A global crisis fire lit by Bin Laden and inflamed by America's Bush and Greenspan

Global markets gave only the briefest positive reaction to the death of Osama bin Laden, and even then the indicators were contradictory.

Oil prices declined then rose on the possibility of disruption to future supplies, while equities, in those markets that were trading on Monday, also showed positive early gains.

It was as if the equities traders were telling us this was good news, while the energy sector was more worried. Gold, that "safe haven" commodity in troubled times, also leapt, indicating there might still be plenty to be worried about.

Confused and confusing signals from the markets to an event of this scale are no surprise. It has always struck me as highly artificial the way we expect financial markets to reveal the true meaning of any given situation, oracle-like, when most practitioners agree the markets are little more than an aggregation of greed and fear.

But in a different sense, the death of the Saudi-born terrorist could be viewed as a landmark event in global economics and finance, the end of an era in which a single philosophy came to dominate US financial thinking, and then took over the world, with mainly negative consequences.

I refer to the notion of quantitative easing, or QE as it is now widely abbreviated. The phrase itself gained currency only after the financial crisis of 2007-2008, as the US began printing trillions of dollars to drag itself out of a recession. But the concept had been around a lot longer.

I was mulling over news of bin Laden's death with a thoughtful investment banker type on Monday evening, when he suddenly threw into the conversation: "Well, he did cause the financial crisis, you know."

He has been accused of lots of things, but I had never before heard him blamed for the global meltdown of a couple of years back. I thought that was all down to investment bankers such as my friend, self-delusional property analysts and incompetent regulators. But when my companion elaborated, I had to confess there was a certain persuasive logic to it.

The attacks of September 11 2001 came just as global financial markets were beginning to recover from the great bursting of the dotcom bubble. The financial scene, especially in the US where much of the dot-com euphoria was generated, was fragile. When New York finally opened again after enforced closure, there was a "patriotic surge" of investors buying assets to show that the attacks would not damage America's financial morale. This was well-intentioned but short-lived, as reality caught up with even the most patriotic trader.

With world business frozen and markets terrified, there was a real danger the attacks could have sparked a gigantic economic downturn.

Into the breach stepped George W Bush, the president, and Alan Greenspan, the chairman of the Federal Reserve. They began to print money - the former to fund the "war against terrorism", the latter to head off economic disaster at home.

It was this loosening of monetary policy by the US that eventually led to the asset inflation, credit crunch and market collapse of 2007-2008. So in a way, my banker friend was right when he said bin Laden caused the financial crisis; or at least, he had panicked US political and economic leaders into measures that eventually blew up in their faces in 2008.

After the crisis, the creeping quantitative easing of Mr Greenspan became official government policy under his successor Ben Bernanke, and trillions of dollars' worth of US assets were injected into the global economy, with consequences that we are still living with today.

At the same time, US foreign policy was dominated by the "war on terror", which had in effect become wars in Afghanistan and Iraq. The inflationary effect of this should not be underestimated.

The US military-industrial complex mushroomed in size, with whole government departments springing up to pursue it.

Some economists say the war in Iraq has cost the US some US$3 trillion (Dh11.01tn) on its own, with Afghanistan weighing in with perhaps an additional $1tn.

The Americans have already pulled large-scale military forces out of Iraq, and the death of bin Laden may prompt President Barack Obama to rethink US policy on Afghanistan. At the same time, the official economic policy of quantitative easing is also coming to an end.

So the process that began in September 2001 has gone full circle, militarily and economically. The US is going to have to revert to a peacetime economy for the first time in a decade, and the consequences, for Americans and the rest of the world, will be far-reaching.