This dialogue exchange between Shredd - dogsvova and Bye The Sea members was in reference to a previous chat - Here is the LINK to that chat
[Shredd] Greetings everyone at BLC. I was researching the two camps of a free float versus a managed float and had some thoughts around this, combined with some interesting material I found. A study out of MIT simply stated what determines exchange rates….supply and demand for foreign exchange. In other words, the supply source comes from foreign demand for domestic supply of goods and assets. http://web.mit.edu/14.02/www/krugman/1026LEC.pdf
dogsnova: Outstanding explanation.. Shred I do have a question for ya..
Would this scenario be a hybrid type approach? The CBI's posted market price floating against the USD while the CBI's posted exchange rate is locked @ 1166? I believe that's what's happening now.
Read More Link On Right
Shredd: Good question but what I'm presenting is the plan around the CBI program rate via the monetary policy exchange regime. What you are referring to is the closely related market price. The difference between the two is normal and affect one another.
Bye The Sea: Simply excellent Mr. Shredd. This chat could be compared to a "G" rated movie, in that persons of all economic levels of understanding gained from your expertise.
I have said for quite some time, and maybe on the phone with you the time we spoke, that MY expectations all along have been for a penny, while hoping for a dime, but getting a Dollar would be the ultimate as the end result.
This may very well be how they roll this out, merely by deleting one zero at a time from the exchange rate after starting us off at 1000 dinar to the Dollar. That would be managed, yet have some elasticity to it as well. I'm sure many here would disagree. Yet, it is a very do-able scenario.
Think about it, Penny to a Dime to a Dollar -- remove one zero at a time from the Dinar. Very affordable for Iraq, while encouraging speculation of sorts, and easy for Citizens to understand.
Education would be easy, and it could be completed in a 2 year period quite easily. Oh well, just my beliefs from Day One of this investment.
Once again Mr. Shredd, II thank you again for "sticking your neck out" by educating we members here at this wonderful site. All the best, bye the sea.
Shredd: Certainly logical BTS but the consistent message we are seeing is the dinar being equal to the dollar. Exactly how they do that is yet to be seen but an initial jump straight to the dollar bears more weight to me simply based on the high level of concern for the citizen to not be taken advantage of.
You do make a good point regarding stirring speculation but that is not an objective of the CBI....they want to mitigate speculation because it only benefits the speculator (low buy, high exchange).
By contrast, true investment brings in working capital while generating interest for the lender/investor. That kind of investment is what the CBI wants.
Bye The Sea: Darn Shredd, I had this lengthy post written out, giving you my rationale for the managed float and rise from a penny to dime to Dollar and it vanished as I posted it. Dang. I'm not typing all of that again on an iPad.
Oh well, we can disagree, and be fine. This is one time I'd like to be short a market only to find out how wrong I am.....What a glorious day that would be. I am off to see Iron Man.
Best regards Shredd. bye the sea.
Shredd: I had to add this to the chat!
Expressed the Presidency of the Council during the meeting its full support for the central bank to scrutinize the work of private banks and archiving of information within the bank and reform measures, which include a set dollar exchange rate and reduce the phenomenon of money laundering and strengthen the capacity of the central bank in economic development.