Thursday, May 24, 2007

Monetary Policy

Back in March I noticed a graphic from the State Dept's Iraq Weekly Status Report that charted the volume of American dollars sold in the Iraqi Central Bank's currency auction (denoted by the blue line). What caught my attention was the dramatic decline in dollars sold beginning in early-November 2006, a trend that didn't reverse until late-January 2007. (The pronounced "W" in the center of the graph.)

I suggested at the time that the November date corresponded to the mid-term elections that many saw as a referendum on the Iraq war, and the January date to Bush's State of the Union address where he announced the Baghdad Surge. The idea being that Iraqis might have decided to hold onto their (stable) greenbacks until America's continued presence in securing the country was reaffirmed.

Here's what that same chart looks like in this week's report

In case you're having trouble reading the fine print, volume of dollars sold has roughly halved (from $90 million to $48 million per day) in the past ten days.

It'll be interesting to see what happens to that number now that Congress has folded on including a withdrawal timetable in the Iraq war funding bill. From the looks of things, though, not much has changed in terms of Iraqi confidence in their country's ability to maintain stability in the absence of an American presence.

Posted by Judah in:  Iraq   

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