Bin Laden's Death: Is Your Money Safer Now?

As I came in to work this morning, two guys in the train seat in front of me were carrying a big American flag and wearing USA T-shirts. They were headed to the World Trade Center for a hastily convened celebration of bin Laden's death at the hand of U.S. forces yesterday. (Twitter, it seems, works for pro-government demonstrations too.)

But has anything really changed? And in light of the mission of this website, is a world without bin Laden going to be an easier place to make yourself and your family financially secure? I'd say it is marginally, and it has everything to do with confidence. But the background threat to your money that al Qaeda and its ilk represent has not gone away.

First, let's restate the President's point about the future of al Qaeda: Killing bin Laden does not kill al Qaeda. It doesn't even slow it down. I just spoke to John Arquilla, a professor of defense analysis at the U.S. Navy Postgraduate School in Monterey, Calif. specializing in special ops. While Arquilla was gratified that the small war, anti-network tactics that he has long favored have paid off, he warned that this was no time to be overconfident.

I'd say al Qaeda's actual operational capabilities haven't been much affected at all. The model that al Qaeda has moved to over the past couple of years involves lots of little cells operating more or less autonomously. We've seen evidence of them in Morocco and Germany just recently, and we in America should realize that we've been very lucky. Cells here and abroad have come very close to doing us a good deal of mischief.

As for whether the loss of bin Laden is a psychological blow to al Qaeda, Americans should realize that the organization had already counted him a martyr years ago. To put it in stock market terms, they had already discounted his death. Rather than demoralizing al Qaeda his demise could well serve as a rallying cry, just as the massacre at the Alamo galvanized the Texans in the 1830s. You simply don't kill a network by killing its leader.

Now, at least, it has taken care of that last failing. Bespoke Investments notes that when Saddam Hussein was captured, stock investors' euphoria lasted less than a day -- and, indeed, the immediate market bounce didn't last the full day today, either. But I think the death of bin Laden is different. I'd suggest it's closer to the first week of the Persian Gulf War, when U.S. technological (not to mention military) prowess surprised everyone; in the confident decade that followed, U.S. markets went on a 10-year tear. It all depends on the psychological starting point.

At that time, the U.S. military, last seen stumbling around Panama and Grenada, scared few opponents, especially Saddam Hussein. In a similar vein, throughout the pursuit of bin Laden, al Qaeda and the Taliban could deride Americans as lazy and wedded to expensive but ineffectual technology and incapable of the flexibility, creativity and human intelligence needed to roll up a shadowy network.

That now appears to be an underestimation of American culture and adaptability, and to the extent markets shift their thinking accordingly, that could bolster the dollar, restrain inflation and lower the price of gold. That, in fact, is how the markets reacted this morning. As economist Ed Yardeni put it in his newsletter, "The immediate reaction in the financial markets confirms my view that the dollar's weakness and gold's strength have been related to the perception that America is in decline. If that changes now, then the dollar might continue to strengthen and gold might at least stop going straight up for a while." Note that nothing material has changed, and that I'm not predicting a return to the 1990s. But in the financial markets, confidence counts for a lot.

Now comes the requisite warning about too much confidence: There are risks out there that go well beyond further declines in the dollar and increases in gold, risks that an uptick in consumer confidence and America's relative public stature in the world don't begin to address. "The longer a terrorist network is allowed to exist, the closer it comes to acquiring weapons of mass destruction," says Arquilla.

It's a sobering thought. Al Qaeda still exists, and its members still hate us. There's no reason not to join the flag waving at the World Trade Center or anywhere else in America -- but face the fact that the work isn't done yet. Says Arquilla: "I don't feel any safer today than I did yesterday."