Multiple Variables
Jude Wanniski
October 18, 2001


BUMPING THE CEILING: Once the financial markets could see there would be no escalation of Al Qaida’s terrorism by intemperate reaction from the Bush administration, they quickly absorbed the blows from September 11. Of course, Wall Street remains sensitive and could nosedive at any time if another shoe drops, but for the most part we think the market is now bumping up against the deflation ceiling that will not go away. The steady decline to $279 in the price of gold is another indication the markets are pricing in less political risk. We get back to our position of August 2, “Market Inflection Point,” scanning the horizon for some reason to see an end to the monetary deflation. Unhappily, there is even less reason at the moment, as the policy makers who might otherwise scramble for change now have anthrax to blame for falling auto sales and building permits. Our bullishness “up to a point” has worked well, and we have Secretary of State Colin Powell to thank for that. Until some serious political people take up our deflation model, there will again be no reason to hold any equities unless you are good at picking the right companies in the right sectors. The National Review has now decided that Treasury Secretary Paul O’Neill should resign, but for all the wrong reasons. O’Neill has been passive, the good soldier following the White House lead on macro-economics, but as long as Republican opinion leaders are happy with monetary policy, they are not part of the solution. O’Neill has at least kept his powder dry and nobody is proposing a better alternative.

ANTHRAX: Having thought about political terrorism for a decade, I do not believe the anthrax attacks have any connection with the Islamic world in general, or Iraq in particular, as the WSJournal asserts is the case. The letters laced with anthrax contain no message representing a “cause,” which is the first requirement for a political terrorist. The suicide bombers of September 11 had Osama bin Laden to explain by videotape why they did what they did, and they left enough evidence around to connect themselves with the first bombing of the WTC. By aiming at individual journalists and political figures -- NBC’s Tom Brokaw and Senate Majority Leader Tom Daschle -- the anthrax killer was not making any kind of point that could be connected to Islamic extremists. The parallel with the Unabomber is the most persuasive, a Hannibal Lecter maniac who may have a crazed hatred of liberal journalists and members of Congress. The spores picked up by New York Gov. George Pataki’s staff probably resulted from his NBC interview. If so, the threat to the national health and national economy would be tiny, and it is more likely the FBI will find the fellow long before bin Laden is located. The market declines attributed to the anthrax scare on Capitol Hill do not square with the timing. It was hours after House Speaker Denny Hastert announced he was closing the House that the market went into its nosedive Wednesday. The more serious problem for the economy is the potential for a wider war, if the WSJournal has its way.

IRAQ: Bear in mind that practically every conservative opinion leader, excepting Jack Kemp and Pat Buchanan, has signed onto Richard Perle’s strategy leading to war with Iraq (and for the rest of the Islamic world for that matter). Paul Gigot, the new editorial page editor of the WSJ, has not reviewed the page’s dependence on Perle as I’d hoped. Instead, he is turning up the volume on Perle’s party line, which is being parroted by the Washington Times, the National Review, the Weekly Standard, the NYPost, and the publications of Mortimer Zuckerman, the NYDaily News among them. The WSJournal today carries a three-column indictment of Iraq by Jim Woolsey, former director of Central Intelligence, who was recruited into the Perle network 30 years ago. The only CIA director we’ve had with an IQ in double digits, Woolsey was foisted on President William Clinton by Perle in 1991 -- as a “Democrat” who had worked for the late Mississippi Democrat John Stennis. He did not last long.

FARRAKHAN: We have invited Nation of Islam leader Louis Farrakhan to be the speaker at our annual client dinner in New York City next month. You may note that in a Chicago speech Tuesday night, he asked for “proof” of Osama bin Laden’s complicity in the attacks of 9/11. It almost seems shocking that he would ask for “proof” given what we know of the man, but from the perspective of the Muslim world, Farrakhan is correct in wanting to make sure the campaign in Afghanistan eventually can pass the smell test. Other great empires have fallen because they behaved badly once they got to the top. “I would like to see America escape history,” he said in Chicago, the one line I wrote down when he said it. It is a huge headache for the Bush administration to not have a smoking gun connected to bin Laden, when he says he didn’t do it. The British government produced a document of evidence against him, but it does not look firm enough to stand up in a court. If bin Laden is “coughed up” by the Taliban, to use the President’s phrase, exoneration by an international court would be quite an embarrassment, given the amount of damage in the Afghanistan raids. It seems clear to me that there is enough evidence for an indictment of bin Laden, but conservative commentators are now openly saying he should not be taken alive. Next, we follow the Perle line that argues we do not have to have any hard evidence that Saddam Hussein’s people were involved, but that we can act violently on our certain knowledge that he was involved to go in and finish the Gulf War.

POST SCRIPT: In reporting on the Farrakhan speech, the Associated Press threw in the line that he once called “Judaism a gutter religion.” A year ago, I protested to AP that he never said such a thing and never, ever said a disrespectful thing about Judaism. The managing editor told me the New York Times says he did and that was good enough for the AP. The Times could not track down the quote and Metro Editor Joyce Purnick, who used it in a column, e-mailed me: “I am convinced that Farrakhan did describe Judaism as a ‘gutter religion. He may have used other pejoratives as well, but ‘gutter’ was one of them as far as I can humanly tell.” I’ve offered her $1,000 if she could find the term “Judaism” connected to any pejorative in a Farrakhan speech or writing and have not heard from her. The Times today carried the AP story, with a thumbnail photo of Farrakhan, but without the “gutter religion” quote. It did carry the line that Farrakhan has “condemned Zionism,” clearly using the word “condemned ” to further demonize him. As far as I know, Farrakhan has taken issue with “Zionism” only as it has been carried out politically in a way that has led to a half-century of conflict. He has repeatedly said he accepts Israeli statehood and that he considers himself as much a Jew as a Christian or a Muslim. That does not fit with the stereotype, so it does not get reported. I have disagreements with Min. Farrakhan on many issues, but none are serious. I’ve told him that there are not as many conspiracies in our government as he thinks there are -- that he does not give the political establishment enough credit for mere stupidity and ignorance.