The Specter of Iraq

2014.7.22.Krugman.Iraq.Main(Image: TUNIN; Russia / CartoonArts International / The New York Times Syndicate)I don’t write much about Iraq and all that these days, but a recent report by James Risen of The New York Times brings back the horror of the whole thing. And I don’t just mean the fact that Americans were lied into war; that most of our media and policy elite rushed to join the bandwagon; and that the venture led to awesome waste of lives and money.

No, Iraq was also a moral cesspit. Not only were we taken to war on false pretenses, it was clear that this was done in part for domestic political gain. The occupation was treated not as a solemn task upon which the nation’s honor depended, but as an opportunity to reward cronies. And don’t forget the torture.

So in a way it’s not too surprising to learn that we didn’t just, incredibly, rely heavily on politically connected mercenaries, but that said mercenaries threatened violence against our own officials: “Just weeks before Blackwater guards fatally shot 17 civilians at Baghdad’s Nisour Square in 2007,” Mr. Risen wrote, “the State Department began investigating the security contractor’s operations in Iraq. But the inquiry was abandoned after Blackwater’s top manager there issued a threat: ‘that he could kill’ the government’s chief investigator and ‘no one could or would do anything about it as we were in Iraq,’ according to department reports.”

And guess what: “American Embassy officials in Baghdad sided with Blackwater rather than the State Department investigators as a dispute over the probe escalated in August 2007, the previously undisclosed documents show.”

But it’s still shocking, and a reminder of just how deep the betrayal went.

Swedish Sadomonetarist Setback

O.K., this is fairly amazing. I’ve written often about “sadomonetarism” among central bankers – the evident urge to find some reason, any reason, to raise interest rates despite high unemployment and low inflation.

The most influential hive of this kind of thinking is the Bank for International Settlements, which for some reason commands great respect even though it offers an ever-changing rationale – inflation! Any day now! Or maybe not! Financial stability! – for its never-changing advocacy of tight money. But the place where policy makers most dramatically gave in to this urge is Sweden, where the majority at the Riksbank decided to indulge its rate-hike vice while freezing out one of the world’s leading experts on deflation risks, my friend and former colleague Lars Svensson.

Well, guess what: Mr. Svensson has been proved so dramatically right by events – raising rates didn’t curb rising debt, but it did push Sweden into deflation – that the central bank has done an abrupt U-turn, slashing rates (and overruling the governor and first deputy governor).

Actually, the drama of this U-turn may be a very good thing, since it might convince investors that this is a real regime change.