Another Rum's Rush?

Iraq's prime minister can't be feeling too comfortable, what with the very uncivil war at home and a less-than-ringing endorsement vioced by his US sponsors.

WATCH YOUR BACK, NOURI.
And your front and sides. That, unfor­ tunately, is good advice for anyone in . iraq, but especially fm' its prime minis­ ter, Nouri Kamal al-Maliki. Mter last week's summit in Jordan, President George W. Bush called Maliki the "right guy for Iraq."

This ringing endorsement of the beleaguered Iraqi leader had a rather familiar sound to it. Rather like Bush's declaration that Defense Secretary Donald Rumsfeld would be staying on for the duration of his administration. Asserting in an interview with the Associated Press Nov. 1 that Rummie and Vice President Dick Cheney would stick around for the remaining two years of his presidency, Bush declared, "Both those men are doing fantastic jobs and I strongly support them."

Scarcely a week later, and less than 24 hours after GOP candidates took their "thumping" in the mid-term congI'es­ sional. elections, the Pentagon chief got what might be called the Rum's Rush.

There's no sign that the U.S. administration is about to orchestrate a similar exit strategy for Maliki. Yet the prime minister can't be feeling too comfortable, what with the very uncivil war at home and a less-than-ringing endorsee ment voiced by his U.S. sponsors last week.

In a classified memo leaked to the New York Times just ahead of Bush and Maliki's scheduled confab, Stephen J. Hadley, the U.S. administration's national security adviser, expressed severe doubts about the Iraq leader's ability to stabilize the ever-worsening situation, adding that Maliki depended on Shiite extremists for political support.

"His intentions seem good when he talks with Ameri­ cans, and sensitive reporting suggests he is trying to stand up to the Shia hierarchy and force positive change," as the Times quoted the memo's assessment of the Iraqi leader. "But the reality on the streets of Baghdad suggests Maliki is either ignorant of what is going on, misrepresenting his intentions, or that his capabilities are not yet sufficient to turn his good intentions into action."

Talk about the pot calling the kettle black!

Mter reading this wonderfully laudatory description from his allies, Maliki decided he'd rather go duck hunting with Dick Cheney than have a sit-down just then with Dubya & Co. But after a day's delay, the U.S. and Iraqi leaders had their tete-a-tete, during which President Bush told his coun­ terpart that his administration would resist calls for a "grace­ .ful exit" from Iraq. As if that were possible at this point.

The bipartisan Iraq Study Group, led by former Secre­ tary of State James A Baker III and former Rep. Lee Hamil­ ton, is due to release its long-awaited report. According to various press accounts of the report, it sounds as if the panel headed by the Bush family cOl1sigliere will recommend a gI'adual, if not gI'aceful, withdrawal over the next year or so.

The Times quotes people familiar with the report as saying that it favors some 15 U.S. combat brigadesgI'adually being pulled back from Iraq but doesn't specify any specific timeta­ ble, which the administration has opposed. For its part, the Washington Post also quotes people familiar with thl? report saying that it v,ill recommend nearly all U.S. combat units be withdrawn by 2008, leaving only troops to train, advise and support the Iraqi forces. (We're notfamiliarvvith the people fa­ miliaI' with the document, so we can't say if they're all the same folks familiar to these Beltway denizens.)

The U.S" efforts in Iraq "might have been a turning point for the Middle East and another positive for the global economy," writes Michael CosgI"oye in his Econo­ clast monthly newsletter. "But to date it has turned out that the Iranian, Syrian and Russian axis has won while the U.S.-U.K. axis appears to have lost. And Saudi Arabia to date has also lost since Iran won."

While Cosgrove optimistically opines that a gI"OUP friendly to the U.S. could still gain power and vindicate Bush, he worries that an international perception of a weak Ameri­ can foreign policy could spark the sille of dollar assets.

Cosgrove points out that net capital inflows have totaled some $4.1 trillion since the March 2003 Iraqi invasion, which he deems a sign of foreign investors' confidence in the U.S. That could reverse, he adds, if the "solution" to the Iraqi situation is perceived by foreign investors to be a " sign of U.S. policy weakness, as in the 197013.

Not that the dollar needs much inducement these days to decline. The euro soared past $1.33 last week, which was less than three cents shy of its peak in its relatively short existence, which was touched on New Year's Eve of 2004. The British pound, whose history goes back a bit further, was closing in on two bucks at $1.98, the highest since George Soros made· his killing when sterling was kicked out of the Exchange Rate.Mechanism in September 1992.

While the greenback's swoon no doubt is causing a bit of pain to American tourists traipsing across Europe, travelers to these shores are all smiles. Manhattan seems to be teem­ ing with tourists these days, not just to see the sights and the shows, but to snap up bargains at prices that seem half of what they pay at home.

But the stock market didn't appear to take the. dollar's sudden, steep drop with such equanimity, especially in the two sessions following the Thanksgiving holiday. Part of that might have reflected bad memories of October 1987, when a dollar crisis culminated in a 22% one-day Dow debacle. In­ stead of threatening to send in­ terest rates soaring, as they did in 1987, this dollar decline threatens to choke off exports, on which the global economy has come to depend.

"We believe the world wants a weaker U.S. dollar about as much as U.S. consumers want to pay more at the pump for gasoline." writes Joseph Quinlan, chief market strate­ gist for Bank of America's Investment Strategies Group. "Despite all the chatter about global imbalances and the need for a correction in the gI'eenback, the world, in our opinion, just isn't ready for a sizable, secular decline in the buck. Such a move would undercut the primary source of gI"owth of many nations: exports."

The rest of the world has gotten hooked on exports, especially those shipped by the container-full to America.

By Randall W.Forsyth