Sunday, August 27, 2006

Bond Market

Irving Kellner explores whether bond market can make up its mind and what stagflation has in store.

Tactics of Children?

Here, is an interesting quote form Thomas Schelling, winner of 2005 Nobel prize in Economics.

Sunday, August 06, 2006

War and Economics

I've written earlier about how war can be a tempting tool to resolve economic crisis in the short term but with grave long-term consequences.

John Mearsheimer, in his book The Tragedy of Great Power Politics, points out the important relationship between economic and military power.

Now, the current war in the Middle East shows another the aspect of war which is closer to what Mearsheimer has noted. War can also be used to set back the economic progress of a potential adversary.

In its U.S. weekend edition, published on August 6, 2006 but with no significant mention of Hiroshima's anniversary, Financial Times reports:

At least 45 large factories have been hit by Israeli air strikes according to a list compiled by Lebanese businessmen. On the list are factories for furniture, medical products, textiles, paper and a milk plant. Procter and Gamble's warehouse in Beirut was bombed, with damage to $20 million of stock.

In total, 95 per cent of industry has ground to a halt, according to the Association of Lebanese Industrialists. Those companies not directly targeted have been halted by the Israeli blockade.

Until fighting broke out last month, Lebanon's economy was on track for its best year in more than a decade. Exports were up over 100 per cent on 2005 and tourism was booming.


Annualised growth for the first five months of the year was estimated at 5 per cent.

Economists are now looking at another zero-growth year or worse...

"Israel is taking advantage of the war to destroy what it can of the infrastructure as well as the basic sectors of the infrastructure as well as the basic sectors of economy," said Adnan Kassar, president of the Lebanese Economic Organisation grouping the country's business associations.

"They want to destroy everything--even pick-up trucks loaded with potatoes or watermelons. People on motorcycles have been killed like birds."

Some Lebanese believe that Israel has calculated that businessmen, if they suffer enough, will put pressure on the government to put more effort into neutralising Hizbollah guerrillas.

Such are the uses of war strategy to knock out economic and power competition.