Central bank: a plan to raise the exchange rate of the Iraqi dinar

[R Veyron]

What ever it is, June is just around the corner so we'll all find out then....

[skeptic1138]

True they only list banks as buyers.  But some of these banks are money changers I believe, speculators.  The people in Iraq would prefer to deal with the money changers.  The money changers are adding on their additional charge, the people pay it.  They give them their dinar take the hit, and its not pretty.  So how I see it is this.  The ordinary person wants dollars, more so than yesterday.  They do not want to deal with the banks because they still do not trust them so they are victims of the money changers.  In a nutshell, the banks have not many clients, the money changers do.

 

Still CBI makes money from these transactions.  The dinar still suffers within Iraq, while they still hold 1166 internationally.  The people want dollars....and they complain about the dinar....I don't know seems like there is a skunk in the outhouse to me!  The CBI knows what they are doing, or they have a map.  I am not speaking of an RV, only what I am reading with their so called delima.  

I haven't found a list of who the "banks" are, and not sure that would tell us anything anyway.  But looking at the list of auction results there is a curious aspect.  The auction doc lists both a market price and an auction price. So maybe the auction price is the opening price and the market price is what it actually went for ???

 

I agree that the dilemma is the exchange rate actually being used in Iraq (maybe the auctions too) is falling below what the CBI has set and this is not about an RV.

Edited May 26, 2013 by skeptic1138

[shydude]

The wheels on the Bus go round and round, round and round, round and round

The wheels on the Bus go round and round every rumor day

[Darin]

The CBI is not a retail bank. The auction listings only list banks as buyers.  He is talking about controls the CBI might issue for control of buying and selling dollars in general, not (just) from the CBI.  The exchange rate at the auctions is always very close to if not exactly 1166, he is talking about the exchange rate on the street.  Its speculators buying from ordinary people, i.e. on the street (we've got some usual translation issues of corse), or at least that is I think what it says.

 

Is that how you read it?

 

I'm a little skeptic on how the CBI would be able to introduce regulations on how the average Joe on the street is exchanging hard cash with the average Jim. Now if they were an entity or business, I could see regulations proposed upon them. But in a free market society, how can a country state what value a person may or may not sell an item when factoring in supply and demand?

 

Is the CBI now beginning to become scared that dollars are in high demand and that the dinars are not wanted by no one?

[skeptic1138]

I'm a little skeptic on how the CBI would be able to introduce regulations on how the average Joe on the street is exchanging hard cash with the average Jim. Now if they were an entity or business, I could see regulations proposed upon them. But in a free market society, how can a country state what value a person may or may not sell an item when factoring in supply and demand?

 

Is the CBI now beginning to become scared that dollars are in high demand and that the dinars are not wanted by no one?

Yea not sure. It seemed like the article was saying that a buyer of dollars would have to show they needed the dollars for imports, i.e. to stop speculators.  But seems pretty much impossible to enforce.  Maybe the CBI should stop auctioning dollars and just exchange them at their specified rate.  I don't see the point of the auctions in the first place.

[JeffThompson]

Many are very confused about currency value increases to begin with but to clarify or in my best opinon.

 

There will be multiple increases in the Dinar and a free float along with a major increase. It is a time game. But it will get to a dollar and then eventually increase past a dollar.

 

When I mean a dollar I mean 1IQD= 1USD

 

But again this is not overnight and many people are tired of the Dinar and make it look like a scam because they think it will be overnight millions. No investment is overnight and POW a million.

 

Be patient, all good comes to thoose that wait.

 

This is strickly my opion and not advice, only invest or buy when you can and buy wisely remember no matter how safe any investment is there is always a risk of loss or heavy taxation by the US government in the event of a sudden increase in value.

 

 

[Kaduku]

Say it's so, it would really be very helpful for my future plans.

[Maggie123]

Many are very confused about currency value increases to begin with but to clarify or in my best opinon.

 

There will be multiple increases in the Dinar and a free float along with a major increase. It is a time game. But it will get to a dollar and then eventually increase past a dollar.

 

When I mean a dollar I mean 1IQD= 1USD

 

But again this is not overnight and many people are tired of the Dinar and make it look like a scam because they think it will be overnight millions. No investment is overnight and POW a million.

 

Be patient, all good comes to thoose that wait.

 

This is strickly my opion and not advice, only invest or buy when you can and buy wisely remember no matter how safe any investment is there is always a risk of loss or heavy taxation by the US government in the event of a sudden increase in value.

 

Thank You Jeff Your Opinion Is Appreciated

[Kaduku]

Awesome!

[skeptic1138]

Many are very confused about currency value increases to begin with but to clarify or in my best opinon.

 

There will be multiple increases in the Dinar and a free float along with a major increase. It is a time game. But it will get to a dollar and then eventually increase past a dollar.

Perhaps you would care to explain how that would be possible. If the dinar floats, its value can not be set by the CBI and is set by the market place.  Currently the market place is not even supporting the current value let alone one 1000x higher. If the dinar is pegged then the CBI must honor all comers for exchange and thus back at least M1 if not M2 (as they are currently) with reserves. With M1 of 65T, M2 of 75T and reserves of 75B USD, how can its value be pegged significantly higher than 1000 IQD to 1 USD?  At 1 IQD to 1 USD Iraq would have a money supply value greater than the entire rest of the world combined (which is in the neighborhood of 50T USD).  How could that ever be possible let alone with their current GDP of 100+B USD or even a future GDP of several times that amount?

Edited May 26, 2013 by skeptic1138

[handy]

As much as I hate to admit it , I think they're just talking about an increase in the street rate to match the bank rate . There's been a few articles talking about how just that small difference is causing alot of problems right now. However I still believe it will re-value eventually 1 to 1 but that is just my opinion , maybe I'm wrong.

[dontlop]

[fib1618]

Many are very confused about currency value increases to begin with but to clarify or in my best opinon.

 

There will be multiple increases in the Dinar and a free float along with a major increase. It is a time game. But it will get to a dollar and then eventually increase past a dollar.

 

When I mean a dollar I mean 1IQD= 1USD

 

But again this is not overnight and many people are tired of the Dinar and make it look like a scam because they think it will be overnight millions. No investment is overnight and POW a million.

 

Be patient, all good comes to thoose that wait.

 

This is strickly my opion and not advice, only invest or buy when you can and buy wisely remember no matter how safe any investment is there is always a risk of loss or heavy taxation by the US government in the event of a sudden increase in value.

Pump those dinar sales Jeff.

As much as I hate to admit it , I think they're just talking about an increase in the street rate to match the bank rate . There's been a few articles talking about how just that small difference is causing alot of problems right now. However I still believe it will re-value eventually 1 to 1 but that is just my opinion , maybe I'm wrong.

You're right.

[fishing]

We all have to wait and see, no one knows!

[fib1618]

Perhaps you would care to explain how that would be possible. If the dinar floats, its value can not be set by the CBI and is set by the market place.  Currently the market place is not even supporting the current value let alone one 1000x higher. If the dinar is pegged then the CBI must honor all comers for exchange and thus back at least M1 if not M2 (as they are currently) with reserves. With M1 of 65T, M2 of 75T and reserves of 75B USD, how can its value be pegged significantly higher than 1000 IQD to 1 USD?  At 1 IQD to 1 USD Iraq would have a money supply value greater than the entire rest of the world combined (which is in the neighborhood of 50T USD).  How could that ever be possible let alone with their current GDP of 100+B USD or even a future GDP of several times that amount?

+1

[SocalDinar]

Perhaps you would care to explain how that would be possible. If the dinar floats, its value can not be set by the CBI and is set by the market place.  Currently the market place is not even supporting the current value let alone one 1000x higher. If the dinar is pegged then the CBI must honor all comers for exchange and thus back at least M1 if not M2 (as they are currently) with reserves. With M1 of 65T, M2 of 75T and reserves of 75B USD, how can its value be pegged significantly higher than 1000 IQD to 1 USD?  At 1 IQD to 1 USD Iraq would have a money supply value greater than the entire rest of the world combined (which is in the neighborhood of 50T USD).  How could that ever be possible let alone with their current GDP of 100+B USD or even a future GDP of several times that amount?

They may retire the larger notes as they move forward. I'm guessing here of course. They could raise the value to a penny per dinar and set a timeline to turn in the10 and 25 K notes.

[fib1618]

We all have to wait and see, no one knows!

Some understand what's economically possible.

They may retire the larger notes as they move forward. I'm guessing here of course. They could raise the value to a penny per dinar and set a timeline to turn in the10 and 25 K notes.

They don't have enough foreign reverses to rv to a penny even if they abandoned their policy of stability and decided to bump the rate.

[hame55]

Perhaps you would care to explain how that would be possible. If the dinar floats, its value can not be set by the CBI and is set by the market place.  If the dinar is pegged then the CBI must honor all comers for exchange and thus back at least M1 if not M2 (as they are currently) with reserves. With M1 of 65T, M2 of 75T and reserves of 75B USD, how can its value be pegged significantly higher than 1000 IQD to 1 USD?  At 1 IQD to 1 USD Iraq would have a money supply value greater than the entire rest of the world combined (which is in the neighborhood of 50T USD).  How could that ever be possible let alone with their current GDP of 100+B USD or even a future GDP of several times that amount?

"Currently the market place is not even supporting the current value let alone one 1000x higher. "

 

Which market? Because you refer to the Iraqi local market. You are right. But the international market would support much higher.

 

Secondly, you are taking their books at face value concerning how many trillions they have out M1 M2 - if you believe them, there are too many dinars to RV high. I don't believe them.

[sandstorm]

The mere fact this press release is from the cbi....guarantees its nothing significant.

[Darin]

Some understand what's economically possible.

They don't have enough foreign reverses to rv to a penny even if they abandoned their policy of stability and decided to bump the rate.

Instantly? No... Can't say they are unable to crawl their way to it though.

[skeptic1138]

They may retire the larger notes as they move forward. I'm guessing here of course. They could raise the value to a penny per dinar and set a timeline to turn in the10 and 25 K notes.

As flb1618 says they don't have the reserves to RV to a penny (which would be roughly a 10x increase).  But suppose somehow they get the 750B USD that would require.  How does "retiring" larger notes change anything?   The value (and hence liability against reserves) of 1000 250 IQD notes (if such a denomination exists) is exactly the same 10 25,000 IQD notes.  Think about the money you have in the bank, is it listed by the number of notes or just the number of dollars?

[sandstorm]

The mere fact this press release is from the cbi....guarantees its nothing significant. central banks dont announce massive rvs. mostly because massive rvs dont ex

"Currently the market place is not even supporting the current value let alone one 1000x higher. "

 

Which market? Because you refer to the Iraqi local market. You are right. But the international market would support much higher.

 

Secondly, you are taking their books at face value concerning how many trillions they have out M1 M2 - if you believe them, there are too many dinars to RV high. I don't believe them.

your talking about iraq. iraq is a total mess. if their books are wrong....your guarantteing no one would honor a rv'd rate. who would trust them? Every single other central bank in the world would demand transparency. If the books are cooked....theres definitely not going to be a rv

[skeptic1138]

"Currently the market place is not even supporting the current value let alone one 1000x higher. "

 

Which market? Because you refer to the Iraqi local market. You are right. But the international market would support much higher.

 

Secondly, you are taking their books at face value concerning how many trillions they have out M1 M2 - if you believe them, there are too many dinars to RV high. I don't believe them.

On what do you base this assertion?  Why would there even be a demand internationally for IQD when there is not anything you can buy in IQD?

 

If you look at the list of countries by the percentage of GDP for the money supply we would expect Iraq to be in the range of 50-60%, and that is what the CBI says.  If it were 10x lower (i.e. enough to make a huge difference) how could the economy function?  We know the size of the economy as its all around exporting oil.  We also see the auctions cycling large amounts of dinar so we know there is constant churn of IQD (oil sales exchanged to dinar exchanged back to dollars for exports).  So the numbers fit.  They can't really be off by enough to make a difference.  They also of course are being watched by the IMF, WorldBank, UST, UN, etc and more than anything want acceptance into the world economy.  Cooking your books by 10x or 100x etc isn't they way to accomplish that, even if somehow they could get past the other issues I mentioned.  So I just don't see this as possible.  Plus or minus 5%?  Sure, 1000% no way.

[skeptic1138]

Instantly? No... Can't say they are unable to crawl their way to it though.

Time doesn't change the need to back a pegged currency.  They have added to their reserves over the amount needed to back their expanding money supply by maybe 1% for the past 5 years or so.  Lets say they can increase that overage to 5% per year.  Then to increase their reserves by 10x to be able to raise the rate by 10x (to a penny, whether all at once or little by little) that wold take 200 years.  Note that if you do want to slowly raise your countries exchange rate so you are telegraphing your intentions, you do want to do it very slowly so you do not attract speculators.  e.g. China has taken about 10 years to move 30% (if I recall correctly) under pressure from the rest of the world to raise their rate over balance of trade issues.  I'm guessing that sort of time scale is not what you had in mind.

[Darin]

As flb1618 says they don't have the reserves to RV to a penny (which would be roughly a 10x increase).  But suppose somehow they get the 750B USD that would require.  How does "retiring" larger notes change anything?   The value (and hence liability against reserves) of 1000 250 IQD notes (if such a denomination exists) is exactly the same 10 25,000 IQD notes.  Think about the money you have in the bank, is it listed by the number of notes or just the number of dollars?

With the JPY having a M2 of over 800 Trillioin, a M3 over 1 Quadrillion, and they seem to be fine operating off of a penny in comparison to the dollar.

Recent news also sounds like they'll be continuing to print money as well, a form of QE.