Kaperoni From Dinar Alert Forum:
Kaperoni proves the dinar will float..because it did before! A study of IMF documents and articles.
[kaperoni] Why Iraq will free float the dinar…Direct from the IMF. (what the guru’s don’t want you to know!)
[kaperoni] I have heard all the reasons why not,
[kaperoni] But below is a document from the IMF that gives the facts about post war torn countries..and the choice of exchange regime.
[kaperoni] Adopting Full Dollarization in Postconflict Economies: Would the Gains Compensate for the Losses in Liberia?
[kaperoni] [link to www.imf.org]
[kaperoni] This is a great document because it explains in detail how these countries build a monetary policy post conflict….Which is what Iraq is.
Read More Link On Right
[kaperoni] And how they transition from a closed economy to a market economy. And how some chose to dollarize there economies over having there own currencies, etc.
[kaperoni] First we will explore dollarization of a country…
[kaperoni] Here is a good quote…
[kaperoni] “In postconflict countries, the choice of an exchange rate regime is often an issue for discussion, as a result of the usual loss of confidence in the existing currency during the conflict.
In light of the chaos at a postconflict stage, building such confidence through ongoing efforts for sound economic management may appear a far-reaching task, particularly in light of weak institutional capacity.
Under such circumstances, a move to full dollarization is often seen as a quick solution to regain confidence.”
[kaperoni] And this one…
[kaperoni] “Theoretically, full dollarization represents a trade-off between potential gains and losses. Specifically, full dollarization is expected to impose an iron frame on economic decisions, ensure fiscal discipline, and reduce exchange rate risk.”
[kaperoni] And this one…
[kaperoni] “These gains, in turn, would lower interest rates and boost investment, exports, and economic growth.”
[kaperoni] These are all positive things to consider for a war torn country. In fact, since Iraq has been heavily dollarizing as of late to remove the dinar (most of it worn out) one has to question if the CBI has changed policies?
And chosen to dollarize for the vary reasons listed above. Keep in mind Maliki has always had a “weak dinar” policy and this change would fit right in with that theory.
[kaperoni] Here is another quote…
[kaperoni] “As for losses, dollarization makes the provision of liquidity costly (because of the loss of seigniorage), exposes the economy to higher output volatility in response to real shocks (because of the loss of controls over monetary and exchange rate policy), and increases liquidity risk of commercial banks (in the absence of the central bank’s lender of last resort function).”
[kaperoni] This gives us the reason not to dollarize. These are significant reasons and would be a deterrent for the CBI to even consider full dollarization at this stage.
[kaperoni] And we can confirm this with this quote…
[kaperoni] “However, with the exception of Timor Leste and Bosnia and Herzegovina, all recent postconflict countries have favored their own currency.
The main reason for deciding against full dollarization appears to be the high costs associated with the adoption of a foreign currency.”
[kaperoni] Ok, so let’s now look at “exchange regimes.” This is key as Iraq will soon have to chose one…
[kaperoni] “Postconflict economies pose specific challenges. A conflict often destroys a country’s physical and economic structures, and government’s capacity to devise and implement sound economic policies. Many people may have been killed, injured, or displaced during the conflict.
Serious deficiencies in the health and educational and sanitation standards of the population are observed. A prolonged period of poor humanitarian developments could be a new source of social unrest.”
[kaperoni] Does that sounds like anyone we all know? Sure it does…this is describing Iraq to a T!
[kaperoni] This is where it gets good. So many have said I was nutz, that Iraq could never free float the dinar. That cannot happen…the reasons are many! But guess what? Turn to page 14 of that document and see the facts! What exchange regime did Iraq have prior to the war?
Here is the hammer…..or should I say drum roll…. Yup..free float! Iraq, pre-war under Saddam was a floating dinar.
This clearly debunks the so-called gurus who said Iraq could never float the dinar as we have stated over and over for the last 8 months through numerious articles. Iraq themselves (CBI) have even stated this in the recent power point presentation given to potential investment banks just last Jan, 2013 when they said… “Achieve stability in the exchange rate of the Iraqi dinar in the context of a flexible exchange rate system orbit.”
[kaperoni] So now we have the CBI stating the exchange regime they expect to enter... "flexible exchange rate system orbit.” (which is a free float) and the IMF document clearly showing prior to the war the Saddam dinar was a float. Does it get any better than that? Are you convinced of what is about to come yet?
[kaperoni] The good news is, there is a plan for the dinar..and that plan does include raising the value of the dinar. And hopefully, at some point, the dinar will have a significant value greater than it has now.
Which means as dinar holders, we can potentially profit greatly from that appreciation, but it’s going to take time. It is clear, that will not occur overnight.
That an overnight RV of sorts is not monetary policy and is certainly not an “exchange regime” under the IMF.
[kaperoni] The other factor that has always needed to be considered is the dinar we hold. The dinar intentionally sold out of Iraq to rebuild the CBI’s own financial reserves. These dinar have to be accounted for. This reason alone prevents an overnight RV.
The dinar sold out of Iraq has to enter “market circulation.” In other words, our dinar ( physical money) needs to get collected, validated and converted to electronic money and then enter the central banks around the world. As Saleh himself stated.. in this 2011 article…
[kaperoni] Economy sober works to support the dinar and attract global investment - 29/08/2011
[kaperoni] “and aspiring professionals affairs financial that are supported Iraqi dinar as part of international reserves, through the establishment a strong economy enhances the value of local currency.”
[kaperoni] And this article from 2011… Experts: we aspire to make the Iraqi dinar portion of international reserves - 28/8/2011
[kaperoni] “Experts regard financial ambition that the Iraqi dinar is adopted as part of international reserves, through the establishment of a strong economy boosts value of local currency.”
[kaperoni] Both of these quotes provide two bits of very important information.
1. The dinar will be “part of international reserves” which means central banks will buy the dinar we hold. Which confirms the description and plan above.
2. A “strong economy enhances the value.” Again, this confirms no overnight RV but a gradual appreciation “float” over time based on the establishment of a strong economy.
[kaperoni] Now you have the plan. Now you know…this will take time to achieve a high rate. All we can do is sit back and watch for the float of the New Iraqi dinar.
***************************FOR REFERENCE BACK TO ORIGINAL CHAT
Kaperoni: (March 5, 2013 at 3:50 PM SAID:) Issues, Enorrste did a specific chat on that article. It is a free float, not a managed float.
As well, take a look at the Minister of Finance doc I bumped today from 2007 (posted 2011).
Clearly, there are several references to a free float of the NID in that. Believe me, they would not have signed a contract with a "facilitator" to impliment the plan if it was not the plan.
The good new is its a float which means we can make alot of money watching the dinar rise.
The bad news is, its not going to happen overnight as some state. I expect the dinar to be 1 to $1 by the end of 2013. Let's hope anyway!