Nobel winning economist, Joseph Stiglitz spoke at the Foreign Affairs Symposium series at Johns Hopkins University tonight. I was looking forward to hearing the author of The Three Trillion Dollar War give a talk. Though the program said that Stiglitz would be speaking about how to make globalisation better, which implies that the man at least knows that it sucks right now, Stiglitz actually did speak about the cost of the Iraq war. It was good and I learned a few new bits about the interface between government and private contractors.

For example, Stiglitz and his co-author found a curious arrangement between the DoD and its contractors.

Since contractors are not covered by the VA, they had to buy insurance for their employees. These employees would be in Iraq, and this did not sit well with the insurance companies. Nonetheless, the insurance was bought, but because it was too expensive, the US government paid the premiums for the contractor. But it gets worse.

Or better, depending upon one's perspective. There existed some "fine print" in those insurance policies, explicitly stating that injuries due to "hostile action" would not be covered. Hardly appropriate insurance for any American going to Iraq, let alone those jackasses from Blackwater. And so the US government stepped in to spare the struggling defense contractor from those onerous insurance premiums. Hmmm, maybe that free market ain't so great.

Ahh, but it is! Because that free market can somehow convince the government to pay for the free market insurance for the free market contractor. And that demonstrates just how awesome the free market is; getting the taxpayer to pay for what would normally be considered the costs of doing business. Because it's all about the short term.

So, what we have here is the US government outsourcing to private mercenary contractors, paying their insurance premiums for coverage that doesn't exist. And then the US government will pay for the treatment of those injured and maimed contractors because the insurance they paid for Blackwater security guards in Iraq does not cover injuries due to "hostile actions." That is what is called, "externalizing costs." That's efficient.

Now, obviously, this tactic is brilliant profit maximization in the short term. Which is exactly the problem. The situation described above is so obviously wrong to anyone with a conscience that it is beyond belief that anyone can think this is sustainable. But those making these kinds of arrangements don't see the problem here. And that is a problem, too.

But I digress.

After Stiglitz spoke, it was Q&A time. I asked Dr. Stiglitz,

The dollar is on shaky ground these days, and the world seems distraught at the behaviour of the United States, both on the foreign front and domestically. Since the mortgage debacle emerged, the US dollar has fallen dramatically, now posting at $1.57 for a euro. Given that the largest holders of US dollar-denominated debt are resistant to US military aggression against Iran, what is the likelihood that foreign debt holders opposed to such aggression might dump the US dollar on world markets, which would collapse the dollar and the US economy?

Sadly, Stiglitz mumbled something vague about "the global balance of economic power," failed to offer any kind of an answer to the question and moved on to the next question. Like I said, short. Perhaps the question's contemplation is simply too grim.

Look, there are four major holders of US debt (the EU, China, Japan and OPEC), each owning more that $1 trillion in dollar-denominated assets, and that all of them are resistant to an utterly foolish attack on Iran. Is retribution possible given the interdependency of those regions on the US economy? After all, if they dump the dollar, bust the consumption economy of America, where is all the crap that China makes going to go?

If America represents one thing, it is "efficiency of the markets." For no where else on this earth has 5% of the world's population managed to create an environment that encourages them to consume 25% of the world's resources with no one actually taking a whack at them. But one cannot help but wonder how much longer the world will continue to finance the "forward leaning," aggressive military posture the United States has adopted.