The central bank clarifies the fact that it is not possible to pay salaries next month

[ronscarpa]

On 4/2/2020 at 2:12 AM, Theseus said:

Iraq will definitely need to RI before it can RV. What I mean by this is that the IQD will need to be reinstated (RI) back onto the world Forex market which is currently devoid of the IQD. I only speak of an RI in that terms. When I speak numbers other than the current price point for the dinar, this is a revaluation. An RI can be done simultaneously with an RV and to some this is confusing which can be discussed later.

 

While a 10 cent RV would be an increase in value to the reserves, true, but there are other mitigating factors that go against a 10 cent RV. First, we speak of purchasing power. This begets the current MCP practice Iraq employs. The only way a 10 cent RV would work is to do away with the MCP that Iraq employs. However, the black market would still continue to be done in USD due to purchasing power the USD has over the IQD thus the MCP practice would not be done away with. A requirement the IMF holds for Article IIIV.  In order for the Iraqi denizen to not only feel like they have more purchasing power they need to be reassured that their national currency is emblematic of their increased sense in purchasing power. This means they need to feel and need to see that the currency they hold in their hands, IQD, is actually worth more than the currency they gave up, the USD. Purchasing power has more to it than just numbers on a sheet of paper. There has to be confidence behind it, this is the "feel" part. (The US monitors this, partly, through Consumer Confidence Index levels)  If the general Iraqi sees that their currency is less than what they are being told they have to give up, then the RV will never hold no matter how much education Iraq gives their people. Its like telling a child they have to eat their peas over that scoop of ice cream.Let's face it, any normal child, let alone any normal grown adult, will want the ice cream. Peas, YUCK! And pea-flavored ice cream (DOUBLE YUCK!) just won't cut it. I have always maintained that a par value, 1 to 1,  or lower (anything below a 1 to 1) RV will not suffice for Iraq due to the psychological and physical effects it will have in regards to purchasing power. The Iraqi people have been in the poor house too long and they are clamoring to break free. While I am in the 1.16 camp, since Shabibi, there is always a hope for a higher than that RV. I will continue to look at this investment and make my decisions through the data-driven decisions rather than how much I invested emotionally into it.

 

Love is the folly of the fool; for it makes men fools and fools men.    

 

Thank you Theseus - well said..! 

[ronscarpa]

On 4/2/2020 at 4:43 AM, Adam Montana said:

 I agree with a lot of what you're saying in the entire post, for example:

I think the term "black market" carries a stigma that can be misleading. People immediately think of human organs, illegal drugs, and slaves... but in this case, the term mostly means "currency trading outside of the government actions". The term "black market" is technically correct, but in the case of the RV/RI the "black market" will be tiny and almost insignificant compared to CBI Auctions, FOREX, etc - the "not-black market".

 

There are big numbers - lots of currency - that is and will be traded on the "black market". But those numbers will pale next to the official trading, and most people don't have access to the "black market" and will primarily use official channels. Which is why - although I agree with your logic and argument - I still think the GOI can successfully RV at ten cents. It would be most successful with a float, because the ability for IQD to increase more will encourage people to desire IQD over USD because of the opportunity for profits. The USD, after all, is not going to gain in value. Herd mentality kicks in, Iraqi people and outside sources will increase the demand for IQD based on further speculation, and that adds even more value. 

 

I do see and agree with some of the logic in the $1.16 argument. I just also see strategic value in a 10 cent + float.

With a float, their currency will hold more potential than the USD. But I agree with you that at $1 or higher ($1.16) there is no question - at that rate it is more valuable. Both rates have positive aspects.  Solid plan for anyone. 

 

Thanks Adam...!