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Everything posted by wc41
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Excellent Adam, always refocusing with clarity! Thank you!! π
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@ladyGrace'sDaddy I feel the same! I am a very light 'poster' though a very avid reader And Appreciative of ALL his contributions! When you're able please express this to him in my behalf. My heartfelt prayers for his parents, strength and encouragement for the family!!
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Trump gives victory speech: impeachment was a disgrace
wc41 replied to Synopsis's topic in Dinar Rumors
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@Adam Montana Excellent encouraging recap as always!! You've even been positive through the 'no news' dry times and kept this gravy train on track!! Now were pulling into the station!!!
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Excellent CL Thank you for that breakdown! Much easier to digest!!!
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After posting my first ever news article this week, Iβll Definitely Take An RV/RI this next week!!! ππππ Thank you @Adam Montana
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- adam montana weekly
- iraqi prime minister
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All sharper minds than mine dig in! @Adam Montana and all news hounds!! Policy papers: Iraqβs Monetary Policy Mudher M. Salehβs testimony re: the appreciation of Iraqi Dinar in 2006-8, raises serious questions? By Dr Amer K. Hirmis * The purpose of this note is to shed light, and comment, on two views expressed recently in relation to the appreciation of the Iraq Dinar (IQD) in 2006-2008. Muhammad Tawfiq Alawi (henceforth M. Alawi), former minister of communications in Iraq, gave a talk on December 13, 2019 in Washington D.C. to an Iraqi audience, in which he mentioned the appreciation of the Iraqi Dinar (IQD) during 2006-2008 as an example of lack of economic planning in Iraq. Mudher Muhammad Saleh (henceforth M. Saleh), former deputy governor of the Central Bank of Iraq (CBI), and currently finance advisor to the outgoing prime minister, responded the following day, in an article published at the βIraqi Economists Net.β M. Alawiβs and M. Salehβs contributions are respectively available at: https://www.youtube.com/watch?v=xsStEhEWMoc&feature=youtu.be, and, http://iraqieconomists.net/ar/2019/12/19/Ψ―-...(continued)]. These contributions might attract a number of observations from readers. This note, however, focuses on two observations, set out below. First, that the βindependenceβ of the CBI was compromised in negotiating and signing a βStand-By Agreementβ with the IMF in late 2005. Second, by following the IMF programme in Iraq, the CBIβs administration focused its attention on limited instruments of monetary policy as dictated by the IMF, and much less on contributing to national economic growth and leveraging badly needed major structural changes in the economy. 2. Summary of the two contributions In his talk, M. Alawi noted that the appreciation of the IQD in 2007 by 20 per cent was wrong, and that it was seen by βignorant politiciansβ to reflect a strong economy, not realising βthe damaging impacts this would have on...specifically foreign trade.β He also added that he went to see Sinan al-Shibibi, governor of CBI at the time, to tell him, personally, how damaging the appreciation of IQD would be to the economy. Al-Shibibi told him βthat he was under pressure from above (i.e. politicians) to do so, and that this decision was imposed on him, and that CBIβs responsibility related to monetary policy, controlling inflation, deciding interest rate levels and banking (!); that the politicians point actually related to the wider national economy...I (al-Shibibi) could not do anything...(but to oblige).β 1 I am very grateful to Dr Barik Schuber, chief IEN editor, for commenting on an earlier draft of this note. 1. Introduction 1 Dr Amer Hirmis Mudher M. Salehβs testimony page 1 of 7 Policy papers: Iraqβs Monetary Policy M. Salehβs response falls into three parts; the first covers negotiating the βParis Clubβ agreement, signed on November 21, 2004. Both he and Sinan al-Shibibi were members of the negotiating team, headed by the Finance Minister - Adel Abdul Mahdi (currently the outgoing prime minister). The negotiations led to a reduction i in three tranches. βStand-By Agreementβ (SBA) with IMF.β The final tranche, 20 percent reduction, would take effect if βIraq succeeded in implementing the agreement with IMF by the end of 2008.β M. Saleh then provides the rationale for appreciating the IQD by 31.9 per cent over three years, inclusive; from the end of 2005 to the end of 2008. He suggests that the βeconomic modelβ that the IMF was applying to implement its programme in Iraq required reducing inflation from 20 percent to 6 percent. This scale of reduction required a nominal anchor for (Iraqi monetary policy/CBI) to set a path for appreciating IQD by 20 percent, and also to raise the internal value of IQD iii through raising interest rate by at least 20 per cent. He goes on to say that βthe CBI was forced to follow a contractionary (tight) policy to reduce inflation...the Head of the IMFβs team made it clear that (the IMFβs programme) obliges (Iraq to accept) certain prerequisites; these being amending the internal and external value of the IQD, i.e. interest rate and exchange rate. Al-Shibibi categorically refused such restrictive monetary policy, and left the room, saying βwe will not accept such conditions which curb development.β M. Saleh asked al-Shibibi to return to the meeting because the Head of the IMF team indicated that if (Iraq does not agree the terms) the IMF programme would be stopped, and consequently the βParis Clubβ agreement revoked! M. Saleh (argued) this would result in greater damage (to the economy). βAll of us had to accept the increasing IQDβs exchange rate, to reach 1,182 for each US$ by the end of 2008, from a base of 1,560 IQD for each US$ at the end of 2005.β M. Saleh concludes that βthe problem in my estimation does not only lie in the appreciation of the IQD at the time, in spite of the decline in inflation from 22 percent down to 6 percent (as the IMF required)...but that the major problem (in the economy) remained to be a five times increase in government employment today compared with 2003, and an increase in the government wage bill seven times, which meant that a government employee earns twice the average per capita GDP.β 3. Analysis As the author of this note is not a specialist in monetary policy, the analysis and the evaluation that follows is of general nature. The analysis is in two parts; the first relates to CBIβs βindependenceβ, the second is on the lack of material impact monetary policy post-2003 has had on diversifying the Iraq economy (GDP). The βindependenceβ of CBI The above account clearly shows that the CBI had yielded to political pressure, leading to the appreciation of the IQD during 2006-8. The appreciation of the IQD of the βParis Clubβ debt (US$ 42.5 bn) by 80 per cent, or US$34.0 bn, ii implemented The second 30 per cent reduction was βconditional on signing a Dr Amer Hirmis Mudher M. Salehβs testimony page 2 of 7 Policy papers: Iraqβs Monetary Policy by nearly 32 percent, and the increase in interest rate to 20 percent over 2006-8 was, in effect, a decision made for, not taken by, the CBI. It is in this sense that the CBIβs own administration did, arguably, compromise the Bankβs βindependence.β Was this a grave decision? Was it a grave mistake? And, was such a major concession to the IMF an opportunity for some members of the CBI administration to resign, as the guardians of the CBIβs βindependenceβ? That is a judgement for future historian of monetary policy in Iraq, to make. It is also legitimate to note that the argument used by M. Saleh to persuade al- Shibibi to return to the meeting with IMF is rather tenuous. The present author is hopefully wrong in suggesting that M. Saleh has not made the case in his subsequent writings iv demonstrating that the damage to the Iraqi economy βwould have been greaterβ than accepting the IMFβs conditions. Another serious question relates to the IMFβs condition that the CBI had to appreciate IQD (and raise interest rate by at least 20 percent) in tackling specifically imported inflation. To state the obvious, the appreciation of IQD had lowered domestic prices of imports; theoretically, this ought to have a downward effect on inflation. The extent of the downward effect would depend on the price of imported goods in the inflation basket of goods and services. Whilst controlling inflation is within the remit of the CBI, the Bank is yet to quantify the extent of imported inflation - i.e. provide a justification for linking the appreciation of the IQD and imported inflation in the way M. Saleh has expressed as being specifically such a critical monetary policy issue! That said, it has been suggested that Iraq has been experiencing cost-push/risk- premium inflation post-2003, triggered mainly by domestic factors, including the cost of security, acute shortage of gasoline and fuel products, electricity, transport, corruption (as an economic/financial cost), all of which accumulate in the value v Arguably, yielding to the IMFβs condition that interest rate should be raised to 20 percent during 2006-8 (alongside appreciating the IQD) did not, to say the least, contribute to national economic growth and to leveraging major structural changes in the wider economy. Nor had it attracted notable domestic and foreign private investment in productive sectors, though only a factor in decision-making process. βThe monetary transmission mechanism...is weak. The effectiveness of interest rate changes in influencing inflation is thus very limited. Economic activity is dominated by cash transactions, and the banking system is chain, and translate to higher market prices of domestic goods and services. More generally, shouldnβt evidence be provided to show whether the CBIβs monetary policy of supporting the US$ has succeeded in curbing inflation? Monetary policy and the wider economy It is fair to say, however, that raising interest rate was not a reaction to market mechanisms; it was an administrative decision by the CBI, as noted by the IMF in its 2006 report (p.8) - Dr Amer Hirmis Mudher M. Salehβs testimony page 3 of 7 Policy papers: Iraqβs Monetary Policy largely inert. Few loans are extended and the deposit base is not very active. Raising interest rates will nonetheless signal the authoritiesβ determination to deal with inflationβ (see www.imf.org/external/pubs/ft/scr/2006/cr06301.pdf, italics added). The decision to raise interest rate to 20 percent prompted the minister of planning in 2009, Ali Baban, to express his deep concerns about how disconnected monetary policy was from the real economy. Baban observed that the CBIβs policy of controlling inflation (as its central target) by raising interest rate so high was vi misguided and choking private investment possibilities. Adding his voice in 2011, Ahmed Braihi Ali (currently on the CBIβs Board of Directors) noted that βtargeting inflation may be consistent with intervention in the exchange market to prop up the IQDβs exchange value, but a dearer IQD in the trade market may also be harmful to non-oil Iraqi exports, job creation, attempts to ameliorate the structural problems, and, thus economic growth more generally.β Ali continued β...cheaper imports (if dumping), might lead to the closure of many SMEs in the country as they would not be able to compete with cheaper imports. It is important that the CBI strikes the right balance between its responsibility for monetary policy and its (direct or indirect) vii The views against raising interest rates and the damaging practices of (practically unregulated) commercial banks is shared by Iraqi industrialists, for example, Jamal Muhsin viii and Mahdi al-BanaΔ« ix who suggested that the βthe CBI has contributed to the demise of the industrial and agricultural domestic production through βauctionβ of foreign currency and the US$ generally...It has more to do with the CBI selling its reserves...to the importers and the (domestic) banks, only to continue the haemorrhage (of foreign reserves) and the rise of domestic production costs, to the point where firms cease to compete with imported goods that are supported by the countries of origin, floating their currencies, and ensuring that Iraqi-produced goods become less cost-competitive.β They also raise the issue of the near impossible conditions the private commercial banks apply to investors seeking credit (cf. end note iv). It is fair to say that these issues are of critical importance in terms of the impacts of the CBIβs monetary policy on the Iraq economy post-2003. A more balanced testimony by M. Saleh might have detailed the negative impacts on CBIβs monetary policy on the wider economy. 4. Evaluation Although M. Saleh concludes rather fleetingly that the problem in his estimation did not only lie in the appreciation of the IQD at the time...but that the major problem remained to be a five times increase in government employment today etc. it would have been right to state albeit briefly the damages the CBIβs monetary policy, inter alia, caused the Iraqi economy, post-2003. Given that M. Saleh has access to up-to- date relevant data, there would have been merit in assessing the lack of progress in restructuring of Iraqi GDP resulting from the monetary policy followed by CBI under the influence of the IMF. Perhaps it is also legitimate to ask whether a monetary policy supporting economic diversification, and tighter regulation of the commercial banks and the currency auction, might have resulted in much less than five times increase in government responsibility for the wider economyβ (brackets added). Dr Amer Hirmis Mudher M. Salehβs testimony page 4 of 7 Policy papers: Iraqβs Monetary Policy (public sector) employment, and its damaging fiscal consequences, denying more funds for investment in productive sectors of the economy, infrastructure and the defragmentation of the allegedly corrupt institutions. Blaming fiscal policies for the unnecessarily large size of government might be interpreted as an attempt to exonerate the CBI from its mistaken monetary policies post-2003! The reality is that monetary and fiscal policies have been operating in diametrically opposite directions; respectively contractionary versus expansionary policies since 2003! Instead, M. Saleh appears to embrace the IMF programme in Iraq, and the Fundβs economic arguments, at least in terms of adopting a liberal exchange rate and trade liberalisation (much in line the βWashington Consensusβ), eliminating quantitative restrictions, providing trade protection and virtually minimum (if any) tariffs. The CBI designed the so called βcurrency auctionβ which, as is widely recognised, has become a mechanism for laundering money and supporting what M. Saleh calls the βliberal financial capitalismβ in Iraq. When asked, in an interview in March 2019, to elaborate on βmajor economic reformsβ in Iraq, including comprehensive restructuring of the economy and rumours of βunfetteredβ privatisation of public assets along the βprescriptions of the IMF and their known conditionsβ, M. Saleh clearly evaded the question. Instead he spoke about βpartnership (between the public and private sectors) in the first instance and, secondly, βsecured privatisationβ...β x Finally, apart from the erroneous figures mentioned in M. Salehβs βtestimonyβ and xi It is a welcome initiative that a senior advisor to the (outgoing) Iraqi prime minister should take the time to βclarifyβ the βeconomicβ arguments and politics that led to the appreciation of the IQD during 2006-2008. However, the above analysis clearly shows that M. Saleh did not provide the readers with a balanced account; he did not touch on the negative consequences of these decisions on the wider economy, for which the CBI should take responsibility - i.e. not contributing to the restructuring the Iraqi economy (GDP), or supporting the private sector to invest in productive sectors. It is a fact that the contribution of productive sectors to GDP has actually diminished since 2003. Suffice it to mention that manufacturing contribution to non-oil GDP (1988 prices) has declined from 4.4 percent in 2004, to 3.5 percent in 2014, then to a mere 1.9 percent in 2019 (first xii the misleading statements, attempt to defend CBI monetary post-2003. His βtestimonyβ, could, and should have provided a balanced account by elaborating on the damages caused by contractionary CBIβs monetary policies, in line with IMFβs condition, for which the administration of the Bank ought to take responsibility (it is fair to say). 5. Conclusion three quarters). his intervention might correctly be read as another Dr Amer Hirmis Mudher M. Salehβs testimony page 5 of 7 Policy papers: Iraqβs Monetary Policy Notes: i Cf. Ashley Seager, 2004, US persuades Paris Club to write off Β£23bn of Iraqi debt (posted at reduce https://www.theguardian.com/business/2004/nov/22/iraq.debt, accessed July 10, 2010). Ashley notes that the deal with the βParis Clubβ would cancel 80% of the debt, which amounted to about US$42bn (Β£23bn); Paris Club deal is seen as central to get the Iraqi economy back on its feet. ii βIraqβs external debt comprised four components: Paris Club bilateral debt ($42.5 billion), non-Paris Club bilateral debt ($67.4 billion), commercial debt ($20 billion) and multilateral debt ($0.5billion). Debt relief negotiations first led to an 80% reduction of the Paris Club debt. The Paris Club agreement also set the terms for non-Paris Club and commercial debt cancellation levelsβ [see Martin A. Weiss (2011) Iraqβs Debt Relief: Procedure and Potential Implications for International Debt Relief , available at: https://fas.org/sgp/crs/mideast/RL33376.pdf, accessed on Jan. 10, 2020]. The above figures suggest that Iraqβs external debt, immediately post-2003, was estimated to be US$130.4 billion. βReducing this debt to a sustainable level has been a priority of the U.S. government... Negotiations with non-Paris Club bilateral creditors including Saudi Arabia and other Persian Gulf countries are ongoing. The United States forgave its Saddam-era debt, worth $4.1 billion, in November 2004β (ibid). iii In theory, t iv A list of Mudher M. Saleh relevant writings (in Arabic) is posted at CBIβs website, see https://www.cbi.iq/page/37. The most relevant paper to this note is his July 2008 paper entitled βMonetary policy of the CBI and the need for economic growth and stabilityβ (see https://cbi.iq/static/uploads/up/file- 152223338434531.pdf), in which he notes (p. 16) that βmany banks have taken the opportunity in invest their surpluses, in some cases 100 percent, in the CBIβs instruments, making profit, rather than be concerned with economic activity...β However, the present author is not aware of M. Saleh having answered the question posed above relating the balance between the alleged damage to the Iraqi economy and the abandonment of the SBA with IMF, and would be happy to be informed otherwise. v See for example the recent paper by Amir al-Athath, 2018, Analysis and critique of monetary policy in Iraq (available at http://iraqieconomists.net/ar, accessed July 9, 2018). Also, see the IMFβs 2006 Iraq - country report, which stated βThe factors driving inflation have been changing over the past two years...but the ongoing insurgency, and the resulting acute shortages of certain goods (especially gasoline and other fuel products), continues to play a major roleβ (https://www.imf.org/external/pubs/ft/scr/2006/cr06301.pdf). vi Baban, Ali (2009) Monetary and Economic Policies in Iraq...What Connection? (al-Awqat al- Iraqiyyah, a weekly economics magazine published by the Ministry of Planning, available at: http://www.iraqitimesmg.com/subgest/weekeconomic.htm. Accessed on April 19, 2009). vii Ali, A. Braihi (2011b) Inflation viewed from the perspective of the real economy variables versus monetary analysis (posted on www.iier.org, accessed on December 14, 2012, in Arabic). viii Jameel Muhsin, 2019, The concept of the private sector in Iraq β what reform do Iraqi demand from an authority that is the core of the problem? (available at: http://assafirarabi.com/ar/25177/2019/04/11/ (to be completed). ix Mahdi al-BanaΔ«, Chairman of βAdvanced Food Industriesβ company, as quoted by Amir al-Athath (op cit: 7). Al- BanΔ« βs article was published at http://iraqieconomists.net/ar/, on March 21st, 2013. x Al-Thaqafa al-Jadida, 2019, al-Thaqafa al-Jadida Talks to Dr. Mudher M. Saleh ( March 2019 issue 4040-405, pages 128-146. The question relating to IMF and M. Salehβs answer appears on pp. 143-46). xi In his βTestimonyβ, M. Saleh mentions that βthe βParis Clubβ agreement signed on November 21, 2004 reduced 80 percent of gross Iraq debts...estimated at US$ 128 billion...β This statement could easily be mistaken to mean that the agreement reduced 80 percent of US$ 128 billion, and that this amount included all foreign as well as domestic debt. This is incorrect. The βParis Clubβ bilateral debt actually amounted to US$ 42.5 billion, and the 80 percent reduction amounted to US$34.0 billion. Also, not mentioned in M. Salehβs testimony is that the 80 percent reduction was to be made in net present value (NPV) terms. As shown in Note ii above, Iraqβs external debt, immediately post-2003, was estimated to be US$130.4 billion (not US$ 128 billion) of which the βParis Clubβ comprised US$ 42.5 billion. xii Central statistical organisation (CSO) - Iraq, and authorβs calculations; for 2019 figures, see CSO, 2019, Preliminary estimates of GDP for the first three quarters (http://cosit.gov.iq/documents/national accounts/national income/reports/gdp...%202019.pdf). he internal value of money is the value of money when buying goods and services. This is the real value of money and it is measured by the purchasing power of money. The external value of money is what the currency is worth, as measured in foreign currency. This is the exchange rate. __ * Amer K. Hirmis, January 20, 2020 Dr Amer Hirmis Mudher M. Salehβs testimony page 6 of 7 Policy papers: Iraqβs Monetary Policy Dr Amer K. Hirmis is Principal at UK-based consultancy CBS Ltd. (2008-present). In October 2009, Amer began a 20-months assignment as Senior Development Planning Advisor to the Ministry of Planning in Iraq (funded under the DANIDA programme for βpeace and reconstructionβ in Iraq). The posts Amer has assumed include Chief Economist and Head of Policy at the London Chamber of Commerce and Industry (1992-5), Economic Advisor to UK South West Regional Development Agency (1996-8) and Associate Director and then Head of Consulting and Research (Middle East) at the global firm DTZ (1998 to 2007). END Copyright Iraqi Economists Network, January 28, 2020 http://iraqieconomists.net/en/ Dr Amer K Hirmis is the author of βThe Economics of Iraq β ancient past to distant futureβ [https://www.amazon.com/Economics-Iraq-Ancient-distant-future/dp/1999824105] [Chapter 6 of the book is entitled βMonetary and Fiscal Policiesβ]. Dr Amer Hirmis Mudher M. Salehβs testimony page 7 of 7
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@Adam Montana thank you sir!!! looking forward to THE date with an Amazing Rate!!! (When it actually happens:)
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Dinar support for daily transactions is required now
wc41 replied to yota691's topic in Iraq & Dinar Related News
Even the GOI/CBI should have a tighter interpretation of "now" VS "in the coming days"!!! we'll find out if they understand SUDDENLY!!! π -
Amir Tsarfati: Special Middle East Update
wc41 replied to Butifldrm's topic in Iraq & Dinar Related News
@Synopsis awesome very complete and timely update; including Bicracki PM! Thankyou for your consistent diligence!!! -
Millennials Really Do Ruin Everything, And Big Oil Is Next
wc41 replied to Pitcher's topic in Iraq & Dinar Related News
Relevant and insightful observation. This is an interesting one to watch because there is $$ to be made in both directions. We pray the favor of Iraq's developing natural resource based economy carries greater influence till they reestablish their currency in the world market.- 1 reply
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LOVE IT!! @Synopsis Your perception, translation and creativity make this fun!! Same for ALL our news hounds. My how things are about to change.... ππ°ππππ!!! (covered in prayer for wise stewardship)
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Absolutely π
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@cranman I've processed through this specific thing as well as responding to my full scope of responsibility. Here is what I received when I wanted to grow into this new level of fiduciary responsibility. I began "Allowing myself permission to release resistance to resources" Marinate on that!! I realized my doubt (no matter how simple or complex) about this happening and my ability as a wise steward when it arrived was captured within that word of wisdom. This is a very brief summary of my growth over the last several years. Yes; I'm ready for this or Any Resource from wherever that was previously beyond my wildest comprehension!
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@Dinarrock hopefully soon you can unpack their need to 'manage float'. Does this support RI verses RV??
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Thankyou Adam; you and all your in depth news hounds continue to keep us connected and directed. πππππ
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True Dat Thug; and Thankyou for the constant flow Quality First Rate reporting of all things IQD / up to minute Iraq!!! You have served us well keeping us connected and directed in this journey!! ππππ
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@Synopsis I like the attention you give to the 'old silk road' given the tribal affinity to hold on to the past; centuries of regional economic prosperity along the entire route. The wiser negotiators now will acknowledge that building it into current law and regulation. π Your amazing depth and detail is an exciting, encouraging reminder of what is afoot! Thanks-a-multi-million!! π
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An RI would be more than acceptable! πππ‘π
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Adam you've always been excellent in pointing those with a nose to know where to look; then you and Awesome news hounds dig up 'not so obvious' current events. This one is classic!!!! Thank you!!
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Explosion Heard near US Embassy in Baghdad
wc41 replied to miquel's topic in Iraq & Dinar Related News
Ok Crew...... This is sounding pretty good!! π Great thoughts and coverage on SUDDENLY!!! π