer in a burger joint. But duty called. We rallied in the dark -- as I recall, it was around eight o'clock -- and marched to the capital. I don't recall the next couple of weeks in crystal clear detail, but I do know that I went to several rallies, one of which entered the state capital. We lay down on the floor, under the rotunda. We were not, alas, arrested.

Yesterday I went along the path by the lake to the center of town. The anti-war rally was going to be held, either cleverly or bizarrely, on Congress street bridge. The usual demonstration routine is to march to the capital steps and listen to a couple of hours of hopelessly inelegant speeches, which we punctuate with cries of encouragement or outrage. As I approached the bridge, I saw that it was jammed with people -- this caused me to smile real broadly at the women approaching me on the path. They smiled back, and then called my name. I focused -- it was S. and her friend, J. S., who never really utters a political word in my presence, surprised me when I talked to her on the telephone last week by telling me that she was going to go to the anti-war rally. She and J. handed me a sign that they'd been handed. It recommended peace as a means of lowering taxes -- perhaps a sentiment that would appeal to passing Congress street drivers, but not exactly the beatitudes. I think they were a little disappointed -- S. mentioned that the crowd didn't go anywhere. She was up for a march. J. mentioned that it was the first demonstration she had ever been to.

I proceeded with my little tax sign to the bridge. Both sides of it -- the walkways -- were covered with people -- although as I walked from one end to the other, I realized that the crowd came in lumps. There were stretches that were pretty bare. The atmosphere was midway between a serious demonstration and a summer afternoon at Barton Springs Pool. The same kids that you see at the pool -- the lanky seventeen year old boys with goatees and drums -- were assembled at the south end of the bridge, in their third world knits, drumming. There were a number of girls of around the same age. There were some middle aged people like me, there were college students, there was a man who unfurled a large black flag (nice gesture), there were bicyclers I recognized as Critical Mass, there were people in trucks and cars going back and forth across the bridge, there were signs asking drivers to honk for peace, and there was an endless amount of flashing the peace sign at drivers, many of whom flashed it back. A woman --maybe nineteen -- had painted a peace symbol on her face, and was telling her friends that maybe they should sing something by that guy, you know... Bob Dylan, or like the Beatles. Another woman, whose sign was dense with a long quote, was asked about it and gave a long explanation of how she had gotten the quote from the Egyptian book of the dead and how Bush's nephew at Fox news had gotten him in during the coup, etc.

On the whole, the rally showed two things. On the dark side, since the grassroots politics of the eighties were pretty much decimated during the nineties, the mechanics of rallying large groups of people and directing acts of civil disobedience have to be learned all over again. This group, however good hearted, was far from being the shock troops of the revolution, unless the revolution requires a lot of bongoing.

On the bright side, the rally did draw at least a thousand people. It is a start. There are, this time, no leaders, no leading organizations, to organize what will probably be a struggle this year and the next. The Democrats have disappeared into a vacuum. The Greens, after embarrassing the Dems, seem more concerned with extending the principles of the Feingold McCain bill than with the kind of politics we get AFTER we elect our politicians. Perhaps the leaders of the new anti-war movement are still in grad schools in Michigan, or working in software in San Jose -- I don't know. There are big questions ahead. If Bush does commit troops to Iraq, the big question is going to be withdrawing them. Of course, the anti-war side has to be for withdrawal. But the devil in the details is that withdrawal, at that point, will lead to chaos; while occupation will lead to a war of low level attrition as in Vietnam. A peace movement should definitely put these scenarios before the American public continually, before the war starts. When I went home, I switched on the radio, but the unctuous Southern tones of our President were more than I could take, so I switched it off, and then waited for the commentators. An hour latter, I turned it on again and listened to them. Amazingly, the Dem's house leader, Nancy Pelosi, mentioned the hazards of occupying Iraq. Wow -- a woman who actually thinks, in a position of some power!
Surely she will be attacked for that.

Tuesday, January 28, 2003

Remora

Conservatives like Mickey Kaus have been cannonading the NY Times for its leftwing bias since Howell Raines became editor in chief. Liberals like Eric Alterman have naturally retaliated by defending Raines. In LI's opinion, the NYT crusade to open the Augusta Masters to women is eminently defensable. However, we aren't golfers, we believe that gender biases in sports are much more pronounced in, say, football or basketball than in golf, and we don't really have any interest in the story.

A more serious breach of journalistic integrity has emerged about the Time's reporting from Venezuala. We wonder if Kaus or his conservative cohorts are going to report on the right wing bias of the newspaper... No we don't. We dont' think for a moment that they will report on this story, which goes like this.

Narco news is a site run by Al Giordano. In a news story about the Times' firing, or letting go, of its Venezualan stringer, Francisco Toro, Giordano revealed a systematic bias towards the upper class side in the dispute between Chavez and the national strikers. In fact, Giordiano's piece is revelatory about what it means to "strike" in this instance. It means that the owners of banks locked out their employees for a number of days -- which was reported in the Times as a bank employees strike. More, in Toro's case, the Times news reporting was being done by a man who was politically active, by his own account, on the anti-Chavez side. Toro finally resigned. Actually, Toro comes out of Giordano's story as a decent man, torn by conflicting interests. Giordiano published Toro's resignation letter to the NYT editor Lyon:


Dear Pat,

After much careful consideration, I�ve decided I can�t continue reporting for the New York Times. As I examine the problem, I realize it would take much more than just pulling down my blog to address your conflict of interests concerns. Too much of my lifestyle is bound up with opposition activism at the moment, from participating in several NGOs, to organizing events and attending protest marches. But even if I gave all of that up, I don�t think I could muster the level of emotional detachment from the story that the New York Times demands. For better or for worse, my country�s democracy is in peril now, and I can�t possibly be neutral about that.

I appreciate your understanding throughout this difficult time, and I hope in the future, conditions will allow for me to contribute with the World Business page again.

Sincerely,

Francisco Toro

What is interesting is that Giordano's generally accurate report on the NYT reporting has been attacked by the NYT in a really silly and stupid way. Giordiano printed this reply to his site from Patrick Lyon:


To: "Alberto M. Giordano"
Subject: Re: To Pat Lyons from Al Giordano
Date: Wed, 15 Jan 2003 10:54:53 -0500

Mr. Giordano,

Requests for information or comment from The New York Times should be directed to our vice president for corporate communications, Catherine Mathis, at (212) 556-1981.

Questions about whether a defamatory screed posted on the Internet with reckless disregard as to its truth or falsity is libelous should be directed to a competent lawyer.

Patrick J. Lyons
International Business Editor
The New York Times

Now, it is true that NarcoNews, like LI, like almost any media site on the web, exhibits a gleeful contrarian style that contrasts with the establishment media's tone of evenhandedness. The latter tone isn't always a bad thing. I would pity the man who got all his news and views from, say, this site. There is certainly something reactive about that gleefulness. It reeks of the back row of the classroom.

However, it is also a lively corrective to the deadening biases of the corporate media. My little experience of Timesmen is parallel to Girodano's -- Timesmen seem to regard themselves as members of an exclusive fraternity, and in their offhours take on that country club drawl, indicative of the delusion that they are the very giants of the earth.

As for Narco News publishing a defamatory screed -- that is simply silly. That said, Giordano shouldn't hug this big splat of NYT vitriol too closely to his breast -- he isn't, really, being censored by the heavy hand of government. His reply is a little too cumbersome, and involves imagining a courtroom exchange between himself and the Times. Like Tom Sawyer daydreaming of the ways in which he would be missed if he were dead, there is something queasy about the wish fullfillment involved in daydreaming about having one's day in court with the NYT. This kind of thing happens when a freelancer gets to confront a real media giant -- proportion is the first casualty of media criticism. However, the NYT does measure its language -- it is hard to imagine Lyon sending a similar message to the much more read Kaus.

Monday, January 27, 2003

Dope

Hume, Huxley, and war

The importance of distance should never be under-estimated. Heidegger, whose defense of Nazi-ism is well known, is continually being rediscovered (surprise) as the rotten bug under the rug of continental philosophy; that Derrida relies so much upon his work has been discussed in the terms one would usually reserve for talking about hiring Typhoid Mary to cook the cutlets in some local dinner. Yet who cares that David Hume, the surely one of the roots of English philosophy and its rather sterile offshoot, analytic philosophy, had, shall we say, rather dim views about blacks during a period in which the trade in black flesh (and the attendant destruction of African culture) was at its height? LI was pondering this while reading, yesterday, Thomas Huxley�s excellent Victorian study of Hume. Huxley himself is rather impatient with the �nonsense� that is usually ground out about race and national character. We like Huxley for that. We like Huxley for his reasons for embracing Darwinism. And more than that � we actually like Hume. But we have to admit that Hume admitted to the inroads of prejudice on his philosophical degree zero, his wariness in the presence of generalizations. Here is what Hume has to say about race:

"I am apt to suspect the Negroes to be naturally inferior to the Whites. There scarcely ever was a civilised nation of that complexion, nor even any individual, eminent either in action or speculation.... Such a uniform and constant difference [between the negroes and the whites] could not happen in so many countries and ages, if nature had not made an original distinction between these breeds of men.... In Jamaica, indeed, they talk of one Negro as a man of parts and learning; but it is likely he is admired for slender accomplishments, like a parrot who speaks a few words plainly."

This was from his essays, which Huxley justly celebrates. On the whole, Hume�s essays are under-appreciated today, except by libertarians and fans of Adam Smith. That�s because, before Adam Smith, Hume put into theoretical language a lot of what we now consider the foundations of classical political economy.

It is hard to swallow apercu like the above, however. One�s inclination is to think that such thoughts have no influence, really, on, say, Hume�s epistemology. Perhaps this says something about the success of analytic philosophy in convincing its constituency that philosophy consists of isolated areas of focus � epistemology, ontology, ethics, etc. � which are logically separated from each other. Really, though, I think it is that we are far enough away from the slave trade, as opposed to the Holocaust, not to feel it in the skin, like some old war wound. But it is an old war wound, nonetheless. A hole in the side of the world.

Analytic philosophers -- and, even more, the incompetent commentators on philosophy in the popular press -- are much more eager to discuss the influence of Heidegger�s Nazi-ism on his ontology than they are to bracket it, and discuss the ontology alone. We are being a little unfair: Hume never claimed that his epistemology was interwoven with his racism, as Heidegger claimed that his encounter with Seyn was interwoven with Hitler. Still, frankly owning up to a belief in black inferiority, especially during a time when Scottish merchants were making a pretty penny in selling blacks on the theory of that inferiority, should raise some questions about Mr. Hume. However, I doubt they ever will.

The tremendous influence of this contempt for a �lower� race has never, really, been traced to its most extreme ends in all the branches of our history. LI wouldn�t even attempt it � it is too depressing. But when we hear casual remarks about the war of civilizations, and about �reforming� the Islamic world, we have to wonder whether the speakers have any acquaintance with western civilization, besides driving in its huge cars and admiring its overpasses and malls. We live on a very thin crust of liberalism. It is about forty years old � as old as LI. That the inheritors of the most vigorous opponents of the liberal mindset � the people who opposed civil rights for blacks, women, and the working class for the better part of American history, those who defended lynch law, laws to break up unions, and opposed giving women legal equality with men � now casually claim this as their heritage and their sanction for making war on the benighted. This has to be an irony worthy of one of Hardy�s poems, or perhaps � we are enmeshed in the dark ignorance in the belly of the beast..
Remora

Tomorrow, as the President gives his State of the Union address, LI will be out with (one hopes) thousands of Austinites protesting the war.

Why? Why shouldn't the U.S, with or without a coalition of allies, invade a country that is ruled by a bloody dictator? A country that manifestly would do better without the dictator?

As we have hammered home on this site, the problem with Saddam Hussein is not his expansionist policies. These have been little in evidence since the Kuwait war. The most striking instance of the change in S.H.'s view, or more likely, ability to incurse on his neighbors is the practical division of his own country. Those attempts that he has made to take back Northern Iraq have been feeble. They've been feeble even judged by his military strength. Though Iraqi forces are probably strong enough to defeat the Kurds in Northern Iraq, those forces, as Hussein knows, would be quickly reinforced by others. Or at least so he must calculate, given his relative inaction.

LI thinks S.H. will topple internally. We also think that an invasion is no guarantee that the country would manifestly do better -- there is absolutely no guarantee that the U.S. would even dismantle the Ba'athist infrastructure; or that, if they did, they would do it in order to create democracy. The Bush administration, while making the required rhetorical genuflection to democracy, has made evident plans for post-Saddam Iraq that are anything but democratic, involving the use of Iraq's oil, and the use of the country as a platform to attack Iran. The kind of country that would allow such things would most likely be either a colony or a tyranny.

This isn't a case of blaming America first -- it is a case of reading the press. Business Week, back in November, published one of those cheerfully obscene articles that you come across in the business press about re-arming Iraq. This one sounds like it could have come from one of the war game scenarios created by the Washington Institute for Near East Policy, who are to the D.C. belligerent crowd what the Lake District was for the Romantic poets -- an inspiration and a home.


"Flash forward to 2003. Saddam Hussein, the despised Iraqi despot, is now in exile on the isle of Elba, once Napoleon's haunt. A new coalition government in Baghdad friendly to the U.S. is getting organized. But Iran is making ominous noises about border issues, raising fears it might exploit its neighbor's weakness. A decade of economic sanctions has seriously eroded the Iraqi military's conventional capability, and now the country is sorely in need of weapons to defend itself. So the U.S., which just finished disarming Iraq by rooting out weapons of mass destruction, now is considering how to rearm Bagdhad.

Sound farfetched? Hardly. Indeed, some U.S. Iraqi watchers already are mulling how to fortify a friendly post-Saddam regime. And some Wall Street analysts are talking about a new export market for American arms makers -- though comparisons to the bullish market for sales to Egypt and Israel after Camp David are probably overblown."

LI has often pointed out that the occupation of Iraq is almost surely going to create the kind of attrition visited upon American troops in Lebanon in 1982 and 1983, bringing forth the same choices: do I stay or do I go? But staying involves ratcheting up hostilities and taking casualties on a scale that begins to look like the first couple years of the Vietnam war. Meanwhile, at home, instead of the Great Society, Bush is pushing the Great Giveaway. We've been here before. William D. Nordhaus, of the Yale Economics Department, has a paper on his website that asks about the economic consequences of a war with Iraq. It begins with some sobering historical considerations (oh, and this is a pdf link):



"While historians have documented the many miscalculations
involved in war, little has been written on faulty economic forecasts, but a
couple of examples will suffice. Lincoln�s Secretary of the Treasury
estimated that the direct cost of the war to the North would be $240 million,
which amounted to about 7 percent of annual GDP at that time. The actual
cost to the North turned out to be $3,200 million, or about 13 times the
original estimated cost.2 The cost to the South was much greater, for most of
its capital stock was destroyed and output per worker was depressed for
nearly a century. The most prophetic economic analysis of war and peace of
all time, Keynes�s Economic Consequences of the Peace, did not foresee the
great German inflation that was virtually at hand, nor did it contain any
hints of the Great Depressions in Britain of the 1920s or of the world of the
1930s.

"In more recent times, the costs of the Vietnam War were grossly
underestimated when the buildup occurred. The original budget estimate
in early 1966 underestimated the cost for the coming fiscal year by $10
billion, or about 1� percent of GDP. By assuming that the war would end
by June 1967, the Pentagon underestimated the cost of the war by around
90 percent. The war in fact dragged on until 1973, and the total direct cost
was in the range of $110 to $150 billion.3 The indirect costs were more
difficult to gauge but comprise inflation and economic instability, civil
unrest, and, some have argued, a growing disenchantment with authority
and government in the United States."

Of course, left out of this list, and considered most pertinent by the belligerents, is the cost of the last Gulf war. However, that comparison is probably misguided. The financial contribution of the Kuwaitis and the Saudis is not going to carry the burden of this one. Alas, when the war is discussed in the mainstream press so far, the emphasis is on the defeat of S.H. That, it seems to us, is only the first stage in the war. The next stage, the occupation, will be filled with low level conflicts -- acts that will be described as terrorist. If we take the intifada in Israel as a model, we are talking about a couple of thousands of casualties -- U.S. soldiers and their collaborators in Iraq taking the hits. It is at this point that the money meter -- to say nothing of the blood meter -- starts ticking. This is why we find analyses like this of the Independent's Jeremy Warner much too optimistic.



".... The double-dip recession, so much talked about at the last WEF annual meeting in New York but widely dismissed as unlikely, may already be upon us, and that's before an Iraqi war has even begun.As one chief executive puts it: "We need a quick and successful outcome. If we don't get it, we're dead." This seems to me still by far the likely outcome, but don't bet on it. A senior Bush adviser told me: "If the war is still going after a month, then we may be in trouble."

In the less benign scenario, the war proves difficult and protracted. The price of oil rises sharply and then stays there. Developed economies are not as reliant on oil as they used to be, but the consequences would still be catastrophic, turning a weak recession of the type that followed the Gulf War into something much more serious.

As war stretched into a third and fourth month, with no end in sight, the Fed would continue to cut rates, perhaps down to zero if necessary. With the federal funds rate already at an historic low of 1.25 per cent, it can readily be seen that the US is already very low on monetary ammunition. Furthermore, higher oil prices might eventually prove inflationary, necessitating a rise in interest rates and deepening any economic downturn.

All very scary, and alarmingly, only too possible."