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CBI Auction 16 Oct 2011


oleman
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Announcement No. (2000)

The latest daily currency auction was held in the Central Bank of Iraq on the 16-OCT-2011. The results were as follows:

Details Notes

Number of banks 21

Auction price selling dinar / US$ 1170

Auction price buying dinar / US$ -----

Amount sold at auction price (US$) 172,179,000

Amount purchased at Auction price (US$) -----

Total offers for buying (US$) 172,179,000

Total offers for selling (US$) -----

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So....the CBI continues to draw-in dinar from circulation. IMO, this must lead to something happening soon as the dinar supply dwindles.

These auctions have been ongoing for six years.

If they only sold 100 million 20 days a month, they would have removed 154 trillion dinar from the circulation.

The have never had more than 30 trillion in circulation.

Please explain exactly how they are drawing in dinar that isn't there, and what they have done for the last 5 years, since at least 24 trillion would have dwindled in the very first year and they would have already dwindled all the dinar in circulation at that time, in the first 6 months of the first year.

I am serious; please explain. All you have to do is show me the Math. I am really interested in understanding this concept.

Also, since their M2 is increasing, it presents a real problem with the concept of them drawing in currency.

It is either one or the other.

They either have bazillions of dinar that they are lying about in the small numbers and are trying to draw it down, or are still increasing the currency and using the auctions to control inflation and keep the banks balanced in a dual- currency economy as the CBI has claimed.

Someone is telling a story. It can't be both ways.

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These auctions have been ongoing for six years.

If they only sold 100 million 20 days a month, they would have removed 154 trillion dinar from the circulation.

The have never had more than 30 trillion in circulation.

Please explain exactly how they are drawing in dinar that isn't there, and what they have done for the last 5 years, since at least 24 trillion would have dwindled in the very first year and they would have already dwindled all the dinar in circulation at that time, in the first 6 months of the first year.

I am serious; please explain. All you have to do is show me the Math. I am really interested in understanding this concept.

Also, since their M2 is increasing, it presents a real problem with the concept of them drawing in currency.

It is either one or the other.

They either have bazillions of dinar that they are lying about in the small numbers and are trying to draw it down, or are still increasing the currency and using the auctions to control inflation and keep the banks balanced in a dual- currency economy as the CBI has claimed.

Someone is telling a story. It can't be both ways.

Tell us then what happens in the opposite scenario? Your saying there has been 154 trillion dinar added to the circulation. Not sure that the removal of old worn bills would bring us to the 30+ trillion you claim is in circulation.

Edited by odogtriever
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Tell is then what happens in the opposite scenario? Your saying there has been 154 trillion dinar added to the circulation. Not sure that the removal of old worn bills would bring us to the 30+ trillion you claim is in circulation.

From a previous post. More information is presented in the discussion of the post......

***********************

They are buying and selling USD, which means they are selling and buying Dinar.

If they sell USD, they buy Dinar

If they buy USD, they sell Dinar.

They are the Central Bank, and Iraq is a dual currency country.

There are usually between 20 to 26 banks participating.

If my bank took on a lot of dinar, and my dollar reserves were low, I would wait until the CBI was selling dollars, and would sell my dinar back for dollars untill I had the balance of the two that my bank usually required. The opposite if I took in too many dollars, I would wait until they were selling dinar.

This is the way the CBI acts as a Central Bank, and serves the other banks to keep them in balance and able to operate in a dual currency economy.

It is a very popular forum fact that these auctions are used to take dinar out of circulation. Think about it...

Six days a week, 52 weeks a year, five years, 100 to 200 million per auction; when would Iraq have ceased to have any dinar in circulation?

100 million dollars buys approx 100 billion dinar. Ten days per Trillion Dinar (1000 bililion is 10 x 100 billion, is a Trillion)

Let's be uber conservative and say that it took 2 weeks to take in a trillion Dinar..(10 times 100 billion is a trillion).

That would be 2 trillion dinar off the street in a month. 24 trillion off the street in a year; and these are grossly small auctions of only a hundred million dollars per day, five days a week.

In five years, they would have taken 120 trillion of the current 30 trillion Dinar that the CBI claims responsibility for.

The problem here is that they never had 120 trillion dinar, but if the auctions were used to contract the money supply, that is a very conservative portrayal of how much the cash would have shrunk.

So, if they are buying dollars, they are selling dinar. If they are selling dollars, they are buying dinar.

Wax On, Wax Off...

**********************************

Soiled bills are replaced with new ones; no loss, no gain.

There never was 154 trillion in circulation, but that is a very conservative estimate of how much would have been removed from circulation in6 years.

The CBI claims 30 Trillion currently in circulation

Other thread

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Announcement No. (2000)

The latest daily currency auction was held in the Central Bank of Iraq on the 16-OCT-2011. The results were as follows:

Someone please check my math: :unsure:

Details Notes

Number of banks 21

Auction price selling dinar / US$ 1170

Auction price buying dinar / US$ -----

Amount sold at auction price (US$) 172,179,000 => 201,449,430,000.00 Dinar purchased by the 21 Banks

(It looks like they are trying to remove the US Currency from Circulation)

Amount purchased at Auction price (US$) -----

Total offers for buying (US$) 172,179,000

Total offers for selling (US$) -----

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From a previous post. More information is presented in the discussion of the post......

***********************

They are buying and selling USD, which means they are selling and buying Dinar.

If they sell USD, they buy Dinar

If they buy USD, they sell Dinar.

They are the Central Bank, and Iraq is a dual currency country.

There are usually between 20 to 26 banks participating.

If my bank took on a lot of dinar, and my dollar reserves were low, I would wait until the CBI was selling dollars, and would sell my dinar back for dollars untill I had the balance of the two that my bank usually required. The opposite if I took in too many dollars, I would wait until they were selling dinar.

This is the way the CBI acts as a Central Bank, and serves the other banks to keep them in balance and able to operate in a dual currency economy.

It is a very popular forum fact that these auctions are used to take dinar out of circulation. Think about it...

Six days a week, 52 weeks a year, five years, 100 to 200 million per auction; when would Iraq have ceased to have any dinar in circulation?

100 million dollars buys approx 100 billion dinar. Ten days per Trillion Dinar (1000 bililion is 10 x 100 billion, is a Trillion)

Let's be uber conservative and say that it took 2 weeks to take in a trillion Dinar..(10 times 100 billion is a trillion).

That would be 2 trillion dinar off the street in a month. 24 trillion off the street in a year; and these are grossly small auctions of only a hundred million dollars per day, five days a week.

In five years, they would have taken 120 trillion of the current 30 trillion Dinar that the CBI claims responsibility for.

The problem here is that they never had 120 trillion dinar, but if the auctions were used to contract the money supply, that is a very conservative portrayal of how much the cash would have shrunk.

So, if they are buying dollars, they are selling dinar. If they are selling dollars, they are buying dinar.

Wax On, Wax Off...

**********************************

Soiled bills are replaced with new ones; no loss, no gain.

There never was 154 trillion in circulation, but that is a very conservative estimate of how much would have been removed from circulation in6 years.

The CBI claims 30 Trillion currently in circulation

Other thread

Thanks for the reply. That makes sense to me. Balancing the USD to the IRD in country. I am not sure we can put much into the auctions as an indicator to an RV or RD either way. That being said, I am no economist.

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Someone please check my math: :unsure:

Details Notes

Number of banks 21

Auction price selling dinar / US$ 1170

Auction price buying dinar / US$ -----

Amount sold at auction price (US$) 172,179,000 => 201,449,430,000.00 Dinar purchased by the 21 Banks

(It looks like they are trying to remove the US Currency from Circulation)

Amount purchased at Auction price (US$) -----

Total offers for buying (US$) 172,179,000

Total offers for selling (US$) -----

Markinsa,

I am sure your math is correct.

Without the breakdown to see if there were any cash sales or transfers abroad at the 1183:1 rate that includes a 13 dinar commission per dinar, it is hard to see it as anything else.

They buy and sell dollars, which means they sell and buy dinar.

It has been very effective in keeping inflation down, the exchange rate stable, and redistributing both currencies to the various participating banks; as well as taking oil payments in dollars from the GOI and giving them Dinar to be paid in salaries and the running of the country.

While the currency auctions would provide an excellent means of contracting the money supply, we have seen no evidence of it being used in this manner. The M1, M2 and Foreign Reserves are all still on the rise.

Thanks for the reply. That makes sense to me. Balancing the USD to the IRD in country. I am not sure we can put much into the auctions as an indicator to an RV or RD either way. That being said, I am no economist.

It has taken me a long time to come to that explanation, and it still may not be entirely accurate.

It is easy to see how it gets interpreted as taking dinar out of circulation, and would provide an excellent means of doing so.

They are usually a month (at least) behind in updating the key financials spreadsheet and aggregates data on the CBI site, and I try to look it over periodically for indications that they are contracting the cash supply.

They may, in fact, be doing that, and it would be a month before we knew.

So, take my explanation as my interpretation, as I have no absolute certainty either way.

I remain hopeful and check the figures in anticipation of a change..

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I would think that the only dinars being pulled out of circulation would be the "cash" part of the auctions. If I remember correctly that is a very small portion usually around 2.5 million. The rest would all be electronic therefore not affecting the physical dinar in circulation. That would be pulling about 1 trillion a year out of circulation physically. Just guessing here.

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I captured this from the CBI website Oct. 1 :

Interest rates CBI policy rate (valid from 1 Apr 2010) 6%

IQD 7 day deposit 4%

Primary credit facility 8%

Economic indicators

Core inflation (YoY): Aug 2011 7.61%

Inflation (YoY): Aug 2011 5.24%

M2 growth (YoY): Jul 2011 15.3%

For 2011F:

GDP - real growth rate 9.6%

Budget deficit/GDP 13.7%

Current account deficit/GDP 10.9%

Net foreign reserves $58B

This is from today :

Interest rates CBI policy rate (valid from 1 Apr 2010) 6%

IQD 7 day deposit 4%

Primary credit facility 8%

Economic indicators

Core inflation (YoY): Aug 2011 7.61%

Inflation (YoY): Aug 2011 5.24%

M2 growth (YoY): Aug 2011 14.5%

For 2011F:

GDP - real growth rate 9.6%

Budget deficit/GDP 13.7%

Current account deficit/GDP 10.9%

Net foreign reserves $58B

My question: If the current M2 growth is now only 14.5%. how is it growing?

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Which is more advantageous, and to whom: Removing dinars from the street, or dollars?

Removing dinar; if they could be "retired", thus contracting the money supply, which lessens the CBI liability, while giving the remaining dinar in circulation more purchasing power.

This would be an advantage to the CBI, as it decreases their liability

It would benefit the people, as the current reserves could back a higher exchange rate if the liability was significantly reduced.

This would be reflected in the CBI key financials balance sheet, as well as their aggregate numbers.

Aggregates - look at all 3 sheets

Key Financial Indicators

Key Financial Indicators - Documentation

CBI Statistics

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I captured this from the CBI website Oct. 1 :

M2 growth (YoY): Jul 2011 15.3%

M2 growth (YoY): Aug 2011 14.5%

My question: If the current M2 growth is now only 14.5%. how is it growing?

So this says

M2 in July 2011 is 1.153 times M2 in July of 2010

and that

M2 in August 2011 is 1.145 times M2 in August 2010

What we don't know from this is how M2 changed from July to August 2010. But lets say it was just slowly increasing. Then indeed this would show that from July to August 2011 M2 went down very slightly, but still is greater then it was a year ago. So the slight decrease from July to August is not enough to make up for the increases (15%) from August 2010 to July 2011. Year over year seems an odd way of expressing such things to me, I think of it more for reporting on financial things that have a strong seasonal component, which this does not so much.

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So this says

M2 in July 2011 is 1.153 times M2 in July of 2010

and that

M2 in August 2011 is 1.145 times M2 in August 2010

What we don't know from this is how M2 changed from July to August 2010. But lets say it was just slowly increasing. Then indeed this would show that from July to August 2011 M2 went down very slightly, but still is greater then it was a year ago. So the slight decrease from July to August is not enough to make up for the increases (15%) from August 2010 to July 2011. Year over year seems an odd way of expressing such things to me, I think of it more for reporting on financial things that have a strong seasonal component, which this does not so much.

Yes we do, just look at the Key Financial Indicators from the CBI. The spreadsheet gives you actual M1 and M2 numbers: :twothumbs:

-

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These auctions have been ongoing for six years.

If they only sold 100 million 20 days a month, they would have removed 154 trillion dinar from the circulation.

The have never had more than 30 trillion in circulation.

Please explain exactly how they are drawing in dinar that isn't there, and what they have done for the last 5 years, since at least 24 trillion would have dwindled in the very first year and they would have already dwindled all the dinar in circulation at that time, in the first 6 months of the first year.

I am serious; please explain. All you have to do is show me the Math. I am really interested in understanding this concept.

Also, since their M2 is increasing, it presents a real problem with the concept of them drawing in currency.

It is either one or the other.

They either have bazillions of dinar that they are lying about in the small numbers and are trying to draw it down, or are still increasing the currency and using the auctions to control inflation and keep the banks balanced in a dual- currency economy as the CBI has claimed.

Someone is telling a story. It can't be both ways.

So with what you are saying they can rv any time they want by just destroying dinar for a couple days??

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So with what you are saying they can rv any time they want by just destroying dinar for a couple days??

I am not sure it would be that simple, or that large.

The CBI currently has foreign reserves sufficient to back the dinar in circulation by 110%.

If they continue to fully back the exchange rate, that would allow an increase of 10% as an RV.

The exchange rate would move to 1053:1 ( 1170 - 117).

The more they cut circulation, the more their foreign reserves will allow the exchange rate to rise.

The numbers from the CBI do not show any reduction of the cash liability; they have shown a fairly consistent rise in the amount that is in circulation.

A slow contraction would not upset the balance of the two currencies. A rapid contraction would force the country to use dollars exclusively.

If they withdrew all the dinar in circulation, there would be nothing to RV.

Even with a large contraction of the cash supply, the CBI would have to abandon the practice of fully covering the exchange rate to give the numbers everyone is expecting.

The whole concept is this:

Too much cash lessens the buying power.

Adding zeros in the past created too much cash.

To get more value, they have to drastically cut the amount of cash in existence.

How they do this without going into fractional reserve banking currently seems impossible.

As long as they owe the Paris Club and IMF, it is unknown if they will be allowed to employ fractional reserve banking to back the exchange rate.

There are a lot of unknowns that open up a wide range of possibilities..

Not much of an answer, but just an idea of what the possibilities may be.

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I am not sure it would be that simple, or that large.

The CBI currently has foreign reserves sufficient to back the dinar in circulation by 110%.

If they continue to fully back the exchange rate, that would allow an increase of 10% as an RV.

The exchange rate would move to 1053:1 ( 1170 - 117).

The more they cut circulation, the more their foreign reserves will allow the exchange rate to rise.

The numbers from the CBI do not show any reduction of the cash liability; they have shown a fairly consistent rise in the amount that is in circulation.

A slow contraction would not upset the balance of the two currencies. A rapid contraction would force the country to use dollars exclusively.

If they withdrew all the dinar in circulation, there would be nothing to RV.

Even with a large contraction of the cash supply, the CBI would have to abandon the practice of fully covering the exchange rate to give the numbers everyone is expecting.

The whole concept is this:

Too much cash lessens the buying power.

Adding zeros in the past created too much cash.

To get more value, they have to drastically cut the amount of cash in existence.

How they do this without going into fractional reserve banking currently seems impossible.

As long as they owe the Paris Club and IMF, it is unknown if they will be allowed to employ fractional reserve banking to back the exchange rate.

There are a lot of unknowns that open up a wide range of possibilities..

Not much of an answer, but just an idea of what the possibilities may be.

I am not sure it would be that simple, or that large.

The CBI currently has foreign reserves sufficient to back the dinar in circulation by 110%.

If they continue to fully back the exchange rate, that would allow an increase of 10% as an RV.

The exchange rate would move to 1053:1 ( 1170 - 117).

The more they cut circulation, the more their foreign reserves will allow the exchange rate to rise.

The numbers from the CBI do not show any reduction of the cash liability; they have shown a fairly consistent rise in the amount that is in circulation.

A slow contraction would not upset the balance of the two currencies. A rapid contraction would force the country to use dollars exclusively.

If they withdrew all the dinar in circulation, there would be nothing to RV.

Even with a large contraction of the cash supply, the CBI would have to abandon the practice of fully covering the exchange rate to give the numbers everyone is expecting.

The whole concept is this:

Too much cash lessens the buying power.

Adding zeros in the past created too much cash.

To get more value, they have to drastically cut the amount of cash in existence.

How they do this without going into fractional reserve banking currently seems impossible.

As long as they owe the Paris Club and IMF, it is unknown if they will be allowed to employ fractional reserve banking to back the exchange rate.

There are a lot of unknowns that open up a wide range of possibilities..

Not much of an answer, but just an idea of what the possibilities may be.

Dalite

if as u said there are many possibilities.....

if iraq increase the rate of 10% as an RV

i wonder what will people (who hold the iraq dinar) do?

people will continue to hold them or sell them....interesting.....

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