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The central bank's plan for reducing its Iraqi dinar ورقة الـ25000 دينار Paper of 25,000 dinars 04.08.2011 04.08.2011 فارس عمر Faris Omar كانت الثروة النفطية وما تحققه من عائدات وفيرة، تؤمن غ

First off stop crying and blow your nose cause the snot bubbles are runnning into your mouth.....secondly if you get. This upset whenever you see someone talking about a RD, then maybe you aren't adul

O come now. Your just mad because I punked you out in another thread and pointed out to everyone that you are no more than a Go RVer who doesnt have a clue and will believe anything that sounds good.

We are gonna have to rely on your expertise for this one!huh.gif Willing to try just about anything once, except possum... I heard he is too stringy! laugh.gif

Mimosas!! Champagne and OJ... NOT OJ SIMPSON... The juice.. wait.. No... ORANGE JUICE!! YUMMY!!! CRYSTAL AND ORANGE JUICE!!!! B)

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There are guys that just can't stand other people getting rich from this investment. They don't want others to be blessed form this great opportunity. These guys are known as dinarck, keepm, and gt5junkie, etc. Funny how these guys keep coming here to say that there is gonna be a lop when they themselves are nothing but speculators like us. Oh yea, like CBI is gonna say "we will RV so buy as much dinar as you can" right? how stupid can you be? These guys probably are so insecure themselves that when they see someone driving a better car than they do, they get pissed off and hate them. They themselves say LOP, however in the other end, are keep stacking on dinars.

This investment is very similar to any other investments. If the dinar value was really going down and/or they had intention of doing lop, CBI wouldn't say things like removing 3 zeros (trying to confuse us), dinar is a bad investment, etc. They would actually encourage people to buy loads of dinar. Look at DOT COM crash and REAL ESTATE for example? history always repeats itself.

My fellow dinar investors, do not be discouraged by lots of smoke and mirrors and especially from these insecure people in dinarvets. Cheer up! we are coming to an end soon!

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To the newbie...read all the posts till you make up your mind who makes sense. Do not listen to pumpers who have names that start with O, T, ...

After a while you will see the same old names saying the same old negative comments and you can just pass by and not read them anymore. It is wise to consider all the good information you can, but you will have to come up with which side you are on. If you believe in a LOP then do not buy more dinar. If you believe in a LOP I guess they have a special room for you to chat in. Why do these guys love to stay on the site and be so negative, I do not understand, but it is their choice. It does make you think! That is not bad!

Be Blessed!

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The loppers are here! The RV stance is here!

l l

l l

l l

V V

sad.gifsmile.gif

Any question? Oh yeah, the big

gap in the middle is a bottomless

abyss!

Edited by RodandStaff
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WOW...OK huh.gifblink.gifunsure.gif

I just looked at this again, and it appeared that my humor got lost in the translation. I'm sorry about that. I really meant this as humor, not the sterling chomping on the two of you that it seems like now, even to me.

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I just looked at this again, and it appeared that my humor got lost in the translation. I'm sorry about that. I really meant this as humor, not the sterling chomping on the two of you that it seems like now, even to me.

Gotcha Francie..thank you!! ;):)

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The loppers are here! The RV stance is here!

l l

l l

l l

V V

sad.gifsmile.gif

Any question? Oh yeah, the big

gap in the middle is a bottomless

abyss!

Well that didn't paste the way I wanted it to.... imagine them with a big void in the middle, and the smiley face under the RV side... cause they are the only ones who appear to have a positive outlook on the outcome. rolleyes.gif

Edited by RodandStaff
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If this thing RV's by tomorrow morning, I will make pancakes for everyone here on this site. Maybe. :eyebrows:

Yummy, can you do Hawaiian Pancakes? :)

Just thinking ahead a little...

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There are guys that just can't stand other people getting rich from this investment. They don't want others to be blessed form this great opportunity. These guys are known as dinarck, keepm, and gt5junkie, etc. Funny how these guys keep coming here to say that there is gonna be a lop when they themselves are nothing but speculators like us. Oh yea, like CBI is gonna say "we will RV so buy as much dinar as you can" right? how stupid can you be? These guys probably are so insecure themselves that when they see someone driving a better car than they do, they get pissed off and hate them. They themselves say LOP, however in the other end, are keep stacking on dinars.

This investment is very similar to any other investments. If the dinar value was really going down and/or they had intention of doing lop, CBI wouldn't say things like removing 3 zeros (trying to confuse us), dinar is a bad investment, etc. They would actually encourage people to buy loads of dinar. Look at DOT COM crash and REAL ESTATE for example? history always repeats itself.

My fellow dinar investors, do not be discouraged by lots of smoke and mirrors and especially from these insecure people in dinarvets. Cheer up! we are coming to an end soon!

You are 100% correct. Its funny how these three "usernames" all come at the same time too. I really think that all three: dinarck, keepm and gt5 are the same person with different screen names, they have multiple accounts. Anyways, these three are idiots and should just sell their dinar.

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I guess I don't understand what makes dinarck, keepm, andrea gt5 idiots. Just because they have a differnt view of the end outcome from the rest of yoi does not make it wrong. It is sad the some have to resort to name calling and the like in order to prove their self worth. Only someoje that is insecure in their view would resort to such tactics. I have read several posts that STRONGLY suggest these individuals confine themselves to the R/D, LOP section of this site because they don't want to be brought down. Their R/V glasses are on and are so thick they either can't see or don't want to see another possible outcome. Playing devils advocate one could also suggest that there is a place for those of you that are making demands of these individuals and that site would be Okie and the other Gurus. There is always happy times to be found there. Its R/V all day everyday. You wont get brought down there. You wont ever have to acdept the possibilty of an R/D or LOP.

Furthermore I still can't figure out why so many are not taking the CBI at their work. They have said in no uncertain terms that they were going to R/D. They are going to delete or remove the 000's not lift. I for one went from an R/V for sure guy to a more R/D leaning guy. I don't relish that idea but I can't coninue to bury my head in tje sand forever. I have truly had to do some real soul searching but I have prepared myself for the worst but am hoping for the best. You have to ask yourself individually can you do the same.

OK BASH AWAY

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I guess I don't understand what makes dinarck, keepm, andrea gt5 idiots. Just because they have a differnt view of the end outcome from the rest of yoi does not make it wrong. It is sad the some have to resort to name calling and the like in order to prove their self worth. Only someoje that is insecure in their view would resort to such tactics. I have read several posts that STRONGLY suggest these individuals confine themselves to the R/D, LOP section of this site because they don't want to be brought down. Their R/V glasses are on and are so thick they either can't see or don't want to see another possible outcome. Playing devils advocate one could also suggest that there is a place for those of you that are making demands of these individuals and that site would be Okie and the other Gurus. There is always happy times to be found there. Its R/V all day everyday. You wont get brought down there. You wont ever have to acdept the possibilty of an R/D or LOP.

Furthermore I still can't figure out why so many are not taking the CBI at their work. They have said in no uncertain terms that they were going to R/D. They are going to delete or remove the 000's not lift. I for one went from an R/V for sure guy to a more R/D leaning guy. I don't relish that idea but I can't coninue to bury my head in tje sand forever. I have truly had to do some real soul searching but I have prepared myself for the worst but am hoping for the best. You have to ask yourself individually can you do the same.

OK BASH AWAY

Great post Darren! Thank you! I'd give you another + but I ran out today. I seem to do that every day.... :lol:

I too was an RV for sure gal. I don't like the idea of a RD any more than you and most of the other members here, yet it is now seen as a distinct possibility....more likely, a probability. I'm prepared, but not liking it....

Kudos on the post!

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Mimosas!! Champagne and OJ... NOT OJ SIMPSON... The juice.. wait.. No... ORANGE JUICE!! YUMMY!!! CRYSTAL AND ORANGE JUICE!!!! B)

REAL oranges, not that fake plastic kind.

Well that didn't paste the way I wanted it to.... imagine them with a big void in the middle, and the smiley face under the RV side... cause they are the only ones who appear to have a positive outlook on the outcome. rolleyes.gif

NOTHING pastes here right. It looks good in the editor. Perfect, but you get a surprise.

In the old days on our BBSes we could control the result with empty spaces on each line in the text editor.

Great post Darren! Thank you! I'd give you another + but I ran out today. I seem to do that every day.... :lol:

I too was an RV for sure gal. I don't like the idea of a RD any more than you and most of the other members here, yet it is now seen as a distinct possibility....more likely, a probability. I'm prepared, but not liking it....

Kudos on the post!

Do you mean an RD?

Furthermore I still can't figure out why so many are not taking the CBI at their work. They have said in no uncertain terms that they were going to R/D. They are going to delete or remove the 000's not lift. I for one went from an R/V for sure guy to a more R/D leaning guy. I don't relish that idea but I can't coninue to bury my head in tje sand forever. I have truly had to do some real soul searching but I have prepared myself for the worst but am hoping for the best. You have to ask yourself individually can you do the same.

OK BASH AWAY

RIGHT. And what do they say?

CURRENCY STABILITY is all important.

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I guess I don't understand what makes dinarck, keepm, andrea gt5 idiots. Just because they have a differnt view of the end outcome from the rest of yoi does not make it wrong. It is sad the some have to resort to name calling and the like in order to prove their self worth. Only someoje that is insecure in their view would resort to such tactics. I have read several posts that STRONGLY suggest these individuals confine themselves to the R/D, LOP section of this site because they don't want to be brought down. Their R/V glasses are on and are so thick they either can't see or don't want to see another possible outcome. Playing devils advocate one could also suggest that there is a place for those of you that are making demands of these individuals and that site would be Okie and the other Gurus. There is always happy times to be found there. Its R/V all day everyday. You wont get brought down there. You wont ever have to acdept the possibilty of an R/D or LOP.

Furthermore I still can't figure out why so many are not taking the CBI at their work. They have said in no uncertain terms that they were going to R/D. They are going to delete or remove the 000's not lift. I for one went from an R/V for sure guy to a more R/D leaning guy. I don't relish that idea but I can't coninue to bury my head in tje sand forever. I have truly had to do some real soul searching but I have prepared myself for the worst but am hoping for the best. You have to ask yourself individually can you do the same.

OK BASH AWAY

Thanks for that Darren. The bottom line is that these cry babies know that we are probably right so they vent their anger towards us because we are the obvious target. Funny how not one of them can gather enough mental ability to explain why we are wrong. They only want to attack us because they know we are right. They seem to forget that we are on an opinion forum and not all opinions are going to jive with theirs. Instead of backing up their opinions with logic they call us names which is typical of someone who has lost the debate and can not back up their position.

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Thanks for that Darren. The bottom line is that these cry babies know that we are probably right so they vent their anger towards us because we are the obvious target. Funny how not one of them can gather enough mental ability to explain why we are wrong. They only want to attack us because they know we are right. They seem to forget that we are on an opinion forum and not all opinions are going to jive with theirs. Instead of backing up their opinions with logic they call us names which is typical of someone who has lost the debate and can not back up their position.

Dinarck, I am not one to bash or to talk down on others.

But let's say we are getting misleading information (as I have stated before) and they are planning on doing a straight up RV. It is still very possible that this is the case. In fact, this so called "dreaded LOP" is easy to understand, what I have put together is not so simple. So I am wondering if all of these "LOP articles" are put out for a reason. To deter more and more people from investing before they pull the trigger. Also, trying to explain Economics to the average U.S. citizen would be nearly impossible. On top of that, they are dealing with the "Iraqi citizens," people who are less educated then us. Now, to top it off, we are all on a "Dinar forum" discussing possibilities and most people still have a hard time understanding economic concepts.

What good would it do to try and explain what they are really planning on doing and how they planned on doing it? It wouldn't do any good, they might as well make the announcement in a foreign language because nobody would understand it anyways.

Did you read what I just posted in the News section? Open Market Operations aka "Currency Auctions" Contractionary Policy - Effectively Remove Currency from Circulation

Read more: http://dinarvets.com.../#ixzz1UOeJm0Sb

I think everybody should read this because it deals with the number one reason as to why Iraq can't do a significant RV due to how much currency is in circulation. I think you would enjoy the read because it is based on facts, black and white, real research.

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No LOP, It seems simple enough to read and make that determination. Geez my 6 grade daughter could understand this article. :o

No, it really does look like a lop. If i were iraq i would be lopping zero's off of a 10,000 bill calling equal to a new 10 dinar bill and then revaluing that to 2 to 3 times and that would mean we all tripled our investment. How is deleting (raising) three zero's from the currency not a lop???????? It also is not clear anywhere that the zero's are coming off the exchange rate...they all say off the bills.. I hope i'm wrong but it looks like it time and time again.

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This is just me opion so dont bite me head off or anything but I don't think these articles were put out to deter people from investing before they pulled the trigger. This can be explained with the fact that even to this day they continue to have CBI currency actions. If by your logic they would have stopped these actions a while ago. Im just saying.

The unfortunate thing is that the more money that is printed and actioned the less likely there will be an R/V, just to much money in circulation which is something that has been addressed many times in this thread as well as others.

Let's still hope for the best case senerio but prepare for the worse.

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This is just me opion so dont bite me head off or anything but I don't think these articles were put out to deter people from investing before they pulled the trigger. This can be explained with the fact that even to this day they continue to have CBI currency actions. If by your logic they would have stopped these actions a while ago. Im just saying.

The unfortunate thing is that the more money that is printed and actioned the less likely there will be an R/V, just to much money in circulation which is something that has been addressed many times in this thread as well as others.

Let's still hope for the best case senerio but prepare for the worse.

I understand what you are saying, however, my "logic" is based off of facts. The currency auctions also known as Open Market Operations is a Monetary Policy tool that countries use to reduce their monetary base. The central bank would typically sell bonds in exchange for hard currency. When the central bank collects this hard currency payment, it removes that amount of currency from the economy, thus contracting the monetary base.

This is known as Contractionary Policy. They auction off USD to bring in IQD's from the other banks.

Process:

Since most money is now in the form of electronic records rather than cash, open market operations are conducted simply by electronically increasing or decreasing ('crediting' or 'debiting') the amount of base money that the bank has in its reserve account at the central bank. Thus, the process does not literally require new currency. (However, this will increase the central bank's requirement to print currency when the member bank demands banknotes, in exchange for a decrease in its electronic balance.)

When there is an increased demand for base money, action is taken in order to maintain the short term interest rate (that is, to increase the supply of base money). The central bank goes to the open market to buy a financial asset such as government bonds, foreign currency or gold. To pay for this, bank reserves in the form of new base money (for example newly printed cash) is transferred to the sellers bank, and the sellers account is credited. Thus, the total amount of base money in the economy has increased. Conversely, if the central bank sells these assets in the open market, the amount of base money that the buyer's bank holds decreases, effectively destroying base money.

The above is not my "guess" or a potential possibility. This is fact. You can't argue that...

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Dinarck, I am not one to bash or to talk down on others.

But let's say we are getting misleading information (as I have stated before) and they are planning on doing a straight up RV. It is still very possible that this is the case. In fact, this so called "dreaded LOP" is easy to understand, what I have put together is not so simple. So I am wondering if all of these "LOP articles" are put out for a reason. To deter more and more people from investing before they pull the trigger. Also, trying to explain Economics to the average U.S. citizen would be nearly impossible. On top of that, they are dealing with the "Iraqi citizens," people who are less educated then us. Now, to top it off, we are all on a "Dinar forum" discussing possibilities and most people still have a hard time understanding economic concepts.

What good would it do to try and explain what they are really planning on doing and how they planned on doing it? It wouldn't do any good, they might as well make the announcement in a foreign language because nobody would understand it anyways.

Did you read what I just posted in the News section? Open Market Operations aka "Currency Auctions" Contractionary Policy - Effectively Remove Currency from Circulation

Read more: http://dinarvets.com.../#ixzz1UOeJm0Sb

I think everybody should read this because it deals with the number one reason as to why Iraq can't do a significant RV due to how much currency is in circulation. I think you would enjoy the read because it is based on facts, black and white, real research.

Thanks for you respectful rebuttal to my post 20Million. Its a breath of fresh air for someone to actually want a discussion instead of throwing knives because of an opinion they dont like.

Well I would agree that it is a possibility that all of this is misinformation but I would also have to say that it is highly unlikely. If they didnt want people to invest in the currency then they shouldnt have sold trillions of it to begin with. I think that damage has been done. Seems like they would just lock down the supply instead of filling their reserves with the proceeds. Also, if Iraq knew the DFI would eventually come back to them then why would they need to sell trillions of dinar to fill their reserves if a RV was there plan? Plus why now? Why suddenly do they want people to not invest in IQD? What difference would it make if people bought more? There is already 30 trillion in circulation. How would that change?

Now lets think just for a minute about what is going on with the articles and statements from the CBI. I think we all agree (other than a few hardline Go RVrs) that we are being told RD. That really isnt up for debate anymore. That is fact. Anytime a country has to Redenominate their currency they have to explain to the public and businesses what is going on. They do this through media and statements from leaders of their central bank which is excactly what we are seeing now. Think about it. Iraqis drinking coffee in the mornings reading the newspapers and slowly starting to get the picture of what is to occur. Its only us who have speculated on the IQD that cannot accept what is going on. Iraqis are not sitting around waiting for their 25,000 notes to suddenly become worth 25,000 USD more less 75,000 like Okie says. They would probably laugh if they knew some of the nonsense that has been written over the years about their currency. They are reading these newspapers and understand what they are being told and understand why it is needed. Same in Venezuela. Do you think that the population was saying that it was all smoke and mirrors and that they were just being mislead so people wouldnt invest in the currency? Do you think that when they were being educated on their RD that they were expecting there notes to actually increase in value by a 1000%? No. Dont see any difference now. Venezuela is swimming in oil and they had a redenomination because their currency was in a hyperinflated state and that is what is done to currencies in a hyperinflated state.

If Iraq was planning to RV their currency to any amount then why not just do it instead of misinforming the world and their own population? It doesnt make sense. Imagine the distain the Iraqis would have for their Gov if they were lied to in this way and they ended up missing out on becoming wealthy because they traded dinar for USD before the RV because they were worried about a RD that they were unsure of.

Also lets talk about how a RV is even possible. I agree that a low RV could happen but a RV to 1 or Okies 3 is impossible. So lets say that a RV to .01 or .02 was the plan. Why would they put out enough propaganda to make Nazi Germany proud before they did it? Seems like they would come out and say the exchange rate is stable and we plan to continue 1170 for the next 10 years. Thats all they would need to do to keep specualation down. Instead we get 100 articles clearly spelling out RD and the leaders of the CBI telling us RD.

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Thanks for you respectful rebuttal to my post 20Million. Its a breath of fresh air for someone to actually want a discussion instead of throwing knives because of an opinion they dont like.

Well I would agree that it is a possibility that all of this is misinformation but I would also have to say that it is highly unlikely. If they didnt want people to invest in the currency then they shouldnt have sold trillions of it to begin with. I think that damage has been done. Seems like they would just lock down the supply instead of filling their reserves with the proceeds. Also, if Iraq knew the DFI would eventually come back to them then why would they need to sell trillions of dinar to fill their reserves if a RV was there plan? Plus why now? Why suddenly do they want people to not invest in IQD? What difference would it make if people bought more? There is already 30 trillion in circulation. How would that change?

Now lets think just for a minute about what is going on with the articles and statements from the CBI. I think we all agree (other than a few hardline Go RVrs) that we are being told RD. That really isnt up for debate anymore. That is fact. Anytime a country has to Redenominate their currency they have to explain to the public and businesses what is going on. They do this through media and statements from leaders of their central bank which is excactly what we are seeing now. Think about it. Iraqis drinking coffee in the mornings reading the newspapers and slowly starting to get the picture of what is to occur. Its only us who have speculated on the IQD that cannot accept what is going on. Iraqis are not sitting around waiting for their 25,000 notes to suddenly become worth 25,000 USD more less 75,000 like Okie says. They would probably laugh if they knew some of the nonsense that has been written over the years about their currency. They are reading these newspapers and understand what they are being told and understand why it is needed. Same in Venezuela. Do you think that the population was saying that it was all smoke and mirrors and that they were just being mislead so people wouldnt invest in the currency? Do you think that when they were being educated on their RD that they were expecting there notes to actually increase in value by a 1000%? No. Dont see any difference now. Venezuela is swimming in oil and they had a redenomination because their currency was in a hyperinflated state and that is what is done to currencies in a hyperinflated state.

If Iraq was planning to RV their currency to any amount then why not just do it instead of misinforming the world and their own population? It doesnt make sense. Imagine the distain the Iraqis would have for their Gov if they were lied to in this way and they ended up missing out on becoming wealthy because they traded dinar for USD before the RV because they were worried about a RD that they were unsure of.

Also lets talk about how a RV is even possible. I agree that a low RV could happen but a RV to 1 or Okies 3 is impossible. So lets say that a RV to .01 or .02 was the plan. Why would they put out enough propaganda to make Nazi Germany proud before they did it? Seems like they would come out and say the exchange rate is stable and we plan to continue 1170 for the next 10 years. Thats all they would need to do to keep specualation down. Instead we get 100 articles clearly spelling out RD and the leaders of the CBI telling us RD.

No problem, always better to have a civil debate than a knife throwing fight smile.gif

I just put together another article explaining Expansionary Monetary vs. Contractionary Monetary Policy. My thoughts are that it was entirely necessary for the excessive printing, low interest rates, and everything else that pertained to Iraq's economy and where they are at right now in order to get to a better status in the future.

What Does Expansionary Policy Mean?

A macroeconomic policy that seeks to expand the money supply to encourage economic growth or combat inflation (price increases). One form of expansionary policy is fiscal policy, which comes in the form of tax cuts, rebates and increased government spending. Expansionary policies can also come from central banks, which focus on increasing the money supply in the economy.

Generally speaking contractionary monetary policies and expansionary monetary policies involve changing the level of the money supply in a country. Expansionary monetary policy is simply a policy which expands (increases) the supply of money, whereas contractionary monetary policy contracts (decreases) the supply of a country's currency.

What Does Contractionary Policy Mean?

A type of policy that is used as amacroeconomic tool by the country's central bank or finance ministry to slowdown an economy. Contractionary policies are enacted by a government to reduce the money supply and ultimately the spending in a country.

This is done primarily through:

1. Increasing interest rates

2. Increasing reserve requirements

3. Reducing the money supply, directly orindirectly

This tool is used during high-growth periods of the business cycle, but does not have an immediate effect.

Investopedia explains Contractionary Policy

When both spending and the availability of money arehigh, prices start to rise - this is known as inflation. When a country is experiencing higher-than-anticipated inflation, the government might step in with a contractionary policy to try to slow down the economy. Their goal is to reduce spending by making it less attractive to acquire loans or by taking currency out of circulation, and thus reduce inflation. The effectiveness of these policies vary.

1. Increasing the interest rate at which the Federal Reserve lends will also increase the rates at which banks lend. When rates are higher, it is more expensive for individuals to obtain loans; this reduces spending.

2. Banks are required to keep a reserve of cash to meet withdrawal demands. If the reserve requirements are increased, there is less money for banks to lend out. Thus there is a lower money supply.

3. Central banks can borrow money from institutions or individuals in the form of bonds. If the interest paid on these bonds is increased, more investors will buy them. This will take money out of circulation. Central banks can also reduce the amount of money they lend out or call in existing debts to reduce the money supply.

It is pretty clear to see that for the past 8 years or so Iraq has been using Expansionary Monetary Policies. We know this from excessive printing of their currency, they have gone from roughly 6 trillion dinars to roughly 30 trillion dinars, low interest rates & low bank reserve requirements. They have actually done a pretty good job considering that there are side effects to expansionary policies such as high inflation.

Expansionary Policy is a useful tool for managing low-growth periods in the business cycle, but it also comes with risks. First and foremost, economists must know when to expand the money supply to avoid causing side effects like high inflation. There is also a time lag between when a policy move is made (whether expansionary or contractionary) and when it works its way through the economy.This makes up-to-the-minute analysis nearly impossible, even for the most seasoned economists. And finally, prudent central bankers and legislators must know when to halt money supply growth or even reverse course and switch to a contractionary policy.

Expansionary Monetary Policy

In the United States, when the Federal Open Market Committee wishes to increase the money supply, it can do a combination of three things:

1. Purchase securities on the open market, known as Open Market Operations

2. Lower the Federal Discount Rate

3. Lower Reserve Requirements

These all directly impact the interest rate. When the Fed buys securities on the open market, it causes the price of those securities to rise. In my article on the Dividend Tax Cut we saw that bond prices and interest rates are inversely related. The Federal Discount Rate is an interest rate, so lowering it is essentially lowering interest rates. If the Fed instead decides to lower reserve requirements, this will cause banks to have an increase in the amount of money they can invest. This causes the price of investments such as bonds to rise, so interest rates must fall. No matter what tool the Fed uses to expand the money supply interest rates will decline and bond prices will rise.

Increases in American bond prices will have an effect on the exchange market. Rising American bond prices will cause investors to sell those bonds in exchange for other bonds, such as Canadian ones. So an investor will sell his American bond, exchange his American dollars for Canadian dollars, and buy a Canadian bond. This causes the supply of American dollars on foreign exchange markets to increase and the supply of Canadian dollars on foreign exchange markets to decrease. As shown in my Beginner's Guide to Exchange Rates this causes the U.S. Dollar to become less valuable relative to the Canadian Dollar.The lower exchange rate makes American produced goods cheaper in Canada and Canadian produced goods more expensive in America, so exports will increase and imports will decrease causing the balance of trade to increase.

When interest rates are lower,the cost of financing capital projects is less. So all else being equal, lower interest rates lead to higher rates of investment.

What We've Learned AboutExpansionary Monetary Policy:

1. Expansionary monetary policy causes an increase in bond prices and a reduction in interest rates.

2. Lower interest rates lead to higher levels of capital investment.

3. The lower interest rates make domestic bonds less attractive, so the demand for domestic bonds falls and the demand for foreign bonds rises.

4. The demand for domestic currency falls and the demand forforeign currency rises, causing a decrease in the exchange rate. (The value ofthe domestic currency is now lower relative to foreign currencies)

5. A lower exchange rate causes exports to increase, imports to decrease and the balance of trade to increase.

Contractionary Monetary Policy

As you can probably imagine, the effects of a contractionary monetary policy are precisely the opposite of an expansionary monetary policy. In the United States, when the Federal Open Market Committee wishes to decrease the money supply, it can do a combination of three things:

1. Sell securities on the open market, known as Open Market Operations

2. Raise the Federal Discount Rate

3. Raise Reserve Requirements

These cause interest rates to rise, either directly or through the increase in the supply of bonds on the open market through sales by the Fedor by banks. This increase in supply of bonds reduces the price for bonds.These bonds will be bought up by foreign investors, so the demand for domesticcurrency will rise and the demand for foreign currency will fall. Thus thedomestic currency will appreciate in value relative to the foreign currency.The higher exchange rate makes domestically produced goods more expensive inforeign markets and foreign goods cheaper in the domestic market. Since thiscauses more foreign goods to be sold domestically and less domestic goods soldabroad, the balance of trade decreases. As well, higher interest rates causethe cost of financing capital projects to be higher, so capital investment willbe reduced.

What We've Learned AboutContractionary Monetary Policy:

1. Contractionary monetary policy causes a decrease in bond pricesand an increase in interest rates.

2. Higher interest rates lead to lower levels of capitalinvestment.

3. The higher interest rates make domestic bonds more attractive,so the demand for domestic bonds rises and the demand for foreign bonds falls.

4. The demand for domestic currency rises and the demand forforeign currency falls, causing an increase in the exchange rate. (The value ofthe domestic currency is now higher relative to foreign currencies)

5. A higher exchange rate causes exports to decrease, imports to increaseand the balance of trade to decrease.

It looks as though during times of Expansionary Monetary Policy Lower Interest rates lead to higher levels of capital investment. Maybe that is why all of us “speculators” got on board,that might also explain why all of the major oil corporations started signing contracts with Iraq. That also explains why the demand for domestic currency was low and the demand for foreign currency (USD) was high, causing a decrease in the exchange rate. The value of the domestic currency is now lower relative to foreign currencies.

I am not entirely sure but I would think that the GOI and CBI are looking towards transitioning to contractionary policy. This will in turn decrease the amount of currency in circulation, raise interest rates, and raise the bank reserve requirements. Wait, didn’t the CBI recently raise the bank reserve requirements? I think they did…

http://economics.abo...ey/a/policy.htm

http://www.investope...nary-policy.asp

http://www.investope...nary_policy.asp

http://www.federalre.../openmarket.htm

Let's say that Iraq has about 30 Trillion Dinars in circulation, that is a TON of dinar! In fact, it is way too much. If they want to RV at anything significant at all they can either do one of two things.

One - They can lop 3 zeroes off of their currency bringing the total currency in circulation to roughly 30 billion.

Two - They can do use a combination of different Monetary tools via Contractionary Monetary Policy. This will also directly reduce currently in circulation. This can be done through Open Market Operations also known as currency auctions.

We all know that they do not follow the "Islamic Banking Law" / "100% Full Reserve Banking" so they don't have to back their currency with anything tangible. Heck, they don't even have to back their currency in circulation 100% using foreign reserves. They operate using the fractional reserve banking system.

I wonder if maybe Iraq could implement Contractionary Policies while gradually increasing their rates. That is kind of a 2 in 1 scenario. Reducing currency in circulation while increasing their rates.

Edited by 20MillionDinar
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