The Federal Reserve and Treasury Department recently decided that pumping billions of U.S. dollars into the war-torn Iraqi economy might not be such a great idea after all. Why? Because, like non-interventionist and fiscal conservatives have been saying all along, that money flows straight through its intended recipients into the hands of Islamic extremists.
The U.S. has been propping up Iraq’s cash-dominated economy with massive inflows of American dollars — pulled from Iraq’s very own Fed account — since the U.S. invasion and overthrow of Saddam Hussein.
After toppling Saddam and rendering the dinar useless by devastating the Iraqi economy, the U.S. helped set up a Central Bank of Iraq that operates in the image of the U.S. fiat currency system and is funded largely by oil reserves.
The Fed has a similar arrangement set up with a number of other countries which tie up as much as two-thirds of the $1.3 trillion fiat dollars the U.S. has in circulation at any given time.
“The Federal Reserve seeks to accommodate other countries’ need to have access to their dollar deposits in the form of U.S. bank notes for legitimate purposes,” a Fed spokeswoman noted in a recent statement. “A number of central banks around the world, including the Central Bank of Iraq, maintain accounts at the Federal Reserve Bank of New York and at times withdraw currency from their accounts.”
But Iraq poses a special problem brought on by U.S. failures in the country over the past decade. Toppling a government is pretty easy for America’s mighty military, but establishing any semblance of order and accountability with handpicked puppet governments has always been tough for U.S. officials.
It’s no different for the current puppet regime heading Iraq.
The Wall Street Journal explained recently how the U.S. dollars make their way into Iraq:
Foreign central banks hold dollars and can call on the Fed for currency distribution. The new $100 notes are flown to Baghdad after leaving a Fed facility in East Rutherford, N.J. In Baghdad, the bills are moved to the Iraqi central bank, where they are sold in daily auctions in which Iraqi financial firms request dollars that they pay for largely using dinars, the country’s currency.
Early on, U.S. concerns centered on roughly 2,000 financial firms called exchange houses, which are active participants in these auctions.
U.S. officials believe several of these Iraqi firms have ties to Islamic State and have deep concerns the exchange houses are being used as conduits of dollars to the group, said a U.S. official and another person familiar with the matter. While the U.S. inevitably loses control at some point over the dollars it sends abroad, the Fed is barred from sending cash to entities it knows will distribute it to U.S. enemies.
Let’s break that down. U.S. $100 bills hot off the press have for years been flown into Iraq where they are exchanged for dinars — which the U.S. made useless — by financial institutions with ties to the Islamic State terror group.
Sure, U.S. officials got around to quietly shutting off the terror dollar faucet over the summer, but not before $13.66 billion flowed into the country in 2014. That’s a lot of U.S. money. In fact, it’s three times more than the $3.85 billion shipped to Iraq in 2012.
U.S. officials have long wondered why simply lobbing dollars at Iraq hasn’t helped the country’s economy. But they have now discoveredthat the money isn’t making it to Iraqi businesses and markets but into the hands of the well-funded ISIS terror organization and even into Iran.
Still, the U.S. is allowing money to trickle into Iraq in smaller amounts because, as Daniel Glaser, assistant secretary for terrorist financing in the Treasury’s Office of Terrorism and Financial Intelligence (how’s that for a title?), put it: “From a counterterrorism perspective, it is not in our interest for there to be an economic crisis in Iraq derived from a lack of U.S. dollars.”
But there’s already an economic crisis in Iraq. And there’s already a terror problem in Iraq and throughout the Middle East — one U.S. foreign policy created and U.S. dollars are funding. If the American public doesn’t start pushing back, D.C. bureaucrats with titles like “assistant secretary for terrorist financing” are going to continue doing just that: financing terrorists.