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hello again my friends.  its your bud here with another :twocents:  worth of a take on what i see happening within the borders called iraq.  and it is really good news from my vantage point!  the topic of this opinion piece is the '6 major factors that influence an exchange rate'.  i will cover each factor briefly in reference to iraq and hope to derive whether or not those invested are either in a good or bad position. 

 

as many know, the importance of an exchange rate revolves around one country's trading relationships with other nations.  trade relationships is the sole purpose of an exchange rate.  where there is no international trade, an exchange rate tied to a currency has no domestic significance.  with this in mind lets peer into the 6 factors of exchange rate influence between iraq and its trading partners.

 

1) Inflation - iraq has done a fantastic job steering its inflation rate.  the latest report (aug 2015) has inflation at 2.2%.  some economists would mark this as the ideal inflation rate.  this places iraq is a great position with trading partners for determining a strong exchange rate to the iqd.

 

2) Interest Rates - iraq has maintained a steady interest rate of 6% over the last 5 years.  compared to other nations, it is a phenomenal rate.  the importance here is the attractiveness it has to foreign investors.  should iraq sure up the security situation with daesh and clean up political corruption, foreign investors might feel confident enough to pour funds into iraq at these rates.

 

3) Current-Account - iraq has done quite well between trading partners and has held a positive current account balance (exports vs imports) over the previous 9 years except for 2010.  oil is its primary export and it has been strong enough a commodity to keep iraq experiencing gains in its current accounts.  as iraq build its non-oil sector through the plan for increased industry and agriculture, exports should increase and it will be reflected in the current account.  

 

4) Public Debt - this is where the hidden gem is revealed and the reason for the title of my opinion piece.  everything in the papers speak to iraq's "deficit financing".  however for some reason it appears to be seen in a negative light.  my opinion is much different.  not all debt is good but in this instant i definitely believe it is.  when most developing nations look to expand its economic markets as iraq is doing, there will be an inevitable deficit to fiscal policy (the budget).  in the short term, this is a very very good thing!  where most under developed nations utilize deficit financing for payment of domestic and foreign loans, this does not hold true for iraq.  iraq is using this tool as developed nations would, for capital formation for economic growth and boosting the private sector.  this type of debt is the best stimulate for the economy in the short term.  (here is a good slide-show presentation explaining deficit financing.)

 

5)  Terms of Trade - balance of trade for iraq is simply outstanding and last reported at approximately $40B usd ($44B previous year).  compared to turkey (-$6B usd), japan (-$268B yen), germany $24B eur.  i would say that iraq comparatively has a case for a strong dinar.  its current accounts and balance of trades are unbeatable (maybe a little exaggeration there).

 

6) Political Stability & Economic Performance - well, you can't shine everywhere :blush: .  unfortunately this important piece is dragging iraq down.....and i mean wayyyyyyyy down.  nobody in their right mind want to stick hundreds of millions in an environment like this.  this area alone is holding iraq back the most.  all things considered, if this one area is corrected there is no reason why foreign investment wont flood the country and the domestic currency surge in demand.  

 

there you have it gang.  hopefully this piece wasn't too long.  this should give us all a solid overview of the factors that influence the dinars TRUE exchange rate the most.  from it we should be able to make a sound judgement on where the currency is headed and whether or not we want to remain involved. 

 

be blessed!   :tiphat:

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Thank you Trinity I always look forward to your posts. I've learned a lot about the economic growth potential from the information you bring us thank you again. I still very much believe in this investment and its amazing to watch history being made before our eyes in Iraq.

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Thank you Trinity I always look forward to your posts. I've learned a lot about the economic growth potential from the information you bring us thank you again. I still very much believe in this investment and its amazing to watch history being made before our eyes in Iraq.

thanks fancy and everyone for your favorable responses.  i still very much believe as well my friend.  i think it is crucial for us holding dinar to tie our belief of its future to information that can be monitored.  knowledge grants so much more power.  we often read people's opinions concerning whether or not the exchange rate of the iqd will appreciate however those opinions are often not founded upon economic principles.  how often do we read anyone expounding on the 6 pillars influencing a currency's exchange rate.  and then when do the ones who opine measure those 6 influencers against the iqd? 

 

i believe the metrics can be made very simple for us.  we don't have to guess at all.  we can gauge our investment risks against sound fundamental data.  doing so moves us away from apotheosizing individuals as oracles of dinar mysteries, and places us on an equal playing field with anyone else assessing the risks of this investment through fundamental analysis.  and such is my intent to inspire dialogue, share information, and empower the community.  

Edited by TrinityeXchange
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Thanks TrinityeXchange, information is key and digesting fact from fiction is the challenge. A level headed approach and attention to details makes for better decision making, which you do very well. Their are to many gurus and pumpers out there that try to deviate us from the reality but thanks to people such as yourself with the assistance of the finest news hounds in the Dinar world, keeping grounded and sane makes for a easier ride. For those of you who have been here and on this ride for many years, deserves my respect, this is a true test of patience. I as well look forward to your posts and value your thoughts and hope for the day that we can take this venture to the next level. Until then, we patiently wait...

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my wife says that to me alot

minus the et part of it   :cheesehead:

If you'd put something on over your thong, she might change her outlook.

 

It's OK to have an a$$, just not be one.  You need to have one to hold your legs on.

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4) Public Debt - this is where the hidden gem is revealed and the reason for the title of my opinion piece.  everything in the papers speak to iraq's "deficit financing".  however for some reason it appears to be seen in a negative light.  my opinion is much different.  not all debt is good but in this instant i definitely believe it is.  when most developing nations look to expand its economic markets as iraq is doing, there will be an inevitable deficit to fiscal policy (the budget).  in the short term, this is a very very good thing!  where most under developed nations utilize deficit financing for payment of domestic and foreign loans, this does not hold true for iraq.  iraq is using this tool as developed nations would, for capital formation for economic growth and boosting the private sector.  this type of debt is the best stimulate for the economy in the short term.  (here is a good slide-show presentation explaining deficit financing.)
 

 

Hey TE thanks for another excellent opinion piece.

 

Your 4th point 'the hidden gem' grabbed my attention - as without stimulus (albeit a debt instrument) there is no development of the private sector which is key to broadening Iraq's dependence away from oil.

 

Once 4) is flowing to businesses then Points 1) & 2) add impetus to the overall growth and it will snowball. 

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