Groovgal explanation of article, Parts 1,2,3: Dinar Speculator 6/19/10

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June 19, 2010 · Center for Studies and Research/ Consultant CBI d. The appearance of Mohammed Saleh Part 1

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I took a moment to look over a article that was published today titled Center for Studies and Research/Consultant CBI. Articles written in a foreign language and then translated are hard to decipher and sometimes it’s simply impossible to follow the author’s thought process. However, with the recent posting upon DD pertaining to this article a few people came to me and asked me to give my thoughts on it. I will try to do my best but there is room for error seeing as how this article is a translation.

The beginning of the article is simply explaining the purpose of countries having foreign currency reserves and how they affect the rate of exchange (value of a country’s currency). The central banks (Iraq = Central Bank of Iraq and in the US = Federal Reserve) hold foreign currencies and bonds that belong to other countries. In this case the CBI is holding large quantities of USD, however foreign exchange reserves could also include gold, Special Drawing Rights given by the IMF…

The purpose of having foreign currency reserves is to “back” or support/uphold the value of the local currency. The United States dollar is the more popular choice of the reserves currencies, however the Euro, UK pound, and the Japanese Yen are also used.

When a currency is an internationally recognized currency it is apart of the flexible exchange rate system and therefore is considered a liability at that point. The value of the currency can fluctuate dramatically, however when a country chooses to purchase foreign fiat currencies such as the US dollar to deposit within their reserves it can stabilize the value of their currency by “backing” or “supporting” it’s value. The larger a countries reserve deposits grow the stronger the domestic currency becomes.

When the value of a currency drops and becomes unstable a country can and most often is experiencing inflationary pressures. The country is then put into the position of having to sell off assets to defend the rate of exchange or the value of their currency to keep it from crashing. Assets include that of foreign currency reserves. A country can also experience basically the same situation when a countries currency is over valued as well. In short, it is very important for a country to keep the value of their currency stabilized and well managed to avoid inflation, hyper-inflation and having to sell off assets, therefore losing even further strength of their currency.

The beginning of this article is essentially explaining what I have said above when it refers to the use of using foreign currency reserves as a “shock absorber.”

The article further explains that the CBI/GOI is using it’s foreign currency reserves to meet the national demands while still working to de-dollarize within it’s borders and strengthen the purchasing power of the IQD. In laymens terms, they are using the USD for imports while forcing the locals to use the IQD. The Iraqi people became largely dependent upon the use of USD to purchase all of their daily needs. It was essential for the CBI to de-dollarize and force the Iraqi people to use the domestic currency in order to reestablish faith and strength for the domestic currency. Once this process is complete the CBI can then move to the next phase of their monetary policies set forth by the IMF within the Framework Agreements.

The article then moves on to discuss Article 27 of the Code of the Iraqi Central Bank No. 56 of 2004, which basically states that the CBI agrees to follow the international standards of market exchange by increasing foreign currency reserves to “back” and “support” the value of their currency. By doing so, it will starve off risk of volatility or extreme fluctuation of the rate of exchange. And, if inflationary pressures were to set in they will have enough liquidity in reserve to sell off in order to defend their rate of exchange. They agree to diversify their reserves by purchasing USD or any of the other widely accepted stable currencies that I’ve mentioned above. In turn, this will strengthen their international credit rating.

The article explains that they still have not reached the minimal international credit rating of C which is defined by the IMF, therefore the IQD will not be apart of the international recognized reserve currencies. Of course, this will change once the CBI follows the Framework laid out by the IMF. We also know that multiple countries such as The US, Europe and China all have the Iraqi Dinar within their reserves, however since the IQD is not internationally recognized it cannot be seen as a true foreign reserve currency at this point. The article explains that Iraq’s international credit rating is 23%. If we were to compare that to our consumer lending paper scores that banks use to weigh our own credit it would be similar to lending to an individual who has a credit rating of under 300. The government of Iraq has poor credit rating and therefore the IMF has laid out what steps the CBI needs to make in order to regain their international status; one of which is to raise their liquid assets (foreign reserves) to acceptable levels.

On an “Economic level,” the country of Iraq is running solely off of imports since they do not domestically produce their own consumptions. What I mean by this is that they do not produce every day items such as toilet paper, candy bars, toothpaste, etc and therefore they must import those goods for their use i.e. consumption. While they are dependent upon imports in order to keep their citizen’s functioning on a everyday level, the only export they are seeing growth in is that of their oil production. They are working avidly to increase their agricultural sectors in order to broaden their exporting capabilities, therefore strengthening their countries income.

On a “political level,” Iraq is still protected under and subjected to their Chapter 7 agreement. The article states, that as long as Iraq is still in Chapter 7, it will continue to be seen as a country who cannot function peacefully within the international community and therefore can still be forced to do what the UN tells them to do. I would like to include that the revaluation of their currency falls into this section.

The foreign currency reserves are kept in the vaults and is used to pay off international debts even though it would be cheaper to hold these reserves in a bank abroad since it is costly to transfer the monies to the countries creditors. Meanwhile, the continued oversight of the monies by the IMF will go on to starve off the possibility of money laundering, crime and terrorism. Furthermore, they are working to increase their foreign reserves and working to keep the value of the IQD stabilized in order to create an environment where diplomacy can thrive.

In efforts to shift their currency to the flexible exchange rate system and to become internationally recognized there are certain steps that have to be taken in order to join the free market economy without creating inflationary risk. The article explains that they cannot jump into the deep end of the pool immediately and that they must take these steps in their proper order or they will find that inflationary pressures will cause them to fail. If they were to join the free market economy also known as the flexible exchange rate system and to become internationally recognized too soon and inflationary pressure was to set in, then they would risk having to sell of their vast foreign currency reserves which they’ve already set aside and allocated for other debts to defend their rate of exchange or the value of their currency.

The paragraph within the article that states, “Of local currency in the first stage through the expenditure budget will undoubtedly deducted from the market needs and its share of foreign currency and weaken the cover of the national currency, as well as being disruptive direct the policies of the Iraqi Central Bank to raise the purchasing power of the Iraqi dinar and promote its exchange rate against the dollar, which requires the availability of foreign currency resources constantly aimed at creating a strong Dinar and the development of a stable economic prosperity leads to continuous An important anchor in building economic security and national defense for the stability of Iraq’s economy against external shocks for the longest possible period.” This paragraph is explaining what I’ve been explaining for the past year or so.

The CBI is explaining that it crucial that they continue to increase their foreign currency reserves and place no risk upon them by coming in at a rate too low or too high which would place the Iraqi Dinar at a risk of inflationary pressure. They cannot have a strong currency without vast foreign currency reserves to strengthen it’s value, hence if they are forced to sell off their reserve currencies in the event that inflationary pressure sets in then the strength as well as it’s value topples. The article goes on to explain that the risk will always be relative to today’s economic conditions, however if they take this opportunity to continue to increase their foreign reserves then they place themselves in greater standing in the future with dealing with the global economy once their currency becomes internationally recognized by joining the flexible exchange rate system.

The CBI states, that while the monetary plan is critically important to their becoming internationally respected by all nations it is not the sole importance and that they must continue international dialogue and diplomatic ties in the meantime to prevent them from becoming isolated as they had been when Saddam Hussein was in power.

The CBI states, that it is important for their currency to become internationally recognized in a timely manner to starve off black market influence, which has shown to cause hyperinflation, increase rates of poverty and low standards of living by influencing the rate of exchange. The more quickly they take the steps needs to have their currency become internationally accepted the faster they can cut the black markets ability to undermine their economy.

Over the past decades the article explains that the rate of exchange has fluctuated between $3.22 per 1 USD to 1450 per 1 USD. I thought it was rather funny that they used the word bipolar while describing the fluctuation. The article explains that in the past while under the ruling of Hussein they were not completely following the flexible exchange rate system that is internationally recognized, similar to what we just read of Venezuela’s currency. It goes on to say that while there are reasons for having this sort of monetary policy, it is unrealistic and cannot be done this way and by following Hussein’s peg theory it will only lead them in the wrong direction.

For the last year to two years, you’ve all heard various theories of how the Iraqi Dinar will go about becoming internationally recognized. Certain individuals have claimed that the Dinar will be pegged to that of the Euro or the USD. I have done all that I could to combat these claims with scholarly articles as well as professional and educated reason why it will not be a direct peg. However, I am most elated to see that the CBI has come out and stated, “…That the foreign currency auction in late 2003, has come to announce the end of the fixed exchange rate system pegged regime in Iraq…And the shift towards flexible exchange rate regimes.” You see it for yourselves from the CBI directly. The Iraqi Dinar will not be a direct peg! I’m most happy to see this argument finally put to an end!

The Chairman goes on to address the various types of exchange rate systems and explains that while they are defined by economist that they are much more complex than simply identifying them as pegged, pure floats, managed floats etc. The Chairman explains that Reinhart and Rogoff (2004) said that 153 countries claimed rate stability with their pegged exchange rates between the years of 1983 and 2003, however 53 % of the remaining countries chose to adopt a managed float exchange rate.

He went on to explain that according to another study conducted by Levy –Yegati and Sturzengger in 2005 showed that a pure float in which a country allows their currency to join the flexible exchange rate system and slowly gain in value experienced high volatility and proved to be unstable. He also explained that the countries in question had to maintain high levels of foreign currency reserves in order to prepare themselves for possible downfall.

It plainly states the reasons why the Iraqi Dinar will not be directly pegged to any one currency, or become a pure float as Kaperoni has stated earlier today. The article goes on to explain that the CBI will adopt the theory of a managed float or as they describe it within the article semi-floating managed float as stated in the conclusion of this article.

Since it will be a managed float… there is no way possible that the Iraqi Dinar can gain a slow growth. Instead, it will come out closer to the average of the currency basket in which its float is managed by. “ Which leads to lower inflation and raise the external value of the Iraqi dinar at a rate rose by the Iraqi dinar exchange rate during the study period, including over 41%”

Once again, I believe that we will see a rate of no lower than $2.30, however I truly suspect that it will fall into the 3+ range.

1. Groovgal’s Explaination of Part III Center For Studies and Research

A few days ago I broke down parts 1 and 2 of the Center for Studies and Research / Consultant for the CBI. The appearance of Chairman Mohammed Saleh.

Parts 1 and 2 covered the Central Bank of Iraq’s financial system, partial history of its currency, the Strategic Framework Agreement, and the reintegration of the Iraqi Dinar into the flexible exchange rate system that is recognized internationally. Although these articles are translated into English, I’ve had some individuals contact me asking to further clarify these articles into simpler terms. I’ve taken it upon myself to add additional information or further explanation beyond what the articles entail for mere educational purposes.

While it is easy to sit and read any of these documents as most of you do and are doing now, it is sometimes difficult to truly understand what is being said if you do not know the background or further knowledge of the topics being discussed. If you are an individual who already has a firm grasp on economic financial systems or global politics then you might find this to be more than what you need, however I’m writing this for the newer investors who are unfamiliar with what they are reading.

It was brought to my attention that a few who had read parts 1 and 2 of this study had seen the articles as reflecting negatively upon our investment, however they are anything but negative! These are fantastic and further prove that we have made a very wise choice in deciding to invest in the Iraqi currency. While this has been a long road we are close to the end.

I’ll move on to explaining part 3 of the Center for Studies and Research / Consultant for the CBI. The appearance of Chairman Mohammed Saleh, which was published yesterday. After I go through explaining and making the article easier to comprehend I’ll add some additional thoughts.

Mohammed Saleh of The Central Bank of Iraq believes that the current monetary policy, being that of a fixed rate on the Iraqi Dinar, is a natural and beneficial way of maintaining the financial system, which is based on market competition. However, the CBI desires to expand the Iraqi Dinar into the international market by joining the flexible exchange rate system in effort to join in global financial community.

Yet, it is important that the CBI continues surveillance on the flow of monies in order to curb possible illegal activities such as money laundering, terrorism, or tax evasion by Iraqi citizens depositing their monies in banks abroad.

The CBI wishes to leave behind the era of Saddam Hussein and no longer wishes to restrict the flow of foreign currency exchange. They are anticipating the upcoming freedom for its citizens and brighter economic climate within Iraq. The era of Saddam Hussein was narrowed by suppression of the Iraqi people who had limited freedom to own and dispose of legitimate economic rights. Chairman Saleh described this era as dark economic times specifically in the area of foreign currency exchange and as a result it left Iraq isolated from their neighbors as well as the global community.

He expressed excitement at the new horizon that stood before the people of Iraq. The provisions of Article VIII of the International Monetary Fund Convention, allows member countries to adopt freedom of foreign currency exchange by joining the flexible exchange rate system and it further allows member countries to lift restrictions upon its citizens and provide freedom to move monies with the exception of illegal cash flows as mentioned above. Individuals who partake in money laundering or other illegal actives hinder the value of the currency and restrict its growth by creating a parallel markets similar to the current model of North Korea.

Within a restricted monetary system these types of activities are greatly reduced, however the CBI does not wish to restrict its citizens even though the cost of surveillance will be a burden. By not adopting Article VIII and joining the global financial community the country of Iraq would only generate a negative financial system that would weaken its capacity and ability to attract foreign investments nor capital (cash) flow from within or globally.

The GOI/CBI is anticipating the Investment Law No. 13 of 2006. However, they wish to take the proper steps as to not repeat the mistake of others such as the problems that occurred within South East Asia during the years of 1997 – 1999. South East Asia experienced an endemic that proved to be detrimental to its economy due to the flight of foreign capitals, investment portfolios, deposits and various debt issues of high liquidity (currency in circulation) while having weak foreign reserves available. South East Asia experienced an imbalance within their budget pertaining to the balance of payments and their deficit. The situation proved to be unprecedented and resulted in the collapse of the currency exchange rates.

However, in spite of this, Iraq has little concern of joining the flexible exchange system. The CBI is seeking a monetary policy and has been doubling up on their foreign reserves to date, in order to create a firm foundation to cope with issues that might arise concerning external balances (debt) of the national economy because of currency speculation and capital flight abroad. They wish to be greatly prepared for any strong shocks to its economic system due to external factors.

In light of what has already been mentioned above, the CBI does not see its current monetary policy as one that would provide freedom and instead it restricts movement of cash flows to and from the country even though the current policy had controls and regulations in place that restrict money laundering, crime and terrorism. He believes the current monetary system is conflicting with the CBI’s greater goal of economic freedom.

He states that it is the of the CBI to take on the responsibility of Iraq’s economic stability, encourage communication between government organizations and others in order to strengthen the control of illicit money and fight economic crime which is the responsibility of all.

Between the State and Monetary Stability

Monetary policies or dollarization is one of the most important challenges within any monetary policy of developing nations. Iraq in particularly used the United States dollar as a substitution of its national currency in transactions and contracts internally as well as externally in order to function.

In spite of Iraq using the United States dollar for its transactions the country also used mostly loans granted in foreign currency and extended the pay back of these loans over long periods of time. 70% of the loans derived from Latin American.

The CBI supports joining the IMF who has allowed them to partially dollarize within its borders. However, while following the IMF’s agreement to promote sovereignty of the Iraqi economy by partially dollarizing their country they’ve found that of the bank deposits reflect that only 30% is actual Iraq Dinar, while the remaining is still that of the United States dollar, which is showing proof of a parallel currency within its borders still today. The amount of USD that is in circulation at any one time can extend upwards of 80% outside of the banking sector. Yet, the 30% of Iraq Dinar that is in circulation within its borders is proving to settle transactions and payments on a domestic level.

Notwithstanding the current monetary policy set forth by the IMF and adopted by the CBI to achieve the goal of stability, the parallel currency challenges of the USD in circulation has decreased with the adoption of monetary policies to strengthen the external value of the Dinar, which has increased in value by more than 40% of the last five years.

The challenges of de-dollarizing the Iraqi economy proved to be a struggle with competing against the high exchange rate of the USD, however now they are seeing signs that the Iraqi people are beginning to show faith within their local currency and strengthening the Iraqi peoples view of the their financial systems.

The country of Iraq is experiencing the largest reformation of monetary policy seen by meeting specific targets set forth by the IMF to achieve stability with the value of the IQD and the growth required to accelerate the development of opportunities, advance the process of government operations, manage domestic interest rates in order to achieve the intermediate objectives of the monetary policy itself. In this regard, the purpose of dollarization is a measure of monetary effectiveness set forth in effort to make the Iraqi Dinar more attractive, which is shown by the monetary demand or stability.

Seignorageis one of the sources of revenue generating strong cash charges resulting from increased demand for the Iraqi Dinar. It has been a positive reflection on the income disclosed in the annual financial statements of central banks.

In spite of this transitional phase of de-dollarization, the CBI uses the method of auctions to control aggregate demand through levels of reserve liquidity (foreign reserve deposits) generated mainly by government spending and inflationary pressure resulting from within it. The auction achieves three objectives:

1) It serves as an intervening tool to achieve stability with the value of the Iraqi Dinar by defending the exchange rate equilibrium, which has kept inflation down, especially that of imported goods and strengthen the export base.

2) It has provided a means of applying an indirect tool of the monetary policy in the management of liquidity and controlled economic stability by providing a continuous basis for achieving a balance within the money market.

3) It has proved to be the main source of funding for the private sector of trade and goods as well as other services needed by the country.

The previous dictator supported a financial policy prior to the war that weakened the economy, and adopted monetary policies that were unable to fund the general budget, which has delayed economic growth for decades and as a result it plunged the country into a massive wave of hyperinflation and the continued instability upon the value of goods. It plunged the country into a prolonged recession that led to the deterioration in economic and social development, which is still seen today.

In consideration to the challenges the current government is facing due to what the former Hussein regime left behind, they have been able to combat the hyper-inflationary pressure that had set in by managing the value of the Dinar as well as interest rates. For the first time in decades, even though the value is nominal, the Dinar has seen stability. The current interest rate is keeping inflation low and as a combined result for the first time in three decades the CBI has greater ability to advance the financial system by continuing the policy of money markets and stability in face of exceptional circumstances.

Three years ago the rate of inflation was 34%. One year ago the rate of inflation was 20%, however today it has fallen to 5%.

The current interest rate is about 17% for most, however some interest rates are 20% – 25%. The CBI has been trying to persuade the banking sector to offer lower interest loans to encourage development and investment. The CBI may resort to adopting additional monetary tools that work as a legal way of enabling monetary policy to reduce points (cheaper loans). By giving a point deduction spread of no more than 3 percentage points it will combat the current status of 10 percentage points which is unproductive. The CBI is considering providing a national orientation to address the imbalance within the structure of interest rates to generate a stronger and healthier atmosphere in the area of financial intermediation. They believe that this step would encourage real investment opportunities within the private sector.

I hope that you were able to fully understand what the above article is trying to convey. This is all very positive for us as investors of the Iraqi Dinar. While digesting the above information try to reflect upon parts 1 and 2 of this study, and you’ll find that the CBI is saying that they are eager to join international ranks!

There was a window of opportunity that had opened in October of 2009 and closed in December of 2009. Sadly, many things obstructed our investment from becoming valuable. The government of Iraq stalled on advancing their economic stance until the elections took precedence and terrorism within its border took hold. Was this done on purpose or was this simply the governmental heads too inexperienced to move in a timely manner, it is hard to say. However, since January 2010 we have seen an influx of articles pertaining to their economic stability. We’ve seen actual words written within these articles such as Dinar, revaluation and re-denomination. For those of us who have been in this for such a long time we know just how wonderful it is to actually see these issues being addressed, whereas these words had not been mentioned before. That alone shows just how close we are to the end of this trial.

During the month of October 2009 we had the G-8 meeting on financial realignment. The global leaders (United States, European Union, United Kingdom, Russia, Japan, Italy, Germany, France and Canada) met to discuss trade barriers as well as global currencies. It was during this time that it had became painfully aware that China was manipulating their currency, VND was undervalued, Venezuela’s was undervalued, as well as several others. Many of you will remember me being the first to tell you more than a year ago that approximately 13 to 14 currencies would revalue and we’ve seen at least half of them already do so.

The global leaders met and had agreed that Iraq was in a wonderful position to revalue its currency, however Iraq stalled. Towards the end of October China began to cause problems with the United States and claimed that our currency was a risk and as a result they threatened to sell off their T-Bills. This was nothing more than a political maneuver by China in hopes that they might look as if they were more powerful than that of the United States. Yes, the value of the USD has fallen somewhat but not near to the degree that China was trying to insinuate.

Everyone must understand that China has been doing this for years only many of you are just now paying attention because of your interest in this investment. These advances by China are nothing new. China is consistent in causing havoc and they enjoy doing so. China is kept a bay for a reason and the G8 will continue to keep China at bay and continue to make sure that China hasn’t too much power. Why do you think the US is forcing China to revalue its currency?

Sure the United States wants trade relations to stabilize but this isn’t the only reason. China is growing far too fast and the G8 is looking for the fastest and safest way to slow their growth down. The only way for a communist country to economically survive is to feed off of the actual producing nations. China does so via their trade imbalances. The United States has stated that in order for the trade imbalance to correct itself they want China to increase the value of the Yuan by 8% in gradual increments, although it is undervalued approximately 10-40% against other currencies. The Chinese economy faces several hurdles that have been created by its communist theories. The country runs on government run banking sectors unlike the United States and these banking sectors are completely unorganized and overran by corruption. The Chinese government has dropped their interest rates for so many consecutive years that the economy is on the verge of imploding in some respects. The Chinese government is growing at a rate faster than what they have planned for due to the housing and automotive sales. Unfortunately, the Chinese government did not consider oil consumption while watching their housing and automotive markets sore, because they are now in a mad scramble for oil, in order to supply fuel for vehicles and heating.

Timothy Geithner has said that the U.S. is considering imposing trade sanctions and they just might do it. The global community is already taking measures to limit their funding to China, such as the United Kingdom’s move to stop funding aid to the bloated country. The United Kingdom sent 40m pounds to China from 2008-09 alone. But trade sanctions are only a minor issue in comparison with the new carbon laws that the UN is making grounds on. The UN has been working on climate change laws that would restrict the CO2. emissions. China is one of the leading threats to our environment in the eyes of the individuals who believe this propaganda of climate change. If the UN succeeds with the new carbon laws China will be forced to pay out millions to retool their factories in order to meet the demands. China is trying everything in its power to offset this process.

If you noticed, China is not part of the top G8 who are the actual figureheads of the world. There is a reason for this. If you look at the list of the G8 they all have good relations with one another and hardly see upsets either on a political or economic level. The only exception could be that of Russia in concerning the arms issues but that is small in consideration with the other 192 member nations of the UN.

Many of you are unaware that the United States was actually the one to create the United Nations in 1945 under Franklin D. Roosevelt’s administration. Ever since the first meeting, consisting of 50 nations on April 25, 1945, the United States has held the most voting power and we will continue to do so.

There are not very many nations who are truly seen as what I would coin as “troublemakers,” but the ones I would deem as troublemakers would be that of Iran, China, North Korea, Cuba, Pakistan, and Saudi Arabia. These nations have shown to cause political upset when the global leaders desiring advancement. If you are on top of your current events you’ll notice that each of the nations I just mentioned are in the news on a daily basis, it seems. Lol

There is so very much currently taking place across the globe that it would be endless for me to list here within this article. I will not bore you with all the political upsets that are taking place seeing as your only interest is pertaining to that of the Iraqi Dinar or the Vietnam Dong. However, you must understand that everything is interconnected. We cannot solely look at what is occurring within Iraq’s or Vietnam’s borders to truly understand what is taking place or grasp what steps are actually being taken to revalue these currencies.

We are currently experiencing a global recession with the exception of Switzerland who recently reported that they will hardly feel any affects due to the actions they had taken a few years ago. The global leaders have taken a step back and studied what needs to occur in order to stabilize the global economy, and in doing so they’ve came to the conclusion that there is trade imbalances that are currently in place. In laymen’s terms, the global leaders do not believe it is fair for certain countries to be benefiting from undervalued currencies and essentially creating a monopoly on industry by being an attractive location to build factories and have cheap labor thus prospering at a rate greater than the countries they are exporting to. One example of this would be the trade imbalance between China and the United States.

That is the reason why we are hearing of so many countries revaluing or devaluing their currencies. Now, will the United States devalue its currency? Absolutely not. One reason would be that we produce most of the common every day goods within our borders and our exporting is not great enough to be of concern. In fact, China was complaining because the value of the dollar had fallen and they wanted reassurance that it would rise again. Of course this issue was quickly dropped once the light was shown upon their currency manipulation. Lol

Many speak of a global currency created under a new world order. I don’t see this being an issue for many many many years. Too many steps would have to take place in order for that to occur without there being a global uprising. I can speak for pages on this topic alone as to why this is not an issue within our near future.

I hope that I’ve addressed some of the current hot topics that I’ve seen flying across the chat room’s screen throughout the day. If you have questions about any of the above-mentioned topics please feel free to ask and I’ll consider expanding upon them.

Third: the monetary policy, financial flows, movement

In spite of this, however, such fears are still very limited impact on Iraq, in order to double the flow of foreign capital involved until now. However, seeking monetary policy the Central Bank of Iraq to the currency composition of reserves sufficient glittering, focused primarily foundation To cope with any contingencies may be exposed to the external balance of the national economy because of the potential currency speculation and capital flight abroad Surprise, as well as sensitivity to any adverse surprises may be the subject to the national economy resulting from the strong shocks Movements by external financial spam.

In the light of the foregoing, I do not see that the current monetary policy of the country is one of the style that supports restricting the movement of cash flows to and from outside the country as long as Taatqtaa

With controls And the regulations and directives in force Almcdjapllaguetsad Aharola conflict at the same time and conditions of foreign exchange, especially the law against money laundering and money, crime and terrorism.

I find that the CBI financial entity is responsible for the economic stability of the country, encourages communication and consultation offered by the competent organs and control devices Others in order to deepen the control on the movement of illicit money

.

And the fight against economic crime and prosecution is a national responsibility and joint responsibility of everyone.

Fourth:

Monetary policy in the face of contradiction

بBetween the State and monetary stability

Is dollarization is one of the most important challenges facing the makers of monetary policy in developing countries in general and Iraq in particular and that meant the use of United States dollars or any foreign currency to the ability of substitution of the national currency in transactions and contracts of internal financial and promise a store of value in the same time.

In spite of the financial dollarization, composed mostly of local loans granted in foreign currency over a long period, which stands

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In some countries of Latin America to about 70% of the total loans granted locally, but

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Central Bank of Iraq, supports one of the concepts of international financial institutions, amended, to express the phenomenon of dollarization in Iraq.

Partial Dollarization

The dominant conception of the IMF regarding the partial dollarization partial Dollarization

Is the largest expression of the reality of the phenomenon of dollarization and sovereignty of the Iraqi economy. If the bank deposits to money supply in the broad sense of more than 30%, the phenomenon of dollarization of the country lives in part.

Parallel Currency

But if one takes into account the installation of the money supply, which is dominated by the nature of currency in circulation, which sometimes extend to 80% of the total money supply, we find that the United States dollar is still caught on to it a parallel currency in circulation outside the banking system Parallel Currency

In the settlement of transactions and payments of domestic monetary

Promise a good store of value

.

It can be said that the phenomenon of partial dollarization is still prevalent and not exceeding 30% in the settlement of the movement of cash transactions in the local economy.

Notwithstanding the foregoing, the monetary policy Adopted by the Central Bank of Iraq as part of Strutijeth to achieve the goal of stability, has shown that the financial system Almdolr taking a drive towards a gradual decrease, and the phenomenon of dollarization partial and roots are now less than before, because freeing the foreign exchange and the adoption of monetary policy to strengthen the external value of Iraqi dinar, which increased during the last five years to more than 40%.

Took the expectations of rationality to the public pour all around to keep the Iraqi dinar because of the gradual improvement in the value of Iraqi Dinar and the high exchange rate against the U.S. dollar, having started the monetary policy, the establishment of a framework for effectively working towards the strengthening of trust in Iraqi dinars, which help confidence in local currency, the creation of conditions strong and deep in the stability of the financial system.

De-dollarization

With this, the phenomenon of de-dollarization Alladolrp One of the main objectives of monetary policy in our country in the face of

Partial dollarization.

The response of the dollarization of the central banks give much The largest to reformulate its monetary policy and in accordance with specific targets to achieve stability in the general level of prices and building the required growth and accelerate the development opportunities and advance the process of operating in the country and strengthen at the same time the link between domestic interest rates and change the overall spending, or domestic demand, and supports the effectiveness of movements exchange rates, for, all in the improvement of mechanical moving cash, any transfer of the impact of the operational goals of monetary policy to achieve the intermediate objectives of monetary policy itself.

Stating in this regard, that the strength of response of dollarization, is a measure of the effectiveness of monetary policy in the provision of reference moving to make the Iraqi dinar is more attractive, which usually reflected the stability function of the monetary demand or low speed of money circulation, stability and so influenced by my reference exchange rate, interest rate and Adahma variables active mentors in the stability of the monetary demand and the strengthening of mechanical moving cash at the same time.

Seignorage

And Aevotna, that the policy Alladolrp, is one of the sources of revenue generating strong cash charges Version Seignorage Resulting from increased demand for local currency, which reflected positively on the income disclosed in the annual financial statements of central banks and strengthen the status of net wealth of the balance sheet in such banks or central banks.

In spite of this, seeking monetary policy strategy in building the path of stability in this transitional phase through which Iraq is to provide a stable environment to attract growth and economic prosperity starting Baktall cash becomes today a strong and firm, and in this context is the auction of foreign currency and means of monetary policy directly affecting the cash basis of the country in order to control aggregate demand through the levels of liquidity generated mainly by government spending and inflationary pressures resulting from it, where would the auction in question achieve three objectives:

1 – Intervention as a tool to achieve stability in the Iraqi dinar by defending the exchange rate equilibrium, which reflected positively on the general level of prices, especially of imported goods and inputs to final production and strengthen the export base.

Means of applying the indirect tools of monetary policy in the management of liquidity and control over the economy Mnasebha, is a case of the application of open market operations required a continuous basis to achieve balance in the money market and strengthen the opportunities for financial stability.

A main source of financing private sector trade of goods and services needed by the Iraqi market and financed essential.

In this fed monetary policy adopted by the Central Bank of Iraq

In all directions and since the Iraqi Central Bank Law No. 56 of 2004 towards the provision of opportunities for stability and success of the national economy. The only policy that is almost unique to such an overall objectiveIn tackling inflation and reducing the annual increase in the overall level of prices and the strengthening of stability in the financial system at the same time, as Is the monetary policy

.

Self-produced for a public good is unique in its importance a commodity to maintain the stability of the purchasing power of the national currency.

Especially after those associated with policy reform basic synchronization Bajrat the goal of strengthening the bonds of the money market and brokerage operations with the imperatives of foreign exchange market stability and support the stability of the external value of the Iraqi dinar, as a government to achieve Twasenhma signals Sareeten powerful signals from the market, which were endorsed monetary policy to achieve the goals mentioned by

Two reference interest rate on the dinar reference rate and the Iraqi dinar exchange at the foreign currency.

Valthrr financial markets witnessed in Iraq Over the past five years

Illustrated by actual financial market patriotism through freedom of the banking system and the launch of its ability to determine the interest rates payable and the city has, which promised an essential element of the strengthening of financial intermediation is the core of financial stability, especially after it was abandoned measures are enforced by the monetary policies of the previous adoption Through direct means, the resort to indirect policies that support market forces in order to avoid the phenomenon of fiscal restraint and the development of ceilings on bank credit or assigning credit or the imposition of administrative interest rates outside the market forces and balances

.

. Where he led the braking financial policies prior to the deviation of the financial market and weaken the climate brokerage, as well as the adoption of monetary policy cheap for lending to the general budget, which has delayed economic development for decades and plunged the country into a massive wave of hyperinflation and the continued and replaced speculative price on goods and services subject productive investment and low total savings Which plunged the country into a prolonged recession led to a deterioration in economic and social development which, to a level that threadbare economies, a phenomenon that still live some of their dark until this moment.

As The success achieved by the current monetary policy in the face of hyper-inflation of the country and use a reference interest rate monetary policy

policy rate .

policy rate as part of its dealings with the banking system, had the greatest impact in the face of inflationary expectations in the ongoing and expanding, which was torn and crushed in Asagraralblad investment decisions in the interest of the real sectors of the speculation.

This has made a reference interest rate

Nominal On the Iraqi dinar For the first time with a hint of the nominal exchange rate momentum Astaqraria strong, reflected in turn on the stability of the transactions in the national economy and helped to maintain On real interest rates positive for the first time in the history of the country (after more than three decades) than the nominal interest rate on the inflation rates, which enhanced the ability of the financial system to continue and give the money market opportunity, stability and durability in the most exceptional circumstances that our country has undergone in recent years since 2003.

With the decline in inflation is the foundation of 34% per annum three years ago to about 5% per annum with the present and to engage in the era of rank decimal one for inflation, the reference interest rate adopted by the Central Bank has landed the other with lower inflation from 20% a year to less than 5 % currently, having achieved Useful signal of monetary policy goal of achieving strong returns on the Iraqi dinar and turn it into a bumper currency attractive and strong in the face of inflationary expectations that the country suffered through periods of time long past.

In spite of liberalization of the financial market and subordinating monetary policy to work according to market mechanisms, as well as giving financial system in general and the banking system, in particular the freedom to determine interest rates Bnevshma without direct intervention from the Central Bank of Iraq (except for the launching signal interest monetary policy), but the Central Bank of Iraq had noted regrettably that the sector of private banks had stuck to his signals, high interest on loans granted to the public and rates are still higher level of inflation which is displays the financing for development in this era of stable, experienced macroeconomic risks of economic recession and the disruption of human and material resources to the private sector

.

And the whole national market.

It is still interest charged by many private banks for loans extended to the public convergence of the annual averages about 17%, but up-date interest

.

In some of them to between 20% – 25% annually.

That the policy of persuasion or moral influence with a group of different banks and urged them to reduce interest rate levied on loans granted and encourage them to grant credit to serve the development of economic activity in the country is perhaps a preliminary central bank may resort to the adoption of additional measures could be state sponsorship Aoahiana Legal, enabling monetary policy to reduce points spread between the interest rates payable and bank interest of the city (where the point where, unfortunately, in some banking entities is less than what can be on savings deposits and higher what can the credit granted to the public) by making the deployment points at normal levels not exceeding 3 points in accordance with banking practices, natural, instead of the current status of 10 points

و

Which is intersecting with the objectives of financial stability in accordance with the standard indicators of Banking Supervision

ا ,

International orientation and required to address the imbalance in the structure of interest rates, banking, is to generate a strong and healthy atmosphere in the conduct of financial intermediation, In the midst of the economic policy direction for the country in general and monetary policy in particular to encourage real investment and strengthen the development opportunities in the private sector through a foster strong stability provided by monetary policy through the application of

Their stability, in the past three years her.

http://translate.goo...�X_X2Xx9aTQn3lg

Medic :

GG…..this was the greatest summation of events past…..present and the forecast of the future of the IQD…….I have ever seen in print……I am extremely proud that you have been a friend and a member of this site……people like you and others is why this site is the best site for information and factual information and logical legitimate responses to what is really going on…..

mailman17: actually, groovys summation is without a doubt the best i have seen compiled……like med said, if anyone here has not read it yet, please do…it pretty much sums up the last 7 years in a nutshell.

mailman17: busman…that has to be the best compilation of the crap we have gone through over the last 4 years…literally….and she put it together in a way for everyone to get the gist

mailman17: its kinda nice that she did that….although me, med bf, gg and others know how we got here, its nice that you all know now. xI hope it also puts your mind at ease as to why it is taking so damn long

mailman17: thats kinda hard to explain in laymans term…but gg pulled it off ….and that doesnt even delve into the political scene

mailman17: it just goes to show, just how much is behind this little investment of ours…

Medic:

GG again thank you so much for the incredible explanation…..as you have explained there are allot of dynamics involved……I try to let this be understood that it is not as simple as the IMF just sayin RV……We are winding down and what the exact catalyst for the revalue or redenomination or rebase is…..only those who actually will make the final decision know…..

[ronscarpa]

June 19, 2010 · Center for Studies and Research/ Consultant CBI d. The appearance of Mohammed Saleh Part 1

Medic:

GG again thank you so much for the incredible explanation…..as you have explained there are allot of dynamics involved……I try to let this be understood that it is not as simple as the IMF just sayin RV……We are winding down and what the exact catalyst for the revalue or redenomination or rebase is…..only those who actually will make the final decision know…..

Thanks GG for an awesome summary and analysis...Bless you...!

Thanks WOODY for posting this!

RON

[kox]

Great, thank you for all the work to put this together...its coming isn't it???? Ya hoo

[jlintim]

Simply the best post I have read ever posted on this site.

Thanks for taking the time to explain.

[kingfish]

This is a very good post as it not only talks about our investment but also the effect on world markets.

Great job.

GO RV!!!!

[Bobbydee]

Thanks K98 for the post. I feel much better about this investment. GG has made it possible to understand why it has taken so long for an RV. It's better for them to take their time and do this right. GO RV!!!!!!!!!!!!!! God Bless Semper Fi

[kittycat]

GREAT article Groovegal! Thanks for the time and effort that was put into it!

[automag]

Wow!!! Thanks GG for that report. That was excellent. I learned a lot too. Thanks again for your time and efforts.