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Saturday, December 29, 2007

More Iraq Surge News

If you are either a political junkie or you have an affinity toward military strategy, then the counter insurgency manual authored by General Petraeus is for you. In it he describes counter insurgency in three phases: clear, hold and build. The clear portion entails the military goes into the bad areas and clear out the bad guys. This is the most difficult and most dangerous portion of counter insurgency. It often involves hand to hand fighting in urban environments.

Once, the clear portion is completed the military leaves a presence in the newly cleared areas so that the bad guys don't come back. This is what is referred to as the hold portion of counter insurgency. By holding a presence, the locals are more likely to believe that any lull in violence will not merely be a lull but rather a new reality.

The last portion is the build portion. This involves money and infrastructure coming in and economically turning around areas. The locals must see that there are possibilities beyond the violence past they remember, and economic activity is vital to any new reality.

When there are signs of economic revival that is strong evidence that the counter insurgency strategy is not only working but is now entering some of its later stages.

Thus, this story is not only remarkable but should be heartening to all that consider victory in Iraq vital like myself...

So has the dinar, up 10% against the dollar this year. Now the dollar, admittedly, is no monetary fortress, and the dinar is one of the few Middle Eastern currencies left free by its issuing government to float in value (the exchange rates of most of the region's scrip are lashed to the dollar). The price of a barrel of oil, of which Iraq is a leading producer, has had a pretty good year itself. Still, during the 2007 New Year prediction season, how many guessed that the dinar would outperform the communist Chinese renminbi (up 6.3%) or the Russian ruble (up 6.8%)? The name of no such monetary prophet jumps to mind.

As for the Iraqi stock market, it is as much a hope as an institution. Trading is spotty, financial information is scarce, and the state-of-the-art technology is a white board. Yet the prices scrawled in marking pen have been in a strong uptrend. At last report, they were ahead by 36.8% on the year. For the plucky foreigner who got in at the lows, the total return — stock-price gain augmented by currency appreciation — would have topped 50%.

Of course, Iraq's economy was in tatters at the beginning of the year so many of these numbers should be taken with a grain of salt. There is still plenty of hard work left however signs that the economy is expanding, and these clearly are, are quite positive and only show more evidence of the remarkable success of Petraeus' surge strategy.

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