Dec 28 2008
Bethlehem and Lebanon: What War Will Do.
When I was young, Lebanon was an attractive tourist destination. Bethlehem, too, was a tourist destination for Christians, even if no one was completely certain that the sites were accurate. Commerce flourished, the locals did well.
Then came war, and with it, economic ruin. Consider how stability will enhance the wealth of a nation and you can contrast the United States to these small nations that used to be prosperous. Peace equals stability equals wealth.
It’s worth noting this now because Obama has stated unequivocally that he intends to put in a stimulus package to get people working again, to create jobs and rebuild some of the areas of the nation that needs work, such as the great number of bridges that are in trouble. Yet naysayers point to the programs Roosevelt put together as historical proof that such packages don’t work. It was World War II, these naysayers argue, that bought us out of the Depression, not the jobs that the President created.
Maybe that is true, but long term war costs can really hurt a nation. It’s worse when the war is fought on your own soil. Businesses can’t rely on the safety to conduct business, banks can’t loan well, people can’t keep their homes stabilized. The wealth of a nation erodes. Wars keep commerce from happening smoothly. Governments spend money on bullets instead of roads and education. People spend their money on safety and survival instead of common goods. Folks who try to keep from getting shot are not patronizing stores on a normal basis.
As investors, war is a problem that must be taken into consideration when analyzing any aspect of investing in that country or region. Let’s consider FOREX transaction. Currencies rarely become strong when the country is being bombed repeatedly. Want to invest in a regional fund? It’s best to know what each country is doing. Are there countries involved in wars? Any unstable governments? Any repressive regimes? These are all factors when analyzing prospectuses of any funds investing in specific regions of the world.
What then has fighting two wars done to the debt of the United States? What will be the long term effect on our currency? On the taxes our children will have to pay? On inflation in the next five years? The judge is still out on this problem, though many financial gurus like to tell us what to expect. The truth is, no one really knows for sure. Of one thing we can be certain: it has been best for us that these wars have not been fought on our soil. But how terrible that is for the residents of those other countries.
