RIYADH, 3 September 2007 — While the impact of the US mortgage crisis on the US economy has grabbed headlines in the American and international media, that resulting from the wars in Iraq and Afghanistan has not caught the media attention due to intriguing silence on the part of the US administration, a Saudi financial consultant has observed.
Quoting a study conducted by Joseph Stiglitz, a Columbia University professor who won the Nobel Prize in Economic in 2001, and Linda Bilmes, a Harvard budget expert, Motasher Al-Murshed, financial consultant, told Arab News that the Iraq war could cost the US economy over $2 trillion. The study blames the US government for continuing to underestimate the cost of the war.
Arab News sent an email message to the US Embassy in Riyadh for its comments, but there was no response as of press time.
Al-Murshed said one major factor why the American media remained focused on the housing crisis while it never evaluated the impact of the war on the US economy was due to the fact that the American media was toeing the government line by playing down its repercussions. “Here we find a parallel in the US media coverage prior to the invasion of Iraq claiming that the country had weapons of mass destruction (WMDs) and was in league with Al-Qaeda. Both the myths were subsequently debunked.
According to the paper, the escalating cost of the war is likely to pile pressure on the White House, which has scaled back its ambitions to rebuild Iraq or seek funds for reconstruction. “But that will not prevent the US government from financing the war effort, which has already created the inflationary spiral,” said Al-Murshed, who has over 20 years’ experience in the banking sector, in treasury and capital markets with leading financial institutions.
He pointed out that the US Congress wants to sue the Organization of Petroleum Exporting Countries (OPEC) for “price fixing”.
“But it conveniently forgets that the US-led wars in Afghanistan and Iraq have resulted in a huge consumption of refined goods. Together with the political uncertainties in the region, this has led to a mark-up in oil prices.”
“The question is: how will the US government raise such a huge amount to fund its war effort? It will have to tap the international financial market apart from relying on its own resources,” he added.
According to the Government Accountability Office (GAO), the watchdog arm of the US Congress, the money spent so far could have helped fund employer health insurance for some 107.5 million US citizens, more than double the estimated number of people without health coverage.
For 2007, the Pentagon has requested another $50 billion for military operations, and other US government agencies have requested $771 million for reconstruction and stabilization activities.
He said that one way or the other, Gulf citizens could get involved in financing the US war effort, since they have huge funds invested abroad in mutual funds and derivatives as well as bonds and securities. So they would end up funding part of the war effort, Al-Murshed pointed out.
