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IQD - The CBI's Fiat Currency


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IMO, the CBI is already exercising its “Fiat Currency” prerogative by keeping the exchange rate between the IQD and the USD artificially high at 1180:1.

 

According to long established internationally accepted guidelines and Central Bank transparency rules, the exchange rate between one currency and another is usually “guided” by the ratio between the volume of the home country currency (IQD) exposed to trade versus the volume of an internationally accepted reserve currency (USD) held in reserve.

With those transparency rules and guidelines, the international banking community can choose to accept any Central Bank’s published “Fiat” rate ~ or not.

 

In Iraq’s case that would be approximately 90 Trillion IQD exposed to trade versus approximately 40 Billion USD held in reserve and that would “indicate” an exchange rate of approximately 2250 IQD to 1 USD (2250:1).

 

The international banking community led by the Fed and the IMF (in which Iraq is a founding member and has kept the IQD pegged to the USD for at least 30 years) have already accepted the CBI’s currently published stronger “Fiat” rate of 1180:1. The CBI trades at that rate daily with its currency auctions and everybody says OK.

 

However, the big question might be how far is the same international banking community prepared to go before it just says NO to an upgraded “Fiat” exchange rate and just stops trading with the country publishing the rate?

 

Such a sanction would simply render any “considered unrealistic” exchange rate null and void right from the get go; so what’s the upper limit before the international Central Banking Community led by the Fed and the IMF just says NO to Iraq and the CBI on its published “Fiat” exchange rate?

Instead of the published 1180:1, is 1000:1 going too far?

How about 100:1 or 10:1? Where’s the acceptable upper limit?

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Thanks for the positive tags given.

 

Actually, this thread is meant to garner opinions about what the international banking community (led by the Fed and the IMF) might tolerate as an acceptable IQD/USD exchange rate before coming to the conclusion that it would be best not to trade with Iraq anymore because of the increased costs in USD’s.

 

An exchange rate is a ratio between two numbers and if you raise the value of one then you effectively lower the value of the other. No getting around it mathematically.

 

For example, if the board of directors of the CBI decide to exercise their “Fiat” prerogative and raise the value of the IQD, then they are effectively lowering the value of the USD in Iraq at the same time.

That means a person would have to spend more USD’s to buy stuff in Iraq and that includes barrels of oil ~ which are always sold in petro-dollars.

 

If the international corporations, which have already contracted to pump out Iraq’s oil have to start paying out more USD’s than they anticipated to purchase IQD’s in order to pay the wages of the locals that they hire in the oil fields, how much of a downgrade of the value of the USD would they tolerate before putting those Iraqi contracts on hold and concentrating on other oil fields where they can still make the profit that they anticipated?

 

If oil brokers have to start paying out more USD’s than they anticipated to buy barrels of oil from Iraq how much of a downgrade of the value of the USD would they tolerate before they decide that they’d be better off buying those barrels elsewhere?

 

If the value of the USD is lowered in Iraq, how does that affect those other economies around the world that depend on the USD?

 

IMO the question becomes what “Fiat” exchange rate can the board of directors of the CBI get away with before they start to squelch the Iraqi economy and/or the international banking community just says NO to Iraq.

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