Seattle Bubble Forum Archive

While watching the excellent Frontline documentary on the Iraq war, it occured to me that there are a lot of parallels to the global credit crisis.
- Initially, the war seemed to be a great success, exceeding all expectations, just like the reflation after the .com bust in 2001/2002.
- The architects of the war had a lot of personal denial, and disbelief when things started to go bad, and were still claiming that things were hunky dory when it was clear to everyone else that they weren't.
- A continual attempt to down-play the gravity of what was happening in the war, and say that things were "contained". Each new strategy (or bail-out) was touted as having "solved" the problem. The failure of one strategy just needs to the implementation of another one, all of which start to look the same after a while.
- The war has unpredictable periods of calm, puntuated by sharp upturns in violence. Just when policy makers think things are going ok a mosque is blown up in Samara, or the UN HQ is vaporized by a car bomb. Think of how the credit crisis will have a Northern Rock episode, and then go through a couple months of calm before the next big shoe drops. In fact, there can even be a month or two where the statistics of sentiment, or various economic indicators, tick up, making everyone think all is well.
- The whole thing drags out far longer, without a firm resolution one way or the other, than either the optimists or pessimists could possibly have foreseen. There is no simple tipping point at which the US loses the war and retreats, but no point at which the US can say they have "won" either.
- Attempts by US policy makers to say this is an "Iraqi" problem, and wash their hands of it, fail as everyone holds them responsible for causing the war in the first place. In fact, Iraqi's themselves don't feel much need to take responsibility for their own affairs since they know they have the US government's hands tied behind it's back (i.e. it doesn't want to accept failure by withdrawing) and can just keep relying on it for largesse.

Link to Frontline documentary on Iraq war:

I would disagree about one point - the pessimists about the war weren't wrong about how long it would drag on. Back in '02 I was pretty certain we'd decimate the Iraq military, get Saddam and his sons, and "win" the war within 100 days.... and then be stuck with a fractioned country, a destined-to-fail puppet government, and the US military being tied to Iraq for 5-10 years, until we finally just said F*** it and left Iraq in pieces. I'm not the only one who thought this - by all accounts Colin Powell pretty much had the same evaluation.

Agreed. But in general, I think you can start to rule out wrong predictions/beliefs much quicker than you can vindicate right ones. Picture a [urlhttp://en.wikipedia.org/wiki/Venn_diagram]Venn diagram[/url] of all the possible predictions (about the war or housing). The diagram might have 3 circles in it. The first is all bullish predictions, the second is all bearish predictions, and the third is what really has happened (or is still possible to happen).

The circle containing possible or measured results will be constantly decreasing as results move from being possible to being impossible. For instance, we do not know today that housing in Seattle will fall significantly in price. We do know that predictions of a prolonged period of stable price increases (3%-6% increases between now and 2014) is false. So while we didn't prove the 80% drop in price guy right, we did prove the 8% increase in price guy wrong.

Also, we need to differentiate between general predictions and predictions which are predicated on other events which we know did not happen. If a hawk says we would have won Nam without the dissatisfaction at home, that is an unfalsifiable thesis. It doesn't pass muster, because even with 20/20 hindsight there is no way to validate or falsify such a claim. Likewise, the claim that the Iraq war was necessary to prevent the spread of terrorism can never be validated nor falsified. This is because we only have one chance at each experiment and so can prove with no statistical certainty which is right.

What we can do, is look back at what happened and learn from what was done well or poorly. We can also attempt to quantify the results enough that we can place an event in the proper historical perspective. Regarding Viet Nam, we might now say that there is some evidence that the war did in fact slow the spread of communism, but perhaps the cost in lives and general unrest was too great a price.

I think we're both in agreement. Also, with regards to Iraq you can say the 'pessimists' view that it would be a quagmire has born out. But that says nothing regarding necessity of going to war. I guess we've debunked 20/20 hindsight as a myth.

20/20 hindsight assumes a clear picture to look at from your posterior. It's fairly easy to say "In hindsight, no-doc subprime loans were a bad idea" because we have a pretty clear picture of what the outcome of that is, and a few hundred years of history to reference the alternative. It's hard to say "In hindsight, going to Iraq was a bad idea." There are too many 'what if' variables with no possible way to answer. You could argue for days over the merits of dropping the A-bomb on Hiroshima and Nagasaki, Vietnam, Iraq... or pretty much everything we've done in the past 50 years in the Middle East. Without knowing the outcome to the other option, we'll never know.

Guess we're 20/20 with a few blind spots.