**Tomorrow new mechanism for buy/sell of U.S dollar**

[Laid Back]

This is the new monetary policy in motion.!

Go CBI

Go budget

Go Tarriffs

Go HCL

Go dinar

Go strong $1.13:1

[davis411]

i know my account could sure use a new monetary motion

[unirod]

The banks in Iraq will have to get the IQD from somewhere to back their transactions internationally and domestically. So they will be buying IQD either digital or currency. I would not expect the IQD to stay at 1170 for long....IMO

[Calijim1]

Wouldn't they just exchange it at the CBI?

[WheresmyRV?]

This article has to be the article of the week!

[Officiallytook]

Whooop!whoop!

[TrinityeXchange]

Trinit . you mentioned in the other article that.we're about to see something phenomenal. What is your take on time frame. Any estimates?

hi txdinargirl. i think you are referring to my remarks about banking reform and the phenomenal event being the capitalization of the banking system.  as the government and cbi bring equality to the financial sector, those who are invested in the isx and hold bank stocks will witness some very nice growth.  remember that up until today, the financial sector has been eXtremely lopsided...and that is putting it lightly.  the government/state owned banks have enjoyed all of the privilege of banking without competition.  the laws were all established to promote state owned entities for no other reason than dictators controlled state owned banks and stacked the rules entirely in their favor.  

 

now imagine how fast private banks will grow once equality is brought to the financial sector.  there is a directive by the prime minister and governor of the cbi to promote the private banks.  as far as time frame go, we will witness change in iraq almost overnight.  four months from now reading news about banks and their new dealings will become mainstream.  

 

i know many people still wonder what this means in regards to a iqd revaluation.  i believe these monetary changes are critical to an organic increase to the value of the iqd.  what tips us off to this is the fact that the goi did not want to go outside of the country and borrow money from foreign entities to fund its deficit.  the goi elected to use its own domestic facilities to do this.  this means that the iqd will increase in its use and momentum.  as the iqd circulates, exchange hands, more and more within the local economy the demand for it will increase......increase in demand equals an increase in value.  along with this we know that the money count has been continually reduced.  the latest article on the subject put the money count at under 4B notes with the goal to get the note count down to 1B notes.  both of those measures alone will add value to the currency.  

 

will we see them revalue the iqd by decree?

will we see them un-peg the iqd from the dollar and we watch it increase organically by a float?

which will come first if they do both?

 

i don't have an answer to that question.  i leave that to financial brains like Adam to make clear.  what i do know is through documented research it is accepted as truth that developing nations transitioning to a market economy, especially those like iraq subject to tremendous trade of terms shocks (i.e. volatility in oil prices), remain at extreme risk when pegged to the usd.  IF the goi transitions to a true market economy, and liberalizes rafidain - rasheed banks, we should expect to see them unpeg from the dollar.  however developing nations struggle to truly release control of the money.  they will often come right up to brink of creating a market economy and then stall out by maintaining majority control of banking.  

 

all we can do my friends is understand what they are doing and understand the risks that involved.  what the goi and cbi will actually do.....no one knows....

[Lex]

Thank you Trinity for your balanced perspective.  I have been invested for a couple of years but not involved with the Guru sites. Now that I am it's even more confusing.  So who and what to believe becomes a challenge as to what is going on and how it may affect my investment.  While I feel there is a lot to catch up on, and I will, your posts have helped to clear a couple of my questions.

 

Thank You

[Tripphood]

Bump

This article is great news and could bring what we are looking for. Thanks Easy.

Edited February 22, 2015 by Tripphood

[dog53]

Doesn't it have to become a globally excepted currency . Before anything can happen. Right now unless you live in Iraq its just funny money.

until then we

wait

[Tripphood]

Here is a good explanation of what all of this means....thanks to Ennorste.

First, a brief quote from the article:

“Governor of the Central Bank, explained that "It is not true that the central stays busy selling the currency like ATM daily", stressing that "the transition to a new phase is to conduct foreign remittances through the banking system within the mechanism developed for it."

Second, a repeat of the definition of foreign remittances:

Foreign remittance can be defined as ‘the purchase and sale of freely convertible foreign currencies.

Now, what does is all mean?

The CBI is stopping the auctions, effective tomorrow morning. This is a fact. We know that the auctions were the primary monetary tool that the CBI used to hold the exchange rate on the street within 2% of the official CBI rate for the dinar. With the Parliament intervening with Article 50 in the new budget, the CBI became hamstrung.

First, they said they would go to court to overturn this illegal intervention in their ability to perform their proper function.

After consideration, however, they decided to move up the plan to move toward a freely floating currency and entrance into Article 8 of the IMF charter. I personally suspect that eliminating the auctions entirely was always a part of the CBI plan. The Parliamentary intrusion, however, has forced them, apparently, to move up the plan somewhat. I see this as a very good thing for us.

Moving from currency auctions run by the CBI to allowing foreign remittances at the bank level is nothing short of huge. Why do I say that? Simply this: foreign remittances only work when the sale and purchase is between “freely convertible foreign currencies” as the definition above states.

The term “freely convertible foreign currencies” .

From Wiki:

“Freely convertible currencies have immediate value on the foreign exchange market, and few restrictions on the manner and amount that can be traded for another currency. Free convertibility is a major feature of a hard currency.”

From this definition we see that the dinar will be moving to the foreign exchange market and that it will be seeking to become a “hard currency.” This, folks, is the true impact of this article. The dinar is about to become internationally recognized, tomorrow. It is just that simple.

Now, the question arises: will they also move to a float, or will they keep the dinar locked into the dollar at 1166 to 1?

There is nothing in and of itself that will require the CBI to move to a float tomorrow, or even in two or three weeks. However, over the long run, not allowing the dinar to float will have serious inflationary pressure come to bear on the economy of Iraq. Here is a statement from a research study on this very matter. This study had to do with Bangladesh:

"Applying Vector Autoregressive (VAR) techniques, the empirical results find that a one percent increase in remittances inflows increases inflation rate by 2.48 percent in the long run, whereas no significant relationship is evident between these two variables in the short-run in Bangladesh."

From another study I give this summary quotation:

“The analysis considers yearly and quarterly data for seven Latin American countries. Our theoretical model predicts that remittances should be inflationary and generate an increase in the domestic money supply under a fixed regime but deflationary and generate no change in the money supply under a flexible regime. These differences are borne out in the data.”

We see, therefore, that it will not be in the interest of the CBI to stay under the fixed rate regime. Iraq is very leary of increases in the inflation rate. Therefore, I predict that they will change their exchange rate regime to a flexible regime (float).

The result, as I have already stated in numerous posts, and as is born out in this quote just above, is that there will be “deflationary pressure” in Iraq rather than inflation in Iraq once they move to the float.

The reasons for this are simple to enumerate. First, Iraq has none of the problems of Bangladesh, Ukraine, or the other countries that have left a fixed rate regime for a floating currency. For instance, Iraq has enormous reserves in relation to the total outstanding money supply (over 150% coverage at this time). Second, Iraq does not have an inflation problem (in spite of articles that confuse “inflation” with a “weak dinar”). Third, Iraq has enormous natural resources. Fourth, Iraq is the “wild west” in terms of investment opportunity from abroad. All of these forces will ensure that the dinar value rises rather than falls.

The rise in the value of the dinar means that imports will become less expensive for local Iraqis. Iraq imports most of its goods and services at this time. Therefore, with lower import prices Iraq will have lower prices overall, or deflation. This is consistent with what I have taught for some time now and is also consistent with the summary of research in Latin America mentioned just above.

To summarize: the auctions are ending, being replaced with foreign remittances. Foreign remittances are only possible with a freely convertible currency. A freely convertible currency is one that is internationally recognized. In order for this to work, the CBI will have to move from a fixed rate regime to a floating currency or suffer from inflation. Therefore, I predict that they will do so sooner rather than later. I predict within the next 15 to 45 days, consistent with my earlier prediction of 30 to 60 days.

I hope you have all made a drink!

[sxsess]

Great post Tripphood! This makes much sense. The only problem is Iraq as they are never predictable on anything.

[Tripphood]

Agreed but timing is everything. Maybe the time is now!

[navira45]

Bump

[magawatt]

Wasn't this tomorrow yesterday? Is on Monday?

[NoviceInvestor]

Doesn't it have to become a globally excepted currency . Before anything can happen. Right now unless you live in Iraq its just funny money.
until then we
wait

And wait ... And wait

[George Hayduke]

To summarize: the auctions are ending, being replaced with foreign remittances. Foreign remittances are only possible with a freely convertible currency. A freely convertible currency is one that is internationally recognized. In order for this to work, the CBI will have to move from a fixed rate regime to a floating currency or suffer from inflation. Therefore, I predict that they will do so sooner rather than later. I predict within the next 15 to 45 days, consistent with my earlier prediction of 30 to 60 days.

 

 

Thanks Tripphood - I just love reading it over and over... this could be a very good summer

[Tripphood]

Thanks Tripphood - I just love reading it over and over... this could be a very good summer

Ha ha, I'm with you George but I have to make the correction that I only shared this from a friend who hangs out elsewhere. His name is Ennorste and he is very knowledgable. Glad you liked!