Impending war hurts economy

Will Pietrangelo

The impending war is taking a toll on United States economy … at least for now.

The prospect of another war with Iraq has sent the United States economy and its investors into a state of uncertainty that may halt any chance of an economic rebound. The uncertainties of war and the unwillingness of the United Nations to back a United States-led war has shaken an already weak economy. Iraq is not the only concern on the minds of investors; the renewed threat of North Korea’s nuclear arsenal and the potential danger of a terrorist attack has also created a negative environment for investors as they hesitate to risk their money during such a tense period.

This overwhelming feeling of uncertainty has obviously been weighing on investor’s minds as they choose to take their money from stocks to the relative safety of bonds. There is not much for investors to be positive about these days, which has become obvious with the overall recent downturn of the equity markets. Other economic factors such as the high unemployment rate and increased gas prices have individual investors approaching the future with caution, avoiding large purchases and only buying the major consumer staples. Individual investors are not the only ones being cautious. Major corporations are also holding back on major purchases and investments despite the lowest interest rate seen in 40 years. This concern was recently commented on in a Wall Street Journal article by E.S. Browning and Gregory Zuckerman. Browning and Zuckerman showed their concern for the coming war and its possible effects on the economy.

“The broader worry is that the lingering anxiety about possible military action is paralyzing decision-making at U.S. corporations, postponing important spending moves and holding back economic growth,” they said.

Despite all the negative outlook of the media, there may be better times ahead. The best hope for the economy right now is a quick and easy resolution to the Iraq crisis that will provide stability and confidence in the marketplace. The senior economist at, Gus Faucher, believe ending the conflict with Iraq quickly and without a major catastrophe will set the economy on the right course. Faucher recently made a relevant statement in a Smart Money article concerning unemployment.

“Should the U.S. go to war in the next month or two and secure a quick and relatively painless victory, job growth should start to accelerate in the second half of the year,” he said.