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Source link: http://archive.mises.org/5980/iraqs-monetary-policy/

Iraq’s Monetary Policy

December 6, 2006 by

I didn’t know until the release of the “Iraq Study Group Report” that Iraq’s “inflation is above 50 percent. Unemployment estimates range widely from 20 to 60 percent.” So a quick look at the primitive date at the Iraq Central Bank shows a 40% increase in M2 from November 2005 through May 2006 (the last time the data were updated). Cause and effect, with very little time lag! Also, it doesn’t seem like the famed “inflation-unemployment tradeoff” is working very well.

{ 13 comments }

Siggyboss December 6, 2006 at 3:38 pm

I’m surprised Iraq has a central bank. US Dollars and currency from neighboring states likely dominate.

tarran December 6, 2006 at 4:02 pm

Not really,

I would expect that waving US$ would get one shot as a collaborator. Ditto with Iranian, Saudi, Kuwaiti, Turkish or Syrian currency. There was a time in 2004 where the dollar was falling in relation to the Iraqi dinar, so apparently people had begun to prefer the Dinar.

Person December 6, 2006 at 4:48 pm

Well, let’s be reasonable. They could take inflation down to a nice 8%, but that would push unemployment up to 120%. If you think being fired is bad, wait till you’re re-fired.

On the other hand, they could bring unemployment down to a manageable 12%, but do you *really* want half of the earth’s mass to be paper Dinars a year from now? I DIDN’T THINK SO!

Mark Brabson December 6, 2006 at 6:03 pm

As I remember, Saddam Hussein had $100,000 in United States currency on him when he was captured. Even under his regime U.S. currency was preferred.

Of course, it would be out of the question for the Iraqi’s to be allowed to have commodity money. We are bound and determined to shove a central bank and fiat money down their throats.

Gil Guillory December 6, 2006 at 8:55 pm

When in Iraq in 2003, I observed that workers at chemical plants were paid in US dollars — cash. All chemical plants are government industries, so when the government fell, the source of wages in the plants dried up. I loaned an Iraqi about 1000 USD, and he paid it back in USD. Kuwaiti dinars also circulated, as well as Iraqi dinars. Most Iraqis were under the impression that Iraqi dinars would hold value. They told me they thought that with Hussein’s regime toppled, no new notes would be printed…

Vanmind December 7, 2006 at 12:43 am

Oh, man, I sure have been unemployed 120% before. It hurts.

Björn Lundahl December 7, 2006 at 2:04 am

“Also, it doesn’t seem like the famed “inflation-unemployment tradeoff” is working very well”.

It never has worked. In those cases where it seems to work, artificial employments and malinvestments have been created.

Real employment and real full employment can only be accomplished in a free market. A gold standard and wages determined by the market will do the trick. Political stability and peace will increase investments.

Björn Lundahl
Göteborg, Sweden

Paul Edwards December 7, 2006 at 6:20 pm

Björn,

I think Jeffrey was attempting to be funny through irony and understatement. (It’s not as funny though, if a joke has to be explained is it?)

Björn Lundahl December 8, 2006 at 1:38 am

Paul Edwards

I think Jeffrey was attempting to be funny through irony and understatement. (It’s not as funny though, if a joke has to be explained is it?)

I knew that Jeffrey was trying to be funny through irony. It was quite obvious. I think he was funny too.

I just wanted, anyway, to express my opinion. Nothing wrong with that, is it?

Best regards

Björn Lundahl

Björn Lundahl December 8, 2006 at 2:12 am

Paul Edwards

I can see your point of view and I am very sorry, but my post was really not meant to be addressed to Jeffrey or to criticize him.

Jeffrey Tucker is really very nice and, also, a very clever guy.

Björn Lundahl

Stefano December 17, 2009 at 4:56 pm

Thanks for your post and good information.
It’s been quite some time since you wrote this report so I was wondering – Ive been hearing alot of rumors about a dinar revaluation coming soon. What do you think of this? I posted this article below is it complete BS or does it have any validity???

http://www.dinarbanker.com/2009-iraq-dinar-news/feature-article-iraqi-dinar-revaluation.html

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