Last night, President Obama went on air to announce the killing of the United States enemy number one, Osama Bin Laden. Many of us in the financial markets knew, spoke to, or had contact with those that died in real time. For the US, it was the end of an era of the “Peace Dividend” and the beginning of an era of military campaigns. Unlike the killing of Hitler, Bin Laden’s death will not signal the end of the war on terrorism nor will it end the military efforts in Afghanistan and Iraq.
The death of the world’s most notorious terrorist will likely bring reprisals from his terrorist network. Through Wikileaks Guantanamo releases, Al Qaeda is known to have planned attacks at London’s Heathrow airport or a nuclear attack somewhere in Europe should Bin Laden be killed. The State Department issued this warning: "Given the uncertainty and volatility of the current situation, U.S. citizens in areas where events could cause anti-American violence are strongly urged to limit their travel outside of their homes and hotels and avoid mass gatherings and demonstrations."
The death stands in sharp contrast to what is happening in the Middle East and North Africa. From Syria to Libya to Yemen, people are rising up against dictatorial governments and putting their lives on the line in an open way via demonstrations and direct armed conflict. Ultimately, this is the only way to bring about lasting change. Could anyone who witnessed 9/11 think this would be possible?
Given this volatile and uncertain world we inhabit, how should we view this event?
In the short run when it comes to terrorism, the best news is usually no news meaning no attacks.
The markets initially reacted positively to the death of Bin Laden with the US dollar rising, but it will likely be a transitory event unless there is a significant reprisal.
In the medium to long run for the economy and markets, the events of 9/11 for the United States have not changed and remain the costs for armed services, homeland security and interest on the expansion of the debt outstanding due to deficits.
For the military, there will likely be a reduction in the US presence in both Iraq and Afghanistan. For homeland security, there doesn’t appear to be any slowing of spending on this as both terrorist and cyber attacks remain a growing issue. For the interest on the growing national debt, the downgrade by S&P is a clear warning that this issue is not being resolved.
It is this legacy that the United States must fight to avoid Bin Laden having a larger, longer negative impact.
Andrew B. BuschDirector, Global Currency and Public Policy Strategist at BMO Capital Markets, a recognized expert on the world financial markets and how these markets are impacted by political events, and a frequent CNBC contributor. You can comment on his piece and reach him hereand you can follow him on Twitter at http://twitter.com/abusch.