After the chat discussion led by Winston concerning the Explanation to Banks of New Monetary Policy Instruments by the CBI, I realized that the unexpected liquidity developments with open market operations and the relationship to the Kurds, warranted a review of Kurdistan and the CBI relationship and where we are at with our investment.
The federal structure of Iraq is both formative and on shaky ground. The Arab leadership in the country has been reluctant to recognize the Kurds as the second-largest national grouping in Iraq and as their sovereign partners. The process of hammering out a revision of the monetary and fiscal disposition of Iraq has been as we have surmised an arduous task for Shabibi. These efforts as we have seen are a complex mix of components on many levels including the volatile political elements that Maliki has introduced that has an impact on how and when the CBI can function effectively throughout this process. I think we can all agree that in keeping our financial house in order, priority has to be given to the reliability of our income and expense projections.
In light of these facts, consider if you will the Arab leadership of the country has been reluctant to recognize the Kurds as the second-largest national grouping in Iraq and as their sovereign partners. This relationship between the Kurds and the Central continues to deteriorate. In my opinion, The Kurds are edging closer to declaring their own separate state. The evidence is compelling. Barzani’s most recent travels and activities are indeed provocative and after receiving Jordan’s prime minister in Erbil, would you not begin to wonder if the Kurds are now attempting to establish their own foreign policy?
Now back to Shabibi and why we are waiting. I would propose this line of questioning, while speculating on the notion that the CBI’s lack of movement is predicated on the possibility that should a separate state emerge, the exchange rates and monetary dynamics modeled on Iraq by the CBI do not include a country divided!
1. What do you suppose would happen if say just 50% of the Kurdish contribution to the central government suddenly stopped or was deferred for political and economic restructuring?
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2. Hypothetically if Kurdistan officially became a separate state, what do you think that would do to the plans and government balance sheets Shabibi has managed and followed all these years?
3. If your you going to put $100,000 in your home improvement but realized that there was a good chance that your spouse might file for divorce, would it be reasonable to hold off on pulling the trigger until you had time to come to a political impasse or understanding about the situation?
We have done an outstanding job filtering out the process methodology and its significant components that define the process from identifying the need to examining the stated goal. Included in this real time tracking of events we have been relatively accurate in weighing the objectives and objections throughout this investment ordeal. Reasonable care has been taken to identify and post numerous triggers such as Chapter VII-HCL- Erbil-dropping zero’s- Redline/inflation and the list goes on.
Conclusion: This condition I think bodes well with the other key factors we are tracking and is worth keeping an eye on. I believe that the issue of inflation will be addressed sooner than later and will prevail as the primary motivation that moves this investment forward ahead of less critical issues we have examined. We are positioned very well and I would not be suprised to see the dinar emerge as a player at any time now. I just want us to be mindful of the scope of these issues as they relate to our investment.