JPMorgan Chairman and CEO Jamie Dimon, in a letter to shareholders, touched on a theme that critics of the Iraq war were highlighting more than a year ago: That spending on the war was damaging to the economy.
Dimon cited "an expensive war in Iraq" as one of the possible triggers of the economic collapse. Spending on the war ballooned the deficit and crowded out investment in domestic priorities. Meanwhile, the trade deficit soared.
"I suspect when analysts and economists study the fundamental causes of this crisis, they will point to the enormous U.S. trade deficit as one of the main underlying culprits. Over an eight-year period, the United Sates ran a trade deficit of $3 trillion. This means that Americans bought $3 trillion more than they sold overseas. Dollars were used to pay for the goods. Foreign countries took these dollars and purchased, for the most part, U.S. Treasuries and mortgage-backed securities. It also is likely that this process kept U.S. interest rates very low, even beyond Federal Reserve policy, for an extended period of time."
Those depressed interest rates, in turn, pushed air into the housing bubble until it popped.
Dimon also cites the 2008 energy crisis as a shock to the economy that played a part in bringing it down. The energy crisis may still have occurred without the instability in the Middle East caused by the U.S. invasion, but with Iraq's oil supply knocked off-line for years, it didn't help.
Dimon also places some of the blame for the crisis on greed for ever-higher profits, which he refers to as "irrational pressure...to show increasingly better returns." The system he's referring to -- which pressures companies to steadily increase returns due to the cost of capital -- is called capitalism.
"Many other factors may have added to this storm -- an expensive war in Iraq, short-selling, high energy prices, and irrational pressure on corporations, money managers and hedge funds to show increasingly better returns," offered Dimon.
"The modern financial world has had its first major financial crisis. So far, many major actors are gone: many of the mortgage brokers, numerous hedge funds, Wachovia, WaMu, Bear Stearns, Lehman and many others. Some of the survivors are struggling, particularly as we face a truly global, massive recession -- and it still is not over," he wrote.