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EverCurious452

Lopster
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About EverCurious452

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  • Birthday 10/20/1953

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    : under the dome of silence
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    The thread that lead to my permanent mod review status (effectively being silenced since few posts get approved): http://dinarvets.com/forums/index.php?/topic/208123-the-sterling-currency-group-indictment/#comment-1569946

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  1. I'll after to quibble with some of that Rock. First the history. Indeed the IQD did get into the 3,000 to 4,000 range prior to the 2003 war (the CBI history page ( https://cbi.iq/page/39) says it got to 3,000 to 1 USD in 1995 . When the banking system was reset in late 2003 or early 2004 after the war it came out at about 1480 to 1 (https://tradingeconomics.com/iraq/currency It stayed around that level til late 2006 when they started to increase its value to fight inflation reaching (roughly) the present rate around mid 2009, They were able to make such an increase in the rate due to having sufficient foreign reserves to cover it. And while that steep increase ( a drop in the graph above since its dinars per dollar) its only about 20%. That indeed IS huge for a currency but nothing like the 100,000% folks on this site are looking for. Now for the idea of demand. A pegged currency is going to be much less impacted by supply and demand than a floating currency would be. Why would anyone pay more than the central bank is offering? (plus margins and feeds and cost etc associated with the various intermediaries). Supply and demand have some impact, that is why the street rice of dollars in Iraq is a bit higher than the official rate. Of course since here is virtually nothing you can buy where you need IQD there is no demand in the first place. But even if there were the central bank has plenty of IQD for sale, they print them after all. As long as the IQD remains pegged the rate will be limited by the ratio of foreign reserves to the money supply and and as long as those reservers are replenished by oil revenue, nothing is going to change here. The IQD went down in value from its rough parity with the dollar (or more) to the 3,000 to 4,000 to 1 level due to Saddam hyper-inflating the currency and the only way to undo that is with a redenomination. But I don't think there is any pressing need to do so. They can very well continue just like they are. The CBI could only float the IQD (if that is what folks mean by "going international") if there were sufficient volume in IQD to keep the rate stable (rate stability is their main goal after all, it's in their founding documents). And since there is virtually no such volume floating the currency just won't work. So that is not going to happen either. I think we in agreement on that point.
  2. I agree. It's due to the low cost of labor which is (mostly) due to the low cost of living. Materials cost is less of a factor as that is less country dependent and materials are easy to ship around. Again China is an outlier in that they can offer materials cheaply as the state run companies do not have to show a profit. But low costs of labor, living, etc. are not due to the exchange rate. that's all I'm saying. Interestingly, low labor costs are become less of an issue with robotics that are even cheaper. How that will all play out is as yet unknown. This topic started by my reply to Rock's claim that a LOP moving the exchange rate of the new dinar to 0.86 USD would "fit very well with international trade", and I responded that traders do not care about the exchange rate, as long as its stable. RVer's have made a similar claim, that Iraq can not enter international markets as long as their exchange rate is so low. These statements are false. Its rate stability that is desired not a particular value.
  3. In what way? China takes a long time for wages and prices to adjust to a new exchange rate as the government runs the whole country like one business moving profits around to subsidize other sectors. The complaint about them relative to currency (as opposed to stealing IP, not opening their markets etc) is that they were artificially lowering their exchange rate. Like I said, that will at least in the short term (and for China more like the medium term) make their products less expensive in dollars than they were at the higher rate. But the primary reason that it is inexpensive to manufacture in China is not their exchange rate but the cost of labor which is mostly driven by the cost of living.
  4. No, this is false. This would violate the one price law in economics. Consider two countries, A and B. They are very similar with similar GDP, industrialization, living standards, education, tariffs, etc. and both have a pegged currency (the Aye and the Bee). The Aye has traded over the past 50 years in a range of 900 Ayes = 1USD to 1100 Ayes = 1USD, while the Bee has traded in a range of .9Bees = 1USD to 1.1Bees = 1USD. Both countries have widget manufactures that export widgets. Which one will be less expensive in DOLLARS? Answer, neither they will cost (roughly) the same. If the price in dollars was significantly different then you could end up owing the world by simply going round and round buying from A and selling to B. Driving the rate down will temporarily make things cheaper in Dollars until local wages and prices adjust. But, that is only relate to the previous rate. Its the CHANGE to the rate that matters, not the absolute rate.
  5. No that is not correct. If the rate changes downward, so stuff in their country becomes cheaper for buyers in other countries relative to the previous situation its good at least in the short term for exports. But that is only relative to the previous higher rate. The Won has been at this general level for decades. So exports are helped or hurt when their rate goes down or up again relative to the previous rate, but overall having an exchange rate in the neighborhood of 1000-1400 Won to 1USD has not hampered their economy or their ability export. The absolute exchange rate has little to no bearing on trade (or the economy) at all, it's the change in the rate that matters. This is why rate stability is the goal of every central bank.
  6. South Korea does not seem to have had any problems with international trade despite their exchange rate being 1 USD = 1134 Won.
  7. Maybe. But I would advise extreme caution when using nuanced parsing of broken english from an Arabic to English translation, as evidence for anything. All the more so if it appears to be counter to the basic constraints on the operation of a pegged currency.
  8. Yea no idea either. I also don't know what "change their monetary and fiscal policy" really means or even if the articles are accurate or if this is just some politicians view. My only point is that as long as the rise in value is aimed at making sure inflation does not start to be a problem, the amount of the rise will be very small (i.e. undoing the small increases you mentioned).
  9. oops, that was supposed to be "RV levels are beyond dreamland", damn spell check!
  10. You make my case for me. I didn't say "put" a lid on inflation, I said "keeping" a lid on inflation. i.e. preventing it from becoming a problem, just like the article says. "maintain the stability of inflation". That implies just ticking the rate up slightly to counter the slight down ticks that have occurred over the last year or so when oil prices were down. That isn't going to e anywhere near what someone who has held this for 10 years would need just to match inflation let alone the DOW (and RV levels are behind dreamland).
  11. I don't know just what article you are referring to, but usually such are connected with keeping a lid on inflation and as such involve rate changes in the range of fractions of one percent over periods like a year. If you have been in this for say 10 years, you're going to need something on the order of 25% just to match inflation and the spread you did pay / will pay on each end. If you want to match the DOW over that time you're going to need more like 80% (again including the spread). Do you reallly think these rate the rate change articles are suggesting that level of change? I'd say that would be pretty wishful thinking.
  12. Indeed. At something around 0.3 to 0.5 IQD per 1 USD in the late 80's to 3,000 to 4,000 IQD per 1 USD in 2003, that's HYPERinflation.
  13. Right, and of course importers in Iraq WILL still have to pay for things in USD or Euros and those prices will not change so post (a mythical) RV people in Iraq will appear to have 100x or 1000x more to spend but the dollars at the CBI will be unchanged and will be 100x or 1000x less than what would be needed to meet that import demand (which is why the RV is a myth in the first place). As for electronic Vs physical currency, I think the whole issue is irrelevant. The reason that electronic purchases and payments etc work is that they are the same as physical currency from a financial perspective (just much more efficient from a transaction perspective compared to shipping tons of physical cash around). When Zul speaks of the massive flows in the Forex, I assume he is thinking that the CBI will float the IQD instead of RVing and that it will then greatly rise in value. While floating the IQD is theoretically possible (unlike an RV) I think it's extremely unlikely that the CBI would do this. The CBI's stated goal is rate stability (1st) and low inflation (2nd) and the low volume of exchanges and Iraq's single resource economy would bring about rate instability. Even if that hurdle is surmounted it is also extremely unlikely that the value of the IQD (if exchangeable in international markets) would rise in value at all, and even more extremely unlikely that it would rise by the sort of RV levels folks talk about. So the likelihood of all that is extremely * extremely * extremely unlikely. i.e. aint hapening.
  14. I hope there is NOT 100B IQD owned by Dnarians (people have put $100M USD into this?), but even if that is true it's still a drop in the bucket compared to the 70 or 80 Trillion IQD in Iraq. That is what makes the RV impossible. With their new wealth Iraqis will want to buy lots of imported stuff but the supply of dollars from oil exports does not go up so the CBI will run out of dollars in a flash. The cost of items produced in Iraq will of course also skyrocket due to increased demand, that does not put pressure on the CBI's reserves.
  15. For a "possibility" to be real, it must have a probability that is > 0. Indeed what people are interested in is the likelihood or probability of an event. But before trying to determine that, it's often easier to determine if the event in question is possible at all. Technically, science (using bayesian reasoning) can not rule anything out completely but only given them extremely low probabilities. That is due to the possibility that we're in the matrix or brains in jars as they say. But for any practically application I think we can call such things impossible. e.g. someone might assert that it's a possibility that Iraq could discover $80T USD worth of gold. But using the current price and ignoring how low the price of gold would fall given such a huge increase in supply, that would be roughly 1,000 times the amount of gold currently above ground. I think we can safely say that Iraq discovering 1,000 times the amount of gold ever mined anywhere on earth, is not possible given our knowledge of this planet (e.g. it would impact the gravity map which we know with astonishing accuracy at present).
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