The Making of a Quagmire

The situation in Iraq has generally been supportive of Gold prices, not only because of the geopolitical instability that it has caused, to which Gold has reacted positively, but also because the financing of the war has been dollar dilutive.

1. The Pentagon is requesting the Whtie House to seek $99.7 billion more for the Iraq and Afganistan conflicts. An interersting (albeit unoriginal) comparison emerges to the Veitnam War, as the amounts for the Iraq conflict is approaching the costs of the Vietnam War. The Vietnam War cost an inflation-adjusted $121 billion at its height in 1968, according to the Congressional Research Service. Interestingly, the war financing is done on the basis of off-balance sheet accounting, "Democrats such as incoming Senate Budget Committee Chairman Kent Conrad of North Dakota have grown increasingly critical of the fact that Iraq spending is kept on a set of books separate from the rest of government operations."

2. Bush is mulling a troop increase in Iraq, in the amount of 15,000 to 30,000 additional troops.

3. In another Vietnam parallel, the U.S. is also intensifying its efforts to "Iraqize" the conflict, that is, to increase the training of Iraqi troops and police so that the responsibility for the conflict can be increasingly handed over to Iraqis. The "Vietnamization" of the Vietnam War was generally considered a failure. Nevertheless, I think that one difference with Iraq is that the insurgents have not yet enunciated a viable alternative regime which I think has been an important factor in allowing the almost-failing government supported by the U.S. to limp along.

4. The November "stats" for the Iraq War for 2003, 2004, 2005, 2006, according to the New York Times: