Saleh claims GOI can meet payrolls for 3-5 years !

[rockfl9]

This is not my understanding. The flow as I understand it is:

The MOF sells oil for USD, they take the USD to the CBI and exchange for IQD for their budget. This causes the money supply to go up and the reserves to go up by the same ratio.

Them retail banks buy USD with IQD at the auctions to serve importers (the total of the auctions matches the import totals). This causes the money supply and the reserves to both go down, again in lock step based on the exchange rate. Because the rate for the first exchange is 1164 and the 2nd is 1166 the CBI makes a tiny profit.

Differences in these two flows month to month is why the reserves and the money supply go up and down, but overall they  both go up if Iraq imports less then the dollar value they export, and they both go down if they import more than they export.  For most of the past few years they have had a trade surplus (e.g. in 2013 imports were about $60B USD and oil sales were about $70B USD).  With the huge drop in oil prices I'd expect this to be reversed, but haven't checked.

Nope! Oil sales do not affect the reserves. Oil sales go into the Iraqi TREASURY ( an account in the CBI). The CBI reserves is a different account.

When the GOI needs dinar it instructs the CBI to offer (SELL) an equivalent in dollars. Actually it is not an Auction because the price is fixed.

The cbi tacks on a commission for the service.  the CBI reserve amount doesn't change as NO dinar were created or destroyed.

[EverCurious452]

Nope! Oil sales do not affect the reserves. Oil sales go into the Iraqi TREASURY ( an account in the CBI). The CBI reserves is a different account.

Sure, this is what I said (perhaps not clearly), the MOF sells oil for dollars.  Those dollars stay with the MOF (where the account is located is irrelevant but I'd guess you're right its at the CBI).  This account is certainly distinct from the CBI's reserves.

 

When the GOI needs dinar it instructs the CBI to offer (SELL) an equivalent in dollars. Actually it is not an Auction because the price is fixed.

The cbi tacks on a commission for the service.  the CBI reserve amount doesn't change as NO dinar were created or destroyed.

This is the part I'm not sure we're in sync. When the GOI needs IQD, it simply exchanges USD (in its CBI account ) for IQD with the CBI. Those USD then go into the CBI's reserves, and the IQD issued increase the money supply.

Importers then exchange IQD for USD in the "auctions" (which aren't really auctions since the price is fixed), which lowers the reserves and the money supply. Thus the reserves and money supply grow or shrink each year based on whether Iraq has a trade surplus where they both grow and has been the case for several earlier years or a trade deficit where they both shrink, which may be happening now due the lower oil prices (but I'm not sure).  You can see this in their import/export data and how that matches up with increases in reserves and the money supply.

Edited September 12, 2015 by EverCurious452

[EverCurious452]

Or perhaps even simpler:  Anytime the CBI takes in USD and issues IQD in exchange (mostly the MOF with oil dollars) that raises the CBI's reserves and raises the money supply correspondingly.  When the CBI takes in IQD and give out USD in exchange (banks in support of importers) that lowers the reserves and lowers the money supply.

 

So in 2013 exports were $70B USD and imports were $60B USD so for the year the reserves went up by $10B and the money supply grew by 11T IQD.  Month to month it goes up and down as imports and exports don't match up month to month.

[rockfl9]

 

This is the part I'm not sure we're in sync. When the GOI needs IQD, it simply exchanges USD (in its CBI account ) for IQD with the CBI. Those USD then go into the CBI's reserves, and the IQD issued increase the money supply.

Importers then exchange IQD for USD in the "auctions" (which aren't really auctions since the price is fixed), which lowers the reserves and the money supply. Thus the reserves and money supply grow or shrink each year based on whether Iraq has a trade surplus where they both grow and has been the case for several earlier years or a trade deficit where they both shrink, which may be happening now due the lower oil prices (but I'm not sure).  You can see this in their import/export data and how that matches up with increases in reserves and the money supply.

NO again!

The dollars go to the Importers/traders etc not to the CBI

There is no new IQD that is issued they are all OLD IQD that were in circulation. It is an even trade.

There is no increase in money supply or the reserves.

The MOF/GOI will then "give away " the dinar received, it will be spent somehow and the importers/dealers will get it back to use in the next cycle.  

[EverCurious452]

NO again!

The dollars go to the Importers/traders etc not to the CBI

There is no new IQD that is issued they are all OLD IQD that were in circulation. It is an even trade.

There is no increase in money supply or the reserves.

The MOF/GOI will then "give away " the dinar received, it will be spent somehow and the importers/dealers will get it back to use in the next cycle.  

If this were true, then the MOF could never get more IQD for its budget than was used to buy imports no matter how much was exported, and if imports were less than exports (which has often have been) then the MOF would accumulate USD but reservers would not grow.  But the CBI data clearly shows both money supply and reservers have been growing (at least through 2013) and the delta is equal the trade surplus and they both vary up or down month to month.  Just go check the data. 

 

I didn't mean to imply the CBI issues newly printed IQD.  First of all most of this is electronic and whats not are whatever notes the CBI has.

Edited September 12, 2015 by EverCurious452

[rockfl9]

If this were true, then the MOF could never get more IQD for its budget than was used to buy imports no matter how much was exported, and if imports were less than exports (which has often have been) then the MOF would accumulate USD but reserves would not grow.

 

***  When the MOF/GOI imports things for government use , think Humvees, guns , helicopters , those oil dollars are used . They dont need to go thru the auctions!

 

 But the CBI data clearly shows both money supply and reserves have been growing (at least through 2013) and the delta is equal the trade surplus and they both vary up or down month to month.  Just go check the data. 

 

***  One of the CBIs jobs is to make sure there are  enough dinar in circulation to prop up internal commerce.  Think, more people need more dinar.  print more dinar must put more in  the reserves!

 

I didn't mean to imply the CBI issues newly printed IQD.  First of all most of this is electronic and whats not are whatever notes the CBI has.

 

***  In the eyes of banker/accountant ALL DINAR, paper, electronic or plastic, ARE EQUAL.

 

*** BTW those oil dollars are electronic also . But they never get to Iraq!  They are MOF accounts in London, NYC , Hong Kong etc.

 

 

 

[EverCurious452]

One of the CBIs jobs is to make sure there are  enough dinar in circulation to prop up internal commerce.  Think, more people need more dinar.  print more dinar must put more in  the reserves!

Where would those USD come from?  And you're saying its just a coincidence that the annual rise equals the trade surplus and why would they be making the reserves and money supply go up and down month to month?  I think you're wrong.  Note there is no indication on the currency auctions that they are being done on behalf of the MOF, directly selling its oil dollars.

 

Here is something noteworthy http://cbi.iq/index.php?pid=CbiAuctions The CBI says it sold 200T IQD 90 day bonds on Sept 1st.  Wow, I can't see how its possible to be so big.  The last time they did this was in 2010 and it was only for 100B IQD.

[rockfl9]

Where would those USD come from?

 

*** The easiest way would be to use MOF accounts.  The CBI is the MOF's banker, the MOF has a USD account and a Dinar account. So the CBI prints new money and puts it into the dinar account , then takes an equivalent amount of dollars from the dollar account and puts it in the CBI reserve account.

 

And you're saying its just a coincidence that the annual rise equals the trade surplus and why would they be making the reserves and money supply go up and down month to month?

 

*** The overall trend in money supply is UP!  It may shrink next year but not by much. If they devalue of course they will have to create more money, but it will be cheaper money.

 

 I think you're wrong.  Note there is no indication on the currency auctions that they are being done on behalf of the MOF, directly selling its oil dollars.

 

**** I'm correct!

 

*** The 90 day NOTES are sold to provide a cushion in working funds to supplant variations in revenues. Basically the same 200T rolls over every 90 days .. NO big deal!

       They are usually bought by banks and counted as bank reserves. Considered to have an AAA+ rating.

 

Here is something noteworthy http://cbi.iq/index.php?pid=CbiAuctions The CBI says it sold 200T IQD 90 day bonds on Sept 1st.  Wow, I can't see how its possible to be so big.  The last time they did this was in 2010 and it was only for 100B IQD.

[EverCurious452]

*** The easiest way would be to use MOF accounts.  The CBI is the MOF's banker, the MOF has a USD account and a Dinar account. So the CBI prints new money and puts it into the dinar account , then takes an equivalent amount of dollars from the dollar account and puts it in the CBI reserve account.

Sure, this is the USUAL exchange the MOF uses to get IQD, not the auctions.

 

 

And you're saying its just a coincidence that the annual rise equals the trade surplus and why would they be making the reserves and money supply go up and down month to month?

*** The overall trend in money supply is UP!  It may shrink next year but not by much. If they devalue of course they will have to create more money, but it will be cheaper money.

 

But the month to month values go up and down. That is perfectly explained by exchanges in imports and exports not matching month to month even being counter to the overall trend. If what you say is true this would never happen.

 

 

I think you're wrong.  Note there is no indication on the currency auctions that they are being done on behalf of the MOF, directly selling its oil dollars.

**** I'm correct!

No offense my fellow tank dweller but your assertion is not too convincing.  The data does not support your view yet it perfectly supports mine.

 

*** The 90 day NOTES are sold to provide a cushion in working funds to supplant variations in revenues. Basically the same 200T rolls over every 90 days .. NO big deal!

       They are usually bought by banks and counted as bank reserves. Considered to have an AAA+ rating.

200T? Where does it come from when the entire M2 money supply according to the last spreadsheet for Dec. 2014 is 90T.  I'm thinking it must be mis-stated and was really 200B which would match what they did in 2010 (only 2x as big, not 2000x as big)

[rockfl9]

EC ? In the "auctions" the CBI gives dollars and receives dinar, right?  Where do you think the dollars come from. The CBI cant make dollars.

 

I don't know how you get Monthly data.  I only can get annual reports and see the money and reserves going UP.  But I think it is reasonable to see a monthly dip now and then.  Did you see in the 2014 annual report that the CBI lost $800M on the gold portion of the reserves! 

 

Again I ask where do the dollars come from? The only significant income is oil revenue. What is your data?  There was an article someone found back in 2008 , I think ( when the Guru's started the line that the CBI was buying up dinar to reduce the "note count)  written by a bank of England official that was on the team the UN picked to set up the CBI that  clearly stated that the "auction " mechanism was used to fund the government.

 

I went back and looked at the announcement and the amount is 200B not T . The last 3 zeros are after a decimal . It is a pretty normal amount. They have issued  these 90 day bills for the last 3 quarters, maybe more.. Notice they got more offers than they needed! A good sign .

 

Question for you : Why do you think NO legitimate bank buys or sells IQD anymore?

 

Another::  With the GOI borrowing so much money just to get through 2015 , what will they do next year?

[EverCurious452]

EC ? In the "auctions" the CBI gives dollars and receives dinar, right?  Where do you think the dollars come from. The CBI cant make dollars.

When the MOF exchanges USD to get IQD, that USD goes into the CBI's foreign reserves and the IQD increases the money supply by the same relative amount.

When importers (via the "auctions") exchange IQD for USD the money supply goes down and the reserves go down the the same percentage.

 

I don't know how you get Monthly data.

Its in the statistics spreadsheet, here is 2014 M2 in billions of IQD

 Jan.  88,523

 Feb.  86,631

 Mar.  86,822

 Apr.  87,962

 May  86,457

Jun.  86,583

Jul.   87,264

Aug.  86,412

Sep.  87,462

Oct.  88,974

Nov.  88,025

Dec.  90,728

The only reason for it to be going up and down is differences between imports and exports, the reserves go up and down in lock step.  If the only adjustment to the money supply was a intentional one by the CBI I don't think we would see this sort of monthly variation.  In 2014 they only had 2B USD more exports then imports, so it only went up a 2.2T IQD

 

Question for you : Why do you think NO legitimate bank buys or sells IQD anymore?

It might not be that easy to get in legit banking transactions and the banks may know its being bought for bugus purposes and don't want to be a part of that.

Another::  With the GOI borrowing so much money just to get through 2015 , what will they do next year?

Go deeper into debt, what else?

[rockfl9]

EC: M2 includes Checking and saving accounts, including commercial accounts. I think the dip in Aug. is the side effect of increased imports for Ramadan/Eid.  Other than that month M2 growth was positive. It should slow down for 2015.

[EverCurious452]

EC: M2 includes Checking and saving accounts, including commercial accounts. I think the dip in Aug. is the side effect of increased imports for Ramadan/Eid.  Other than that month M2 growth was positive. It should slow down for 2015.

Look again, Feb, May, Aug, and Nov are all down from the previous month, and in your view imports do not change the money supply as the IQD does not ever go back to the CBI.   I think it IS monthly changes in imports which varies more than oil production, though that can change too.  If the exchanges by the MOF and for Imports both go thorough the CBI, then they both alter the money supply and the reserves and any month where imports are bigger there will be a dip.

Edited September 17, 2015 by EverCurious452

[rockfl9]

I missed that. Sure was a big drop in Feb.

?  How does Jan'14 look from DEC'13 ? Was it a bump up?

But end of year was higher .

So CBI must have printed more dinar and added to the reserves,thats what counts.