The Petro Panic

Fearing war and dreading an oil shock, the financial markets sink into a frenzy of selling. For the U.S. economy, the outlook is stagnant -- at best.

Leftist radicals who think capitalism thrives on war must have wondered what on earth to make of last week. The prospect of combat in the Persian Gulf touched off something resembling panic throughout the financial world. Stock prices sank rapidly in New York City, Tokyo, London, Paris, Frankfurt. At the lows on Thursday, shares of all U.S. stocks had lost more than $600 billion in paper value in slightly over a month, more than in the Black Monday crash of October 1987; on the Tokyo exchange, cumulative losses since the start of the year came to well over $1 trillion. Bond...

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