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the eco of war

 

            The United States Economy is being negatively impacted by the prospect of war with Iraq. Many times uncertainty about the future has an even more negative effect on the economy than being involved in the actual war. This seems to be the case with the United States as we continue to anticipate a change in our country's status. The American people are reluctant to spend money, particularly in regards to high ticket items such as houses and cars, when they are not sure of their potential earnings in a wartime climate. Even Alan Greenspan cautions the Senate Banking Committee that the potential war against Iraq is "the single biggest threat to economic health". Ironically, as governments global spending goes up when the prospect of war looms, the individual tends to curb their spending. When considering the possible scenarios regarding a war with Iraq which include a quick war that does not impact oil prices, a long, drawn-out war with sends oil prices way up, and doing nothing but talking about the possibility of a war, the most negative impact for both the US economy and overall global economics is the prospect of neither a war, nor peace and continuing discussions with no end in sight.
             Oil prices would probably go up when the war with Iraq began but much depends upon how OPEC members react. If they choose to cut their output, prices will initially rise but eventually stabilize at an acceptable rate of around $40.00 a barrel. If the OPEC members choose to flood the market with crude oil which would create a surplus, prices of oil would be deflated. Saudi Arabia and the entire Gulf region has been jolted by the events of September 11. Many countries have been reluctant to invest in the Arab countries and have curtailed their lending in regards to most investment activities in the area. The economy of the Arab nations has been nearly frozen since the attacks on the World Trade Centers.


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