John Taylor on Iraq

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Region: Thinking about international work, some of the most arduous efforts you have undertaken were in Iraq, where you helped to reestablish the central bank. How do you go into countries where the financial infrastructure has been torn apart and begin to rebuild? And are you optimistic?

Taylor: Oh, yes, I'm optimistic about both Iraq and Afghanistan, where I also worked to rebuild financial systems. I think the progress made on the financial side in Iraq was unbelievable. It was amazing how successfully it all went. A whole new currency was put in place in just a matter of months. A new central bank was established; central banking law was developed. There was no financial chaos, which was really a major concern when the Saddam government fell. We prepared for months in advance.

So I think the way I would answer your question is just to be prepared and have some plans that you've worked out even though you don't know precisely what the circumstances will be. This is a management and leadership question. We had to have knowledgeable people on the ground who could talk to the career people in the central bank or the finance ministry after the government fell. Brave people, experienced people, they have to know to report back to Washington if there are changes in the plans. We set up what I called a “reach-back” operation in Washington to provide that capacity. You also have to have communication up through the chain of command in Washington. And you need the best experts you can find. Fortunately, we had Tom Simpson from the Fed Board staff come to Treasury to help us, and he just did a terrific job. Former Fed economist Bill Dewald spent several months in Baghdad under difficult conditions and made an enormous difference. So, good expertise is essential.

And good basic monetary theory came into play. How much of the new currency are people going to demand? How much new currency needs to be printed? And how fast would it be printed? We had to print so much currency that it took 27 747 planeloads to fly it into Iraq. It was printed at seven locations around the world. And then it had to be shipped to 250 distribution points around the country.

Region: A huge helicopter drop of money.

Taylor: It was indeed. It was much more than an economic issue. It was also a security issue and a logistical issue. You have to assemble all the things you need to run an organization, keep it running like clockwork, and even then things can go wrong. I was just so thankful that nothing went wrong in the currency exchange.

See the whole interview in the June edition of the Region.

See also the article related to the chart above ‘Interchange Fee Debate; Merchants are seeking relief from rising credit card fees, but the economics are complex and near-term resolution seems unlikely.

1 Comment

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This page contains a single entry by Paul published on June 11, 2006 2:38 AM.

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