Through The Static

July 12, 2008

Paul Krugman’s Blind Spot

Filed under: Gas,Government,Politics,World News — disciplepete @ 10:01 am

Article from Counterpunch which talks about the economy, the Iraq war, Bush Administration policies, and NYT columnist Paul Krugman’s oversights on these issues in one of his recent columns.

In a New York Times column on Monday (“Behind the Bush Bust”), economics columnist Paul Krugman mused on whether President George Bush could be blamed for the nation’s economic crisis. His conclusion was that, yes, to some extent the crisis was Bush’s fault, but he largely lets the current administration off the hook, instead blaming Republican policies dating back 10-15 years…

…The gaping hole in Krugman’s logic is the Iraq War, which the columnist, incredibly, doesn’t even mention. Yet clearly, the invasion and subsequent war and occupation of Iraq which was purely the result of Bush/Cheney machinations, has been a major, if not the major cause of oil price increases.

By destroying Iraq’s oil production, and by hindering much of Iran’s production (Iran, seen as an enemy by the US, has been frozen out of capital markets, blocking it from being able to modernize and even maintain its own huge oil infrastructure), and putting even Kuwait’s and Saudi Arabia’s production at risk, the US war in Iraq has jeopardized about one-third of the world’s oil capacity—a fact not lost on oil speculators.  Every rumor of a longer occupation or a wider war in the Middle East—especially a possible attack by the US on Iran–has pushed up oil prices further, as has every attack on a pipeline…

…At the same time, the massive amount of industrial production that has gone into the war effort—the building of planes, tanks, armored cars, etc.—while perhaps producing some jobs, has been wholly inflationary in its effect, since this is production that cannot add to available goods and services in the civilian economy. That means that there are more people with wages and salaries, chasing the same number of things to buy—a sure-fire recipe for higher prices. Add to that the huge war budget, all funded by debt, and you have even more downward pressure on the dollar.

 

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