Before I explain the dynamics of this topic, I think it is important to have a better understanding of our investment as it relates to the currency, the monetary system at large and the principles that Iraq has in respect to monetary sovereignty.
Ok with that being said let’s begin with a few basics, especially with new members that are on the fast track to building a more in depth awareness of their money investment and the many factors that influence the dinar and its place in the current scheme of things. First let’s look at the following:
· Monetary Policy
· Monetary Sovereignty ***
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Sovereignty- is the exclusive right to exercise supreme political authority over a geographic region, group of people, or oneself. One of the interesting points with this in regard to Iraq is as many of you are aware, is trying to specify or nail down exactly when Iraq lost their status as a sovereign nation, and after the CPA installed if you will the legal framework and new government mitigation plan, at what point can we say they became sovereign again. Is it when Obama referenced this status in his speech or would we defer until legal elements of government formation are completed by virtue and not by proxy? Today as in modern times, sovereignty as defined at the country level is shaped by four major components and club membership at the IMF. Some or all of which influence and define what constitutes sovereignty. These are:
1. International law
2. The Hague
3. Geneva Conventions
4. United Nations
Want to be a standalone nation that plays in the world’s sandbox? Join a club or join them all. Don’t forget to pay your annual dues Ha ha.
There were times when we gave much weight to this condition in Iraq as an indicator and prerequisite to an RV. Sovereignty however is complex and unique. No two countries are alike so there is no magic formula mixes of ingredients you can stir up and “Poof” now we are sovereign!
Monetary – This is easy enough by itself. Of or pertaining to the coinage or currency of a country.
Now we slap some controls on money and spending and we can steer the economy somewhat and make sure it stays on the road and out of the gutter. That’s monetary policy well for a fun example. Now the good stuff that pertains to our investment we need to understand.
Monetary Sovereignty- As sovereign countries are equal subjects of international law, the sovereignty of one cannot infringe on the sovereignty of another. In practice, however, it is not always easy to know where the sovereignty of one ends and the sovereignty of another begins. This is a critical component for the CBI to keep on its daily radar especially with their neighbors and its influence on their internal monetary affairs. In general, Monetary Sovereignty includes essentially three exclusive rights for a given state.
1. The rights to issue currency, that is coins and banknotes that are legal tender within its borders.
2. The right to determine and change the value of their currency.
3. The right to regulate the use of that currency or any other currency within its territory.
Monetary Sovereignty conceptually defines the playbook by which countries like Iraq operate within in relation to micro and macro economics. Another way of putting this into perspective is the Central Bank’s right to issue currency allows it to conduct the country’s monetary policy. As I noted several days ago, the key component to Iraq’s monetary framework has been managed by the CBI as a crawling peg which as stated above is regulated as an approved methodology by the IMF. Remember there are concessions that go with Sovereignty!
In Conclusion: I would like to again point to The Inflation targeting framework approach as outlined by the IMF appears to be a viable direction for Shabibi and regardless of the framework selected, eligibility to use the IMF Fund resources will remain under the watchful eye of the IMF. As far as Shabibi’s execution of the plan to revamp and manage the currency, it’s painfully obvious that his limitations to control inflation and encourage Parliament to act within the scope of a 4th grade mentality are being stretched to the limit on getting a third reading. Increased purchasing power is mandatory and their options are clearly defined. As Med stated “The strength of this country if it had one is in the Central Bank”