The history of war is the history of powerful individuals willing to sacrifice thousands upon thousands of other people’s lives for personal gains.-Michael Rivero
Correlation isn’t causation. This applies to the implied impact of Osama Bin Laden’s assasination to the financial markets.
People are so used to connecting current events with actions of market prices from which they impute cause and effect linkages. Such available bias leads people to miscalculate on what has truly been driving markets.
Why should Bin Laden’s death lead to falling markets? Because of fears of retaliation? Retaliation by whom?
Alarmism is no more than part of the political propaganda for increased social control.
Osama Bin Laden’s Al Qaeda represents a small faction whose capability is no more than to launch sporadic urban guerilla tactics with limited effect.
As Eric Margolis writes[1],
The specter of al-Qaida provided a handy pretext to invade Afghanistan to secure strategic territory next to Central Asian oil, keep China out of that region, and double spending on arms. The invasion of oil-rich Iraq was also justified by patently false White House claims Saddam Hussein was in cahoots with Osama bin Laden over 9/11.
Al-Qaida "affiliates" in North Africa, Arabia, and south Asia are simply small groups of local militants who have taken the al-Qaida brand name without having any organic or communications links to the remnants of the core al-Qaida in Pakistan. They are more a dangerous nuisance than a deadly threat.
Osama bin Laden may well and truly be dead. He predicted long ago he would die a martyr in a gunfight with US forces. Bin Laden has been more or less retired for the past 8-10 years, spending his time and energies in staying alive with a $25 million price on his head. He had almost become irrelevant.
As I earlier pointed out[2] Bin Laden’s political capital has sharply been eroding as shown in the chart above from the Economist. This underscores Bin Laden’s irrelevance.
I suspect that Bin Laden was disposed of, largely because of political expediency: President Obama’s popularity ratings have plummeted to record lows and whose chances for reelection have been rapidly shrinking. Thus, the need for a massive boost from which Bin Laden’s death provided as the fodder (which it temporarily did!).
While the general public sees Bin Laden as a mortal enemy, behind scenes Bin Laden looks more like a friend of the US military industrial complex, the huge bureaucratic tentacles of homeland defense which emerged post 9/11 and US politicians. The hunt for Bin Laden was estimated at about the $3 trillion (about 15% of national debt) that has sucked up much of resources at the expense of the economy[3].
So Bin Laden looked more like a political stooge donned as a villain for the public to lash at, but covertly have been providing benefits and profits for the political operators, her network of defense contractors and the bureaucracy.
As earlier pointed out if the report is true that Bin Laden lived in the compound, where he was killed, for 5-6 years, then either this represents a massive intelligence failure for the US government or that the US knew all along and tolerated Bin Laden’s presence.
Thus the eroding political capital base of Bin Laden meant that he was expendable and that Bin Laden would represent as the sacrificial lamb to advance the political interests of President Obama. Besides, a new substitute of Bin Laden has emerged: Libya’s Muammar Gaddafi.
So whether Bin Laden was a political stooge or not, the point is that Bin Laden’s assassination will have little impact on the markets.
As one would note in the above charts, the cratering silver prices prompted for subsequent weaknesses in S&P 500, and Emerging Markets benchmarks while the US dollar belatedly rallied. While some may argue that the sharp moves in the US dollar (obversely a dramatic fall in the Euro) may be attributed to chatters about Greece leaving the Eurozone which has been denied[4] and also on the news of the Portugal bailout[5], I see the US dollar rally-Euro decline as a natural response from overextended positions.
So one has to be careful in reading the sequences of events from which to establish causation relationships.
As a final note, it would also be oversimplistic to view the demise of Bin Laden as a ‘victory’ for the US government. After all it had been Bin Laden’s strategy to engage in a “war of attrition” aimed at bankrupting his superpower opponents...a path which the US seems headed for.
As Ezra Klein of Washington Post aptly writes[6],
For one thing, superpowers fall because their economies crumble, not because they’re beaten on the battlefield. For another, superpowers are so allergic to losing that they’ll bankrupt themselves trying to conquer a mass of rocks and sand. This was bin Laden’s plan for the United States, too.
“He has compared the United States to the Soviet Union on numerous occasions — and these comparisons have been explicitly economic,” Gartenstein-Ross argued in a Foreign Policy article. “For example, in October 2004 bin Laden said that just as the Arab fighters and Afghan mujaheddin had destroyed Russia economically, al Qaeda was now doing the same to the United States, ‘continuing this policy in bleeding America to the point of bankruptcy.’ ”
For bin Laden, in other words, success was not to be measured in body counts. It was to be measured in deficits, in borrowing costs, in investments we weren’t able to make in our country’s continued economic strength. And by those measures, bin Laden landed a lot of blows.
[1] Margolis Eric Why bin Laden’s Ghost Is Smiling, May 3, 2011 LewRockwell.com
[2] See Osama bin Laden’s Death: Propaganda, Diminishing Political Capital and Re-election, May 04 2011
[3] Fernholz, Tim and Tankersle Jim, The cost of bin Laden: $3 trillion over 15 years, May 5, 2011, National Journal
[4] Bloomberg.com EU Finance Chiefs See More Help for Greece, Reject Euro Exit (1), May 7, 2011
[5] Monstersandcritics.com EU, IMF confirm 78 billion for Portugal aid package, May 5, 2011
[6] Klein Ezra Osama bin Laden didn’t win, but he was ‘enormously successful’, May 3, 2011, Washington Post
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