Hundreds of Iraqi Yezidis, members of an ancient religious sect heavily influenced by Persian Zoroastrianism, were murdered last week in the most deadly terrorist attack in the world since September 11, 2001. Fuel tankers packed with explosives were ignited in a refugee camp near the town of Kahtaniya, just outside the Kurdish autonomous region. Officials say the death toll has surpassed 500. The American military says this is the handiwork of al Qaeda. They’re probably right: this has their fingerprints all over it.
American commander General David Petraeus recently warned that terrorists and insurgents may use the media as a weapon and stage massive, headline-grabbing attacks as a way of showing the surge is a failure. If this massacre was indeed a part of that strategy, it has failed. Journalists aren’t playing along. They dutifully reported the attack and moved on, treating even this massive terror attack as just the latest in the steady drip, drip, drip of atrocities that erupt in Iraq as a matter of course.
Yesterday, the Dow Jones Industrial Average ended down 30.49 points. Yet both the S&P 500 and the Nasdaq Composite posted gains, and market signals indicate the Dow will turn back up today to continue the advance started on Friday. But even with the recent uptrend, no one thinks the global sub-prime lending crisis is over.
The recent turmoil in the world’s equity markets is a symptom of greater dislocations. There are many causes for the recent problems—such as the mispricing of risk caused by too much liquidity—and none of them have been solved by the recent gyrations in global markets. At some point, the great economic bull run following the fall of the Soviet Union must end. There is a rhythm to economies that governments can moderate, but not eliminate.
Since the end of World War II, the United States has taken the lead in developing mutually supporting systems—embodied by multilateral institutions such as the International Monetary Fund and the World Bank—to ensure prosperity. Yet, if the shocks to this global system are too great, the network’s interconnectedness, normally a strength, becomes its weakness, as one part brings down another. As in an overstressed electrical grid, problems can first ripple and then cascade. So, for the first time in history, virtually all societies can move in sync due to the very nature of the international system we have created.