Dollar Days
Iraq's system of currency will remain a mishmash of Kuwaiti and Jordanian dinars, Syrian pounds, Euros, Saddam-era dinars and best of all, Yankee Greenbacks, possibly for a year or so. That's how long it could take to get a reliable new Iraqi currency up and running.
In the meantime, Uncle Sugar will make a cash infusion by peeling off a shiny $20 bill for every government employee. (I'd like to be the guy in charge of throwing out the double sawbuck, with a cheery "Fight over this, yuh misshapen things!") The payoff is no mean feat, since an estimated 1.5 to 2.5 million people—most of the country's work force, in fact—worked for the government. Anonymous officials in charge of masterminding Iraq's economy say they want to avoid dollarizing the economy, but paradoxically claim inflation won't be a problem "if the money in your pocket is (already) primarily dollars."
This is probably the best approach, since I'm not sure why the US should be taking any role in establishing a new Iraqi currency—precisely the kind of job that should be handled by those "Iraqi people" I keep hearing about. Better we should put our energies into getting whatever forms of currency people will deal with circulating as widely and quickly as possible. Currency stability is an overrated goal in the Middle East anyway. In Lebanon you can pass any kind of money the other guy will accept (generally dollars or lira, though Francs, UK£, Euros and such seem to be grudgingly accepted by some), and as a result people will keep doing business while Godzilla is attacking Beirut. In Syria you have to do everything in pounds, and it's a struggle just to buy a cup of coffee. Jordan also insists all business be transacted in dinars, but there's nothing you'd want to buy. Self-regulation already seems to be working in Iraq: The Kurds do business with stable pre-Saddam dinars.
