Are we watching a John Ford western taking place in Iraq, where the private economy is in the role of the cavalry, riding to the rescue? In a column today in the New York Post called "The Boom Outside Baghdad" Amir Taheri contributes several possible tiles to this mosaic. Yesterday, AT pointed to the now 10% rise in the value of the Iraqi dinar since August. Yes, this appears to have been stimulated by an increase in the Central Bank of Iraq (CBI) interest rate to 16%, but (a) this rate is not out of line with the inflation rate in Iraq of 50% and (b) if there was panic about the future of Iraq, no measures of this type would increase the value of the dinar.
We do not yet have enough information to come to a firm conclusion, but it appears there is a good chance that Bush's bet on the heart of the Iraqi people may be coming home here, in spite of the best efforts of the nihilists. We don't want to panic now if we have arrived at the critical moment for the future of Iraq. Economic activity suggests that we may have arrived at that point.
Hat tip: Jack Kemp