Post From Dinar Updates
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Dinar Updates Friday AM Chat 9-9-16 Part 2 of 3
rcookie says():Iraq opens issuing passports system for his community in Los Angeles, US
Friday 09-09-2016 | 3:06:15 Twilight News / Foreign Ministry announced on Friday for the opening of the system for issuing passports for the Iraqi community in one of the large US states.
The ministry said in a statement today, "it was after the great efforts Consular Department of the Foreign Ministry and in cooperation with the Ministry of Interior and Iraqi employees of the consulate in Los Angeles opening of the issuance of the passport system in the Iraqi consulate in Los Angeles, the US."
The statement pointed out that this system "this important service to the thousands of Iraqis who live west of the United States of America will provide."
Clay says to rcookie(): wow they are truely on the move
subgirl says to clay(): (y)love that!!!
clay says to subgirl):me too next global currency
subgirl says to rcookie():that is huge too!
subgirl says to clay():this morning's news is pretty big!
clay says to subgirl():it sure is especially for a Friday
subgirl says to clay():yes that is true! lol it is their holy day!
clay says to subgirl():yep
larrykn says():now that they put Parliment on hold till the 20th I feel they will get other things done till then
larrykn says():they are surely not slowing down :)
subgirl says to larrykn():(y) I agree.! they are NOT slowing down! they are continuing on... This WILL get done!
rcookie says():The Importance of Exchange Rates in the Global Economy
What is an Exchange Rate?
An exchange rate is the price of a country’s currency relative to other currencies. In other words, it is the rate at which one currency can be converted into another currency. For example, on January 1, 2015, one U.S. dollar could be exchanged for 0.83 euros (€), 120 Japanese yen (¥), or 0.64 British pounds (£).4 Exchange rates are expressed in terms of dollars per foreign currency, or expressed in terms of foreign currency per dollar.
The exchange rate between dollars and euros on January 1, 2015, can be quoted as 1.21 dollars per euro ($/€) or, equivalently, 0.83 euros per dollar (€/$).
rcookie says():Consumers use exchange rates to calculate the cost of goods produced in other countries. For example, U.S. consumers use exchange rates to calculate how much a bottle of French or Australian wine costs in U.S. dollars. Likewise, French and Australian consumers use exchange rates to calculate how much a bottle of U.S. wine costs in euros or Australian dollars.
rcookie says():How much a currency is worth in relation to another currency is determined by the supply and demand for currencies in the foreign exchange market (the market in which foreign currencies are traded). The foreign exchange market is substantial, and has expanded in recent years. Trading in foreign exchange markets averaged $5.3 trillion per day in April 2013, up from $3.3 trillion in April 2007.5
rcookie says():The relative demand for currencies reflects the underlying demand for goods and assets denominated in that currency, and large international capital flows can have a strong influence on the demand for various currencies. The government, typically the central bank, can use policies to shape the supply of its currency in international capital markets.
rcookie says():Different Measures of Exchange Rates
rcookie says():Nominal vs. real exchange rate: The nominal exchange rate is the rate at which two currencies can be exchanged, or how much one currency is worth in terms of another currency. The real exchange rate measures the value of a country’s goods against those of another country. Essentially, the real exchange rate adjusts the nominal exchange rate for differences in prices (and rates of inflation) across countries.
rcookie says():Bilateral vs. effective exchange rate: The bilateral exchange rate is the value of one currency in terms of another currency. The effective exchange rate is the value of a currency against a weighted average of several currencies (a “basket” of foreign currencies). The basket can be weighted in different ways, such as by share of world trade or GDP. The Bank for International Settlements (BIS), for example, publishes data on effective exchange rates.6
rcookie says():Impact on International Trade and Investment
Exchange rates affect the price of every export leaving a country and every import entering a country. As a result, changes in the exchange rate can impact trade flows.
When the value of a country’s currency falls, or depreciates, relative to another currency, its exports become less expensive to foreigners and imports from overseas become more expensive to domestic consumers.7 These changes in relative prices can cause the level of exports to rise and the level of imports to fall.8
For example, if the dollar depreciates against the British pound, U.S. exports become cheaper to UK consumers, and imports from the UK become more expensive to U.S. consumers. As a result, U.S. exports to the UK may rise, and U.S. imports from the UK may fall.
rcookie says():Likewise, when the value of a currency rises, or appreciates, the country’s exports become more expensive to foreigners and imports become less expensive to domestic consumers. This can cause exports to fall and imports to rise.
For example, if the dollar appreciates against the Australian dollar, U.S. exports become more expensive to Australian consumers, and imports from Australia become less expensive to U.S. consumers. Changes in prices may cause U.S. exports to Australia to fall and U.S. imports from Australia to rise.
rcookie says():International Investment
Exchange rates impact international investment in two ways. First, exchange rates determine the value of existing overseas investments. When a currency depreciates, the value of investments denominated in that currency falls for overseas investors. Likewise, when a currency appreciates, the value of investments denominated in that currency rises for overseas investors.
For example, if a U.S. investor holds a German government bond denominated in euros, and the euro depreciates, the value of the bond in U.S. dollars falls, making the investment worth less to the U.S. investor. In contrast, if the euro appreciates, the value of the German bond in U.S. dollars rises, and the investment is worth more to the U.S. investor.
rcookie says():second, exchange rates impact the flow of investment across borders. Changes in the value of a currency today can shape investors’ future expectations about the value of the currency, which can have substantial impacts on capital flows.
If investors expect a currency to depreciate, overseas investors may be reluctant to invest in assets denominated in that currency and may want to sell assets denominated in the currency, in fear that their investments will become less valuable over time.
Likewise, if a currency is expected to rise over time, assets denominated in that currency become more attractive to overseas investors. For example, a depreciating euro may deter U.S. investment in the Eurozone, while an appreciating euro may increase U.S. investment in the Eurozone.9
rcookie says():Types of Exchange Rate Policies
There are two major types of exchange rate policies. First, some governments “float” their currencies. This means they allow the price of their currency to fluctuate depending on supply and demand for currencies in foreign exchange markets. Governments with floating exchange rates do not take policy actions to influence the value of their currencies.
Second, some countries “fix” or “peg” their exchange rate. This means they fix the value of their currency to another currency (such as the U.S. dollar or euro), a group (or “basket”) of currencies, or a commodity, such as gold.
The government (typically the central bank) then uses various policies to control the supply and demand for the currency in foreign exchange markets to maintain the set price for the currency.
Often, central banks maintain exchange rate pegs by buying and selling currency in foreign exchange markets, or “intervening” in foreign exchange markets.
rcookie says():There are pros and cons to having a floating or fixed exchange rate. Fixed exchange rates provide more certainty in international transactions, but they can make it more difficult for the economy to adjust to economic shocks and can make the currency more susceptible to speculative attacks.
Floating exchange rates introduce more unpredictability in international transactions and may deter international trade and investment, but make it easier for the economy to adjust to changes in economic conditions.
In order to take advantage of the benefits of both fixed and floating exchange rates, many countries do not adopt a purely fixed or floating exchange rate, but choose a hybrid policy: they let the currency’s value fluctuate but take action to keep the exchange rate from deviating too far from a target value or zone.
degree to which they float or peg varies. The optimal choice for any given country will depend on its characteristics, including its size and interconnectedness to the country to which it would peg its currency.
rcookie says():Between the end of World War II and the early 1970s, most countries, including the United States, had fixed exchange rates.
10 In the early 1970s, when international capital flows increased, the United States abandoned its peg to gold and floated the dollar. Other countries’ currencies were pegged to the dollar, and after the dollar floated, some other countries decided to float their currencies as well.
In 2014, 34% of countries had floating currencies.
11 This includes several major currencies, such as the U.S. dollar, the euro, the Japanese yen, and the British pound, whose economies together account for half of global GDP.
12 Many countries use policies to manage the value of their currencies, although some manage it more than others. This includes many small countries, such as Panama and Hong Kong, as well as a few larger economies, such as China and Saudi Arabia.
In 2014, 43.5% of countries used a “soft” peg, which let the exchange rate fluctuate within a desired range, and 13.1% of countries used a “hard” peg, which anchors the currency’s value more strictly, including the formal adoption of a foreign currency to use as a domestic currency (for example, Ecuador has adopted the U.S. dollar as its national currency).
13 No large country uses a hard peg. Figure 1 depicts the exchange rate policies adopted by different countries.
rcookie says(): 10 Exchange rates were, in theory, fixed but “adjustable,” meaning that countries could adjust their exchange rates to correct a “fundamental disequilibrium” in their exchange rate. In practice, it was rare for a country to adjust its exchange rate outside of a narrow band.
11 IMF, Annual Report on Exchange Arrangements and Exchange Restrictions, 2014. Exchange rate data on how the exchange rate policies work in practice (the “de facto” exchange rate policy), which may or may not match the official description of the policy (the “de jure” exchange rate policy).
Countries that are members of a currency union (where multiple countries may adopt use of the same currency, including the Eurozone, the East Caribbean Currency Union, the West African Economic and Monetary Union, and the Central African Economic Community) are coded according to how the currency is managed.
For example, the euro is a floating currency, and individual members of the Eurozone for this purpose are counted as having adopted floating exchange rates.
12 IMF, World Economic Outlook Database, October 2014.13 13% use other managed arrangements that do not fall neatly into a “soft” peg or “hard” peg category, sometimesbecause the government changes exchange rate policies frequently.
rcookie says():Exchange Rate Misalignments
Many economists believe that exchange rate levels can differ from the underlying “fundamental” or “equilibrium” value of the exchange rate. When an actual exchange rate differs from its fundamental or equilibrium value, the currency is said to be misaligned. More specifically, when the actual exchange rate is too high, the currency is said to be overvalued; when the actual rate is too low, the currency is said to be undervalued.
Considerable debate exists about what the fundamental or equilibrium value of a currency is and how to define or calculate currency misalignment.14 For example, some economists believe that a currency is misaligned when the exchange rate set by the government, or the official rate, differs from what would be set by the market if the currency were allowed to float.
By this reasoning, governments that take policy actions to sustain an exchange rate peg, such as intervening in currency markets, most likely have misaligned currencies. Additionally, this view suggests that floating currencies, by definition, cannot be misaligned, since their values are determined by market forces.
rcookie says():For other economists, a currency can be misaligned even if it is a floating rate. This is the case if the exchange rate differs from its long-term equilibrium value, which is based on economic fundamentals and eliminates short-term factors that can cause the exchange rate to fluctuate.
Defining or estimating an equilibrium exchange rate is not a straightforward process and is complex. Economists disagree on the factors that determine an equilibrium exchange rate, and whether the concept is a valid one, particularly when applied to countries with floating exchange rates.
Economists have developed a number of models for calculating differences between actual exchange rates and equilibrium exchange rates. Estimates of whether a currency is misaligned, and if so, by how much, can vary widely depending on the model used.15