COMMENT As David Hume observed, rather disarmingly: " 'Tis not contrary to reason to prefer the destruction of the whole world to the scratching of my finger." Nor is it contrary to reason for the markets to pay more attention to some soothing words from Ben Bernanke, the US Federal Reserve chairman, than to the ongoing bombing of Lebanon, the car bombs in Iraq, the pursuit of nuclear weapons in Iran and the wayward missiles emerging from North Korea. The markets have wobbled in the face of what Newt Gingrich has described as the early stages of the third world war - but after Mr Bernanke sketched out a soft-landing scenario for the US economy, most major stock indices are back within 1 per cent or so of where they were at the beginning of the year. Economic Armageddon has been postponed again.
Callous as it might seem, there is logic in this. What is happening in Lebanon is a human tragedy but it is not an economic one. Lebanon itself is economically insignificant, with an economy three times smaller than that of Manhattan. Its entire gross domestic product is a rounding error in the US growth figures. The reason investors noticed the conflagration at all is that oil prices rose, reflecting a small risk of a severe disruption to supplies.
