Open Market Operations aka "Currency Auctions"

[20MillionDinar]

"Open market operations" are monetary policy tools that affect directly the monetary base; the monetary base can be expanded or contracted using an expansionary policy or a contractionary policy, but not without risk.

The monetary base is typically controlled by the institution in a country that controls monetary policy. This is usually either the finance ministry or the central bank. These institutions print currency and release it into the economy, or withdraw it from the economy, through open market transactions (i.e., the buying and selling of government bonds). These institutions also typically have the ability to influence banking activities by manipulating interest rates and changing bank reserve requirements (how much money banks must keep on hand instead of loaning out to borrowers).

The monetary base is called high-powered because an increase in the monetary base (M0) can result in a much larger increase in the supply of bank money, an effect often referred to as the money multiplier. An increase of 1 billion currency units in the monetary base will allow (and often be correlated to) an increase of several billion units of "bank money". This is often discussed in conjunction with fractional-reserve banking banking systems.

So now we know there are monetary tools that affect directly the monetary base. Monetary Base are the notes & coins that are in circulation. The monetary base can be expanded or contracted using two different methods.

First Method: "Expansionary Policy" (Expanding / Printing More Money)

http://en.wikipedia....monetary_policy

"In economics, expansionary policies are fiscal policies, like higher spending and tax cuts, that encourage economic growth.^[1] In turn, an expansionary monetary policy is monetary policy that seeks to increase the size of the money supply. In most nations, monetary policy is controlled by either a central bank or a finance ministry." We already know how a country can "expand" their monetary base / currency in circulation. They print more money. This is exactly what Iraq has done ever since 2003 when they released the new IQD's and put them into circulation. I believe they started with about 6 trillion Dinars back in 2003 but for arguments sake we will stick with the facts. In 2004 IndexMundi states that they had 10,244,220,000,000.00 Iraqi Dinars in circulation. That is a little over 10 trillion dinars.

http://www.indexmund...acts/iraq/money

Now we know that the CBI has the ability to "expand" and has in fact "expanded" their monetary base from 10 trillion Dinars to 30 trillion Dinars in a matter of 4 years! That is a lot of printing...

Second Method: "Contractionary Policy" (Contracting / Decreasing Money in Circulation)

http://en.wikipedia....monetary_policy

Monetary base

Contractionary policy can be implemented by reducing the size of the monetary base. This directly reduces the total amount of money circulating in the economy.

A central bank can use open market operations to reduce the 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.

Iraq's Currency Auctions They sell U.S. dollars to the banks and receive Iraqi Dinars. This happens ALL THE TIME. 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 our key to a significant RV, PERIOD!

Effectively DESTROY BASE MONEY:

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.

Folks, I have created 3 threads this morning and all of them I personally feel are VERY IMPORTANT.

First Thread Titled: "Iraqi Bank Reserve Requirements" http://dinarvets.com...79entry611879This particular thread has debunked the false rumors floating around accusing Iraq of following the Islamic Banking Law, which they do not. This means that they do not follow 100% Full Reserve Banking.

Second Thread Titled: Smart Cards / E-Payment Will Decrease Currency in Circulation" http://dinarvets.com...31entry611831 I explained how moving to E-Payment such as the Smart Card can and will significantly decrease the amount of currency in circulation over time. This method will depend on consistent power through the country in order for the banks and ATM's to work....they obviously need electricity (thanks Dalite for the reminder) The Iraqi citizens will also need to build faith and trust with the different banks in order for this to work. Educational Campaigns could do this for them in a matter of weeks or maybe months.

Lastly, Thread Titled: "Open Market Operations aka "Currency Auctions" This PROVES that the currency auctions can (if not already) bring in tons and tons of Iraqi Dinars which will then be destroyed. This effectively destroys a country's Money Base aka Currency in Circulation.

I have provided tons of links and facts for the naysayers or for those who base their decisions off of logic and reasoning. I'm not sure if this is possible but I think a MOD should "Pin" this thread because it proves that a significant RV is possible. It proves all of the "naysayers / LOPsters" wrong. The biggest argument (which is valid and played a huge role in all of this) is the amount of currency in circulation. Well this thread proves that by using Contractionary Policy the CBI can decrease the Money Base (currency in circulation) through Open Market Operations which also can be referred to as Currency Auctions.

Thank you for taking the time to read through this.

[Rossenbos]

You deserve 20milliondinar for this work!

[20MillionDinar]

You deserve 20milliondinar for this work!

Haha. Thanks Rossenbos.

[tjmunson]

Excellent perspective and open minded thinking. That is exactly what this investment is all about. Great post.

Peace

[JWJW11]

Very nice post! Great info!

[nemesis760]

Iraq's Currency Auctions They sell U.S. dollars to the banks and receive Iraqi Dinars. This happens ALL THE TIME. 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 our key to a significant RV, PERIOD!

Is there a way to see the numbers on how much the monetary base has contracted? That would be awesome, the lopsters would have to reconsider their views if that was the case. This is a great post!

[20MillionDinar]

Is there a way to see the numbers on how much the monetary base has contracted? That would be awesome, the lopsters would have to reconsider their views if that was the case. This is a great post!

Unfortunately we don't have access to those figures at this time.

What we can do is try to figure out how much U.S. dollars is sold at a "typical" currency auction. Once we find those numbers, we figure out how many auctions are going on during a months time. Then we could have a very rough estimate as to how much currency they could bring in during a one month time frame.

Let me give it a shot.

**Disclaimer: Do not take this at face value. This is only an EXAMPLE I am using to make it easier with the numbers.

$100,000,000 ($100 Million Dollars) = 116,950,000,000 Iraqi Dinars (roughly 117 billion dinars)

It is safe to say that an average currency auction that takes place in Iraq ranges anywhere from $60,000,000 being sold up to $200,000,000 USD being sold. I am not exactly sure but let's go with an average of $100,000,000 per auction. I think we are safe to say that is an "average" currency auction.

So if they are able to bring in roughly 117 Billion Dinars per auction. they would need about 10 auctions to bring in a Trillion Dinars. That would be roughly 2 weeks.

2 weeks for 1 Trillion Dinars. So the CBI could technically bring in 2 Trillion Dinars a month right?

24 trillion in one year's time.

They have been doing these auctions for quite some time now. Like for years and years... I think it is safe to say that if they wanted to remove physical currency in circulation they could do it using the methods they are using on a daily basis. Simple as that.

Who can prove they are not using Contractionary Policy to decrease their Money Base via Open Market Operations aka Currency Auctions? Anybody?

Edited August 8, 2011 by 20MillionDinar

[easyrider]

Wow, very very nice post. The bigger ? is will they have the balls to show upon this post and either bash or admit they have been wrong only time will tell. +1 for you sir.

Edited August 8, 2011 by easyrider

[20MillionDinar]

Wow, very very nice post. The bigger ? is will they have the balls to show upon this post and either bash or admit they have been wrong only time will tell. +1 for you sir.

I was wondering the same thing Easy...

Still waiting for somebody to debate these facts

[RichNick123]

"Open market operations" are monetary policy tools that affect directly the monetary base; the monetary base can be expanded or contracted using an expansionary policy or a contractionary policy, but not without risk.

The monetary base is typically controlled by the institution in a country that controls monetary policy. This is usually either the finance ministry or the central bank. These institutions print currency and release it into the economy, or withdraw it from the economy, through open market transactions (i.e., the buying and selling of government bonds). These institutions also typically have the ability to influence banking activities by manipulating interest rates and changing bank reserve requirements (how much money banks must keep on hand instead of loaning out to borrowers).

The monetary base is called high-powered because an increase in the monetary base (M0) can result in a much larger increase in the supply of bank money, an effect often referred to as the money multiplier. An increase of 1 billion currency units in the monetary base will allow (and often be correlated to) an increase of several billion units of "bank money". This is often discussed in conjunction with fractional-reserve banking banking systems.

20 million, this is what I have been harping on for almost a year!! In your estimation how much of the M0 has actually been removed and how much is in circulation in Iraq?

Great post and appreciate your line of thought!

RichNick

So now we know there are monetary tools that affect directly the monetary base. Monetary Base are the notes & coins that are in circulation. The monetary base can be expanded or contracted using two different methods.

First Method: "Expansionary Policy" (Expanding / Printing More Money)

http://en.wikipedia....monetary_policy

"In economics, expansionary policies are fiscal policies, like higher spending and tax cuts, that encourage economic growth.^[1] In turn, an expansionary monetary policy is monetary policy that seeks to increase the size of the money supply. In most nations, monetary policy is controlled by either a central bank or a finance ministry." We already know how a country can "expand" their monetary base / currency in circulation. They print more money. This is exactly what Iraq has done ever since 2003 when they released the new IQD's and put them into circulation. I believe they started with about 6 trillion Dinars back in 2003 but for arguments sake we will stick with the facts. In 2004 IndexMundi states that they had 10,244,220,000,000.00 Iraqi Dinars in circulation. That is a little over 10 trillion dinars.

http://www.indexmund...acts/iraq/money

Now we know that the CBI has the ability to "expand" and has in fact "expanded" their monetary base from 10 trillion Dinars to 30 trillion Dinars in a matter of 4 years! That is a lot of printing...

Second Method: "Contractionary Policy" (Contracting / Decreasing Money in Circulation)

http://en.wikipedia....monetary_policy

Monetary base

Contractionary policy can be implemented by reducing the size of the monetary base. This directly reduces the total amount of money circulating in the economy.

A central bank can use open market operations to reduce the 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.

Iraq's Currency Auctions They sell U.S. dollars to the banks and receive Iraqi Dinars. This happens ALL THE TIME. 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 our key to a significant RV, PERIOD!

Effectively DESTROY BASE MONEY:

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.

Folks, I have created 3 threads this morning and all of them I personally feel are VERY IMPORTANT.

First Thread Titled: "Iraqi Bank Reserve Requirements" http://dinarvets.com...79entry611879This particular thread has debunked the false rumors floating around accusing Iraq of following the Islamic Banking Law, which they do not. This means that they do not follow 100% Full Reserve Banking.

Second Thread Titled: Smart Cards / E-Payment Will Decrease Currency in Circulation" http://dinarvets.com...31entry611831 I explained how moving to E-Payment such as the Smart Card can and will significantly decrease the amount of currency in circulation over time. This method will depend on consistent power through the country in order for the banks and ATM's to work....they obviously need electricity (thanks Dalite for the reminder) The Iraqi citizens will also need to build faith and trust with the different banks in order for this to work. Educational Campaigns could do this for them in a matter of weeks or maybe months.

Lastly, Thread Titled: "Open Market Operations aka "Currency Auctions" This PROVES that the currency auctions can (if not already) bring in tons and tons of Iraqi Dinars which will then be destroyed. This effectively destroys a country's Money Base aka Currency in Circulation.

I have provided tons of links and facts for the naysayers or for those who base their decisions off of logic and reasoning. I'm not sure if this is possible but I think a MOD should "Pin" this thread because it proves that a significant RV is possible. It proves all of the "naysayers / LOPsters" wrong. The biggest argument (which is valid and played a huge role in all of this) is the amount of currency in circulation. Well this thread proves that by using Contractionary Policy the CBI can decrease the Money Base (currency in circulation) through Open Market Operations which also can be referred to as Currency Auctions.

Thank you for taking the time to read through this.

[jv1054]

GOOD TO READ SOME POSITIVE STUFF THAT HAS BASIS AND SHOWS YOU DID YOUR HOMEWORK. THANK YOU

[DinarDana]

Thanks so much for your post and sharing this information. This information was the missing link for me. I came into this investment completely ignorant of currency investments. I have spent hours connecting the dots and listening to various opinions and further researching whatever piece of credible evidence I could find. I just couldn't understand how the CBI was going to reduce the amount of currency in circulation. Sure there are several theories provided, but none seemed to really make sense. I would waver between the Cindy Lopper theory and the strong opinions of many others here on this site. Have a great week.

[YourIntelSux]

20 mil, you're a bad dude! The money supply has been a lot of our concern. You and scooter should should team up and run the USA! All of DV would vote for ya

Peace

Edited August 8, 2011 by YourIntelSux

[20MillionDinar]

20 mil, you're a bad dude! The money supply has been a lot of our concern. You and scooter should should team up and run the USA! All of DV would vote for ya

Peace

LOL. We all know the problem is there, too much currency in circulation. So I am focusing on learning about different solutions and possibilities.

[DinarDana]

LOL. We all know the problem is there, too much currency in circulation. So I am focusing on learning about different solutions and possibilities.

Good job!

[zaborniake]

Good job, 20.

[sandyf]

Iraq's Currency Auctions They sell U.S. dollars to the banks and receive Iraqi Dinars. This happens ALL THE TIME. 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 our key to a significant RV, PERIOD!

Read more:

It does not seem to matter how many times it is said, or how many articles are posted, there is still the hard core of people convinced the CBI are selling dinar at the auctions.

Thanks for the post.

[YourIntelSux]

LOL. We all know the problem is there, too much currency in circulation. So I am focusing on learning about different solutions and possibilities.

Man, I have been saying that's the attitude to have all along. Let's look at the problem and see if it can be done. These lopsters need to have your attitude when it comes to this investment. It's too bad because most of them seem like pretty sharp people but all they focus on is how it cannot be done. We all already know this is a risky investment with a chance of a RD, but that doesn't mean there isnt a chance of a RV. I wish I was smart enough to help ya, but I'm riding your coat tails.haha..keep up the good work!

Edited August 8, 2011 by YourIntelSux

[Butifldrm]

20MillionDinar, great post. Looking forward to read more of your work. Thanks a lot!

[oneremedy]

I bow to you sir! Thank you for the hard work.

[PD46]

This is an excellent post and explains several missing pieces!

Thank you for all of the hard work 20MillionDinar.

Awesome Dude!!!

I was wondering the same thing Easy...

Still waiting for somebody to debate these facts

Probably shifting through "drop 000's" articles and CBI guidelines, by-laws, and procedures at the moment.

[leanonme]

very informative and very beleivable too! Thanks for all the hard work.

[randalln]

Iraq's Currency Auctions They sell U.S. dollars to the banks and receive Iraqi Dinars. This happens ALL THE TIME. 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 our key to a significant RV, PERIOD!

Read more: http://dinarvets.com.../#ixzz1UOsOPzqI

It does not seem to matter how many times it is said, or how many articles are posted, there is still the hard core of people convinced the CBI are selling dinar at the auctions.

Thanks for the post.

Right ,right,

The dumb-a$$ cant even see that it says $ not dinar

We brought Billions of dollars over there so that the country would not shut down wail we where there .............

Now they are selling them back( in cash) for credit in Digital currency

And the bills are being destroyed on the spot (at least most of the bills hehe! )by us.

Edited August 8, 2011 by randalln

[speculatorsRIDE]

20 you now know what sonny1 and his professors friends have known for a long time now. As I have stated on numerous occasions, the CBI has been removing 000 notes from circulation for some time. Now all you have to do is try and convince the lopsters of this. I gave up a long time ago. I tried posting that the CBI was buying dinar but it seems every time I did I was told I was wrong and I refuse to argue on a forum. You have said it in a way I couldn't. Great job my friend. Let's see which lopster speaks up first.

[randalln]

O and most of the auctions are fake

Remember the Iraqi government enacted a law. That gives them the right to just (out right LIE ) about things relating to the economy (approved by the International community )

Thats right we got that passed before anything even gets started