It is extremely hard to know how big a crisis is while it is actually unfolding. Retrospectively, we tend to think of crises -- whether financial or geopolitical -- as one-day wonders: Think of “Black Monday,” the stock market crash of Oct. 19, 1987, or 9/11, the terrorist attacks of six years ago. This notion of short, sharp shocks fits in well with our human inclination to live for the moment. Perhaps it is also a symptom of our era’s chronic attention-deficit disorder.

Yet the really big crises in history unfolded over months and years, not mere days. In these protracted sequences of events, there were many gloomy nights, but also many false dawns. Because hope springs eternal, people tended to attach more importance to the latter, mistaking them for real dawns and blinding themselves to the underlying downward drift.

To illustrate the point, think of the 1997-98 Asian financial crisis, which started July 2, 1997, with the speculative assault on the Thai baht, but was not really over until after the bailout of Long Term Capital Management (Sept. 23, 1998) and the Fed’s three successive interest rate cuts of Sept. 29, Oct. 15 and Nov. 17. In total, that crisis may be said to have lasted 503 days.

What, I wonder, will we see in the next 500 days? The consensus view at the moment is that aggregate losses resulting from the crisis in the U.S. sub-prime mortgage market could amount to $100 billion to $200 billion. What nobody knows yet is exactly who has been hit hardest by these losses. In the coming weeks, we are likely to see a dash for the exits as investors try to redeem money from suspect hedge funds. That in turn could add to the pressure on the banks that act as the hedge funds’ prime brokers.


As the shock waves spread through the financial system, jobs are already being shed. And it’s worth remembering how much more important financial services are today than they were 20 years ago. Meanwhile, American homeowners are experiencing something that has happened in only a handful of years since the 1960s: Average house prices are actually declining.

The combination of tighter borrowing conditions, job losses in finance and housing and a growing mood of pessimism among consumers could prove to be a more toxic cocktail than many investors want to believe.

Today’s geopolitical crisis is playing out in a similarly extended time frame. Just as investors seize on scraps of good news as they track the stock market from hour to hour, so it’s still possible for die-hard supporters of President Bush to point to improvements in the security situation in Iraq.

Since the “surge” of additional U.S. troops got underway earlier this year, there have been marked declines in Iraqi military and police fatalities and in the number of victims of multiple fatality bombings, according to the Brookings Institution’s Iraq Index.


Yet the monthly death tolls scarcely tell a story of incipient peace. According to Brookings, at least 655 Iraqi civilians lost their lives last month as a result of bombings (the latest Iraqi figures are three times higher); 79 U.S. military personnel were killed and more than 400 wounded.

Meanwhile, the prospects for an enduring and peaceful political solution to the conflicts among Shiites, Sunnis and Kurds seem as remote as ever. And, back at home, public confidence in Bush’s strategy is at an all-time low.

This is one important respect in which Bush may be right in drawing a parallel between the Iraq and Vietnam wars. The American people started to lose faith in the Vietnam War at the time of the Tet offensive, which began at the end of January 1968. From October 1968 on, a clear majority of Americans were telling pollsters that they regarded the war as a mistake.

By that time, the Paris peace talks between the U.S. and the North Vietnamese had been initiated. Yet it was not until Jan. 27, 1973, that the Paris peace accords were finally signed. In other words, the agony of ending the Vietnam War lasted more than 1,700 days.


In just the same way, the outcome of the American intervention in Iraq will be determined not in Baghdad but in Washington. Sooner or later, this president or his successor will come under irresistible public pressure to start drawing down American troops in Iraq. This will almost certainly happen, as in Vietnam, before the country they are leaving has genuinely been stabilized.

This great crisis of U.S. foreign policy, like the slow-burning financial crisis we are living through, will play out over hundreds, if not thousands, of days. Throughout that time, we shall read many reports in the newspapers that the surge is working and the markets are rallying. But these reports will just be so much “noise” -- mere static on the airwaves of history.

As in the early 1970s, the underlying geopolitical and financial crises of our time are in synch -- and inexorable.