Thread: Iraq/Dinar News. 09/05 to 01/14/07

Originally Posted by Alphamystic

Question: Why would the CBI be putting USD into the locals banks if their goal is to build local confidence in the IQD?

I thought I read that many locals have been using USD instead of IQD because they trust it more; and that the CBI's ultimate goal was to build confidence with the IQD so the Iraqi's would start using IQD, which would further build demand and increase the rate.

Again Wm Knowles 11/13

The question was asked, "what will the local banks do with the USD until they have to use it to support an RV which will result in an increased demand for USDs? This will be of interest to those who own bank stocks.
All banks maintain bond portfolios of items referred to as "secondary liquidity". In the banking world this "Liquidity" is used for bank reserve requirements (CBI) and is a sign of the finiancial stability of a bank. THESE reserve requirements in Iraq are similiar to reserve requirements required by the Federal Reserve system in the US. Buy placing this money in GOI bonds and bills along with US T-Bills, they are able to create a financial base that ensures coverage of their outstanding obligations and increasing loan demand. So expect the banks to increase their securities and bond portfolios in the short term with the increasing amount of USDs in their banks. This is just the responsible monetary movement that you would expect from an antcipated increase valuation of the currency. By increasing secondary liquidity, it increases the banking structure and ultimatly results in more valuable Bank stock and a healthier banking system. You comments are appreciated.

Originally Posted by frathousemicrowave

Did you read my post? It says I don't know how they do it with the CBI being independent. So I don't know, do you think they have a trillion dinar payroll???

It was directed to Elfwizard not you, he quoted you for his argument.

Originally Posted by frathousemicrowave

Did you read my post? It says I don't know how they do it with the CBI being independent. So I don't know, do you think they have a trillion dinar payroll???

The MOF buys dinars from the CBI. SO the CBI is just acting like a regular bank, the MOF then uses the Dinars he exchanged for dollars to pay for all Government operations.

Originally Posted by Socata 850

GOOD MORNING VIETNAM !!! Whoops wrong era, guess I'm showing my age. Anyway, the total as of today for Dinars pulled out of circulation for the last twelve auctions is:::::: 1,007,744,325,000. The rate has gone down another 3 points to 1446. That is a 24 point reduction since the CBI started this aggresive campaign to reign in the Dinar and boost value within their economy. What a great time this is !!!!

I haven't been paying that much attention to the total amount taken in but I have one question for you. Are you including the transfer amount in your calculations? If so I don't think you should because that is not taking dinar in.

Originally Posted by Elfwizard

The MOF buys dinars from the CBI. SO the CBI is just acting like a regular bank, the MOF then uses the Dinars he exchanged for dollars to pay for all Government operations.

Ok where is your proof that the MOF buys dinars from the CBI -LINK PLEASE?

See my post #421 where Wm Knowles states that the CBI is a banks bank just like our Federal Reserve- they are not a regular bank!

Originally Posted by Mike5200

Ok where is your proof that the MOF buys dinars from the CBI -LINK PLEASE?

See my post #421 where Wm Knowles states that the CBI is a banks bank just like our Federal Reserve- they are not a regular bank!

My point was when the MOF buys dinars from the CBI the CBI is not acting as a GOV entity, they are acting like a reg bank to the MOF by exchanging funds.

Oh heres your link. Again


The
Ministry of Finance sells dollars from its oil receipts to the CBI, purchasing dinars to pay
for government operations. The CBI then sells some of those dollars in the daily foreign
exchange auctions. Transactions at this auction were typically $10-$15 million a day by
the end of March 2004.

http://www.bos.frb.org/economic/ppdp/2004/ppdp0401.pdf

That was a good debate- Thanks Elfwizard!

However I will leave you with this and I'm done, again Wm Knowles 11/13--------------------------------------------------------------------------------

The question was: To what extent will the poliical changes in the GOI effect the monetary policies of the CBI?
Most americans would be very surprised at how independent the Federal Reserve System is from the fiscal policies of the US Gov. With the exception of deficit spending (which effects the money supply) the Fed acts as an independent central banking function. The same goes for Iraq. I have always been amazed over the last couple of years as to how the CBI and the economy seems to continue on its own course despite the upheavals in the GOI i.e. elections, forming a gov. etc. Since the GOIs spending is consistent with their budget, they actually do a better job of not printing money (by deficit spending) than we do. Monetary policy lies within the responsibility of the CBI and political changes, statements, comments etc. will have little influence on their policies just the same as they do in this country. The Federal Reserve system is govern by a board with the New York fed being the lead system. So you can expect the CBI to follow its own agenda, inspite of what the GOI thinks, says, or does. The monetary system is largely "outside" of the politicians in the GOI, and the CBI is much more influenced by suggestions and guidelines from the IMF and the world bank. However, the good news is that an increase in the currency value has been a goal of the IMF, World Bank from its original exchange in Oct. '03 based on how the monetary system has been put in place and the structure of the banking system that has been established from the beggining. There has been a definable trend towards making their money more valuable through sound monetary policies and economic growth, thus establishing Iraq as an eventual economic powerhouse in the middle east. So, I think in terms of the eventual outcome of this investment, as being well on track and that it will eventually rise to higher significant levels. I feel the CBIs establishment of a peg to the USD in Jan. of '04 to around 1475 as being established after the dinar had risen to a level below 1000 as a way of stabilizing the exchange rate. This allowed stability and increased there currency reserves. I think they knew that increasing currency reserves had to come from outside of the country. Afterall where else would they come from? The problem was that they didn't anticipate how long it would take to form a Govern. reduce outside debt and, since the uprising began in Iraq in April of '04, they didn't anticipate the extent of the violence. So where are they now? They (CBI) are setting on one of the most undervalued currencies in the world. The delays that I have discussed have resulted in a situation that requires a "bold adjust" in the exchange rate value to bring the dinar close to its real market value. Since they have been continuing to sell the dinar at such an undervalued level for so long, the exchane rate has become one of the major contributors to the high inflation rate. This issue was mentioned in the last report from the IMF. In that report, they stated that monetary policies would probably have little effect and that the exchange rate adjustment would have to be considered. I hope these discussion answers some questions. Watching the CBIs auctions in the next couple of days will further establish what type of trend they have in mind. As I stated before, They cannot continue to purchase dinars out of the economy for ever. Thank you for your interest and your comments are appreciated.

Originally Posted by Mike5200

That was a good debate- Thanks Elfwizard!

You too, kept me busy for about 2 hours LOL!!

Ya...kept US busy too....

Originally Posted by Mike5200

Again Wm Knowles 11/13

The question was asked, "what will the local banks do with the USD until they have to use it to support an RV which will result in an increased demand for USDs? This will be of interest to those who own bank stocks.
All banks maintain bond portfolios of items referred to as "secondary liquidity". In the banking world this "Liquidity" is used for bank reserve requirements (CBI) and is a sign of the finiancial stability of a bank. THESE reserve requirements in Iraq are similiar to reserve requirements required by the Federal Reserve system in the US. Buy placing this money in GOI bonds and bills along with US T-Bills, they are able to create a financial base that ensures coverage of their outstanding obligations and increasing loan demand. So expect the banks to increase their securities and bond portfolios in the short term with the increasing amount of USDs in their banks. This is just the responsible monetary movement that you would expect from an antcipated increase valuation of the currency. By increasing secondary liquidity, it increases the banking structure and ultimatly results in more valuable Bank stock and a healthier banking system. You comments are appreciated.

Thanks Mike. It looks like I missed that post