Dinar News This is horrible news!

[mikea]

Anybody can change anything in Wikipedia.

[Rawl]

phoenix,

I pay attention to your analysis in order to assess both sides of the argument based on what may be deemed positive and negative interpretations of the same information. The comment about the floating currency raises a question. How would that be managed if the whole process of ridding the system of the large currency is going to play out? If we are talking float, isnt there a possibility of a downward trend or a devaluation of the dollar? I would be interested to get a feedback on that since any downward trend seems to me to be a negative affect on the eventual removal of the large currency and the eventual utilization of the smaller currency.

[Kent]

This is very bad news, people. A managed float is a mechanism that central banks use to prevent an exchange rate from changing too much. It does not mean that the rate is going to 'float up'. In the second quote, it clearly says that "the current exchange rate is reasonable and stable..." It is saying that the $43 billion USD that they have in their reserves is enough to support the rate as it is right now (current).

In short, the CBI just told us that they have enough in their reserves to support the rate as it is right now, and that they are going to adopt a managed float strategy to maintain it right where it is.

More info about what a managed float is at Wikipedia: http://en.wikipedia.org/wiki/Floating_exchange_rate

FP

I think FP's assessment is still accurate. This is still not good news (I wouldn't say horrible) because they seem to be indicating that they aren't going to change anything and that seemed to be his main point. In '07 the IMF indicated that they would adopt a policy of slow growth of about 6% per year and they did that, then they locked it in place for the last year (OK a "managed float"). Now they are saying that they have enough in currency reserves to support the current rate. We would all like them to say they have abundantly more than necessary to support the current rate - giving reason to believe they will increase it. One more observation- I looked for the last 20 minutes and couldn't find it, but wasn't Enorrset's calculation of Reserves much higher just after the article came out last month about moving the 3 tons of gold? If our discussions were counting on more than the $43 Billion, that is bad news as well - at least it is less than we were thinking and reserves are an important (but certainly not the only) basis for what would be an RV.

[mattevan]

It's happened before so why say it can't happen now...Wasn't there a big value change back at WWII or something. Plus what happens when it goes to 3.52 down to .00086...thats a big change in currency...Maybe I'm just thinking wrong but I did perdict a 3/10/2010 Rv at 2.36...so far I'm right on....Come on Dinar.

[Fi3ry_Ph03n1x]

the screen name Henny Penny hasn't been taken yet.... Saving it for you I guess.

Aww, puffs! I thought we were friends! And now you're calling me names? That's not nice. Besides, Henny Penny went around making doomsday predictions. In my post, I didn't predict anything, I only accurately interpreted a news article. When Enorrste does this, there are pages and pages of hymns, anthems, and "Hail to the Chief"s lauding his accomplishment. Gotta play fair if you're going to be a chat moderator.

And for those of you who made note, I agree: "Horrible" was an exaggeration. This news is pretty much the opposite of what we want, but it isn't horrible.

For those who noted that this has been going on, I never said anything about what they have been doing. I only interpreted their stated intentions. It was a gross misinterpretation of the article that caused me to bring it up at all.

FP

[tired_of_waiting]

this is very bad news, people. A managed float is a mechanism that central banks use to prevent an exchange rate from changing too much. It does not mean that the rate is going to 'float up'. In the second quote, it clearly says that "the current exchange rate is reasonable and stable..." it is saying that the $43 billion usd that they have in their reserves is enough to support the rate as it is right now (current).

In short, the cbi just told us that they have enough in their reserves to support the rate as it is right now, and that they are going to adopt a managed float strategy to maintain it right where it is.

More info about what a managed float is at wikipedia: http://en.wikipedia.org/wiki/floating_exchange_rate

fp

your post has validity and credability;however, i have been in this game long enough to know to go with the opposite of what cbi says. You have too read between the lines. Realistic thought process on your part though. --thanks.

[taxguy]

This is very bad news, people. A managed float is a mechanism that central banks use to prevent an exchange rate from changing too much. It does not mean that the rate is going to 'float up'. In the second quote, it clearly says that "the current exchange rate is reasonable and stable..." It is saying that the $43 billion USD that they have in their reserves is enough to support the rate as it is right now (current).

In short, the CBI just told us that they have enough in their reserves to support the rate as it is right now, and that they are going to adopt a managed float strategy to maintain it right where it is.

More info about what a managed float is at Wikipedia: http://en.wikipedia.org/wiki/Floating_exchange_rate

FP

FP, thanks for your post. This is certainly how Shabibi would like for his statement to be interpreted by speculators like you and me. Yesterday Maliki stated that an increase in value of the IQD was being studied by the CBI with the result to be determined "soon." IMO Maliki is trying to pressure Shabibi into pulling the trigger on the RV in order to boost his election prospects. Reference to a potential RV by a country's prime minister could be expected to put upward pressure on the country's currency. Iraq currently uses a managed or "dirt" float to maintain the IQD at its current rate of 1170 to the USD. This method has allowed Shabibi to maintain the IQD at 1170 to the USD despite the up and down swings of the USD. With upward pressure on the IQD, the CBI would likely have to sell more IQD at auction at 1170 per USD to defend this rate. Shabibi says he has enough reserves to defend this rate, but the question is would he want to use his reserves for this purpose, if he was planning an RV later this year? Or would Maliki's ploy work and force Shabibi's hand at an earlier date? Its clear from the press stories, and Maliki's statement, that CBI is developing some kind of plan.

IMO, Shabibi's statement is nothing more than an effort to tamp down speculation. There is nothing in his statement that is inconsistent with an imminent RV. The rate has been stable and has been reasonable for Iraq's purposes to this point. The CBI does have substantial reserves and could defend the current rate for some period of time.

IMO, your post overstates the negative implication of Shabibi's statement. Unless Shabibi was planning to RV today, which we now know that he was not, he basically had no other choice but to issue a statement like this. If Shabibi announced an RV tomorrow at $1, he would not have contradicted a single sentence in his statement. Of course, the same result would hold if he did not announce an RV. In short, Shabibi's statement is ambiguous but in a way that is designed to be interpreted precisely in the manner in which you have interpreted it.

[Fi3ry_Ph03n1x]

I have my doubts about the statements given. I can't imagine they would tell us what they are going to do anyway. The only positive i can take from this is his acknowledgement of the situation.

Ben Bernanke makes statements like this about the Fed and the USD/economy all the time. Every word he says has the capacity to have huge effects on Wall St. and our economy. I think that these kind of statements are not only normal, but necessary to show that the CBI is effectively managing the Iraqi economy.

FP

[Fi3ry_Ph03n1x]

Taxguy, thanks for your insights. In the USA, Ben Bernanke couldn't get away with intentionally misleading people by saying one thing with the intention of doing exactly the opposite. As you know, I didn't delve into any hypotheticals about why Shabibi would make this statement as it petains to Maliki's suspected goals and plans. It is not outside the realm of reason and possibility that Shabibi is intentionally misleading us with plans to do something entirely different. I'm not saying that this statement completely contradicts the possiblity of an RV/RI, but if that is the intention, this statement is certainly misleading. So essentially you are stating in an informed and intelligent way what others have said, that this is a smoke screen (by the way, why is all 'good news' taken as gospel by some, but every piece of 'bad news' is either being misinterpreted or a smoke screen? Some people need to take the blinders off and be open-minded about all info, IMO).

All in all, a good post, sir, and I thank you for your thoughtful contributions to the discussion.

FP

[Fi3ry_Ph03n1x]

phoenix,

I pay attention to your analysis in order to assess both sides of the argument based on what may be deemed positive and negative interpretations of the same information. The comment about the floating currency raises a question. How would that be managed if the whole process of ridding the system of the large currency is going to play out? If we are talking float, isnt there a possibility of a downward trend or a devaluation of the dollar? I would be interested to get a feedback on that since any downward trend seems to me to be a negative affect on the eventual removal of the large currency and the eventual utilization of the smaller currency.

Well, not everyone agrees with the idea that the large denomination notes are the only bills that will be removed from the currency. But even if that were true, the notes being removed wouldn't have anything significant to do with the managed float. With the float, if the value starts to fall, the CBI compensates for it by buying up more currency to stabilize it. If it rises, they sell instead to tamp down any growth in the value of the currency. So any changes in the total money supply could be managed by buying or selling more of the currency. I'm sure there are other ways that central banks control the exchange rate too. This is just my understanding of what the CBI is doing with a managed float. So to answer your question: There can be negative impacts from movement in the USD, or changes in the IQD money supply, but the purpose of the managed float is to counteract those external forces and keep the exchange rate stable. So far, the CBI has done a stellar job of maintaining the ER against all other contributing factors. How this will affect the IQD in the future, only time will tell that.

FP

[kdog]

Smoke Screen!