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Collapse of the dinar is possible


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If the plan is to RV the dinar, everything you will hear or read will be the opposite. “Devaluation” “Lop” “colapsé of the dinar” just my opinion.!   Go RV   

Pitcher, I'm all in for digital currency. But, it took Iraq this long to climb out of the 19th century. And their people still don't trust banks, so bridging that huge gap will take more time than it

Nice to see you my brother 🤙🏽   Agreed🤞🏼   Totally agree.!!! Nice to see you Carrello. Its very interesting that they are putting emphasis on this topic.  

The collapse of the Dinar is a very real possibility.  More important is what happens next.  Do they go to a digital currency.  I believe they will and if they do what happens to our investment?   

 

 

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.Executive order 13303 in 2003 allowed US citizens to puchase dinar.  In fact Bush encouraged people to buy dinar ,and I believe that US citizens received a  $200 rebate from the government at the same time . Bush and the US government would have committed fraud if they weren't acting in good faith . Iraq will be going digital along with the rest of the world I owned a conveinience store /gas station ,basically a cash business, and I was robbed blind ,especially by employees . Digital is good ,believe me ! 

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I’m all for digital currency and I’m all in on the investment of Blockchain Technology.  Go to the thread I started, Crypto Currencies, Start Learning.

 

Im very interested in what Iraq will do because I kind of believe it might be a test of sorts for what may happen in the US.  

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Pitcher, I'm all in for digital currency. But, it took Iraq this long to climb out of the 19th century. And their people still don't trust banks, so bridging that huge gap will take more time than it normally would in a progressive country like Britain or the USA. I don't believe the USA, IMF or WB will allow Iraq and the dinar to collapse, given all that we (they) have put into the country. There is a way that the CBI can remain independent and actually GROW the reserves to historic numbers.   @Adam Montanagave such an example several months ago in his Wednesday chat log, so maybe he can repost that here. It made perfect sense. But then again, we are talking Iraq here. Kazemi is doing amazing things. Let's hope he continues to do so without hinderance from parliament.

                                                                           :twothumbs:

Edited by King Bean
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I believe the people of Iraq will have more confidence in a decentralized crypto (stablecoin, bitcoin,XRP) than the traditional fiat and the banks. Most of the chunky money will be converted into crypto quickly IMO. The population in Iraq is very young BTW.

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33 minutes ago, kwg said:

I believe the people of Iraq will have more confidence in a decentralized crypto (stablecoin, bitcoin,XRP) than the traditional fiat and the banks. Most of the chunky money will be converted into crypto quickly IMO. The population in Iraq is very young BTW.

 

the people might be but imo governments don't like individuals by- passing the banking system , so until they get their hooks dug into digital currency to gain control , full adoption in governments will not happen imo and that kinda defeats in a way using the decentralized currency platform , USA just now allowing brokerages to offer their clients the option to invest in bitcoin and some alt-coins btw i'm not against the crypto space its just still emerging towards full adoption . 

still hopeful iraq can turn its currency on internationally with a increased value while i hold their paper notes... cheers   

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Iraq has a population of 32,000,000 . 20% are youth ,median age is 21.  The young ones in Iraq have never known peace ,first Saddam , and then us . What they do know is the internet . They see what we have and they want it . 

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How did you guys come to the conclusion that Iraq is moving to a digital currency and the Dinar is on the brink of collapse if they don't get their **** together ASAP!! This article isn't offering any solutions, it is stating what could happen if the

GOI  don't implement the White Paper Reform and stop being made a puppet by Iran. Evidently corruption, the lack of economic reform, and the currency auctions have put them in this situation and they can't borrower from the CBI because that  would be detrimental to the Iraq economy and the Dinar. Hell, it is already worthless! If the Iraq Economy and the Iraq Dinar collapse, the Country will be in chaos, everything will go to hell and Iran would win. The last 17 years of this investment will be futile and a total loss. THIS IS SERIOUS GUYS!! If the Dinar continues to depreciate, the demand for the Dollar will be higher in Iraq and there will be no Rv. I hope this is all part of the plan and the White Paper will prevent this from happening. I am not giving up as a matter of fact I am going to try to buy another 2 million dinar (Greedy is my Name) because it is DO or Die TIME GUYS!!! 

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7 minutes ago, dinarham said:

The young ones in Iraq have never known peace ,first Saddam , and then us .

 One must not forget that ever so loving ISIS and the caring nation of Iran... just levity 

all the best dinarham  

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2 hours ago, King Bean said:

Pitcher, I'm all in for digital currency. But, it took Iraq this long to climb out of the 19th century. And their people still don't trust banks, so bridging that huge gap will take more time than it normally would in a progressive country like Britain or the USA. I don't believe the USA, IMF or WB will allow Iraq and the dinar to collapse, given all that we (they) have put into the country. There is a way that the CBI can remain independent and actually GROW the reserves to historic numbers.   @Adam Montanagave such an example several months ago in his Wednesday chat log, so maybe he can repost that here. It made perfect sense. But then again, we are talking Iraq here. Kazemi is doing amazing things. Let's hope he continues to do so without hinderance from parliament.

                                                                           :twothumbs:

This. 👆

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This is the subject article:

 

Iraq’s Central Bank is at risk of losing its independence

yesterday at 12:57 
ANALYSIA bank employee hands Iraqi dinars to a customer. The government is attempting to co-opt the Central Bank of Iraq to its political agenda, warns Farhad Alaaldin, chairman of the Iraqi Advisory Council. File photo: Bilind T. Abdullah/Rudaw
A bank employee hands Iraqi dinars to a customer. The government is attempting to co-opt the Central Bank of Iraq to its political agenda, warns Farhad Alaaldin, chairman of the Iraqi Advisory Council. File photo: Bilind T. Abdullah/Rudaw
Finance Minister Ali Allawi said in a press conference following the adoption of the White Paper for Economic Reform by the Council of Ministers on October 13, "we have a solid and strong relationship with the Central Bank for the purpose of unifying monetary and financial policies, and this will provide us with the possibility to cover all the requirements and entitlements of the salaries of employees and retirees." This statement went unnoticed by all journalists, pundits and analysts. Nobody noticed the attempt of the Iraqi government to undermine the independence of the Central Bank of Iraq (CBI) to implement the financial policies approved by the government.

The objectives of the government are clear. The Central Bank has become "very cooperative" with the government's financial policy. The Bank’s law contradicts such cooperation in order to safeguard and preserve the strength of the Iraqi economy on the one hand, and not to bear any government failure in managing the financial policy on the other hand. This is a context known to successive governments, and because the central bank adopts monetary policies that are independent of the government's financial policies. We all remember the dispute that arose between the government of Nuri al-Maliki and the governor of the Central Bank, Sinan al-Shabibi, in 2012, with the former ending up accusing the latter of corruption and issuing judicial orders for his arrest while he was in the Japanese capital Tokyo on an official visit. Subsequently he was put on trial in absentia and sentenced to seven years in prison in 2014 and removed from his post.

The Role of CBI

The CBI is an institution financially and administratively independent from the government according to Article 103 of the Iraqi constitution. It is responsible for setting monetary policy, issuing and managing the national currency and foreign reserves, and setting up regulations, procedures and controls for the work of local banks in the country and monitoring and auditing their work. It is the official body that represents Iraq in the international financial and monetary institutions such as the International Monetary Fund, the World Bank, and others. Among its tasks is also determining the supply and demand for money by setting interest rates. CBI is also responsible for receiving deposits from oil sales and keeping the state’s cash reserves, and it maintains the value of the national currency. This means that the independence of the CBI from government financial policies is very important to preserve the public funds deposited within the bank.

What the Minister of Finance announced in his aforementioned statement is a dangerous precedent for inserting the CBI into the core of the government's financial policy, and making it a tool to implement this policy. This was clearly demonstrated by what was included in the White Paper of financing the budget deficit and considering CBI reserves as the only source to fill the deficit, and here lies the real danger.

The White Paper on page 37 referred to the danger of using the CBI as a source of financing, they believe it "will lead to severe pressure on the CBI’s reserves and the resulting unsustainable future consequences." This view was further confirmed by the group of experts writing the White Paper on page 42, stating that "indirect monetary financing by the CBI is the only remaining source... The need for this reserve to finance imports of goods and services means its will drop dangerously to low levels within nine months, which will ultimately lead to a real crisis in value of the Iraqi dinar, accompanied by the possibility of a collapse in its value."

It is worth mentioning that the CBI reserves are under threat from three different sources:

First:
Using the CBI reserves to finance the government's fiscal deficit. This is done in two ways, the first is to "buy goods and services" using hard currency, and the second way is by “indirect borrowing” using the central bank to devalue the dinar against the dollar in order to "pay the monthly benefits from salaries."

Second: The continuation of the notorious currency auction, which is a reservoir of corruption and a source of wealth for influential people in the world of politics, money and business. The sale of hard currency in the auction exceeds state revenues in most cases, and this means withdrawal from the Bank reserves and further reducing its levels.

Third: The increasing pressure from the state’s creditors, especially Iran, to finance its economy with hard currency after the US administration listed 18 Iranian banks under sanctions on October 8. Therefore, the CBI and Iraqi banks became the only outlet for Iran for hard currency. The visit of the Governor of the Central Bank of Iran to Iraq on October 12 was for this purpose.

The Central Bank governors kept quiet regarding the government statement to clarify its position. We also did not hear from the new governor. What is his vision for managing the bank’s affairs? What is his monetary policy? How can he preserve the cash reserve? Amid the worsening current economic crisis, it is imperative for the new governor to clarify to the Iraqi people the Central Bank’s policies and its position on the crisis facing the country.

The easiest of solutions is not a solution

According to informed sources, the team of experts is still busy working on the White Paper and adding details and appendices to the road map. The team pointed out the danger of borrowing from the CBI, or using devaluation as a means to match the public budget deficit. They warned that this "will later lead to an increase in the cost of living, and thus reduce the ability of the majority of individuals to meet their requirements, as the country depends entirely on imports to meet consumption." It is clear that the majority of the people will suffer and pay the price as a result of this shift in the adopted fiscal policy.

A financial expert, who did not want to reveal his identity, confirms that "the shortest and easiest solution is to resort to the CBI reserves and move towards printing the dinar, but taking this path is not a solution, rather it is suicide." The real fear is that the government and political leadership will resort to this solution instead of starting real radical reforms, which require executive decisions issued by the government and other legislatively supported decisions by Parliament. 

The national duty here makes it imperative for all political forces and all their leaders not to stand idly by. They must actively participate in adopting practical, even if difficult, solutions that the government team will present through the White Paper and its annexes, in addition to what is presented by other experts outside this team from Parliament, economic research centers and monetary policy experts. 

Keeping the doors of corruption wide open in most state institutions, reluctance to curb the corruption of the ruling parties themselves, and not abolishing their economic offices to limit their control over ministries, institutions and vital sectors, will ensure the continued exacerbation of crises and runs risks to the current financial situation, leading the way to a real collapse in a time frame of a few months. The financial and economic collapse will be followed by the collapse of the state of Iraq, and then chaos will prevail. At that juncture no one will be able to restore and control the situation again, except by a miracle that will be difficult to come by.

Iraq is multi-cultural, multi-factional society with different loyalties, each supported by armed groups. Chaos will mean loss of control and stability, which is difficult to sustain in normal circumstances, let alone in the circumstances of bankruptcy, political strife, scarcity of resources and the loss of people's livelihood.

Iraq is staring at its last opportunity, and the political parties must take it without fail, be brave and make courageous and responsible decisions to remedy the situation, otherwise they will be witnessing the worst possible catastrophic scenarios we have ever seen.
 


Farhad Alaaldin is the Chairman of the Iraqi Advisory Council. He was the political adviser to former Iraqi President Fuad Masum, the former chief of staff to the KRG prime minister from 2009 to 2011, and former senior adviser to the KRG prime minister from 2011 to 2012.
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Thanks to everyone who responded in this post.  I've read  many positive and negative opinions about the Dinar over the yesrs, along with many factual articles 

 

There have been many fear-based articles posted about the IQD, such as one from around 2013 which was ppurportedly written by someone from Forbes claiming the IQD was a scam - which it is not.

 

There have also been many negative opinions written about the IQD posing under the quise of fact, for the simple goal of misdireting or misinforming others.

 

I don't question the current war on caah or the attempts by many  to change to a cashless society. which in my opinion will not happen. 

 

As James Bond stated in the movie,  'From.Russia  With Love',  "Where there's smoke,  there's fire."   Such again appears to be the case o be the case with the IQD.

 

I enjoyed all the responses in this thread - especially the one by iididitfirst-which in my opinion provides  an excellent example of critical thinking, which helps immensly when analyzing situations like these.

 

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The Global Reset is coming.  Some that I’ve read say it’s Coming in the following weeks. Others are more guarded and say it may happen in the next year.  I think it will happen when it happens.  All I can tell you is have some hedges in place because when this Financial Reset, Revalue, or whatever you want to call it happens things will be knarly for awhile.  

 

It’s time to start watching your investments in the Stock Market folks.  Please pay attention to what is going on all around us.  I’m not giving financial advice, but please do your own Due Diligence.  I believe the article below signals that our Fiat Currency status is over.  I hope by now you all realize that the Petro Dollar is pretty much dead.  

 

The Big Boys are switching things up. We are witnessing a major Paradigm Shift like none of us have ever witnessed.  Is Iraq part of this equation.  I truly believe it is and I think our wait one way or the other is almost over.  The next 6 months will be very interesting.  Embrace the change and make it work for your financial goal.

 

Banks Brace for ‘Big Bang’ Switch on $80 Trillion Worth of Swaps

LISTEN TO ARTICLE

It’s being called the “big bang,” and it has derivatives traders on high alert.

In a critical development in the global shift away from old benchmarks that was triggered by Libor’s shortcomings, interest-rate swaps on more than $80 trillion in notional debt will transition this weekend to a new rate for determining their value.

While the switch to the secured overnight financing rate, or SOFR, is expected to boost longer-term liquidity in the new benchmark, it also is fueling concerns about unruly price action because it is expected to trigger the sale of swaps on tens of billions of dollars of debt.

“The big bang is one of the most important steps in the Libor transition,” said Marcus Burnett, director of SOFR Academy, an education technology firm whose clients include banks and asset managers. “We expect rates desks from the largest banks in New York to be participating.”

Read More: In a Post-Libor World, Here Are the Benchmarks That Will Matter

The reset, which will see SOFR replace the effective federal funds rate in calculations that value swaps, is part of a push to make SOFR a standard U.S. reference rate in debt and derivatives markets. SOFR is intended to replace dollar Libor, which still underpins hundreds of trillions of dollars of assets such as mortgages in the U.S. and syndicated loans in Asia. The big bang follows a smaller-scale pivot in Europe this July, a less-complicated switch that occurred without much impact on the market.

Interest rate swaps allow two parties to trade one stream of payments for another, over a set period of time. The most common variety, known as a vanilla swap, involves exchanging payments from a fixed rate for payments from an adjustable rate that is based on Libor or some other reference rate. Another kind, known as a basis swap, involves two adjustable rates.

While SOFR has struggled to gain traction since its introduction in 2018, analysts say the upcoming big bang has already triggered a shift toward more trading in SOFR-linked swaps.

This could help pave the way for a curve that reflects expectations for where the rate will be in the future, addressing one of the new benchmark’s key weaknesses.

SOFR Is Coming

Trading activity in swaps tied to new benchmark jumped in September

Source: Bloomberg/ Depository Trust & Clearing Corporation

The big bang “will have a very, very good impact on liquidity,” said Jason Granet, chief Libor transition officer at Goldman Sachs Group Inc.

Compensation

Still, in the immediate future there will be turbulence in pricing. Clearing houses are planning to effectively neutralize the changes in swap values caused by the big bang, and traders will see their positions automatically adjusted. LCH Ltd. and CME Group Inc. are preparing to distribute compensation from clients whose position values go up to those who see them decline.

LCH will facilitate payment of hundreds of millions of dollars in cash to cover lost value, and at least tens of billions of dollars in basis swaps to compensate for risk, said David Horner, head of risk at SwapClear, which is part of LCH.

However, some firms do not use basis swaps to hedge their discount-rate risk or are otherwise incapable of keeping them on their books, so they are expected to sell them. This Friday LCH will hold auctions in which 18 banks can close out $25 billion in unwanted basis swaps.

Buyers, ideally, would snap them up either as hedges against risk or for their own value. But the approach is largely untested since basis swaps were not distributed in the European version of the big bang.

 
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“For about six months our members and clients have been able to look on their screens and see a forecast for the compensating cash payments and compensating swaps they will receive, so they are familiar with what’s about to happen,” said Horner. “It’s important for the market that it runs smoothly.”

CME will hold a similar auction on Monday. Clients have agreed to a maximum loss, said Sunil Cutinho, president of CME Clearing, and “if their positions cannot be auctioned off then they are fully protected and they can use their own private means to dispose of their positions.”

However, there are concerns about price swings in the market amid a surge in supply as some banks ditch basis swaps they received as compensation.

The big question is how well the auctions go. Clearing houses are not guaranteeing the minimum prices for the basis swaps, which could fall below the maximum that firms are prepared to tolerate, said Joshua Younger, a strategist at JPMorgan Chase & Co.

“Many would then likely unwind them in the open market and the price action could get very disorderly,” he said.

Firms need to understand they are facing more risk from this change first before they eventually get less risk, said Pieter Van Vredenburch, a principal at Market Alpha Advisors and previously a member of the Alternative Reference Rates Committee, which is guiding the U.S. Libor transition, when he worked for HSBC Holdings Plc in 2016.

“The big banks are very prepared for the big bang,” said Van Vredenburch. “But do I think the smaller banks are ready for this? Not even close.” When it comes to the overall switch to SOFR, he said, “there are so many nuances to the transition and the devil is in the details. There is nothing simple in all this.”

 

 

 

 

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19 minutes ago, Pitcher said:

The Global Reset is coming.  Some that I’ve read say it’s Coming in the following weeks. Others are more guarded and say it may happen in the next year.  I think it will happen when it happens.  All I can tell you is have some hedges in place because when this Financial Reset, Revalue, or whatever you want to call it happens things will be knarly for awhile.  

 

It’s time to start watching your investments in the Stock Market folks.  Please pay attention to what is going on all around us.  I’m not giving financial advice, but please do your own Due Diligence.  I believe the article below signals that our Fiat Currency status is over.  I hope by now you all realize that the Petro Dollar is pretty much dead.  

 

The Big Boys are switching things up. We are witnessing a major Paradigm Shift like none of us have ever witnessed.  Is Iraq part of this equation.  I truly believe it is and I think our wait one way or the other is almost over.  The next 6 months will be very interesting.  Embrace the change and make it work for your financial goal.

 

Banks Brace for ‘Big Bang’ Switch on $80 Trillion Worth of Swaps

LISTEN TO ARTICLE

It’s being called the “big bang,” and it has derivatives traders on high alert.

In a critical development in the global shift away from old benchmarks that was triggered by Libor’s shortcomings, interest-rate swaps on more than $80 trillion in notional debt will transition this weekend to a new rate for determining their value.

While the switch to the secured overnight financing rate, or SOFR, is expected to boost longer-term liquidity in the new benchmark, it also is fueling concerns about unruly price action because it is expected to trigger the sale of swaps on tens of billions of dollars of debt.

“The big bang is one of the most important steps in the Libor transition,” said Marcus Burnett, director of SOFR Academy, an education technology firm whose clients include banks and asset managers. “We expect rates desks from the largest banks in New York to be participating.”

Read More: In a Post-Libor World, Here Are the Benchmarks That Will Matter

The reset, which will see SOFR replace the effective federal funds rate in calculations that value swaps, is part of a push to make SOFR a standard U.S. reference rate in debt and derivatives markets. SOFR is intended to replace dollar Libor, which still underpins hundreds of trillions of dollars of assets such as mortgages in the U.S. and syndicated loans in Asia. The big bang follows a smaller-scale pivot in Europe this July, a less-complicated switch that occurred without much impact on the market.

Interest rate swaps allow two parties to trade one stream of payments for another, over a set period of time. The most common variety, known as a vanilla swap, involves exchanging payments from a fixed rate for payments from an adjustable rate that is based on Libor or some other reference rate. Another kind, known as a basis swap, involves two adjustable rates.

While SOFR has struggled to gain traction since its introduction in 2018, analysts say the upcoming big bang has already triggered a shift toward more trading in SOFR-linked swaps.

This could help pave the way for a curve that reflects expectations for where the rate will be in the future, addressing one of the new benchmark’s key weaknesses.

SOFR Is Coming

Trading activity in swaps tied to new benchmark jumped in September

Source: Bloomberg/ Depository Trust & Clearing Corporation

The big bang “will have a very, very good impact on liquidity,” said Jason Granet, chief Libor transition officer at Goldman Sachs Group Inc.

Compensation

Still, in the immediate future there will be turbulence in pricing. Clearing houses are planning to effectively neutralize the changes in swap values caused by the big bang, and traders will see their positions automatically adjusted. LCH Ltd. and CME Group Inc. are preparing to distribute compensation from clients whose position values go up to those who see them decline.

LCH will facilitate payment of hundreds of millions of dollars in cash to cover lost value, and at least tens of billions of dollars in basis swaps to compensate for risk, said David Horner, head of risk at SwapClear, which is part of LCH.

However, some firms do not use basis swaps to hedge their discount-rate risk or are otherwise incapable of keeping them on their books, so they are expected to sell them. This Friday LCH will hold auctions in which 18 banks can close out $25 billion in unwanted basis swaps.

Buyers, ideally, would snap them up either as hedges against risk or for their own value. But the approach is largely untested since basis swaps were not distributed in the European version of the big bang.

 
  •  
  •  
  •  
  •  

“For about six months our members and clients have been able to look on their screens and see a forecast for the compensating cash payments and compensating swaps they will receive, so they are familiar with what’s about to happen,” said Horner. “It’s important for the market that it runs smoothly.”

CME will hold a similar auction on Monday. Clients have agreed to a maximum loss, said Sunil Cutinho, president of CME Clearing, and “if their positions cannot be auctioned off then they are fully protected and they can use their own private means to dispose of their positions.”

However, there are concerns about price swings in the market amid a surge in supply as some banks ditch basis swaps they received as compensation.

The big question is how well the auctions go. Clearing houses are not guaranteeing the minimum prices for the basis swaps, which could fall below the maximum that firms are prepared to tolerate, said Joshua Younger, a strategist at JPMorgan Chase & Co.

“Many would then likely unwind them in the open market and the price action could get very disorderly,” he said.

Firms need to understand they are facing more risk from this change first before they eventually get less risk, said Pieter Van Vredenburch, a principal at Market Alpha Advisors and previously a member of the Alternative Reference Rates Committee, which is guiding the U.S. Libor transition, when he worked for HSBC Holdings Plc in 2016.

“The big banks are very prepared for the big bang,” said Van Vredenburch. “But do I think the smaller banks are ready for this? Not even close.” When it comes to the overall switch to SOFR, he said, “there are so many nuances to the transition and the devil is in the details. There is nothing simple in all this.”

 

 

 

 

I had seen that... going to be an interesting couple weeks leading up to the election and after

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6 minutes ago, NEPatriotsFan1 said:

had seen that... going to be an interesting couple weeks leading up to the election and after

 

I know some traders who are literally scared to death about what was stated in that article.  One friend is calling it the “Great Unwind”.  

 

 

 

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24 minutes ago, Pitcher said:

 

I know some traders who are literally scared to death about what was stated in that article.  One friend is calling it the “Great Unwind”.  

 

 

 

I was listening to Lynette Zang of ITM Metals and I have always been a little bit of a gold bug. She was saying this weekend on Monday Morning it could be like 1929 0r 87 but Ive heard the Fear Porn from the Gold Bugs for a long, long time! I do believe we will have a reset but I believe that it will be a more orderly demolition. I think that the Crypto Currency Asset Class will be the source of the liquidity that the market will desperately need. We will see. I think that Metals, Crypto, Hard Assets will do best in the scenario your article lays out. 

 

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5 minutes ago, NEPatriotsFan1 said:

I was listening to Lynette Zang of ITM Metals and I have always been a little bit of a gold bug. She was saying this weekend on Monday Morning it could be like 1929 0r 87 but Ive heard the Fear Porn from the Gold Bugs for a long, long time! I do believe we will have a reset but I believe that it will be a more orderly demolition. I think that the Crypto Currency Asset Class will be the source of the liquidity that the market will desperately need. We will see. I think that Metals, Crypto, Hard Assets will do best in the scenario your article lays out. 

 

As usual, very well written and you made some great points NE Pats.  I always appreciate your posts.  L Zang is a little loud and very much a gold bug.  I don’t agree 100% with her assessment of the current situation but she is a very knowledgeable person who has worked in Banking for years.  I watch many of her vids.  I try to listen to everyone and then make the right decision for me and my goals.  I’m older than many on this site so my perspective is different than some.  Going thru the Vietnam War, going off the Gold Standard, Gas Shortages, High Interest rates, the oil collapse of 1983-5 and so much more, I can assure you I understand about having some hedges in place.  

 

 

 

 

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3 hours ago, Carrello said:

This is the subject article:

 

Iraq’s Central Bank is at risk of losing its independence

yesterday at 12:57 
ANALYSIA bank employee hands Iraqi dinars to a customer. The government is attempting to co-opt the Central Bank of Iraq to its political agenda, warns Farhad Alaaldin, chairman of the Iraqi Advisory Council. File photo: Bilind T. Abdullah/Rudaw
A bank employee hands Iraqi dinars to a customer. The government is attempting to co-opt the Central Bank of Iraq to its political agenda, warns Farhad Alaaldin, chairman of the Iraqi Advisory Council. File photo: Bilind T. Abdullah/Rudaw
Finance Minister Ali Allawi said in a press conference following the adoption of the White Paper for Economic Reform by the Council of Ministers on October 13, "we have a solid and strong relationship with the Central Bank for the purpose of unifying monetary and financial policies, and this will provide us with the possibility to cover all the requirements and entitlements of the salaries of employees and retirees." This statement went unnoticed by all journalists, pundits and analysts. Nobody noticed the attempt of the Iraqi government to undermine the independence of the Central Bank of Iraq (CBI) to implement the financial policies approved by the government.

The objectives of the government are clear. The Central Bank has become "very cooperative" with the government's financial policy. The Bank’s law contradicts such cooperation in order to safeguard and preserve the strength of the Iraqi economy on the one hand, and not to bear any government failure in managing the financial policy on the other hand. This is a context known to successive governments, and because the central bank adopts monetary policies that are independent of the government's financial policies. We all remember the dispute that arose between the government of Nuri al-Maliki and the governor of the Central Bank, Sinan al-Shabibi, in 2012, with the former ending up accusing the latter of corruption and issuing judicial orders for his arrest while he was in the Japanese capital Tokyo on an official visit. Subsequently he was put on trial in absentia and sentenced to seven years in prison in 2014 and removed from his post.

The Role of CBI

The CBI is an institution financially and administratively independent from the government according to Article 103 of the Iraqi constitution. It is responsible for setting monetary policy, issuing and managing the national currency and foreign reserves, and setting up regulations, procedures and controls for the work of local banks in the country and monitoring and auditing their work. It is the official body that represents Iraq in the international financial and monetary institutions such as the International Monetary Fund, the World Bank, and others. Among its tasks is also determining the supply and demand for money by setting interest rates. CBI is also responsible for receiving deposits from oil sales and keeping the state’s cash reserves, and it maintains the value of the national currency. This means that the independence of the CBI from government financial policies is very important to preserve the public funds deposited within the bank.

What the Minister of Finance announced in his aforementioned statement is a dangerous precedent for inserting the CBI into the core of the government's financial policy, and making it a tool to implement this policy. This was clearly demonstrated by what was included in the White Paper of financing the budget deficit and considering CBI reserves as the only source to fill the deficit, and here lies the real danger.

The White Paper on page 37 referred to the danger of using the CBI as a source of financing, they believe it "will lead to severe pressure on the CBI’s reserves and the resulting unsustainable future consequences." This view was further confirmed by the group of experts writing the White Paper on page 42, stating that "indirect monetary financing by the CBI is the only remaining source... The need for this reserve to finance imports of goods and services means its will drop dangerously to low levels within nine months, which will ultimately lead to a real crisis in value of the Iraqi dinar, accompanied by the possibility of a collapse in its value."

It is worth mentioning that the CBI reserves are under threat from three different sources:

First:
Using the CBI reserves to finance the government's fiscal deficit. This is done in two ways, the first is to "buy goods and services" using hard currency, and the second way is by “indirect borrowing” using the central bank to devalue the dinar against the dollar in order to "pay the monthly benefits from salaries."

Second: The continuation of the notorious currency auction, which is a reservoir of corruption and a source of wealth for influential people in the world of politics, money and business. The sale of hard currency in the auction exceeds state revenues in most cases, and this means withdrawal from the Bank reserves and further reducing its levels.

Third: The increasing pressure from the state’s creditors, especially Iran, to finance its economy with hard currency after the US administration listed 18 Iranian banks under sanctions on October 8. Therefore, the CBI and Iraqi banks became the only outlet for Iran for hard currency. The visit of the Governor of the Central Bank of Iran to Iraq on October 12 was for this purpose.

The Central Bank governors kept quiet regarding the government statement to clarify its position. We also did not hear from the new governor. What is his vision for managing the bank’s affairs? What is his monetary policy? How can he preserve the cash reserve? Amid the worsening current economic crisis, it is imperative for the new governor to clarify to the Iraqi people the Central Bank’s policies and its position on the crisis facing the country.

The easiest of solutions is not a solution

According to informed sources, the team of experts is still busy working on the White Paper and adding details and appendices to the road map. The team pointed out the danger of borrowing from the CBI, or using devaluation as a means to match the public budget deficit. They warned that this "will later lead to an increase in the cost of living, and thus reduce the ability of the majority of individuals to meet their requirements, as the country depends entirely on imports to meet consumption." It is clear that the majority of the people will suffer and pay the price as a result of this shift in the adopted fiscal policy.

A financial expert, who did not want to reveal his identity, confirms that "the shortest and easiest solution is to resort to the CBI reserves and move towards printing the dinar, but taking this path is not a solution, rather it is suicide." The real fear is that the government and political leadership will resort to this solution instead of starting real radical reforms, which require executive decisions issued by the government and other legislatively supported decisions by Parliament. 

The national duty here makes it imperative for all political forces and all their leaders not to stand idly by. They must actively participate in adopting practical, even if difficult, solutions that the government team will present through the White Paper and its annexes, in addition to what is presented by other experts outside this team from Parliament, economic research centers and monetary policy experts. 

Keeping the doors of corruption wide open in most state institutions, reluctance to curb the corruption of the ruling parties themselves, and not abolishing their economic offices to limit their control over ministries, institutions and vital sectors, will ensure the continued exacerbation of crises and runs risks to the current financial situation, leading the way to a real collapse in a time frame of a few months. The financial and economic collapse will be followed by the collapse of the state of Iraq, and then chaos will prevail. At that juncture no one will be able to restore and control the situation again, except by a miracle that will be difficult to come by.

Iraq is multi-cultural, multi-factional society with different loyalties, each supported by armed groups. Chaos will mean loss of control and stability, which is difficult to sustain in normal circumstances, let alone in the circumstances of bankruptcy, political strife, scarcity of resources and the loss of people's livelihood.

Iraq is staring at its last opportunity, and the political parties must take it without fail, be brave and make courageous and responsible decisions to remedy the situation, otherwise they will be witnessing the worst possible catastrophic scenarios we have ever seen.
 


Farhad Alaaldin is the Chairman of the Iraqi Advisory Council. He was the political adviser to former Iraqi President Fuad Masum, the former chief of staff to the KRG prime minister from 2009 to 2011, and former senior adviser to the KRG prime minister from 2011 to 2012.

This should be required reading here. 

 

Thanks, Carello. 

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Ok , i have zero banking extpertise ,I think in an intuitive manner . A+B =F+G . In an ideal world what would be the most efficient and corruptable-proof way of dealing with money in this crazy international world ? Gold- backed digital would solve a shite load of problems . 

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