Part 1 Enorrste /Tlar & Dinar Alert Member Discussion
This article was previously briefly discussed – Please click on LINK for your reference and memory recall – Below is a link & just a snippet from the article
Attempts to undermine the regional economy and the Reserve Bank A second major Arab today Thursday 10 August 2013 09: 51: 11GMT
The Head Office of control of the money and the Iraqi Central Bank Governor Abdel Basset Turki said that regional States seek in one form or another to destroy the Iraqi economy through financial and banking war.
He noted that Iraq today largely reassured after the reserve amounted to approximately $ 80 million of hard currency. Abdel Basset Turki said in an interview with “today” that large irregularities identified by the Office of financial supervision for years in the work of the Central Bank of Iraq as the Cabinet is responsible to follow the work of the World Bank and the Government of Iraq decided to end that costs me to notice undefined management the World Bank agency to reduce and eliminate these irregularities gradually to ensure the safety of the backbone in the Iraqi economy. LINK
2COLLECTG: so turki is sounding like a true fed chairman i got to do my monetary policy! i don`t care what politician don`t like it! sounds like the monetary community got their point across!
…
Read More Link On Right
WEDREAM: thanks Kap looks like turki is on the same/correct track we shall see
Shaund2073: 2COLLECTG, exactly what I was conveying…he sounds like shabs did… change the player the gameplan stays the same…. reminds me of he new england patriots.. im a dolphins fan btw
the fiat currency will fall as asset back currency will take its place
ReVbo: “Not enough control” to continue selling dollars seems like a pretty lame excuse to stop, considering they’ve been doing it for years, but if that’s what you’re going with, Turki, I’ll play along.
BelievingInTheBest: Tlar; I have a question. In your scenario, with leaving some dinar in the Iraqi market, could they free float the dinar from 1166? Or would it be best to introduce a new rate close to $1.00?
With a float, it could allow a more gradual influx of monies coming into the banks as the Iraqi people could determine when or at what rate they would like to bring in their currency.
(Very much like many of us will probably do.) The banks would also be able to make the continuous profits on the spread from the currency coming in.
This could also draw many of the Iraqi citizens into the banking system with opening new accounts, thus kick starting the banking system into the households. This could also help to educate the Iraqi people on how the banking system works and its benefits. (Maybe I am being overly optimistic on that thought.)
I think they could free float from 1166, but it would then take some time to introduce the smalls. However, if they plan to introduce the smalls at the beginning of 2014 this would give them the time to increase the rate to $1.00 before making the change.
If you, or anyone, has some insight on these thoughts I would greatly appreciate the sharing of your perceptions and opinions. I also agree that these are very strong statements coming from Turki regarding Maliki.
HandOverFist: Thanks, Tlar, for your great commentary. Sounds like they are moving right along, despite Maliki
Gainsmore: Thanks Kap- good post and commentary Thanks Tlar – good commentary.
This is speculation on my part and I will go back to my repeating mantra that I stated in the past and that is -Maliki has a “no western central bank policy”… or “no western banking involvement in our part of the world policy”- backed up by his strong and direct link to Iran, which has been anti -Israel and US.
I think this is the REAL reason why we are still waiting for this to show up. Having central banking control is the equivalent of the ‘crown jewel’ of control. And that last statement is not speculation- just read Mayor Rothschild statements to that effect if you want documentation to back that up.
No, we will just have to wait for the kids in the sandbox to fight it out long enough for there to appear a victory in one camp or the other.
Again, this is about fighting for control of a central bank( CBI in this case) in the ME area. They know what they have and they don’t want western dominance to come in and take advantage of the monster growth soon to get underway.
It’s really a case of the pot calling the kettle black for there are seemingly always the lessor of two evils in every scenario and Turki is camping with the IMF and the west ( the lessor) as he is trying to distance himself from the GOI and Iran( and maybe rightly so)…
BlueyesinLevis: I think at some point must come the acceptance that they will never get all the IQD back.. they can NEVER completely dollarize… and when is enough enough? Maybe we are finaly close.
They have informed the citizens often enough about how strong the dinar will be… there are wealthy Iraqis, especially in the Kurdish area, that will hold IQD back as long as it takes.
Remember.. they have not replaced the currency for a long time…The daily use currency is torn and tattered…. Very encouraging. Thanks for the analysis , folks,
Enorrste: Unfortunately this article is written in such a way that even our best bloggers have missed the import of the article. I will explain what I mean.
First, Turki is attempting to get the “monkey off his own back” by claiming that it is the IMF’s fault for not being more pro-active in the monitoring of transactions of dollars. This is, to put it simply, crazy, since he is essentially stating that the IMF should be doing HIS job. Here is the quote:
“even though I charge directly on the work of the World Bank as Director of the Office of financial supervision in Iraq and to the details but didn’t expect it to be this bad for poor oversight of banks and auction sell nor database of private banks in the Bank documents letters of guarantee for banks when borrowing from the Bank to cover cash transactions…”
So, while he admits that he is “charge[d]” as Director of the Office of Financial Supervision (Duh!) with the oversight job, he is attempting to throw off the blame to the IMF for failing to do HIS own job.
Give me a break! This is what happens when you wear two hats at the same time.
However, the second point in the article is the one that everyone has missed. I will quote this in context and it will be clear that the bloggers have missed entirely what Turki was attempting to communicate:
“The Turkish ‘rate of sell the currency before we receive your task as Governor of the Bank amounted to $ 280 million a day today the Bank is selling at a rate of between 160 million to 180 million a day, six days a week so we can control the rising value of the dollar against the Iraqi dinar through window selling, particularly in the Bank for direct sale,
However, I see that $ 100 million is sufficient to control the transactions of sale and purchase, so that we can control the transactions of sale and avoid money laundering and financial corruption.
” Turki said that the Bank still did not reach the full 100 percent control over the validity of transactions of sale in auction,indicating that the Bank has a problem now and is in control, there is not enough control to continue selling dollars because the Bank only has 3 staff to monitor sales and documented 33 private banks and hundreds of millions of dollars in addition to a specialized Committee on accounts to audit…”
Most respondents here picked up on the second part of this paragraph (“there is not enough control to continue selling dollars”) to indicate that the CBI COULD NOT continue selling dollars, when in fact that is NOT what is being said at all.
What Turki said at the beginning of the paragraph proves this: “we can control the rising value of the dollar against the Iraqi dinar through window selling”.
The issue isn’t the sale of dollars: it is the CONTROL of the sale of dollars that is the issue. This is consistent with his attempt to lay the blame on poor IMF oversight rather than on himself.
This entire article is about the money leaving Iraq for Iran and Syria. It has nothing to do with the sale of dollars itself, but only about the CONTROL of the sale of dollars.
He is stating that Iran and Syria (unnamed, but the obvious “regional economy” that he refers to) is effectively screwing up the Iraqi economy and he is calling for more IMF support to stop this process.
He is clearly stating that Maliki’s attempt to get the CBI to lend $5 billion to one of these other countries is NOT going to happen. Furthermore, he is quite comfortable with the current placement of reserves with the IMF and other “safe” institutions.
How does money leaving Iraq for Iran and Syria “screw up the economy” of Iraq? The answer is simple: Turki cannot complete the dollarization of Iraq without stemming the flow of dollars outside of Iraq!
However, he does open the door slightly:
“Turki also said on Thursday that the Bank is considering a new policy to invest the money away from the Government and the political groundwork for the Government to change the political map and that we were looking for a stable economy of Iraq must work to isolate the Government and economy to make sure that the economy is not affected by the change of Government.”
Here we see that investing “away from the Government” means “without interference from the Government.”
Turki is stating that HE will make investment decisions, not Maliki! He adds that he is looking for a stable economy ISOLATED from the Government (private investment is meant here) to ENSURE that a coming change in the Government (Maliki out) will not disrupt the economy
Why is Turki making this plea? He says so, subtly. Here is the quote:
“Turki said that in previous years were found after investigation that the sale of hard currency, there was no corresponding goods to Iraq for lack of polyglot customs system monitors the entry of goods so that we can control our foreign exchange liquidity and must achieve the target entry of goods into the country in order to avoid money laundering or smuggled abroad.”
We see that his primary goal, then, is to CONTROL the outflow of dollars by keeping them within Iraq (his dollarization plan) instead of allowing them to go to Iran and Syria.
Once that drain on dollars to outside countries is stopped, he will be able to complete the dollarization of Iraq itself (Saleh’s plan exactly). THEN, they will be able to open the doors to international trade, which is his final push.
This is entirely consistent with Saleh’s statement: dinars for dollars, run the country on dollars with an open float of the OLD dinar, thus allowing for international trade to come into Iraq, then on 1/1/2015 exchange all dollars for the NEW dinars (small denoms) at $1 per dinar. I hope this helps. Enorrste
Kaperoni Moderator: Awesome as usual Enorrste!
Punisher: Thank You Enorrste…it makes several things much more clear
OutOfTheWoods: Cheers to Enorrste, and his highly adept recognition and interpretation of subtleties!!! –”Faith consists in believing when it is beyond the power of reason to believe.”
HandOverFist: Yes……….it won’t get to a dollar until 2015. Question: If Iraq is to run on only “dollars” for the next 1 1/2 years, what is the incentive to “bid up” the dinar to make it reach a dollar?
Terry: Also, does it make sense to float the dinar sooner or later?
Geezer: Thanks Steve (Enorrste) – the key issue as we all know is Maliki, the cat with nine(ty) lives!! Hope your statement, .” Turki is stating that HE will make investment decisions, not Maliki!” is a correct translation. But I also go back to what Kap says, …… “Turki can cry all he wants, and threaten Maliki, it aint happen till Maliki says so. The reasons have been clearly stated that the CBI cannot do this on their own, it requires goverment assistance from planning, security, engineering, media etc. Without the green light from him, it stalls.”
BelievingInTheBest: So, Iraq will be using only the US dollar until 2015, when they release the smalls? How is this going to be beneficial to the private banks in Iraq?
When the dinar becomes international, how will it make any difference in Iraq when they are all using the dollar?
Being totally dollarized and staying there for a year would be quite the surprise to the Iraqi people, if that is the surprise Turki was speaking of.
Perhaps it is best to see what tomorrow’s news brings. If I were an Iraqi and heard a message like this coming from the person in charge of my central bank, I cannot say I would be real excited. Glad I am not an Iraqi.
Kaperoni Moderator: Handoverfist, it’s all about money. Central banks and other financial institutions buy/sell currency every single day. That is how currencies appreciate to their rightful value.
Central banks want to hold the dinar, because they know it can only go one direction…UP.
And that means the more the they hold or the more they buy/sell the it will effect their economies and financial positions. The dinar will have an effect on the entire global economy as it appreciates in value. That in itself seems to me to be motivation enough to drive its value up to where it rightfully belongs. Here is a quote..
“Since 1973, exchange rates for most industrialized countries have floated, or fluctuated, according to the supply of and demand for different currencies in international markets.”
HandOverFist: Kape, If all these Central Banks and financial institutions will want the dinar, why will it take 1 1/2 years to reach a dollar? You said it will be a free float. It will have to be a managed float for 1 1/2 years to hold it under $1.00………..then, maybe, a free float from there. Don’t you think?
Dezertheat: I agree with BItb, this is not going to hang out and float for 1&1/2 years, they will have a major civil war if so. I am looking to see what happens after Ramadan. and if nothing, then hopefully by jan 1st 2014.
Tlar Part 1: I was in the middle of responding to Ennorste and twice was blown out of the water based on other people responding. First off Turki starts out by bragging that he has reduced the sales of USD from 280 billion per day to 160 to 180 er day. Woopty do.
He also admits in the same paragraph that this has not controlled the exchange rate nor has it stopped corruption or smuggling. H thinks no more than 100 billion is required to satisfy the needs of the market but goes on to say he only has 3 employees to monitor 33 banks so he does not have the manpower to control the results.
Tlar Part 2: Next he starts to complain of government interference. He says pressure by unnamed individuals is being put on banks to loan unsecured loans to neighboring countries of 5 billion at a time.
Gee I wonder where the pressure is coming from and what countries are being earmarked for these loans. As these countries try to obtain the loans, certain Iraqi politicians have tried to discredit the CBI and corresponding banks.
In other words there is pressure coming from within the Iraqi government to make these unsecured loans. These same politicians are “washing money” through these banks and are attempting to discredit the CBI. Read it for yourself:
“He explained that these interventions attempt by some States to persuade the Iraqi Government to put pressure on the Bank to lend to certain banks more than $ 5 billion without real guarantees and rejected the Bank at the time the Iraqi Government has also shown willingness to deposit some in reserve banks for the purpose of strengthening its economy but also rejected the Bank making some politicians accuse the Bank various accusations to discredit him.”
Both Iran and Syria have set up banks in Iraq. These banks although part of the Iraqi system, operating under CBI control, are the target banks of these unnamed countries that are attempting to make these unsecured loans.
Tlar Part 3: In the third part, Turki explains his plan to protect the reserves and keep them at arms length from the government. Here he tacitly implies this is important because of the involvement of certain members of the government in its complicity with the problems of the bank. Although he does not name names, it is the members of the Maliki government he is obviously referring to.
Now lets deal with Saleh’s article yesterday. There are parts to this article that don’t stand as a test to where Iraq is. The first issue that makes no sense is the removal of all dinar off the streets.
If this is done the existing banks in Iraq stand no chance of re-capitalizing. If one dollar is brought in and one dinar is exchanged for it, it removes any possibility of the bank setting up new accounts and getting new customers.
This assumes that the value of the dinar has increased enough to under a float to cause the Iraqi to want to devoid his dollars in favor of dinars. Iraqi’s by and large are broke operating day to day.
If Iraq dollarizes 100 % what will the banks use to set up new accounts with. The average Iraqi has little to no excess money. If he brings in 75 US dollars which is a months pay, what will he open an account with.
So if Iraq dollarizes 100 % they illuminate any chance for the banks to increase operating capital which is one of the stated goals of the deletion of the zeros plan by Shabibi, under the original plan.
I also see this as eliminating any incentive concerning this issue that might have resulted in the banks willing to sacrifice their profits, which I personally believe to be the biggest incentive.
The second issue I take exception to is why in the world would Iraq, assuming they were dollarized, not immediately go to an RV instead of floating the currency at 1166?
The first thing that comes to mind is if there were nothing but dollars in Iraq, and Iraq declared their currency and article VIII currency (international), they would have the ability to pay their balance of payments with dinars.
They would mean flooding the international community with dinars as they paid a 1 million dollar debt with 1166,000,000 dinars to that debt. Considering that Iraq does billions and billions of trade at present and almost everything they need they have to import, this seems counterproductive to the purpose of dollarizing to begin with and it goes against what the bank has been doing.
The goal of the CBI since the middle of last year has been to reduce dinars out to increase value, not increase the number of the dinars out reducing value.
The CBI has made a concerted effort in this area buying back billions of dinar because as each dinar is retired, it raises the value of the dinars still out in circulation. To go against that policy now and use the dinar internationally, flooding the markets, makes no sense.
Lastly, how does all the articles the reference the deletion of the zeros, that have resurfaced since January 1st fit into a complete dollarization of Iraq along with a free float from 1166 fit in.
When Shabibi deviated from the “original plan” last year, choosing to instead just get the program going by floating the currency, the term delete the zeros also disappeared from the articles.
We know he did this out of duress because Maliki was at the pinnacle of his power and was against any change in the currency for personal reasons. Shabibi felt he had to do something. We also know recent articles have said the CBI has reverted back to the original plan. There has only been two plans.
The first or “original plan” to delete the zeros and the second, plan, which was in Shabibi’s mind, at least a way to get the currency started. The original plan called for an RV and it was based on the 2008 study that suggested the CBI could support the currency at 1.13 dinars per dollar and went so far as to suggest that the CBI hold and defend this rare exactly 2 years.
If we are to believe recent articles both the 2014 through the 2016 budgets are supposedly based on an exchange value of 1.16 dinars per dollar. That’s a two year run and follows to a T the suggestion made in the 2008 study.
PART 2 CONTINUED
Shaund2073: 2COLLECTG, exactly what I was conveying…he sounds like shabs did… change the player the gameplan stays the same…. reminds me of he new england patriots.. im a dolphins fan btw
the fiat currency will fall as asset back currency will take its place
ReVbo: “Not enough control” to continue selling dollars seems like a pretty lame excuse to stop, considering they’ve been doing it for years, but if that’s what you’re going with, Turki, I’ll play along.
BelievingInTheBest: Tlar; I have a question. In your scenario, with leaving some dinar in the Iraqi market, could they free float the dinar from 1166? Or would it be best to introduce a new rate close to $1.00?
With a float, it could allow a more gradual influx of monies coming into the banks as the Iraqi people could determine when or at what rate they would like to bring in their currency.
(Very much like many of us will probably do.) The banks would also be able to make the continuous profits on the spread from the currency coming in.
This could also draw many of the Iraqi citizens into the banking system with opening new accounts, thus kick starting the banking system into the households. This could also help to educate the Iraqi people on how the banking system works and its benefits. (Maybe I am being overly optimistic on that thought.)
I think they could free float from 1166, but it would then take some time to introduce the smalls. However, if they plan to introduce the smalls at the beginning of 2014 this would give them the time to increase the rate to $1.00 before making the change.
If you, or anyone, has some insight on these thoughts I would greatly appreciate the sharing of your perceptions and opinions. I also agree that these are very strong statements coming from Turki regarding Maliki.
HandOverFist: Thanks, Tlar, for your great commentary. Sounds like they are moving right along, despite Maliki
Gainsmore: Thanks Kap- good post and commentary Thanks Tlar – good commentary.
This is speculation on my part and I will go back to my repeating mantra that I stated in the past and that is -Maliki has a “no western central bank policy”… or “no western banking involvement in our part of the world policy”- backed up by his strong and direct link to Iran, which has been anti -Israel and US.
I think this is the REAL reason why we are still waiting for this to show up. Having central banking control is the equivalent of the ‘crown jewel’ of control. And that last statement is not speculation- just read Mayor Rothschild statements to that effect if you want documentation to back that up.
No, we will just have to wait for the kids in the sandbox to fight it out long enough for there to appear a victory in one camp or the other.
Again, this is about fighting for control of a central bank( CBI in this case) in the ME area. They know what they have and they don’t want western dominance to come in and take advantage of the monster growth soon to get underway.
It’s really a case of the pot calling the kettle black for there are seemingly always the lessor of two evils in every scenario and Turki is camping with the IMF and the west ( the lessor) as he is trying to distance himself from the GOI and Iran( and maybe rightly so)…
BlueyesinLevis: I think at some point must come the acceptance that they will never get all the IQD back.. they can NEVER completely dollarize… and when is enough enough? Maybe we are finaly close.
They have informed the citizens often enough about how strong the dinar will be… there are wealthy Iraqis, especially in the Kurdish area, that will hold IQD back as long as it takes.
Remember.. they have not replaced the currency for a long time…The daily use currency is torn and tattered…. Very encouraging. Thanks for the analysis , folks,
Enorrste: Unfortunately this article is written in such a way that even our best bloggers have missed the import of the article. I will explain what I mean.
First, Turki is attempting to get the “monkey off his own back” by claiming that it is the IMF’s fault for not being more pro-active in the monitoring of transactions of dollars. This is, to put it simply, crazy, since he is essentially stating that the IMF should be doing HIS job. Here is the quote:
“even though I charge directly on the work of the World Bank as Director of the Office of financial supervision in Iraq and to the details but didn’t expect it to be this bad for poor oversight of banks and auction sell nor database of private banks in the Bank documents letters of guarantee for banks when borrowing from the Bank to cover cash transactions…”
So, while he admits that he is “charge[d]” as Director of the Office of Financial Supervision (Duh!) with the oversight job, he is attempting to throw off the blame to the IMF for failing to do HIS own job.
Give me a break! This is what happens when you wear two hats at the same time.
However, the second point in the article is the one that everyone has missed. I will quote this in context and it will be clear that the bloggers have missed entirely what Turki was attempting to communicate:
“The Turkish ‘rate of sell the currency before we receive your task as Governor of the Bank amounted to $ 280 million a day today the Bank is selling at a rate of between 160 million to 180 million a day, six days a week so we can control the rising value of the dollar against the Iraqi dinar through window selling, particularly in the Bank for direct sale,
However, I see that $ 100 million is sufficient to control the transactions of sale and purchase, so that we can control the transactions of sale and avoid money laundering and financial corruption.
” Turki said that the Bank still did not reach the full 100 percent control over the validity of transactions of sale in auction,indicating that the Bank has a problem now and is in control, there is not enough control to continue selling dollars because the Bank only has 3 staff to monitor sales and documented 33 private banks and hundreds of millions of dollars in addition to a specialized Committee on accounts to audit…”
Most respondents here picked up on the second part of this paragraph (“there is not enough control to continue selling dollars”) to indicate that the CBI COULD NOT continue selling dollars, when in fact that is NOT what is being said at all.
What Turki said at the beginning of the paragraph proves this: “we can control the rising value of the dollar against the Iraqi dinar through window selling”.
The issue isn’t the sale of dollars: it is the CONTROL of the sale of dollars that is the issue. This is consistent with his attempt to lay the blame on poor IMF oversight rather than on himself.
This entire article is about the money leaving Iraq for Iran and Syria. It has nothing to do with the sale of dollars itself, but only about the CONTROL of the sale of dollars.
He is stating that Iran and Syria (unnamed, but the obvious “regional economy” that he refers to) is effectively screwing up the Iraqi economy and he is calling for more IMF support to stop this process.
He is clearly stating that Maliki’s attempt to get the CBI to lend $5 billion to one of these other countries is NOT going to happen. Furthermore, he is quite comfortable with the current placement of reserves with the IMF and other “safe” institutions.
How does money leaving Iraq for Iran and Syria “screw up the economy” of Iraq? The answer is simple: Turki cannot complete the dollarization of Iraq without stemming the flow of dollars outside of Iraq!
However, he does open the door slightly:
“Turki also said on Thursday that the Bank is considering a new policy to invest the money away from the Government and the political groundwork for the Government to change the political map and that we were looking for a stable economy of Iraq must work to isolate the Government and economy to make sure that the economy is not affected by the change of Government.”
Here we see that investing “away from the Government” means “without interference from the Government.”
Turki is stating that HE will make investment decisions, not Maliki! He adds that he is looking for a stable economy ISOLATED from the Government (private investment is meant here) to ENSURE that a coming change in the Government (Maliki out) will not disrupt the economy
Why is Turki making this plea? He says so, subtly. Here is the quote:
“Turki said that in previous years were found after investigation that the sale of hard currency, there was no corresponding goods to Iraq for lack of polyglot customs system monitors the entry of goods so that we can control our foreign exchange liquidity and must achieve the target entry of goods into the country in order to avoid money laundering or smuggled abroad.”
We see that his primary goal, then, is to CONTROL the outflow of dollars by keeping them within Iraq (his dollarization plan) instead of allowing them to go to Iran and Syria.
Once that drain on dollars to outside countries is stopped, he will be able to complete the dollarization of Iraq itself (Saleh’s plan exactly). THEN, they will be able to open the doors to international trade, which is his final push.
This is entirely consistent with Saleh’s statement: dinars for dollars, run the country on dollars with an open float of the OLD dinar, thus allowing for international trade to come into Iraq, then on 1/1/2015 exchange all dollars for the NEW dinars (small denoms) at $1 per dinar. I hope this helps. Enorrste
Kaperoni Moderator: Awesome as usual Enorrste!
Punisher: Thank You Enorrste…it makes several things much more clear
OutOfTheWoods: Cheers to Enorrste, and his highly adept recognition and interpretation of subtleties!!! –”Faith consists in believing when it is beyond the power of reason to believe.”
HandOverFist: Yes……….it won’t get to a dollar until 2015. Question: If Iraq is to run on only “dollars” for the next 1 1/2 years, what is the incentive to “bid up” the dinar to make it reach a dollar?
Terry: Also, does it make sense to float the dinar sooner or later?
Geezer: Thanks Steve (Enorrste) – the key issue as we all know is Maliki, the cat with nine(ty) lives!! Hope your statement, .” Turki is stating that HE will make investment decisions, not Maliki!” is a correct translation. But I also go back to what Kap says, …… “Turki can cry all he wants, and threaten Maliki, it aint happen till Maliki says so. The reasons have been clearly stated that the CBI cannot do this on their own, it requires goverment assistance from planning, security, engineering, media etc. Without the green light from him, it stalls.”
BelievingInTheBest: So, Iraq will be using only the US dollar until 2015, when they release the smalls? How is this going to be beneficial to the private banks in Iraq?
When the dinar becomes international, how will it make any difference in Iraq when they are all using the dollar?
Being totally dollarized and staying there for a year would be quite the surprise to the Iraqi people, if that is the surprise Turki was speaking of.
Perhaps it is best to see what tomorrow’s news brings. If I were an Iraqi and heard a message like this coming from the person in charge of my central bank, I cannot say I would be real excited. Glad I am not an Iraqi.
Kaperoni Moderator: Handoverfist, it’s all about money. Central banks and other financial institutions buy/sell currency every single day. That is how currencies appreciate to their rightful value.
Central banks want to hold the dinar, because they know it can only go one direction…UP.
And that means the more the they hold or the more they buy/sell the it will effect their economies and financial positions. The dinar will have an effect on the entire global economy as it appreciates in value. That in itself seems to me to be motivation enough to drive its value up to where it rightfully belongs. Here is a quote..
“Since 1973, exchange rates for most industrialized countries have floated, or fluctuated, according to the supply of and demand for different currencies in international markets.”
HandOverFist: Kape, If all these Central Banks and financial institutions will want the dinar, why will it take 1 1/2 years to reach a dollar? You said it will be a free float. It will have to be a managed float for 1 1/2 years to hold it under $1.00………..then, maybe, a free float from there. Don’t you think?
Dezertheat: I agree with BItb, this is not going to hang out and float for 1&1/2 years, they will have a major civil war if so. I am looking to see what happens after Ramadan. and if nothing, then hopefully by jan 1st 2014.
Tlar Part 1: I was in the middle of responding to Ennorste and twice was blown out of the water based on other people responding. First off Turki starts out by bragging that he has reduced the sales of USD from 280 billion per day to 160 to 180 er day. Woopty do.
He also admits in the same paragraph that this has not controlled the exchange rate nor has it stopped corruption or smuggling. H thinks no more than 100 billion is required to satisfy the needs of the market but goes on to say he only has 3 employees to monitor 33 banks so he does not have the manpower to control the results.
Tlar Part 2: Next he starts to complain of government interference. He says pressure by unnamed individuals is being put on banks to loan unsecured loans to neighboring countries of 5 billion at a time.
Gee I wonder where the pressure is coming from and what countries are being earmarked for these loans. As these countries try to obtain the loans, certain Iraqi politicians have tried to discredit the CBI and corresponding banks.
In other words there is pressure coming from within the Iraqi government to make these unsecured loans. These same politicians are “washing money” through these banks and are attempting to discredit the CBI. Read it for yourself:
“He explained that these interventions attempt by some States to persuade the Iraqi Government to put pressure on the Bank to lend to certain banks more than $ 5 billion without real guarantees and rejected the Bank at the time the Iraqi Government has also shown willingness to deposit some in reserve banks for the purpose of strengthening its economy but also rejected the Bank making some politicians accuse the Bank various accusations to discredit him.”
Both Iran and Syria have set up banks in Iraq. These banks although part of the Iraqi system, operating under CBI control, are the target banks of these unnamed countries that are attempting to make these unsecured loans.
Tlar Part 3: In the third part, Turki explains his plan to protect the reserves and keep them at arms length from the government. Here he tacitly implies this is important because of the involvement of certain members of the government in its complicity with the problems of the bank. Although he does not name names, it is the members of the Maliki government he is obviously referring to.
Now lets deal with Saleh’s article yesterday. There are parts to this article that don’t stand as a test to where Iraq is. The first issue that makes no sense is the removal of all dinar off the streets.
If this is done the existing banks in Iraq stand no chance of re-capitalizing. If one dollar is brought in and one dinar is exchanged for it, it removes any possibility of the bank setting up new accounts and getting new customers.
This assumes that the value of the dinar has increased enough to under a float to cause the Iraqi to want to devoid his dollars in favor of dinars. Iraqi’s by and large are broke operating day to day.
If Iraq dollarizes 100 % what will the banks use to set up new accounts with. The average Iraqi has little to no excess money. If he brings in 75 US dollars which is a months pay, what will he open an account with.
So if Iraq dollarizes 100 % they illuminate any chance for the banks to increase operating capital which is one of the stated goals of the deletion of the zeros plan by Shabibi, under the original plan.
I also see this as eliminating any incentive concerning this issue that might have resulted in the banks willing to sacrifice their profits, which I personally believe to be the biggest incentive.
The second issue I take exception to is why in the world would Iraq, assuming they were dollarized, not immediately go to an RV instead of floating the currency at 1166?
The first thing that comes to mind is if there were nothing but dollars in Iraq, and Iraq declared their currency and article VIII currency (international), they would have the ability to pay their balance of payments with dinars.
They would mean flooding the international community with dinars as they paid a 1 million dollar debt with 1166,000,000 dinars to that debt. Considering that Iraq does billions and billions of trade at present and almost everything they need they have to import, this seems counterproductive to the purpose of dollarizing to begin with and it goes against what the bank has been doing.
The goal of the CBI since the middle of last year has been to reduce dinars out to increase value, not increase the number of the dinars out reducing value.
The CBI has made a concerted effort in this area buying back billions of dinar because as each dinar is retired, it raises the value of the dinars still out in circulation. To go against that policy now and use the dinar internationally, flooding the markets, makes no sense.
Lastly, how does all the articles the reference the deletion of the zeros, that have resurfaced since January 1st fit into a complete dollarization of Iraq along with a free float from 1166 fit in.
When Shabibi deviated from the “original plan” last year, choosing to instead just get the program going by floating the currency, the term delete the zeros also disappeared from the articles.
We know he did this out of duress because Maliki was at the pinnacle of his power and was against any change in the currency for personal reasons. Shabibi felt he had to do something. We also know recent articles have said the CBI has reverted back to the original plan. There has only been two plans.
The first or “original plan” to delete the zeros and the second, plan, which was in Shabibi’s mind, at least a way to get the currency started. The original plan called for an RV and it was based on the 2008 study that suggested the CBI could support the currency at 1.13 dinars per dollar and went so far as to suggest that the CBI hold and defend this rare exactly 2 years.
If we are to believe recent articles both the 2014 through the 2016 budgets are supposedly based on an exchange value of 1.16 dinars per dollar. That’s a two year run and follows to a T the suggestion made in the 2008 study.
PART 2 CONTINUED
Related Posts
IMF: Anticipate 9pct growth rate in the Iraqi economy this year
Kap / Tlar & Dinar Alert Member Discussion
Attempts to undermine the regional economy and the Reserve Bank
Attempts to undermine the regional economy and the Reserve Bank- CBI considering new policy to stabilize economy
Attempts to undermine the regional economy and the Reserve Bank
