Share this story
Close X
Switch to Desktop Site

The price of war and peace for US economy

Next Previous

Page 2 of 3

About these ads

"The stock market was relieved that we might not go to war," says William Quan, chief economist of Wall Street's Mizuho Securities USA.

Analysts are even encouraged by the prospect that, if there is war, it will be delayed to late winter or even spring.

"On the whole, later is better than sooner," says David Wyss, chief economist with Standard & Poor's Inc. in New York.

The hope is that the vigor of the economic recovery will pick up in coming months, thus ameliorating the shock of war to the economy.

The prize: oil

One key reason why these economists see a diplomatic solution involving effective weapons inspections as best for the economy is the impact of war on oil prices.

When the rhetoric from the White House was threatening, the price of oil moved above $30 a barrel last month, up 40 percent for the year. With the rhetoric now softened and the acceptance of the United Nations' resolution by Iraq, the price has dropped back to about $25.

Peace means more money in the pockets of Americans and others abroad as the price of gasoline and energy decline, helping keep inflation down.

"Peace would give the world economy a boost," says Kate Warne, senior energy analyst with Edward Jones, a brokerage firm based in St. Louis.

William D. Nordhaus, a Yale University economist, argues that a key factor in the economics of an Iraq war is whether the United States fights it with only Britain as an ally, or waits until it has the support of other nations. With broad support, some of the war's costs will be borne by others. Further, he suspects, a broader coalition could dampen hostility in the Middle East, perhaps having fewer side effects for oil prices.

Forecasting in the dark

Economists, of course, do not know whether the war will actually happen, or if it does, whether it will be over quickly or drag on.

To deal with this uncertainty, Mr. Quan has drafted three economic forecasts for next year.

"This is forecasting in the dark," he admits.

Next Previous

Page:   1   |   2   |   3

Follow Stories Like This
Get the Monitor stories you care about delivered to your inbox.