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State of Denial

October 2, 2006 –

state-of-denial.gifThe big news story in the U.S. media is Bob Woodward’s book that is heavily critical of the Bush Administrations handling of the Iraqi war called “State of Denial”. In the book, according to an advanced preview by the New York Times, Woodward accuses the Bush administration of repeatedly misleading the American public regarding the real levels of violence in Iraq. Woodward alleges that the Bush Administration has been saying one thing privately, but an entirely different thing publicly when it comes to the situation in Iraq.
What makes this book especially troublesome for the Bush Administration is that Woodward’s first book in this trilogy, simply titled “Bush at War” cast the Bush Administration in such a favorable light, that during the last election campaign, the official Bush-Cheney campaign website actually featured Woodward’s book, lauding it as the definitive account about the Iraqi war. Now that his most recent book “State of Denial” has cast the Bush Administration in such a negative light, official White House spokesmen are dismissing it and downplaying its credibility.

However, I think such a negative reaction by official White House spokesmen to this book is a huge mistake. In reacting negatively to this book and even in reacting at all, the White House is destroying its credibility with the American people. How can they love his first book so much that they actually feature it on an official campaign website, but dismiss the author’s next book as not credible simply because the author’s tone changes from positive to negative? I believe that such a reaction will only reinforce the beliefs of White House critics that the White House cherry picks its information, disposing of any information that contradicts their official stance while praising any information that agrees with them.

While I’m taking a neutral stance towards this book because to comment on it before reading a single page of it would be foolish, I can still analyze its potential impact upon approaching U.S. mid-term elections and the U.S. stock markets.

Bob Woodward’s books carry a lot of weight in Washington and the generally dismissive stance of White House officials towards his latest book, I believe, may accomplish exactly what the Bush administration fears – turning attention away from the economy and towards the Iraq war immediately prior to the upcoming November 7th election. President Bush himself stated earlier this month that the single most substantive issue that will affect mid-term elections was the economy. Now Woodward’s book threatens to upset this balance. If the tide of the American public’s focus shifts from that of the economy to that of the ongoing violence in Iraq (which recently, though it has remained severe, has taken a very quiet backseat in the media) then the U.S. stock markets may feel the effects.

Why?

Stock markets suffer if people lose faith in the abilities and/or honesty of their leader. Questions about the current administration’s honesty about the war, if they gain momentum, are sure to boil over into questions about the administration’s honesty about the economy. Furthermore, markets react negatively towards uncertainty. If a large percentage of the American public believes Woodward’s latest book, and they conclude that the only way that Bush can continue his plan in Iraq is to send a significant number of extra troops to Iraq post-election, this belief will undoubtedly shake confidence in the economy as well. Politics affects economics. There is no question of this. In fact, it would make sense to short the Hungarian stock markets right now, but I’ll discuss this in a future blog.

What’s truly amazing is how a simple, little book may soon move stock markets.

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J.S. and I have trained in martial arts for a long time. Between the two of us, we both know lots of ex-military men through our training. You name it. Navy SEALs, Infantry, Army Rangers, and CIA. As I read J.S.’s blog today, I was reminded of a story.

About a year and half ago, a friend of mine whose father works in the CIA told me that her father told her that the Iraqi situation was the worst situation he had ever witnessed in his entire life, and that Iraq was regressing towards civil war. I can’t recall whether talk of an Iraqi civil war had yet surfaced in the media at this time, but this certainly was a long time ago. So if it was the worst situation he had ever seen in his career in the CIA and it was that bad 1 1/2 years ago, why has it taken so long for credible reports to surface that refute the stance that things are getting better? That’s all I’m wondering.

And while the general public may not be paying much attention to the negative news coming out of Iraq, most news seems to be increasingly worse. According to the BBC News, “the US Department of Defense latest opinion poll carried out in Iraq indicates that, among the five million Sunni Muslims there, about 75% now support the armed insurgency against the coalition.This compares with 14% in the first opinion poll the Defense Department carried out back in 2003.”

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