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My vision for the future of the global economy


yota691
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How is the exchange rate stable?

Sunday 12 September 2021 323How is the exchange rate stable?

 
Yasser Al-Metwally 
 
The exchange rate of the dollar against the dinar stabilized at a price of 148 thousand dinars compared to the 100 dollars against the official price after raising it at the price of 145,000 dinars, and it is still slightly high.
The question is what is the reason behind this stability?
I see that the main reason behind this stability is due to the application of the theory of supply and demand for the first time in Iraq.
The effects of the inflation that occurred due to the sudden change in the exchange rate became evident on the reality of the standard of living on all members of society without exception, even in varying proportions.
And the poor segment was the most affected, and then followed by the middle class of retirees and employees, who are the vast majority in the country.
One of the effects of inflation is the clear deflation, as the demand for most commodities decreased and cast a shadow on the market.
Thus, there was a somewhat slowdown in the import process due to the weak demand, followed by a slight decrease in the demand for the dollar, so you find price stability evident these days.
The objective of controlling the outlets and preventing the import of some commodities may have other partial effects on the stability of prices.
This reality brings us back to the concept and role of consumer culture in the process of balancing prices in the market, how?
If we have the ability to adopt a consumer culture that limits the apparent wastefulness in our consumer behavior, we will contribute to maintaining price stability. This means that government measures alone are unable to control the pace of prices unless accompanied by a balanced consumer culture by sacrificing some needs for a while, which will limit the The huge demand for hard currency with the aim of stabilizing the price and reducing it to less than the official rate.
The second thing that will help to stabilize the exchange rate is for government agencies to control currency smuggling, and this matter needs great capabilities.
Regarding the return of the official price to its previous era, I do not see the possibility of this in the short term. Rather, it needs time until the government controls the payment of its debts and the monetary reserve remains at the internationally accepted limits.
For this, the citizen must deal with this reality and arm himself with a solid consumer culture that helps him and the state to achieve stability.
We are also approaching a new stage after the elections, even if the picture is not yet clear until a new government is chosen and awaits its economic program, which will define the features of the stage and allow economists and analysts to determine the stages of stability and propose solutions to return prices to their previous era and stability to become parallel to the value of the Iraqi dinar.
Waiting for how things will turn out, then every incident will have a talk, we will watch to see.
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20 hours ago, yota691 said:

We are also approaching a new stage after the elections, even if the picture is not yet clear until a new government is chosen and awaits its economic program, which will define the features of the stage and allow economists and analysts to determine the stages of stability and propose solutions to return prices to their previous era  

"  We are also approaching a new stage after the elections  ", sounds too good to be true, but for now on, let's wait and see how it turns out.

 

"  return prices to their previous era  ", just wonders what previous rate  would that be? 3.22 usd? i still have a doubt that they will return the rate to 1190.

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The yuan and the dollar

Sunday 19 September 2021 201The yuan and the dollar

 
Yasser Al-Metwally 
 

China said that the world should prepare from now on to buy our goods in Chinese yuan, and the decision will be implemented after a month.

This remarkable early warning raises several questions, including: Will the yuan affect the value of the dollar? Or, in other words, will the Chinese currency replace the US currency?
It is known that global trade as a system through which the global market deals in dollars (fixed pricing), and on this basis, economists find it difficult for the Chinese yuan to replace the dollar or affect its value in the short and medium term.
This came during a discussion with someone in this regard, but he added that the Chinese yuan could affect the value of the dollar in the long run.
I found in this vision tangible facts on the ground, based on the speed of economic growth that China is leading over all global economies, and if this growth continues at a rapid pace as it is happening now, the yuan may outperform the dollar in the long run.
I find here in the Chinese decision and its new approach that it used its cunning in order to raise the value of its currency (the Chinese yuan) by imposing its currency in trade exchange operations, and thus will create a price balance with the dollar in the medium term.
The reason we expect the yuan to be able to compete with the dollar in the long run is that it follows the transactions of the oil market globally until China is able to contain all oil-exporting countries in accepting cooperation in the Chinese yuan, of course it needs a period of time, if it manages to acquire the oil market, and this depends Who will win the big fight next?
What is the extent and size of the implications for the Iraqi economy?
The percentage of Iraqi trade dependence on Chinese goods and commodities is
 75 - 80% of the Iraqi market imports. This means that the impact of the Chinese decision to impose its currency will be the largest on Iraqi trade. In other words, the demand for the Chinese yuan will rise to the equivalent of the dollar, or they will gradually share the demand for them between the short and medium term stages.
Here, those in charge of monetary and fiscal policies must take into account the extent or size of the impact on the national economy as a result of this sudden decision, so as not to enter into the cycle of providing the two currencies in parallel with the demand for them.
The private sector, with its commercial and banking sectors, will be the one that will be most affected by this transformation, and it has to deal with the expected effects of this measure.
I expect that if the Chinese decision is implemented so quickly, it will cause chaos in the Iraqi market at first, and it is required to address it in advance.
For this reason, we said that Iraq needs to diversify its dealings with the countries of the world according to its interests; Because the struggle of adults continues in all aspects of life, and we have to play with adults.
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Banking merger

Sunday 26 September 2021 274Banking merger

 
Yasser Al-Metwally 
Finally, the private banking sector was able to achieve a banking merger between two banks, with the aim of the financial leverage required by law in order for the central bank to allow the late bank to raise its capital to the limits approved by law, amounting to 250 billion dinars.
It is noteworthy that a not small number of newly established private banks are faltering to reach the capital determined by the Central Bank.
The circumstances were unfavorable for the implementation of the merger in the past, which prompted the Central Bank to postpone the cancellation of the license for the establishment of troubled banks.
Regardless of the coercion of the decision from its realism, we are addressing the issue from the standpoint of the advantages of banking merger, which has proven successful in many developed countries of the world.
The merger decision contributes to achieving the goals and advantages of the merged banks, as apart from the goal of raising capital, it will combine the expertise possessed by the merged banks.
Moreover, the most important feature is that the merger will achieve effective governance for the management of the bank that resulted from the merger. How?
As the public bodies and boards of directors will seek to choose the efficient administration from among the two banks, this is first.
As for the second advantage, which is no less important than the rational management of the bank, the supervision of the bank's performance will certainly multiply through the partnership between the two banks. 
With these two advantages, the dominance of the owners over the decisions of the board of directors will vanish through the diversity of members.
The merger decision comes as part of an important reform plan for the decision to convert some banking companies into banks, as many of them stumbled in their ability to raise their capital, which puts them between the decision to merge or the decision to cancel the establishment license.
From our point of view, as analysts and observers, we find that the trend towards merging is a correct step, provided that there are incentives provided by the Central Bank to the merging banks to encourage them to merge.
It is useful to note that the major Gulf banks resorted to banking merger in order to acquire the financial market, competition and investment.
One of the most prominent challenges of banking integration in Iraq is a factor related to the failure to absorb the waiver of the status of the sole and dominant owner of decisions that often impede the growth and development of performance
 banking.
Frankly and transparently, we say that the stage of competition has begun, the provision of banking services, their diversity, and the lack of dependence on a single product (the currency window).
This requires rational management that is able to mitigate the severity of potential risks. In sum, the goal for which the banks were established, which is customer service, has returned to continue giving.
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Zero Equation

Sunday 17 October 2021 107Zero Equation

Yasser Al-Metwally 
 

We did not know why the zero-sum equation appears before us with each beginning of a new era, and I mean a new government, because it erases every effect, no matter how useful or not, from the previous one.

It seems that the phenomenon of ego accompanies everyone who confronts responsibility to find the truth in him alone.
This procedure costs the state a lot of time and delays in providing achievements. Therefore, the zero equation was and still is a major obstacle to any solution to the economic challenges facing our national economy. The reason is that any zero-sum beginning of reform weakens the hope of achieving it, because it erased previous attempts. 
actual.
On this basis, the gap has become wide between us and countries in the field of economic development, and this appears even in countries that do not possess the qualifications of economic development, such as the one in Iraq, but the zero equation is what stands as a stumbling block
 for growth.
Now that we are entering a new era after the elections are over, we will watch to see if this era will start from scratch and wipe out all serious attempts to achieve reform?
If we want to read the scene clearly, we must follow the path of the new economic program. If it is built on the basis of completing what was started before, this means that the beginning is correct, and if we start from scratch, the path of reform will be complicated.
Let us be optimistic at the outset in the possibility of fulfilling the promises of change in the new path and work to save the country's economy and put it on the right paths, and this has high requirements and costs, including which we mention.
Institution building and sound institutional performance in the setting of wise and specialized management and technical restructuring of institutions by placing the right man in the right place. A will and ability to make this change is required by adopting the competencies and specializations, each in his place.
The other point that I highlight is the necessity of defining and adopting a specific economic approach with its laws, and of course in accordance with the country's constitution.
The other thing is to rid the state of its dominance over the failed and costly production companies and factories and open the way for the private sector to manage them in order to activate the productive sectors, provide job opportunities and diversify 
Revenues .
Aspirations and aspirations, in the hope that it will find its means in dealing with the complex situation of the country's economy.
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Wish 2022

Monday 03 January 2022 257Wish 2022

 
 Yasser Al-Metwally 
 
One of the wishes for 2022 is the resolution of the electricity file, as it may seem a strange wish, and it is a small word in its number of letters, but it is deep in its content, as it is not personal, but rather a popular patriotism without any doubt. Nearly 18 years have passed since the change, and the electricity file has been on the shelves of successive governments without a radical solution.
In continuation to what came with my last article at the end of the year 2021 on the economic program, any talk of achieving economic growth in isolation from resolving the electricity file is just slogans or air in a network. Why?
Because electricity is the main factor for embarking on real development, which is based on revitalizing and activating the industrial, agricultural or service sectors, and when calculating the economic feasibility of electricity, it shows you its importance in operating the productive sectors of most of its projects that are disrupted due to the lack of electric capacity, and its insufficiency to run projects, meaning that remains The problem of unemployment is constant, rather it is increasing steadily.. What development are we talking about with the expansion of unemployment?
Even investing in economic development, any investor risks his money with the lack of electricity and its impact on cost calculations and without achieving the investor's goal.
This is a simple part that shows us the economic importance of the electricity file in the process of achieving economic development, then the warning of the Minister of Finance calls us to search for alternatives to oil revenues by activating production, right?
Regardless of what has passed, and the money that was wasted without solutions, we leave it to its time. We must now seek the help of global experiences in the treatment of electricity, and we will not go far to follow the experience of sister Egypt, how it was able to transform electricity from a crisis to self-sufficiency and then enter the export phase.
Reports indicate that Egypt was able, within 8 months, to achieve self-sufficiency in electricity, through the implementation of projects at a cost of two billion dollars, and this was the beginning.
After that, I planned to launch to achieve a qualitative leap in the years 2014-2020, as 153 projects for the production of electricity were completed with a total of 27 thousand and 500 megawatts, then Egypt also started implementing the largest project to produce solar energy in the world with a capacity of 2000 megawatts using 200 thousand panels. A solar system covering an area of 37 square kilometers at a cost of two billion dollars.
In 2018, it contracted with Siemens to construct three largest giant plants at a cost of 6 billion euros, so that Egypt could achieve a production surplus of 24,000 additional megawatts to be exported to neighboring countries and the Arab world.
And if we compare the amounts spent on the electricity file and the exorbitant costs, we will find that what Egypt spent in 8 years constitutes only about 2% of what Iraq spent, with the time difference of 8 years in Egypt and 18 years in Iraq.
The question is, does the electricity file remain dependent on providing neighboring countries with the requirements for running energy?
We put this modest wish before the eyes of the prospective new government, to put it in its priorities because of its economic, social and humanitarian importance.. Is this wish really strange?!.
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Shabibi Future Iraq Project it’s called!

The FIP showed how US would tear down Iraq and rebuild it. Two of the last steps were, as Shabibi said, to reorganize  unproductive  banks and rebuild electric grid. Once that happened the Dinar would rise in power and value to its former glory. MEMORY LANE !!!

Joey and I studied this years ago!

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Exchange rate first

Sunday 09 January 2022 375Exchange rate first

 Yasser Al-Metwally
 
It is time to adjust the exchange rate to enhance the value of the national currency (the Iraqi dinar) against the dollar.
And now that the reasons that prompted the decrease in the exchange rate of the dinar against the dollar as a monetary treatment to overcome the obstacle of the country being forced to borrow externally and internally have disappeared, there is no justification for sticking to this painful measure that touched the lives of all segments of society.
The direct reason for this tight monetary policy was the drop in global oil prices with the effects of the Corona pandemic, and the world has largely overcome this difficult ordeal.
With the return of oil prices to the rise, a cash surplus was achieved that contributed to supporting and strengthening the Iraqi cash reserve, the safety valve for periodic financial crises and natural disasters.
In addition to the above, Iraq was able to close the curtain on the debts imposed on Iraq forcibly to Kuwait. These factors and indicators are encouraging to readjust the exchange rate to what it was before the revaluation of the dollar against the dinar 
Iraqi.
Perhaps one of the most important reasons and justifications for the demand to return the exchange rate to its normal state is the situation and the painful effects that the citizen has endured, forcing him to give the government the opportunity to address the already dire financial situation.
The measure to reduce the exchange rates of the Iraqi dinar against the dollar has caused chaos in the market and broke down the stability that the market enjoyed at the previous rate.
The prices of materials and goods have been inflamed, which has affected the purchasing power of the citizen. You can imagine the extent of the suffering caused by the prices of medicines and basic materials for all segments of society, especially the poor, the retired and the employees.
The measures taken by the government to treat the poor segments were not equivalent to the effects of the exchange rate difference.
Accordingly, one of the tasks of the new government is to take decisions to restore the price and take strict measures against price manipulators, especially medicines and important commodities that touch the citizen's livelihood by activating the role of careful monitoring of the market. 
In mentioning the prices of medicines, the Pharmacists and Physicians Syndicates must activate their role in monitoring and accountability.
For this reason, let us make readjusting the exchange rate the first task of the next government and parliament to relieve the burden of the citizen.
And a question that comes to mind, can the concerned authorities begin to gradually reduce the exchange rate until the formation of the government to mitigate the double effects on both sides of the equation?
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  • yota691 changed the title to Exchange rate first
4 hours ago, HowieC said:

indicators are encouraging to readjust the exchange rate to what it was before the revaluation of the dollar against the dinar 

I don't get it. First, they readjust the exchange rate. Second, they revalue. What are the differences between readjusting the exchange rate and revaluing? Will there be two different rates between readjust the rate and revalue?

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6 minutes ago, rvmydinar said:

I don't get it. First, they readjust the exchange rate. Second, they revalue. What are the differences between readjusting the exchange rate and revaluing? Will there be two different rates between readjust the rate and revalue?

I’m thinking, for example adjusting say to 1170. and then moving decimal point over resulting in 1.700, or 1800 = 1.800

It basically is adjusting the dimes and nickels to go along with the dollar in front and then knock off the zero at the end

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2 hours ago, jg1 said:

I’m thinking, for example adjusting say to 1170. and then moving decimal point over resulting in 1.700, or 1800 = 1.800

It basically is adjusting the dimes and nickels to go along with the dollar in front and then knock off the zero at the end

Hope you are right jg1. 1170 delete 3 zeros=1.170. Then, 1:1.170= 0.85 US. 1 IQD=0.85 US isn't Not a bad rate for a start. As long as the rate is between 10 cents to a buck, i will run to the bank and never look back.

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Finance warning and layoffs

Sunday 16 January 2022 169Finance warning and layoffs

 
 Yasser Al-Metwally
 
The dangerous and horrific warning issued by the Minister of Finance in a previous interview regarding the dispensation of fuel by using electric cars and its impact on the decreasing of the state’s resources, which is an affirmation of the rentier economy. This warning comes from the first response to the responsibility of the state treasury. And it should not pass without an in-depth study, however, what I felt is that the warning is summed up in several directions and an allusion to an attempt to impose strict austerity measures to implement what the (white paper) addressed. How do we deal with this expected event? Any measures taken require the availability of factors and buffers of the heavy shock effects left by the austerity measure.
We noticed the Minister’s focus on one aspect or detail that leads to the dismissal of employees without referring to more important measures, and the conclusion is that this measure will justify him pressing towards reducing the salaries of employees and retirees in the manner (whoever sees death is satisfied with heat).
Do you think this measure is a warning or intimidation?
The measure goes towards the weakest link: retirees first, and layoffs second. Come, let's discuss the measures calmly. While economists agree on the importance of finding a solution to the armies of the unemployed in order to achieve economic growth and stability, this measure comes to make matters worse, that is, to expand the size of unemployment. Then the combination of reducing salaries with a previous decision to reduce the value of the dinar means raising the poverty line to an unimaginable consequence.
Accordingly, it was necessary for the minister to go to the most important measures related to addressing the expectations of dispensing with energy or reducing the use of oil?
Or would it not have been better for him to talk about measures to diversify sources of funding by stimulating the economy by activating the productive, service, tourism and other sectors, and stimulating the exploitation of the natural resources that Iraq enjoys, as well as curbing and reducing the state’s luxury expenditures represented in personal benefits and privileges of some classes and the use of privatization to save the collapsed projects. From here lies the beginning, and the procedures for dismissal and salary cuts will be the last card, and the citizen will find that he accepts them with open arms to support the state’s measures when risks and sacrifices are many and are well known. 
The question is will the world really dispense with energy completely? Do electric cars do not need other oil derivatives?
We expect the new government to take seriously the horrific warning and work to confront it according to priorities, as well as start activating investment and operating the productive sectors with decisions that contribute to investing other natural resources owned by Iraq to stimulate the economy.
Why don't we go in our austerity policy to bold decisions that affect privileges and various welfare expenses, and the new government is required to study basic alternatives to address the challenges so as not to make matters worse.
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