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Surrender by Cell Phone
Our presence in Iraq is having an impact — on Iraq and the markets.


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Larry Kudlow

When a declining retail sales report arrived this week, you could almost guarantee that the Treasury bond market would rally on the bad news. Instead, government bonds fell across-the-board, and stocks soared for their best day of the year. Meanwhile, gold prices dropped — by $11. And for the first time in a long time the U.S. dollar exchange rate is showing signs of strength.

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What does all this mean? Here’s a hunch.

These sensitive markets stand at the epicenter of the world’s financial system. Domestic political events and international happenings — including swings in sentiment and confidence over war — all play out in the global markets for U.S. Treasuries, gold, and the dollar.

So, maybe it is dawning on world financial markets that not only is President George W. Bush going to remove Saddam Hussein and his clique, but that the military action will be short and swift, the loss of lives minimal, collateral damage to Iraqi civilians low, and regime change from tyranny to freedom welcomed.

Remember, this is a hunch — a conjecture based on scattered tidbits of gossip and news, as well as my own personal faith in God and the current leadership of the U.S. government. But it is becoming increasingly clear that a solution to the Iraqi crisis is near. Key financial markets might be in agreement.

On Wednesday, a headline on CNN.com read “Iraqi ‘secret surrender’ negotiations underway.” Think of this as surrender by cell phone. Both the U.S. military leadership and the CIA have the cell phone numbers and e-mail addresses of much of the Iraqi command. This latter group appears quite unwilling to die for Saddam Hussein. They may even be sympathetic to American goals of liberating the Iraqi citizenry and working toward some kind of democratically organized representative government of the Iraqi people.

In a related story, some soldiers in the regular Iraqi army recently attempted to surrender to U.S. Special Forces on the Kuwait border. The American contingent sent them back, saying they couldn’t yet accept surrender since the war had not officially begun. An isolated anecdote? Or a harbinger of things to come?

Certainly, the American decision to employ force to remove Saddam Hussein is starting to have a big impact on the hearts and minds of the Iraqi leadership. The extraordinary might of American air power and our high-tech precision-bombing capabilities are well known. What remained was for the Iraqis to see this power — that is, the actual presence of our air armada — in their neighborhood. American-Anglo bombing raids of Iraq’s southern defense perimeter, or what’s left of it, are only reinforcing this message.

Then there is the landing of U.S. Special Forces in Iraq. These extraordinary warriors are equipped to the hilt with the most advanced communication instruments ever devised. Our Special Forces alone are capable of defeating large enemy armies, as they did in Afghanistan (succeeding, by the way, where the old Soviet army failed).

Right now, special-ops troops are rumored to be in and around Baghdad, preparing the ground for the regular U.S. army invasion and earmarking key bombing targets for our air armada. They are also working with Kurdish special forces that are trained and accompanied by their U.S. counterparts. They may also be circling the Iraqi oil fields.

Of course, roughly 300,000 American troops are also in the neighborhood.

Such might sends a signal. And this signal reverberates through every sinew of Iraqi civilian, military, and political life. Our presence is having an impact.

Even though this will be our first truly high-tech invasion, the loss of allied military lives, as well as Iraqi civilian lives, is unavoidable. But once the allies swiftly achieve their objectives, casualty rates everywhere will be reduced. They will be saving lives, reducing body counts, and speeding the transition to a democratically liberated Iraq.

Can Iraq truly be democratized? Daniel W. Drezner points out in The New Republic that a new Iraq will be surrounded by democracies: Turkey to the north, Jordan and Israel to the west, the liberalizing Fertile Crescent states of Morocco, Bahrain, and Qatar, and also the Kurdistan territory inside Iraq.

Jacques Chirac will think himself a great hero should he appear in front of the UN Security Council to cast France’s veto of a final U.S.-British pre-war resolution. But the sweep of history is already passing Mr. Chirac. Not only will he fail to win the Nobel Peace Prize he seeks, he will ultimately be ridiculed and scorned by his fellow countrymen, and democracy-loving people everywhere.

Mr. Kudlow is CEO of Kudlow & Co.



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