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

When I am Done. You Need to read the rules above and hit the Thanks. If not the Your Post will be removed.

Also: This Thread is Not for Storys, Remarks, or Opinions of anything other, the the Dinar. This will be added to the rules for the Lastest News Thread.

I will open this back-up in a few.I am removing the Good Post from the other to here before I come thru the Others.

I can only hope you have read the Updated Rules. I am still going back thru the other thread that I had to lock down. Tonight at Midnight the rules Post above will move to the first post of this Thread.

As OffShore-Wealth.com put it ellegently, we have tried to keep the rules relaxed and the Banning Down. I have been here since the first 900 pages in the History Thread. So even tho that is only 8 months, I know everyone.

Now it has become apparent that the Rules have to be EnForced from here on out. Rolclub will not change from its own views of being a Forum. Please read the rules of this Thread, and inform yourself of the Forums TOS Rules as well. Have a great Investment and the "Dinar Gang" is Back!!!!!!!!!!

Rolclubs Revised TOS Rules for your signature with respect to readers. Please shorten all signatures to 5 to 7 lines. If I have to go into to do it, I will. Some of these signatures have gotten to far out of hand. So Please for the respect of the reader shorten them all to 5 to 7 lines. Thank You Ahead.

Iraq : inflation prominent economic events in 2006


Translated version of http://www.iraqdirectory.com/DisplayNewsAr.aspx?id=2862

Presidential Order 13303: Allows US Citizens to invest in the New Iraq . Under this Order and the Coalition Provisional Government Order 39, a US citizen has the same rights to investments as an Iraqi citizen

IRAQ (PRWEB) March 2, 2004 -- Investment in the new Iraq is guaranteed under the Presidential Order 13303 removing sanctions on investment in Iraq . The new order allows for a restructuring of the banking system in Iraq . US citizens are allowed to invest in Currency, Stocks, Bonds, Real Estate and Business in Iraq .

Iraq has a new currency to replace Iraq ’s two currencies, one of which was easily counterfeited and mostly circulated in a single denomination. Banks issue only the new currency and government employees paid in cash will receive their salaries in the new currency. Until January 15, 2004 the old and new currencies will circulate freely at a fixed exchange rate. Exchange between the old and new currencies is conducted at now charge at multiple exchange points around the country.

The other financial market structures are strong:

95 percent of all pre-war bank customers have service and first-time customers are opening accounts daily. Iraqi banks are making loans to finance businesses. The central bank is fully independent. Iraq has one of the world’s most growth-oriented investment and banking laws.

The new Iraqi dinar which is printed bu De La Rue company in the US and Great Britian, is valued at just 2 tenths of one cent today. The US treasury has a strong dinar policy and is working with the CPA (Coalition Provisional Authority) to reinstate a strong decentralized banking system in Iraq . By December 2004 there will be six Western Banks in Iraq and six Iraqi Banks outside Iraq in operation. In March Three banks were given licence to operate in Iraq, National Bank of Kuwait, HSBC Bank and Charter bank of England .

Originally Posted by Offshore-Wealth.com

Greetings Eric,


The last thing I see as obstacle is the reshuffling of cabinet and ouster of all the dead wood illiterates now holding important positions. Once this is complete, and again, we heard of these problems months ago, so nothing new here, they have always been a government of testing the water first, afraid to make a mistake, but the time has come to shiite or get off the pot, period. Too much BS and not enough action. The question of stably dinar is no longer an issue, and as I see it, this was one of the last and most critical points that had to be established for all to see, so what is next, dump deadwood in parliament, and that includes Maliki. Could happen next week, so we shall see. (g)

Happy New Year to All, Mike

Happy New Year to you too Mike and All on RC

I am glad to see that the rules will be more firmly enforced here in the future.

Now, If they were to get rid of Maliki, how would they do that empeachment? Who would replace him? What is the process being as he is an elected official?

After reading this IMF piece earlier here today, I was intrigued. I decided to input notes based on the CBI activity observed over the past couple of years. If you have been studying the activity most of this becomes clear as day. Certainly proving that a plan is being followed and the actions are right from the IMF “How To Adjust the Currency” policy and procedures hand book. Any other insight to this is greatly appreciated. My notes are in blue.


Adjusting to Capital Inflows

Economic Issues No. 13 -- Fixed or Flexible?--Getting the Exchange Rate Right in the 1990s

In many fast-growing emerging market economies, upward pressure on the exchange rate in recent years has stemmed largely from vastly increased private capital inflows. When capital inflows accelerate, if the exchange rate is prevented from rising, inflationary pressures build up and the real exchange rate will appreciate through higher domestic inflation. [My Note: This is exactly what has been happening in Iraq 76% inflation rate and we have yet to begin real foreign investment in the country. This one reason alone might require the CBI to make a bold adjustment or RV. We are already seeing the pressure to drive the currency rate upwards without major foreign investment occurring yet. Imagine what rate spikes it would require to keep the currency stable in the future without Rv’ing now]

To avoid such consequences, central banks have usually attempted to "sterilize" the inflows–by using offsetting open market operations to try and "mop up" the inflowing liquidity. –[Hmm expand the money supply maybe, just like they did in Iraq? Sounds like maintaining the program rate to me. Another page out of the Marshall Plan and IMF playbook]

Such operations tend to work at best only in the short term for several reasons. First, sterilization prevents domestic interest rates from falling in response to the inflows and, hence, typically results in the attraction of even greater capital inflows. Second, given the relatively small size of the domestic financial market compared with international capital flows, sterilization tends to become less effective over time. –[Can’t keep the brakes on any longer]

Finally, fiscal losses from intervention, arising from the differential between the interest earned on foreign reserves and that paid on debt denominated in domestic currency, will mount, so sterilization has a cost. –[Adjustment of exchange rate required to avoid a financial loss]

As capital inflows increase, tension will likely develop between the authorities’ desire, on the one hand, to contain inflation and, on the other, to maintain a stable (and competitive) exchange rate. As signs of overheating appear, and investors become increasingly aware of the tension between the two policy goals, a turnaround in market sentiment may occur, triggering a sudden reversal in capital flows. –[Iraq’s currency is so severely undervalued, it is nearly impossible IMO to overheat I wish we would get to that point because we’d be cashing out at over $3.00 but it also might explain the initial program rate, it was a safeguard]

Since open market operations have only a limited impact in offsetting the monetary consequences of large capital inflows, many countries have adopted a variety of supplementary measures. In some countries the authorities have raised the amount of reserves that banks are required to maintain against deposits. –[Wasn’t this also done in Iraq recently?]

In others, public sector deposits have been shifted from commercial banks into the central bank–to reduce banks’ reserves. A number of countries have used prudential regulations, such as placing limits on the banking sector’s foreign exchange currency exposure. Some central banks have used forward exchange swaps to create offsetting capital outflows-[Sounds like lop discussion and its pitfalls] -although there appear to be limits on how long such a policy can be used, given the likelihood, as with open market operations, that it can cause fiscal losses.

In other cases the authorities have responded by widening the exchange rate bands for their currencies, thus allowing some appreciation. And a few have introduced selective capital controls.

While such instruments and policies can for a time relieve some upward pressure on a currency and ease inflationary pressure, none appears to have been able to prevent an appreciation of the real exchange rate completely. -[I like that confession]

Can exchange rate flexibility help manage the impact of volatile capital flows? As mentioned earlier, if interest rates and monetary policy are "locked in" by an exchange rate anchor, the burden of adjustment falls largely on fiscal policy–that is, government spending and tax policies. But often taxes cannot be raised or spending reduced in short order, nor can needed infrastructure investments be postponed indefinitely. (Clearly, policymakers who cannot adjust fiscal policy in the short run should not adopt a rigidly fixed exchange rate regime.) Allowing the exchange rate to appreciate gradually to accommodate upward pressures would appear to be a safer way of maintaining long-run economic stability. Furthermore, by allowing the exchange rate to adjust in response to capital inflows, policymakers can influence market expectations. In particular, policymakers can make market participants more aware that they face a "two-way" bet–exchange rate appreciations can be followed by depreciations. This heightened awareness of exchange rate risks should discourage some of the more speculative short-term capital flows, thereby reducing the need for sharp corrections. – [In other words the lop story back in June was intended to scare you off. I’m glad you’re brave]

Although no one can say 100% there will be no zero lop, it is an extremely remote possibility. The statement made by the old MoF was dismissed and he has had his share of detractors for for it. Remember the stated goal of the CBI is the stabilization of the dinar. To do that the people must have confidence in the currency. Replacing the old currency with new and making it worth just a small fraction of what it was takes a toll on confidence. Also in the mix is why is the CBI going through the trouble of removing dinar from circulation if they were going to lop? Does not make sense.

You have to ask the question, what does zero lopping accomplish? As far as purchasing power, not much. When I bought dinar I paid approx. $18 per 25 k. If you zero lop, take off three zeros, and then make the dinar equal to the dollar, if they would go that high, you only have $25 dollar worth of purchasing power. If, and this is a big if, an Iraqi family was able to put away 250,000 NID after a reval they only will have $250. That does not make for a higher standard of living as promised.

The best way to deal with the problem is to remove dinar gradually and increase the value of what is remaining. Let supply and demand do the work. When countries lop they have lost control of the situation and have virtually no other recourse because inflation is extremely high and climbing and the currency is worthless. Although Iraq's inflation is somewhere in the 50% to 70% a year area that is not extreme. Extreme is 70% a month. As far as worthless goes the dinar is not even close to being where the currency say of Turkey or some of the South American countries have been.

This is JMHO as a layman. Comments are welcome.

Originally Posted by Pippyman

The power of "purchasing power parity"....

http://www.imf.org/External/Pubs/FT/...pdf/cashin.pdf


This paper tests for purchasing power parity (PPP) using real effective exchange rate data for 90 developed and developing countries in the post–Bretton Woods period. Support for PPP is found, since the majority of countries experience finite deviations of real exchange rates from parity. The speed of parity reversion is found to be typically much faster for developed countries than for developing countries and to be considerably faster for countries with flexible nominal exchange rate regimes compared with countries having fixed nominal exchange rate regimes.





"The theory of PPP, in its most rudimentary form, states that there is an equilibrium level to which exchange rates converge, so that foreign currencies should have the same purchasing power.1 Therefore, long-run PPP is inconsistent with a unit root in real exchange rates....

We conclude that the majority of countries in our sample have real exchange
rates that revert (albeit sometimes slowly) to PPP and, thus, that PPP holds in the post–Bretton Woods period....

That is, countries with higher inflation rates tend to have shorter lived deviations of their real exchange rates from PPP, which suggests that parity reversion is fast when price movements largely reflect monetary shocks....


Productivity growth is a supply-side factor that can affect the persistence of real exchange rate shocks. The Balassa-Samuelson effect has traditionally been the most popular explanation for the persistence of parity deviations. The Balassa- Samuelson hypothesis highlights the potential effects of differential productivity growth (favoring the traded goods sector) on the behavior of real exchange rates, which ultimately raises the relative price of nontraded goods.
We thus conclude that there is little evidence that either higher productivity
growth or greater government spending can explain much of the observed
pattern of deviation from PPP across countries. Our conclusions are consistent
with those of Rogoff (1996).

V. Conclusion
The validity of purchasing power parity (PPP)—the notion that prices in different countries move toward equality in common currency terms—is of interest to policymakers for two main reasons. First, PPP provides a long-term benchmark for the equilibrium value of exchange rates and, as such, is a criterion for evaluating the competitiveness of real exchange rates. Second, PPP has been adopted as a central building block of many theories of exchange rate determination; the quality of policy advice based on these theories may depend on the validity of PPP.....


Finally, when we examine the determinants of the observed cross-country heterogeneity in the persistence of reversion of real exchange rates to parity, we find that parity reversion tends to be faster in high-inflation countries than in low-inflation countries and slower in countries with less nominal exchange rate variability."

Awesome post, Pippyman. I would only like to challenge one small assertion. That assertion,

"We conclude that the majority of countries in our sample have real exchange
rates that revert (albeit sometimes slowly) to PPP and, thus, that PPP holds in the post–Bretton Woods period...."

suggests that Bretton woods was something more than the vainglorious attempt by the involved banking interests at price controls, which we all know cannot work, to wit, scalpers at a play-off game or, better yet the Yazzman rate. Again, thanks for your erudite and enlightening post.

Voices of Iraq: Baghdad-Newspapers
كتب: nadioshka في يوم الأحد, 31 ديسمبر, 2006 - 11:54 AM BT
Baghdad-Newspapers
Baghdad without newspapers this week
By Adel Fakher and Hamed al-Hamarani
Baghdad, Dec 31, (VOI) – Newspapers disappeared from news stands in Baghdad for the second day running on Sunday and the Iraqi capital looked set to remain without papers until next week.
Officials at the Iraqi dailies Al-Siyadah, al-Bayyina al-Jadida, al-Manar al-Yom and al-Mada told the independent news agency Voices of Iraq (VOI) their newspapers would reappear on Sunday next week, citing this week’s Moslem Eid al-Adha holiday and the Army Day on Saturday.
An editor at the official Al-Sabah daily said the newspaper would reappear on Saturday.
Dozens of newspapers sprang in Iraq after the downfall of the former regime in April 2003 along with magazines and television channels