THE ECONOMIC CONSEQUENCES OF THE PEACE….Niall Ferguson thinks Wall Street isn’t taking the Iraq War seriously enough:

It took a long time for American investors to acknowledge that there might be an economic as well as a strategic downside to failure in Vietnam. The Dow hit 1051.70 on Jan. 11, 1973. By Dec. 6, 1974, it had fallen by nearly half.


If McCain is right and the Middle East does blow up some time after an American exit from Iraq, oil could end up at $100 a barrel. Then what? Well, how about higher inflation, a dollar slide and a stock market sell-off?

We’re supposed to stay in Iraq because it’s helping prop up the stock market? That’s some seriously warped thinking. And what makes it even weirder is the part I left out, in which Ferguson admits that Vietnam had little or nothing to do with the 1973-74 stock market selloff. This gets him points for honesty, I guess, but for some reason it still didn’t stop him from charging ahead with his fears that leaving Iraq might bring the American economy to its knees.

In any case, I suspect Ferguson has it exactly backwards. Spare pumping capacity is so low right now that any serious disruption in oil supply could indeed send prices skyrocketing — and unfortunately, there are plenty of possible disruption scenarios. But while some of these scenarios are either unrelated to Iraq or related to our departure, even more of them, I think, are related to our staying. For some reason, though, hawks always forget about those kinds of scenarios.

Perhaps the question Ferguson should have asked himself is this: If LBJ had exited Vietnam in 1968, after four years of fruitless escalation, how would the American economy have done in the 70s? Probably better, and certainly no worse. What lesson does this hold for four years of fruitless escalation in Iraq?