So what does the Iraq war have to do with the current economic disarray the U.S finds itself entrenched in? While according to an ex- Vice President of the World Bank, a lot.
Professor Joseph Stiglitz told the Chatham House think tank in London that the Bush Administration White House was currently estimating the cost of the War at about $U.S 500 billion, but that figure massively understated things such as the medical and welfare costs of U.S Servicemen.
The war was now the second most expensive in U.S history after World War II and the second longest after Vietnam he said.
The spending on Iraq was a hidden cause of the current credit crunch because the U.S central bank responded to the massive financial drain of the war by flooding the American economy with cheap credit.
“The regulators were looking the other way and money was being lent to anybody this side of a life support system,” he said.
That led to a housing bubble and a consumption boom, and the fall out was plunging the U.S economy into recession and saddling the next president with the biggest budget deficit in history, he said.
Stiglitz also points out that the surge (pun intended there) in oil prices can also be an effect of the U.S excursion into Iraq. He estimates that in all the Iraq War will cost the United States about $3.3 trillion.
Professor Stiglitz attributed to the Iraq War $5-10.00 of the almost $80.00 a- barrel increase in oil prices since the start of the war, adding that it would have been reasonable to attribute more than $35.00 of that rise to the war.
MY TAKE: I am not that fluent in the arena of economics, but this seems logical to me. Wars after all cost money. They often cause nations to loose money (with the exceptions of maybe a few large companies that provide armaments and work as contractors). Rarely does modern warfare ever make a country money.
This just lends credence to the fact that you can’t have colossal tax cuts, not reduce spending, start a war without the support of the vast majority of other countries, and still be capable of fighting a war and remaining in a strong position in that war. We tried that once before, it was called Vietnam. And in the final stages and for many years following America’s tragic experience in those sultry southeast Asian jungles and villages continents away, the U.S experienced what economists refer to as massive “stagflation”, a term again being uttered today.
The U.S economy is just another casualty of the Iraq war.