Start the week: Fear gives way to turkey.

QUERETARO, Mexico, Nov. 19 (UPI) -- A sense of history is needed to predict the future. Mindful of this, your correspondent looks back--to last week, when he wrote "if Monday's crash proves accidental, not deliberate, U.S. stocks will continue their rally this week from the September fall, U.S. Treasuries will weaken on growing expectations of recovery, and the dollar will strengthen." All these things happened, and the trend seems set to continue, largely because of events last week.

In the first place, the Taliban surrendered control of Kabul without a fight and, in doing so, essentially lost power over Afghanistan. What its departure will leave is unclear. But the fall of this violent, intolerant and repressive regime represents a huge success for the United States and, indeed, helps to justify a campaign about which your correspondent had been doubtful.

Are bombs the answer to terrorism? No in most circumstances. But in this case the U.S. government may have been correct in identifying the Taliban, as a government that was associated with terrorists and that would never give them up to the West. It was also right in judging the Taliban an imposition on the Afghan people: a band of religious extremists, many of them foreigners, which had usurped a country. The Mujahedin expelled the Soviet Union from Afghanistan and were a mighty foe. But parallels between the Mujahedin and the Taliban have proven misleading. It has not taken much to bring down the Taliban.

Further tasks remain: the hunt for Osama bin Laden; the dismantling, in as far as it is possible, of the al Qaida terrorist network; the establishment of a new government in Afghanistan; the effort to win over moderate Muslims by ensuring that the West is seen to deal fairly with the Muslim world. In this regard, the fresh emphasis in the United States since the Sept. 11 attack on resolving the dispute between Palestine and Israel is promising.

Though it resorted to force to deal with Bin laden and the Taliban, the Bush administration has not become a sudden anti-Islamic hawk. On the contrary, in this confrontation with Islamic extremists that risked turning millions of moderate Muslims against the United States, the Bush camp has so far been sensitive and intelligent. Whether that will be enough to avert further confrontations is unclear. But the Bush administration has distinguished itself so far.

For business the events in Afghanistan matter greatly. The terrorist attacks of Sept. 11 and the anthrax-bearing envelopes that have succeeded them created enormous fear in the United States. Now further successes in the war will be good for morale in the West. In particular, the capture of Osama bin Laden would be momentous and would provoke a big jump in the U.S. stock market. The Dow Jones Industrial Average, already up by 1,660 points (20 percent) from its Sept. 21 low, would be likely to climb by another 300 points.

Is bin Laden's capture likely? Two weeks ago we commented that the U.S. military claimed to have confined him to an area of caves. Now the military believes bin Laden to be within an area of about 70 square kilometers of southern Afghanistan. Again we say: here's hoping.

Other international events last week helped to bolster sentiment in the United States. The Organization of Petroleum Exporting Countries met Nov. 14 in Vienna. Opec members agreed to cut production in January by 1.5 million barrels per day, but only if non-Opec producers such as Russia, Norway and Mexico agree to cut their production by 500,000 barrels per day. With Opec and non-Opec beginning to play poker the oil price continued its slide.

For the West cheap oil is a boon. Saving money on transport puts money into people's pockets. One academic, Andrew Oswald of the University of Wessex in England, argues that the late-1990s boom in the United States and other economies was a product of the very low oil prices of 1997-98 while the onset of recession in 2001 reflects soaring oil prices in 1999-2000.

For your correspondent, this interpretation is overdone. The stock market boom of 1995-1999 in the United States generated the wealth effect that provoked the consumer boom widely interpreted at the time as a miracle. (Investment also boomed, it is true, but drawn on by excess demand and the channeling of investment funds into companies, especially technology companies.) But nonetheless cheap oil means U.S. and other Western consumers will have more disposable income to spend on other things. It is good for growth--and, in this case, for recovery.

But what will happen to the oil price? Opec is unwilling to lose further market share to non-Opec. Russian oil companies are mostly privately owned and have invested heavily in increasing output. They are unwilling to cut production. Only if the oil price falls steeply, to, say, less than $15 per barrel, is Russia likely to cooperate with Opec and restrain production. Indeed, short of an upturn in the global economy, Opec's only way to retain market share is to allow the oil price to fall. It is the high prices that Opec was able to engineer in the past three years that have led to higher production by other producers. All this points to lower oil prices. The US stock market is right to see this as a positive.

But is it right in general to be positive? Not in your correspondent's view. In the house price release from the Commerce Department Monday morning, which the market appears to have interpreted positively, there is evidence to show why not. U.S. housing starts were better than expected by economists but still down by 1.3 percent from September. Housing permits fell by 3.6 percent in October to an annual rate of 1.473 million: the weakest since December 1997. The housing market, which is seen, correctly, as having helped to buoy up demand in the U.S. economy, is finally weakening, a victim of rising unemployment.

Normally, it is housing that leads the economy into recession. Inflation rises, interest rates rise, house-buyers and consumers are deterred, and then companies begin to feel the pain of falling sales and cut jobs: that is the normal pattern. But this recession is unusual. It has not been provoked by a policy response to rising consumer price inflation. This time, without higher inflation, the economy has suddenly lose steam after companies found they had invested too much.

Say it again: we do not know what we are dealing with. The nature of this recession is unusual and the dangers it presents may be unusually high.

But enough of these grim thoughts. The main threat to the stock market this week is profit taking before the Thanksgiving turkey that will preoccupy Americans Thursday and Friday. That is a better preoccupation than anthrax, and indeed something to be thankful for.

(comments to icampbell@upi.com)