READ!!!...Iraq Dinar...Went from Fixed to Floating Exchange...

[randalln]

DO you all know that i learned to type wail on dinarvets and thats worth all the dinar floats you can drink ..........I now can type 142 words per min and that.....IS THE S#!T FOR A CONSTRUCTION HAND .......with a wrench in there hand

[lotsofdinar]

It won't get you any usd in Iraq if it is floating.

[tandy]

hey can i say something?...........

of course...be my guess...on second thought be my guest!

[randalln]

Even if there are some posters wanting to be negative, I think the movement is amazing!!!!!! I am very excited!!!!!!

What color is the .........movement

[Unitedrich]

hey can i say something?...........

We are all ears randalln

[randalln]

of course...be my guess...on second thought be my guest!

O ya ..... what color is the movement Tandy ......you know if it floats you should flush

[Carrello]

O ya ..... what color is the movement Tandy ......you know if it floats you should flush

Do you think you will fit down that hole?

[Alex38]

Move it along. Anything is better then that Damn 1170 we stare at day in and day out!

[lotsofdinar]

You can't RV a floating currency.

[chilli24]

It won't get you any usd in Iraq if it is floating.

Huh??????

[lotsofdinar]

Floating means the exchange rate is no longer under your control. You can't RV it.

[randalln]

Do you think you will fit down that hole?

IF ITS A TOTO ........maybe

[TFK]

Floating means the exchange rate is no longer under your control. You can't RV it.

As others have stated on other threads, anyone reading this guys posts. JUST IGNORE HIM! He will soon go away. Thanks!

[20MillionDinar]

You want it pegged to the USD.

I don't!

Read this: I posted this in one of my previous threads, it might help you understand WHY we don't want it pegged to the US dollar!

As we know the Iraqi Dinar is now held at a "program" exchange rate as specified by the International Monetary Fund of 1170 dinars per US dollar at the Central Bank of Iraq. However, there is not yet a set international exchange rate and so international banks do not yet exchange Iraqi dinar. The exchange rate available on the streets of Iraq is around 1200 dinars per US dollar.

Typically, a government wanting to maintain a fixed exchange rate does so by either buying or selling its own currency on the open market. This is one reason governments maintain reserves of foreign currencies. If the exchange rate drifts too far below the desired rate, the government buys its own currency in the market using its reserves. This places greater demand on the market and pushes up the price of the currency. If the exchange rate drifts too far above the desired rate, the government sells its own currency, thus increasing its foreign reserves.

The main criticism of a fixed exchange rate is that flexible exchange rates serve to automatically adjust the balance of trade. When a trade deficit occurs, there will be increased demand for the foreign (rather than domestic) currency which will push up the price of the foreign currency in terms of the domestic currency. That in turn makes the price of foreign goods less attractive to the domestic market and thus pushes down the trade deficit. Under fixed exchange rates, this automatic rebalancing does not occur.

Governments also have to invest many resources in getting the foreign reserves to pile up in order to defend the pegged exchange rate. Moreover a government, when having a fixed rather than dynamic exchange rate, cannot use monetary or fiscal policies with a free hand. For instance, by using reflationary tools to set the economy rolling (by decreasing taxes and injecting more money in the market), the government risks running into a trade deficit. This might occur as the purchasing power of a common household increases along with inflation, thus making imports relatively cheaper.

Additionally, the stubbornness of a government in defending a fixed exchange rate when in a trade deficit will force it to use deflationary measures (increased taxation and reduced availability of money) which can lead to unemployment. Finally, other countries with a fixed exchange rate can also retaliate in response to acertain country using the currency of theirs in defending their exchange rate.

The belief that the fixed exchange rate regime brings with it stability is only partly true, since speculative attacks tend to target currencies with fixed exchange rate regimes, and in fact, the stability of the economic system is maintained mainly through capital control A fixed exchange rate regime should be viewed as a tool in capital control. A speculative attack in the foreign exchange market is the massive selling of a country's currency assets by both domestic and foreign investors. Countries that utilize a fixed exchange rate are more susceptible to a speculative attack than countries utilizing a floating exchange rate.This is because of the large amount of reserves necessary to hold the fixed exchange rate in place at that fixed level. Nevertheless, if a government chooses to maintain a fixed exchange rate during a speculative attack, they risk the chance of severe economic depression or financial collapse.

A speculative attack has much in common with cornering the market as it involves building up a large directional position in the hope of exiting at a better price. As such, it runs the same risk: a speculative attack relies entirely on the market reacting to the attack by continuing the move that has been engineered, in order for profits to be made by the attackers. In a market that is not susceptible, there action of the market may, instead, be to take advantage of the change in price by taking opposing positions and reversing the engineered move. This may be assisted by aggressive intervention by a central bank, either directly through very large currency transactions or through raising interest rates, or by activity by another central bank with an interest in preserving the current exchange rate. As in cornering the market, this leaves the attackers vulnerable.

The above tells us that Iraq has extremely large reserves due to the fact that they need to keep their exchange rate stable as it is pegged to the US dollar They do this through their currency auctions. Now, if the IMF (which seems to be the ones who are responsible for keeping them on the fixed exchange rate) allowed the Iraqi Dinar to float then what could happen is the CBI could purchase Iraqi Dinars at their currency auctions and "destroy them" or withdraw them from circulation. This in turn places greater demand on the market and pushes up the price of the currency. Also, if they were not on the fixed exchange rate then they wouldn't have the need for so much extra currency as they wouldn't have to "prop up" or "suppress" their currency on a day to day basis like they have to do now.

Another problem being stuck on this fixed exchange rate is that an automatic balancing of trade doesnot occur. When a trade deficit occurs, there will be increased demand for the foreign (rather than domestic) currency which will push up the price of the foreign currency in terms of the domestic currency. That in turn makes the price of foreign goods less attractive to the domestic market and thus pushes down the trade deficit. This is what has been happening in Iraq for quite some time. The demand for and excessive use of the US dollar in Iraq is actually making the IQD worth less because of the lack of demand. This also makes foreign goods (imports) less attractive pushing down the trade deficit. A"flexible exchange rate" serves to automatically adjust the balance of trade.

Now, on top of all of this they also need to worry about "speculative attacks" which could be cause by speculators and foreign investors. Yes, this is very possible, especially with a country worth so little bit. $60 Billion USD, this market is easy to corner if you think about it. A couple of major corporations, foreign financial institutions, and major investors could EASILY corner this market should they choose to do so! However, this may be assisted by aggressive intervention by a central bank, either directly through very large currency transactions or through raising interest rates, or by activity by another central bank with an interest in preserving the current exchange rate. As in cornering the market, this leaves the attackers vulnerable.

I personally believe that somebody (USA) has an interest in preserving the current exchange rate. This would leave any potential attackers vulnerable. I don't care who says US is not holding massive amounts of Dinar, I say they are for this exact reason. This market would be easy to corner UNLESS Iraq is being assisted by the US through very large currency transactions. If you think this is impossible then think again! Just because you can't find proof that the US is holding tons of dinars, think about this. It is almost common sense!

Overview:

1) There is excessiv eamounts of Dinar which is needed at this time to maintain the fixed exchange rate system. This is a major reason for the over inflated money supply.

2) If the Iraqi Dinar is allowed to float then that would allow them to withdraw and destroy trillionsof dinar immediately. This in turn creates greater demand for the IQD currency and drives up value. Also, being an internationally recognized currency using a flexible exchange rate puts the currency on the FOREX market giving the currency more liquidity and trade volume is increased substantially! A flexible exchange rate also helps to automatically balance trade.

3) Speculative Attacks: Why hasn't the Iraqi market been cornered? Why hasn't any major corporations, financial institutions, or even governments tried to corner this market? Or have they....? It is very possible that the same entity (USA) who could cause the biggest speculative attack on Iraq be the ones who are preventing this from happening through very large currency transactions as there is a major interest in preserving the current exchange rate. Something to think about folks...

Edited January 19, 2012 by 20MillionDinar

[tandy]

Well, if we need to make a port of call, we can use LoD as an anchor, because he weighs us down.

we make have to make a potti call before a port o call...if this thing rv's we gonna have to anyway...think I'll get a potti chair handy or depends.. it all depends (makes sense)...that much excitement might loosen up everybodys disposition if that's what you want to call it...what are you guys and gals going to do first when it does rv? ...have you ever really sat down and given it serious thought as to the important things that must be taken care of from a priority standpoint? If not, now seems like a good time...read the little books Adam has for the community, good info...maybe VIP yourself before it's too late...good ROI in my worthless opinion.......cheers

[lotsofdinar]

Definition of 'Floating Exchange Rate'

A country's exchange rate regime where its currency is set by the foreign-exchange market through supply and demand for that particular currency relative to other currencies. Thus, floating exchange rates change freely and are determined by trading in the forex market. This is in contrast to a "fixed exchange rate" regime."

[20MillionDinar]

You can't RV a floating currency.

The free market could! And yes the CBI could definitely influence the value of the current rate by withdrawing currency from circulation creating a higher demand for the IQD thus increasing the value.

Simple economics - supply & demand

[Unitedrich]

You can't RV a floating currency.

Technically,

You are correct. However, we do not know that this is the case at this point.

Currency Devaluation and Revaluation

Under a fixed exchange rate system, devaluation and revaluation are official changes in the value of a country's currency relative to other currencies. Under a floating exchange rate system, market forces generate changes in the value of the currency, known as currency depreciation or appreciation.

In a fixed exchange rate system, both devaluation and revaluation can be conducted by policymakers, usually motivated by market pressures.

The charter of the International Monetary Fund (IMF) directs policymakers to avoid "manipulating exchange rates...to gain an unfair competitive advantage over other members."

At the Bretton Woods Conference in July 1944, international leaders sought to insure a stable post-war international economic environment by creating a fixed exchange rate system. The United States played a leading role in the new arrangement, with the value of other currencies fixed in relation to the dollar and the value of the dollar fixed in terms of gold—$35 an ounce. Following the Bretton Woods agreement, the United States authorities took actions to hold down the growth of foreign central bank dollar reserves to reduce the pressure for conversion of official dollar holdings into gold.

During the mid- to late-1960s, the United States experienced a period of rising inflation. Because currencies could not fluctuate to reflect the shift in relative macroeconomic conditions between the United States and other nations, the system of fixed exchange rates came under pressure.

In 1973, the United States officially ended its adherence to the gold standard. Many other industrialized nations also switched from a system of fixed exchange rates to a system of floating rates. Since 1973, exchange rates for most industrialized countries have floated, or fluctuated, according to the supply of and demand for different currencies in international markets. An increase in the value of a currency is known as appreciation, and a decrease as depreciation. Some countries and some groups of countries, however, continue to use fixed exchange rates to help to achieve economic goals, such as price stability.

Under a fixed exchange rate system, only a decision by a country's government or monetary authority can alter the official value of the currency. Governments do, occasionally, take such measures, often in response to unusual market pressures. Devaluation, the deliberate downward adjustment in the official exchange rate, reduces the currency's value; in contrast, a revaluation is an upward change in the currency's value.

For example, suppose a government has set 10 units of its currency equal to one dollar. To devalue, it might announce that from now on 20 of its currency units will be equal to one dollar. This would make its currency half as expensive to Americans, and the U.S. dollar twice as expensive in the devaluing country. To revalue, the government might change the rate from 10 units to one dollar to five units to one dollar; this would make the currency twice as expensive to Americans, and the dollar half as costly at home.

Under What Circumstances Might a Country Devalue?

When a government devalues its currency, it is often because the interaction of market forces and policy decisions has made the currency's fixed exchange rate untenable. In order to sustain a fixed exchange rate, a country must have sufficient foreign exchange reserves, often dollars, and be willing to spend them, to purchase all offers of its currency at the established exchange rate. When a country is unable or unwilling to do so, then it must devalue its currency to a level that it is able and willing to support with its foreign exchange reserves.

A key effect of devaluation is that it makes the domestic currency cheaper relative to other currencies. There are two implications of a devaluation. First, devaluation makes the country's exports relatively less expensive for foreigners. Second, the devaluation makes foreign products relatively more expensive for domestic consumers, thus discouraging imports. This may help to increase the country's exports and decrease imports, and may therefore help to reduce the current account deficit.

There are other policy issues that might lead a country to change its fixed exchange rate. For example, rather than implementing unpopular fiscal spending policies, a government might try to use devaluation to boost aggregate demand in the economy in an effort to fight unemployment. Revaluation, which makes a currency more expensive, might be undertaken in an effort to reduce a current account surplus, where exports exceed imports, or to attempt to contain inflationary pressures.

Effects of Devaluation

A significant danger is that by increasing the price of imports and stimulating greater demand for domestic products, devaluation can aggravate inflation. If this happens, the government may have to raise interest rates to control inflation, but at the cost of slower economic growth.

Another risk of devaluation is psychological. To the extent that devaluation is viewed as a sign of economic weakness, the creditworthiness of the nation may be jeopardized. Thus, devaluation may dampen investor confidence in the country's economy and hurt the country's ability to secure foreign investment.

Another possible consequence is a round of successive devaluations. For instance, trading partners may become concerned that a devaluation might negatively affect their own export industries. Neighboring countries might devalue their own currencies to offset the effects of their trading partner's devaluation. Such "beggar thy neighbor" policies tend to exacerbate economic difficulties by creating instability in broader financial markets.

Since the 1930s, various international organizations such as the International Monetary Fund (IMF) have been established to help nations coordinate their trade and foreign exchange policies and thereby avoid successive rounds of devaluation and retaliation. The 1976 revision of Article IV of the IMF charter encourages policymakers to avoid "manipulating exchange rates...to gain an unfair competitive advantage over other members." With this revision, the IMF also set forth each member nation's right to freely choose an exchange rate system.

September 2011

[TFK]

I don't!

I'm not arguing with the comment, just that he is a provocative PITA!

[lotsofdinar]

It's not a technicality, unless you plan to change the definition of a floating currency.

[JREDinars]

I am loving the excitement. There are 142 people reading this topic. Friggin awesome! Float baby float.... Good luck everyone!

[randalln]

we make have to make a potti call before a port o call...if this thing rv's we gonna have to anyway...think I'll get a potti chair handy or depends.. it all depends (makes sense)...that much excitement might loosen up everybodys disposition if that's what you want to call it...what are you guys and gals going to do first when it does rv? ...have you ever really sat down and given it serious thought as to the important things that must be taken care of from a priority standpoint? If not, now seems like a good time...read the little books Adam has for the community, good info...maybe VIP yourself before it's too late...good ROI in my worthless opinion.......cheers

ALWAYS A MAN OF STATURE .....................you are the man

[20MillionDinar]

It's not a technicality, unless you plan to change the definition of a floating currency.

Read my above post, post #46. This will tell you WHY we want a floating currency. Also will explain the benefits...

If you choose not to read it AND decide to keep the same view point then it is obvious that you are in fact just trying to provoke others in order to get attention. Read through it thoroughly and you will understand the real benefits of adopting a "floating" exchange rate of some sort.

[tigerstripes]

Overview:

1) There is excessiv eamounts of Dinar which is needed at this time to maintain the fixed exchange rate system. This is a major reason for the over inflated money supply.

Thank You!

I have asked a couple of times whether the money supply issue is a result of the exchange rate, or if the exchange rate is the result of the money supply.

I believe you are right. They have had to maintain the high money supply, and, effectively increase it.

As foreign reserves go up, and the xchange rate stays the same, the money supply has to reflect that.

At least that's what I was thinking anyway.

[tandy]

there are some excellent points being made however if I might inject a simple thought....( I wished I had worded that differently) oh well we can't all be brilliant...I going to change that to a simple question....Who is right and who is wrong????....it ain't gonna be both ways folks....

randallin...thanks...I ain't sure what stature means I guess it's one of them marble or concrete things that look kinda like a person? That be kinda neat except for the pigeons.

20milliondinar and unitedrich..excellent job from both! as well as couple of others..