Economic Focus-The True Price of the Iraq War

  It really is astounding to look at the amount of money being thrown into Iraq. Whether it is for the U.S. military or the the rebuiliding of Iraq’s ruin economy, the numerical figures on paper are just so huge. Seldom are the figures from Iraq less than billions and billions of dollars.

  What is more astounding is how the Bush administration has tried and fail over and over again to hide the true cost of this war. Nobel Prize economist Joseph Stiglitz was right when he stated that the money thrown into Iraq was a lost cause.

  What is worse was that this war was not accompanied by an increase in taxes for the U.S. people, but rather generous tax cuts that the Bush administration had push for. Furthermore, these tax cuts in the end benefited the ‘rich’ portion of society in the U.S. rather than the poor.

  All this, the war, and tax cuts would not even be possible without foreign countries like China, Japan, and the Opec countries who were willing to hold on to U.S. denominated paper securities (U.S. Treasury bonds and bills). In other words the war funds came from borrowing and the war’s investors were foreign countries.

  Ironic as it is, China and Japan alone holds more than U.S.$500 billion of U.S. denominated paper securities. Not in mention is the vast amount of foreign international reserves (also in U.S. dollars) and also U.S. assets both physical and paper.

  The willingness of these countries to hold U.S. assets drove long-term interest rates to low levels which fostered to much easy credit i circulation in the U.S. To add fuel to the flame, the Federal Reserve under the leadership of its Chairman Alan Greenspan failed to adhere to the Taylor Rule and NAIRU (Non-Accelerating Inflation Rate of Unemployment).

  Instead of following the strict rule of tighening credit when there were too much easy money flowing around (as implied by the Taylor Rule and NAIRU), the Federal Reserve kept interest rates too low for too long. Easy money continued to flood into the sub-prime mortgage market (risky mortgages) and caused a widespread housing bubble there.

  The financial turmoil in the U.S. that is currently pulling so many countries into recession and economic turmoil could be traced back to the irresponsible actions of the Bush administration. Bear in mind that securitization, mortgage bankers, financial derivatives and the lot were just the tools and not the cause.

  The truth remains that the sub-prime mortgage crisis in the U.S. was one of the true cost of the war in Iraq coupled with the irresponsible actions of the U.S. government. While the change from the Republicans to the Democrats may have been a healthy turnabout for the U.S., it is likely that President Barrack Obama would be in a very hot seat trying to restore confidence in the U.S markets and financial system.

  After years of war and turmoil, the situation in Iraq has changed not for the better. Devastation and death continue to plague the everyday citizens of Iraq while the effort of rebuilding their economy have always been disrupted by terrorist and extremists who want nothing to do with the U.S. Currently there is an ongoing exodus of professionals like doctors, professors, teachers and businessmen fleeing Iraq.

  If the Bush administration have envisioned a better and more democratic Iraq, it certainly have not materialized.

Facts

Source: BBC



  • Full name: Republic of Iraq
  • Population: 29 million (UN, 2007)
  • Area: 438,317 sq km (169,235 sq miles)
  • Capital: Baghdad
  • Major languages: Arabic, Kurdish
  • Major religion: Islam
  • Life expectancy: 58 years (men), 61 years (women) (UN)
  • Monetary unit: Iraqi dinar
  • Main exports: Crude oil
  • GNI per capita: n/a
  • Internet domain: .iq
  • International dialling code: 964

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