Recent articles

[dinarck]

Since I am not allowed to post in the news section I figured I would bring a few of the recent articles from there here for discussion.

By Khayoun Saleh

Azzaman, August 8, 2012

Foreign exchange offices have become conduits for the smuggling and laundering of hard cash in the country, said Central Bank Governor Mudher Saleh.

Saleh said high-level government and party officials were involved in illegal money exchange operations primarily aimed at smuggling dollars abroad.

“Most of these offices are run by people with influence in the state and senior politicians via their families and relatives,” said Saleh.

Saleh mentioned no names but his statement is a damning accusation that the government is either directly or indirectly involved in attempts which he said aimed at emptying the country of its hard cash.

These offices, he added, “are using forged documents claiming that the money transferred outside the country is for trade purposes.”

“There are massive operations of corruption and the government is required to investigate them,” the governor said.

Saleh made the comments following reports that many Iraqis had started losing confidence in the local currency by exchanging their savings into dollars.

The dinar is losing ground to the greenback once again after a short period of prosperity.

Saleh said more than $4 billion were leaving Iraq every month, a massive amount which he said did not correspond to the volume of commodities entering the country.

The government, he said, should will put an end to the illegal flow of dollars outside the country “in order to prevent the economy from collapsing.”

Iraqi hard cash reserves amount to more than $60 billion but the governor said it would be difficult for the Central Bank to meet the rising demand for dollars.

The bank auctions millions of dollars every day as part of attempts to withdraw liquidity and safeguard local currency’s value.

It seems that there may have been some confusion with this article in my opinion. They are not talking about dollars from their reserves leaving the country. The way I read it is that many including some from gov. positions are profiting from selling dollars to nearby countries such as Iran and Syria via an established black market. These countries are in chaos with war and sanctions. Irans currency is even more hyperinflated than Iraqs and it seems the dollar is in high demand as a replacement of these countries currencies whose futures are in serious doubt. So it looks like dollars are being sold at a high profit across the borders of Iraq. The problem here is that this demand is removing dollars from the Iraqi market. This adds a large demand inside of Iraq for dollars thus diminishing the actual value of the Dinar on the streets of Iraq. We have seen many articles stating this.

Here is the million dinar question. Why is the CBI fighting the diminishing value of the dinar if they could just "RV" anytime they want? Also why are Iraqis moving to the dollar for security and dumping the dinar if supposedly all these articles speak of a "RV"?

Central Bank: $ 3.25 billion in Iraqi banks rolling average

04/08/2012 03: 51

Baghdad/features & status of the Iraqi media network-the Central Bank of Iraq for the rolling average of the Iraqi banks with $ 3.25 billion and is filling 80% of actual market needs.

He appearance of Bank Deputy Governor Mohamed Saleh (Center features & information network) that "the average circulation of the dollar in Iraqi banks $ 3.25 billion and is filling 80% of the market need.

Saleh said "the Central Bank's ability to meet the market need but these demands worry the Government, Parliament and Central Bank must investigate these applications and their impact on the economy."

The Iraq featuring 38 banks, including seven Government-owned expenses and 23 banks belonging to the private sector and eight Islamic banks.

Tasks of the Central Bank of Iraq to maintain price stability, monetary policy implementation, including exchange rate policies, management of foreign exchange reserves, the issuance of currency management, as well as all sector regulation

This one I dont think there was confusion I just think it was completely spun to sound like what people want to be true. Its obviously just talking about the lack of dollars due to the illegal smuggling across the borders. It says there is only 80% of dollars needed in the market which is hurting the actual value of the dinar. Somehow it was spun by the spewrews to say that 80% of the currency in Iraq is dollars. LOL.

[jon29]

It looks pretty grim. What FOOLS we were!

[WorkerBee]

It looks pretty grim. What FOOLS we were!

Well at least we are in good company. Plenty of well-educated folks with good common sense that got sucked in. Hopefully something good will come of it.

Reminds me of a song Doris Day sang…..

Que Sera, Sera,

Whatever will be, will be

The future's not ours, to see

Que Sera, Sera

What will be, will be.

Only we do get glimpses of the future.

By the way, whatever happened to Sansucci?

[Dalite]

It looks pretty grim. What FOOLS we were!

It's not over, 'till it's over.

Many of us let greed overcome common sense, and fell for the immediate need to buy Dinar on Friday for a RV on Tuesday.

The folks that have been on this ride for 10 years have at least doubled their money. The ones that entered into Dinarville after inflation was brought under control; not so much .

The thing that defines our success is the thing that assures Iraq's failure at democracy. As long as they refuse to do anything to improve their lifestyle, there will not be the necessary stability and security to safely execute currency reform.

As long as that rocks on at present pace, the chance of the CBI being forced to do something totally irrational increases.

For us, irrational spells dollars. Iraq is exceptional at being irrational.

Buckle up, it is not over yet.

What started out as social engineering to extract your money for a false promise may indeed bear fruit.

[caz1104]

It's always nice to venture into the world of darkness and see how the "woe is me" crowd is doing.......................same ol same ol. Today will be a nice sunny day in the world of "optimism",come on up and join the rest of the world....................who knows you just might like it.......................nah,never happen. I wish you all the negativity you desire-JK,Peace.

[dinarck]

It's always nice to venture into the world of darkness and see how the "woe is me" crowd is doing.......................same ol same ol. Today will be a nice sunny day in the world of "optimism",come on up and join the rest of the world....................who knows you just might like it.......................nah,never happen. I wish you all the negativity you desire-JK,Peace.

Please caz give your opinion on where my opinions are incorrect. If you like I can go ahead and pretend that the articles mean what everyone wants so that I can be "positive". Would that make you feel better and more optimistic about this endeavor?

This isn't about positive or negative. It isn't about woe is me or world of darkness. It's about common sense and what the articles are clearly saying. If you like Strykers brilliant "breakdown" of the article better then by all means remain in that section where make believe will keep you optimistic. If you would like to join the discussion on what is clearly going on in Iraq instead then please do instead of whining about the truth.

[captl1]

What everyone fails to see is that the upper government officials such as Talabini and others hold billions in dinars and there is no way they are going to lose 3 zeros off their money.. I think greed is the number one reason it will not lop. imo

[dinarck]

What everyone fails to see is that the upper government officials such as Talabini and others hold billions in dinars and there is no way they are going to lose 3 zeros off their money.. I think greed is the number one reason it will not lop. imo

It's a valid opinion but that's like saying any politician in the US is demanding that the dollar be "RVed".

Since a massive overnight RV is impossible the only hope the gov. officials have is a LONG TERM appreciation of the dinar in its hyperinflated state. In this case I hope you are correct and their greed wins the day.

[SocalDinar]

Msmortgagewiz posted an intersting 2003 assesment of Iraqs financial future regarding its currency.

Near the end they mention Dutch disease, Go to her post and check out the full definition.

Is there anybody with a doctorate in foreign economics that can respond to this. I know there are many educated people here and their opinions are of value, but would like to hear from someone with a Doctoral degree in this very specific field.

Dutch Disease,

In economics, the Dutch disease is a concept that explains the apparent relationship between the increase in exploitation of natural resources and a decline in the manufacturing sector. The mechanism is that an increase in revenues from natural resources (or inflows of foreign aid) will make a given nation's currency stronger compared to that of other nations (manifest in an exchange rate), resulting in the nation's other exports becoming more expensive for other countries to buy, making the manufacturing sector less competitive. While it most often refers to natural resource discovery, it can also refer to "any development that results in a large inflow of foreign currency, including a sharp surge in natural resource prices, foreign assistance, and foreign direct investment".[1]

The term was coined in 1977 by The Economist to describe the decline of the manufacturing sector in the Netherlands after the discovery of a large natural gas field in 1959.[2]

The “Core Model”

The classic economic model describing Dutch Disease was developed by the economists W. Max Corden and J. Peter Neary in 1982. In the model, there is the non-traded good sector (this includes services) and two traded good sectors: the booming sector, and the lagging sector, also called the non-booming tradable sector. The booming sector is usually the extraction of oil or natural gas, but can also be the mining of gold, copper, diamonds or bauxite, or the production of crops, such as coffee or cocoa. The lagging sector generally refers to manufacturing, but can also refer to agriculture.

A resource boom will affect this economy in two ways. In the "resource movement effect", the resource boom will increase the demand for labor, which will cause production to shift toward the booming sector, away from the lagging sector. This shift in labor from the lagging sector to the booming sector is called direct-deindustrialization. However, this effect can be negligible, since the hydrocarbon and mineral sectors generally employ few people.[3] The "spending effect" occurs as a result of the extra revenue brought in by the resource boom. It increases the demand for labor in the non-tradable, shifting labor away from the lagging sector. This shift from the lagging sector to the non-tradable sector is called indirect-deindustrialization.[3] As a result of the increased demand for non-traded goods, the price of these goods will increase. However, prices in the traded good sector are set internationally, so they cannot change. This is an increase of the real exchange rate

http://en.wikipedia.org/wiki/Dutch_disease

Read more:

Edited August 10, 2012 by SocalDinar

[caz1104]

Please caz give your opinion on where my opinions are incorrect. If you like I can go ahead and pretend that the articles mean what everyone wants so that I can be "positive". Would that make you feel better and more optimistic about this endeavor?

This isn't about positive or negative. It isn't about woe is me or world of darkness. It's about common sense and what the articles are clearly saying. If you like Strykers brilliant "breakdown" of the article better then by all means remain in that section where make believe will keep you optimistic. If you would like to join the discussion on what is clearly going on in Iraq instead then please do instead of whining about the truth.

Hi Di,you know i'm just havin fun with you and gang of "darkness". Frankly I would be floored if I read anything different.Peace

[Dalite]

My comment: Disease is bad. This is no different

From IMF publication..

#####################

IMF - Dutch Disease

######################

A quarterly magazine of the IMF March 2003, Volume 40, Number 1

Back to Basics

Christine Ebrahim-zadeh

Dutch Disease: Too much wealth managed unwisely

Miguel de Cervantes Saavedra, the celebrated sixteenth-century Spanish author of Don Quixote de la Mancha, once said that "the gratification of wealth is not found in mere possession or in lavish expenditure, but in its wise application." This was at a time when Spain enjoyed newfound access to a wealth of natural resources, including gold, from the Americas. Could he have recognized, in his own country, symptoms of what later became known as "Dutch disease," a term that broadly refers to the harmful consequences of large increases in a country's income? Finance & Development explores the issue.

In the 1960s, the Netherlands experienced a vast increase in its wealth after discovering large natural gas deposits in the North Sea. Unexpectedly, this ostensibly positive development had serious repercussions on important segments of the country's economy, as the Dutch guilder became stronger, making Dutch non-oil exports less competitive. This syndrome has come to be known as "Dutch disease." Although the disease is generally associated with a natural resource discovery, it can occur from any development that results in a large inflow of foreign currency, including a sharp surge in natural resource prices, foreign assistance, and foreign direct investment. Economists have used the Dutch disease model to examine such episodes, including the impact of the flow of American treasures into sixteenth-century Spain and gold discoveries in Australia in the 1850s.

The diagnosis is . . .

Why does a dramatic increase in wealth have this paradoxically adverse consequence? The answer is found in a classic 1982 paper by W.M. Corden and J. Peter Neary. These authors divide an economy experiencing an export boom into three sectors: of these, the booming export sector and the lagging export sector are the two traded goods sectors; the third is the nontraded goods sector, which essentially supplies domestic residents and might include retail trade, services, and construction. They show that when a country catches Dutch disease, the traditional export sector gets crowded out by the other two sectors.

How does this happen? Let's take the example of a country that discovers oil. A jump in the country's oil exports initially raises incomes, as more foreign exchange flows in. If the foreign exchange were spent entirely on imports, it would have no direct impact on the country's money supply or demand for domestically produced goods. But suppose the foreign currency is converted into local currency and spent on domestic nontraded goods. What happens next depends on whether the country's (nominal) exchange rate—that is, the price of the domestic currency in terms of a key foreign currency—is fixed by the central bank or is flexible.

If the exchange rate is fixed, the conversion of the foreign currency into local currency would increase the country's money supply, and pressure from domestic demand would push up domestic prices. This would amount to an appreciation of the "real" exchange rate—that is, a unit of foreign currency now buys fewer "real" goods and services in the domestic economy than it did before. If the exchange rate is flexible, the increased supply of foreign currency would drive up the value of the domestic currency, which also implies an appreciation in the real exchange rate, in this case through a rise in the nominal exchange rate rather than in domestic prices. In both cases, real exchange rate appreciation weakens the competitiveness of the country's exports and, hence, causes its traditional export sector to shrink. This entire process is called the "spending effect."

At the same time, resources (capital and labor) would shift into the production of domestic nontraded goods to meet the increase in domestic demand and into the booming oil sector. Both of these transfers would shrink production in the now lagging traditional export sector. This is known as the "resource movement effect."

These effects played out in the oil-rich nations in the 1970s, when oil prices soared and oil exports rose at the expense of the agricultural and manufacturing sectors. Similarly, higher coffee prices in the late 1970s (after frost destroyed Brazil's coffee crops) triggered a boom in coffee sectors in producers like Colombia at the expense of the traditional export sector as spending and resources were reallocated to the nontraded goods sector (see chart).

[caz1104]

Please caz give your opinion on where my opinions are incorrect. If you like I can go ahead and pretend that the articles mean what everyone wants so that I can be "positive". Would that make you feel better and more optimistic about this endeavor?

This isn't about positive or negative. It isn't about woe is me or world of darkness. It's about common sense and what the articles are clearly saying. If you like Strykers brilliant "breakdown" of the article better then by all means remain in that section where make believe will keep you optimistic. If you would like to join the discussion on what is clearly going on in Iraq instead then please do instead of whining about the truth.

FYI, JK=just kidding. Lighten up Francis,its not like your vested,right.

[Dalite]

What everyone fails to see is that the upper government officials such as Talabini and others hold billions in dinars and there is no way they are going to lose 3 zeros off their money.. I think greed is the number one reason it will not lop. imo

Corruption is fueling the resistance to the CBI plan for currency reform.

It has taken the CBI at least 6 years of planning to get to this point in time.

The GOI could continue to stonewall them another 6; if not more.

The Greed you are counting on may extend the execution beyond the lifespan of some more of the DV family.

My Momma taught me "Don't ask for something you don't want"

[SocalDinar]

Thanks Dalite,

You highlighted this line.

If the exchange rate is fixed, the conversion of the foreign currency into local currency would increase the country's money supply, and pressure from domestic demand would push up domestic prices. This would amount to an appreciation of the "real" exchange rate—that is, a unit of foreign currency now buys fewer "real" goods and services in the domestic economy than it did before. If the exchange rate is flexible, the increased supply of foreign currency would drive up the value of the domestic currency, which also implies an appreciation in the real exchange rate, in this case through a rise in the nominal exchange rate rather than in domestic prices. In both cases, real exchange rate appreciation weakens the competitiveness of the country's exports and, hence, causes its traditional export sector to shrink. This entire process is called the "spending effect."

Do you think Iraqs exchange rate is fixed? If so why the bump in January?

If the exchange rate is fixed, the conversion of the foreign currency into local currency would increase the country's money supply, The opposite is happening with the influx of domestic currency being sold for foreign currency ( USD )

I really appreciate an answer from someone like you with doctorate in foreign economics . Not just a copy paste guy heres what it means

Edited August 10, 2012 by SocalDinar

[dinarck]

FYI, JK=just kidding. Lighten up Francis,its not like your vested,right.

Haha....was just saying caz. As a matter of fact I am vested. I put serious thought into selling back to Ali last night. It leaves a bad taste in my mouth to lose 4 grand just so that he can turn around and resell it for a 4 grand profit. Such is the dinar paradox. Still hangin on though in the hopes that the RD is shot down. Any more progress towards it and I will probably get out while the gettin is good (somewhat anyway).

[Dalite]

Thanks Dalite,

You highlighted this line.

If the exchange rate is fixed, the conversion of the foreign currency into local currency would increase the country's money supply, and pressure from domestic demand would push up domestic prices. This would amount to an appreciation of the "real" exchange rate—that is, a unit of foreign currency now buys fewer "real" goods and services in the domestic economy than it did before. If the exchange rate is flexible, the increased supply of foreign currency would drive up the value of the domestic currency, which also implies an appreciation in the real exchange rate, in this case through a rise in the nominal exchange rate rather than in domestic prices. In both cases, real exchange rate appreciation weakens the competitiveness of the country's exports and, hence, causes its traditional export sector to shrink. This entire process is called the "spending effect."

Do you think Iraqs exchange rate is fixed? If so why the bump in January?

If the exchange rate is fixed, the conversion of the foreign currency into local currency would increase the country's money supply, The opposite is happening with the influx of domestic currency being sold for foreign currency ( USD )

I really appreciate an answer from someone like you with doctorate in foreign economics . Not just a copy paste guy heres what it means

Actually, you nailed me on that one. It was intentional copy and paste from IMF sources, as I am not sure you would get any qualified answers otherwise; and I don't have those qualifications.

These are some of the "givens" easily verify able, as they are basic elements of currency management.

In Iraq, The exchange rate is fixed. It is pegged to the dollar. It will fluctuate with the value of the dollar from day to day.

OSmall changes offset Inflation.

It has long been assumed that Shabibi would ease the exchange rate up to 1000:1 prior to redenomination.

Again, we all know about that assumption gremlin.

If you look back to July to September of last year, we had some fairly interesting discussions of what tools could be used to offset inflation.

The 3000:1 rate when inflation was 70% gradually increased until inflation came down and stabilized. It has remained relatively flat since then at the 11xx:1 rate we are seeing. Shabibbi has shown he is very proficient at using that tool. As he brought it down from 70% to single digits and increasing the exchange rate was one of the tools. But, in the absence of runaway inflation, or hyperinflation, he may still chose to continue to bump the rate in response to small increases in inflation to keep the percentage in single digits.

As the IMF paper referenced indicates, he has to keep the increases moderate to avoid getting the disease, and to allow missing industry to grow in Iraq. Tarriffs are another way of letting the private sector compete...

If you are looking for a doctorate to give their opinion, you may not find them here. If they are qualified to discuss economic tools in emerging economies, they would have already anticipated redenomination as the main line of defense by the CBI.

[SocalDinar]

Thanks again,

Not trying to hammer you or anyone here.

I'm an electrical contractor with another seperate business so my opinion here does not really mean anything. Everyone has an opinion

But we have no idea what these people do for a living to really value those opinions.

Hard to believe something when it could be coming from a a zookeeper in Butte Montana LOL.

I agree that all the articles are stating that the RD is going to happen thats a fact. But does anyone really know how ? Not really

We can read through countless articles of how's it been done before and try to understand .

How can the USD have any value when we have a trillion dollar deficit year after year and knowingly will never be able to pay off our debt?

Biggest SCAM in history IMO

Edited August 10, 2012 by SocalDinar

[dinarck]

Thanks again,

Not trying to hammer you or anyone here.

I'm an electrical contractor with another seperate business so my opinion here does not really mean anything. Everyone has an opinion

But we have no idea what these people do for a living to really value those opinions.

Hard to believe something when it could be coming from a a zookeeper in Butte Montana LOL.

I agree that all the articles are stating that the RD is going to happen thats a fact. But does anyone really know how ? Not really

We can read through countless articles of how's it been done before and try to understand .

How can the USD have any value when we have a trillion dollar deficit year after year and knowingly will never be able to pay off our debt?

Biggest SCAM in history IMO

Not sure if you have run into the threads with John Jagersons opinions or not but his credentials in the currency arena are truely epic. No one really cares to hear what he has to say unfortunately but I think its obvious that his opinions are far and beyond more accurate than any of us on this forum.

[caz1104]

Haha....was just saying caz. As a matter of fact I am vested. I put serious thought into selling back to Ali last night. It leaves a bad taste in my mouth to lose 4 grand just so that he can turn around and resell it for a 4 grand profit. Such is the dinar paradox. Still hangin on though in the hopes that the RD is shot down. Any more progress towards it and I will probably get out while the gettin is good (somewhat anyway).

LOL,no worries dude. I thought you had dumped your dinar portfolio,my bad. Here's hopin for the best.Peace

[rockfl9]

Socialdinar::::You have it reversed! In the auctions,, the CBI gets USD from the MOF to SELL for DINAR which the GOI uses to fund operations... By the end of the week it is all GONE....RVers do not want to believe that Iraq is in hand-to-mouth mode...The reason mainly is that out of 10M in the workforce 4M are public employees! 2M on pensions or welfare.

[SocalDinar]

Not sure if you have run into the threads with John Jagersons opinions or not but his credentials in the currency arena are truely epic. No one really cares to hear what he has to say unfortunately but I think its obvious that his opinions are far and beyond more accurate than any of us on this forum.

Thanks,

Read the interview and several of his articles..

It seems that His quotes are reused by many on this forum as their own opinions word for word.

[dinarck]

Thanks,

Read the interview and several of his articles..

It seems that His quotes are reused by many on this forum as their own opinions word for word.

Well if a couple of buddies were talking about a recent football game they would use terms that mimick the sports commentator who happened to work the game because the terms they are using is how football works. It's the same thing with dinar discussion. Facts are repeated. What you won't hear the commentator say is that such and such team will score a million points if the quarterback can throw the football out of the stadium. Lol

Edited August 10, 2012 by dinarck

[SocalDinar]

Well if a couple of buddies were talking about a recent football game they would use terms that mimick the sports commentator who happened to work the game because the terms they are using is how football works. It's the same thing with dinar discussion. Facts are repeated. What you won't hear the commentator say is that such and such team will score a million points if the quarterback can throw the football out of the stadium. Lol

LOL thanks That was a good one.

Socialdinar::::You have it reversed! In the auctions,, the CBI gets USD from the MOF to SELL for DINAR which the GOI uses to fund operations... By the end of the week it is all GONE....RVers do not want to believe that Iraq is in hand-to-mouth mode...The reason mainly is that out of 10M in the workforce 4M are public employees! 2M on pensions or welfare.

Sounds like my small city of 16,000 I Personally know 3 retired police chiefs. one makes 216 K a year pension, one makes $320 K a year pension and one makes $410K a year pension.

These numbers are repeated all over California.. The State needs to file bankruptcy and start over.

[umbertino]

Quote

What you won't hear the commentator say is that such and such team will score a million points if the quarterback can throw the football out of the stadium. Lol

End Quote

Apt comparison.

[BigFrankD]

What you won't hear the commentator say is that such and such team will score a million points if the quarterback can throw the football out of the stadium. Lol

Best post ever.