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10/21/02  

What Now?

As emotionally satisfying as the massive deployment of military might would be , it may be the least viable and effective option. Additionally, we could lose the moral high ground, and diminish our ability to control and use world opinion and horror to isolate, discredit, and eradicate terrorism.

Our goal, simply stated, should be to completely isolate bin Laden and hateful Muslim fanaticism. The isolation I speak of must be complete in the sense these people are removed from any kind of support- financial, moral, military, logistical or otherwise. If we respond to violence and murder with more of the same we may discredit our position and potentially risk losing moderate Arabs who are so crucial to isolating bin Laden and his ilk.  

We must not discredit the idea that these are murderers, with no morality whatsoever. However gratifying, countering violence with the same, and killing and maiming presumed innocents dents the sanctity of our position. Additionally, we must recognize the limits of military power, the extreme difficulty of the terrain and the ability to hide deep inside virtually impenetrable mountains. 

We must not allow this conflict to appear to be the US against the Arab world and the followers of the Muslim faith. We must let the horror of this event to frame the conflict as one between the respectful, law abiding, god fearing world against a very small group of murderers. We must also identify clearly the enemy by forcing radical nations (Afghanistan, Iraq, Sudan, Yemen, the break away republics from the old USSR and others) into a corner. Any individual or nation that does not discredit and repudiate completely the actions of bin Laden in word and deed is the enemy of the free world. We must not do anything to prevent this conclusion from being drawn. 

The USA and democracy has always been the vilified object of dictatorships and hate based regimes. Particularly in world of electronic and digital intrusion, we can communicate freedom to the repressed. If we can be induced into behaving in a violent and hateful way, our beacon is diminished. We must avoid the tendency to become at all like our adversaries.

With respect to the some 7 million Arabs resident in this country, the huge majority came here to escape persecution, dictatorship and lack of hope. They love America and what it represents. Their motivation is no different than the successive waves of immigration from over two centuries. While we must enhance our legal ability to identify and prosecute terrorists, and incarcerate suspects, we must simultaneously respect the rights of those who have done nothing wrong. We must accept this balancing act. Failure to balance the need for security with the rights of our citizens could also chip away at our moral position. 

I believe military action is a last resort after our enemies are completely identified by the US and, very importantly, the rest of the free world. If we are patient, it is possible the Arab world, recognizing that bin Laden and Saddam Hussein have placed the majority in a highly compromised position, will bring us bin Laden without a single round being fired. 

If not, we will have their reluctant support to use our military force. 

This is the positive possibility. This scenario might also include aggressive Fed increases to money supply, and fiscal policy including elimination of the capital gains tax and various credits for investment. This rosy scenario could represent a bottom for the market and a rallying point. 

However, equally possible, is a far more negative set of possibilities. This would include a government induced into a disproportionate and horrendous response that kills many innocents and does not accomplish its intended surgical purpose of destroying bin Laden and company. If, further, there are remaining operatives who revert to more traditional bombings of civilian gathering points, we could see confidence completely erode, taking our economic activity to depression levels.

While cell phone producers, defense companies, energy, and consumer non-durables may prove to be early winners, and p and c insurance, air transport, and retailers early losers, the unfolding scenario will dictate how the market ultimately responds for good or ill. 

Curiously, the need to reconstruct telecommunications and technology, as well build true redundant back-up sites could provide a spark to technology. 

Markets hate uncertainty and we have enough to choke any investor. But there is also a brighter side to this that the market is not pricing in which could ignite a rally, particularly if there is a non-violent resolution to the immediate terrorist threat.  

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