[BondLady] Welcome everyone! I would like to let all our new members know we now feature a 24 hour news forum. We have special threads set up with our special administrators player46 and oogie and bubbies with the afternoon and evening news thread as most know I bring the morning news in any where from 2 am on thru the late morning along with all our other posters and ms timmys coffee shop opens as she runs the news every morning at 6:30 cst am here in our chat room . Wake up and have coffee and news with us
[BondLady] I'd like to welcome all our first timers here to BLC , we hope it won't be your last unless it rv's then see ya lol ,just kidding of course. We have put together an exciting chat for everyone. Shredd and Scooter, two very brilliant men will share their knowledge with us first. Welcome Scooter and thank you for being here at BondLady's Corner
[Scoooter] thank you BondLady !
[Scoooter] so I reviewed some of the IMF data and it mostly sounds like it's aligned with how it's supposed to be . One of the big concerns as well as one or two more relate to the oil sector of their economy and the underutilization of the existing workforce.
See Iiraq's workforce has a tremendous demographic for example when comparing to China , China's populace is retiring and that means their consumption power is going downward not upward. India and Iraq on the other hand have upward moving populaces whereby the majority of their populace are in the prime working age.
Read More Link On Right
[Scoooter]Now why is that so important ? Because we want the middle class to develop and grow and grow and grow. That's why it's discerning to find that 90% of their revenues is coming from oil, remember, this is a country where agriculture used to be the largest part of their GDP.
With that said -- when you see they haven't diversified as quickly as they should have it's concerning particulalry when we know that the oil business is being worked from the foreign companies .
[Shredd] Agriculture is 8.7% now
[Scoooter] Their revenues continue to climb and that's good their investment budget continues to roll between 40% 45% which is stout and hefty but I'm wondering why we haven't seen the impact of that investment. Now with that said -- their monetary base continues to expand .
Their Net foreign assets of the CBI is between 65 - 70 Trillion IQD and that doesn't include the numbers sitting in the NY FED there's several accounts that haven't been disclosed which should, in theory, drop right into their reserves we hope so ---
I look at the economic conditions and the word sustainablity and capacity those words become even more important and the reason that is well, because even if they were to RV anything they have to ask several questions will it or can it be sustained and do we have the capacity to support that value. now in terms of the federal banks those banks should have been DEVALUED 5 years ago
[Scoooter] the assets on those books are way overvalued . Why is this important well -- you're not going to see anything happen to the DINAR until those banks have complete transparency and their balance sheets accurate,
there won't be trust from the international investor otherwise... just my two cents so -- that brings us to now ---- and the talk of recalibrating those two banks , it's a good thing I'm just stunned the international community hasn't demanded it sooner so , they appear to be at the same spot as before but the statements from the CBI are getting stronger for this move.
[BondLady] Yasiri: restructure the Rafidain and Rasheed includes four axes .. And will support the banking sector 20-04-2013 01:14 PM Baghdad (news) .. According to a member of the Finance Committee MP / National Alliance / Abdul Hussain al-Yasiri, that the plan to restructure the Rafidain and Rasheed by the International Monetary Fund includes four paragraphs of major help to support and develop the banking sector in the country. Yasiri said (of the Agency news ):
The plan to restructure banks government Rafidain and Rasheed developed since (2007) and formed through a committee headed by the central bank governor and finance minister and head of the BSA, in cooperation with the International Monetary Fund.
added: that the committee began its work, but did not achieve positive results and important in then, but later formed a committee composed of general managers in banks and representatives of the Central Bank and the International Monetary Fund and began their movement in earnest for the support and development of the banking sector in the country.
explained: that the plan includes four axes including restructuring operating banks and strategic restructuring and re-evaluation of assets from cash to banks , as well as re-accounts banks and audited by the external auditor. , and pointed out that the government banks lack the modern technology in spite of the introduction of some technological Kalptaqh Smart and others, but it needs to techniques more to keep pace with the evolution in global banks. / End / 8.'s. http://www.ikhnews.com/index.php?page=article&id=82008
[Shredd] Scoooter can I throw a question at you?
[Scoooter] the external auditor will be key
[Shredd] regarding the above article that you are speaking about, this re-evaluation of assets
[Scoooter] because it won't be accepted until PWC is satisfied the IMF won't be satisfied unless that report is positive and they have accuracy
[Scoooter] Yes that revaluation or devaluation it will be devalued ,it has to
[Shredd] right, I get that part....so the revaluation of assets.....refers to capital backing of these banks, right?
[Scoooter] the assets are overvalued significantly
[Scoooter] Yes the assets backing the banks , correct
[Shredd] ok, and this work seems to be nearing completion
[Scoooter] that's my understanding at least. yes, but it's been there since 2007 -- and they have those little itty bitty items to complete it's the details that keeeeeel ya
[Shredd] right, so with the economic picture in iraq, how do you see this coming to close since they are gov't banks? re: timing
[Scoooter] what will happen is a complete reboot of their banks those two banks do approx. 80% of the banking in that country and the reality is they don't have enough banks to sustain the populace right now nor do they have the capacity
so the thought was to bring the international community and their banks in that's a great idea and I think that would be good but where do they find the qualified workers to work the banks ?
So imagine you're in a economy which is about to explode, the pressure is building and building and then booooooom the "then what" question pops ! what do I do now -- if they don't have enough banks to support the populace --- how can they get the massive transactional type system to stir the economy ? See, what Iraq has the ability to do is stir several volcanic economic eruptions. oh yes volcanoes
[Shredd] good ones
[Scoooter] now, the previous plan was too have several economic eruptions in several key vertical markets one being Agriculture, public sector construction, etc...they have plans already to build those million homes and with the construction multiplier you'll get three times the play on the Dinar thus calling them economic eruptions. I really need to coin that phrase lol. Shredd -- there's a brain dump my friend
[Shredd] Scooter, you are right, the economic stimulus ripples will roll fast
[Scoooter] they will --- indeed. it's like demolition putting the right explosives int he right spot to demolish the building in this case. It's building and nurturing long term sustainable growth
[Shredd] exactly. I hear your point on the banking structure but I believe it is there, plus, banking capabilities outside of the state and govt banks will support the secondary market for example
[Scoooter] So they need to diversify that economy and this will draw more to the capital markets I mean rightj now Iraq's capital markets are running at 5% of their GDP while Jordan on the other hand it's close to 200% of their GDP
[Shredd] agreed . yes and we've already seen that starting....a new large fund just went to market
[Scoooter] and that's sustanable .Shredd exactly but what's even more important is the establishment of the bond market that bond market will help the government be liquid
[Shredd] oh yes it will
[Scoooter] and that's kinda sorta important
[Shredd] indeed... ie sovereign bonds
[Scoooter] Yes --- the primary bond market will be consumed by the internal companies like insurance companies and utility companies and they'll probably be offered at a nice fat rate too I mean % . yes
[Shredd] yes and secondary will be financial products
[Scoooter] and again, they'll realize the multiplier and it's effects will be felt throughout their economy
[Shredd] Hello everyone and thank you very much for joining us. I want to thank Bondlady, Miss Timmy and Scooter for their valuable input.
[Shredd] I wanted to touch on a few things with the hope that it will be to the benefit of our valuable members. First of all, in my “report card” post from yesterday, I quoted the below line from an article http://www.bondladyscorner.com/t70408-shredd-s-report-card-on-iraq and in it was this quote:
[Shredd] The Iraqi economy saw one of the fastest growth rates globally in 2012. It grew by 10.5% to just over USD 100 billion and is set to grow by more than 11% in 2013. Beyond that, Iraq is expected to continue to record growth averaging 9% in the years to 2017.
The Government’s fiscal surplus will likely average some 4% of GDP, in spite of heavy spending in public capital projects and the oil and gas infrastructure.
[Shredd] What I really like about this is the projection that Iraq is expected to boast a fiscal surplus averaging 4% of their GDP. What many people overlook is the spending that Iraq is doing. Yes, they are growing reserves and yes, they are pumping more and more oil out and yes, investment is growing, but guess what………it takes money to fully overhaul a country and the bills are stacked high.
[Scoooter] yes That's exceptional growth and on top of that they've curbed inflation at a controllable rate
[Scoooter] and they did this -- from a lot of learning but they did this with using the auctions as a primary tool to control inflation i think that's pretty cool actually
[Shredd] yes and I will bring that up in just a bit....
[Scoooter] what's also important to note is the residual funds -- the 4% remember
[Shredd] yup. takin the words right out of my mouth
[Scoooter] Iraq's budgets for the past 4 - 5 years have had two sets of books they've had a proposed and then another one called approved the delta in those two allowed for the parliament to have two sets of working books one allocated at one rate and the other still using the nominal rate of exchange.
now the question comes to mind What and where and how are they going to use those excess funds the residuals ? Because think about it if the budget called for oil at 65 but the true actual price was 85 per barrel that's a whole lot of excess funds.
Where did they go and how were they spent ? so it will be interesting to see the next PWC Audit or the BSA audit for the prior years
[Shredd] This is a real promising projection and with all of the growth taking place in Iraq, it makes sense. This stability from the financial perspective is key in the investment of capital-raising sovereign debt opportunities. We saw in the report card that Iraq’s non-oil sector is 36.2% which is not too shabby in my opinion.
[Scoooter] WOW thats stellar compared to where they were
[Shredd] I knew you'd like that. that's as of Feb this year
[Scoooter] I do indeed SWEEET that's killer, now their in striking distance of the diversification they need
[Shredd] So where the heck is the RV? We’ve heard from some that say until stability in the government is achieved or until the conflict between the CBI and the government is resolved, we won’t see an increase in the Dinar’s exchange rate. Well, let’s define the issue shall we?
Three factors really are at play regarding the conflict between the government and the CBI during the last three years:
1. Independence of the CBI per the Constitution (and Central Bank Law)
2. The position of both Shabbs and Turki to not lend to the government
3. Growing size of international reserves
[BondLady] unfrozen funds from all over the world
[Shredd] Others have been focusing on the auctions as an indicator for where the elusive RV is. To clarify, the purpose of the auctions is to manage the exchange rate by controlling the supply.
[Shredd] Scooter, I'd like your thoughts on this part:
[Shredd] Some of you may not know this but when the auctions take place, two types of transactions take place; International transfers and cash payments. International transfers, which make the majority of transactions, are intended mainly to finance imports by the private sector.
Cash sales serve to meet other financial needs such as payments for travel, medical expenses, etc. That all said, fluctuations in the sales on the auction floor are simply targeted transactions to manage the exchange rate differences between the street and the official rate.
Don’t believe the hype that the auction results can tell us the RV is close. The only exception is once the Dinar is on a market-driven free float, the auctions will cease but by then, we will all know already that the Dinar revalued!
[Shredd] thoughts on that part Scooter?
[Scoooter] ok just absorbing a little bit. First the transactional based system in play.
The iraqi's and the central bank have completely revamped those systems they are state of the art and will allow for full mobile technology to be deployed there's a reason for this but will hold off for right now. now these systems were there for several reasons but the population itself ---
there were huge trends occuring and occuring quickly , one the Smart Card type of scenario it was modified to support those types of electronic transactions before the Iraqi's were primarilly a hard currency economy. So the new system was built for the Smart Card.
The company that developed this stuff is out of South Africa and have a dynamite product . not only for the smart card -- supports medical, insurance, banking etc....but also handle the mobile technology what occurred with Iraq became liberated is the young population adopted cellular technology like crazy!!! With the adoption that occurred -- the banking systems needed to adapt to this now, with that said back to your question
[BondLady] (all info related to smart cards>>> http://www.bondladyscorner.com/t68684-bondlady-chat-smart-cards-4-2-2013
[Scoooter] the auctions results and the free float and the value when more transactions take place whether they stem from mobile, or a smart card, or cash the adoption of those will stir usage by the populace to actually set up bank accounts. why is that important ?
think about a young couple trying to purchase thier first house they start establishing credit and they do this more efficiently with smart cards and mobile techinology the more transactions they make the better and money just mulitplys throughout the economy.
What was the question again? hmmmmmm but remember this is a cash society right now and they need to get people educated and they need to get the swirl of economic explosions occuring and they help facilitate this by providing tools to accomplish this goal
[DogzNova] will the auctions show the RV
[BondLady] the auctions don't show the true worth of the dinar so I doubt it
[Scoooter] No they help in Supply and faciltate control over inflation
[Shredd] I'd like to move into the free market economy topic
[Shredd] Lastly, I wanted to remind everyone about the goal in front of Iraq of ascending to the WTO. Like I had stated in an earlier chat that I refreshed today (http://www.bondladyscorner.com/t67072-blc-administators-shredd-and-tlm724-chat-free-market-economy-3-12-2013), Iraq must get to what is called a “free market economy”.
A free market economy is a local economy where supply and demand calls the shots. The greater reality is the intervention by the government is rare. In a free market economy, exchange rates are not pegged (or managed) by the government but rather fluctuate based on the demand of the currency and especially in Iraq's case, the supply of the currency.
[Shredd] Scoooter thoughts?
[Scoooter] correct --- ummmm --- they desparately need to get the government out of the way and let natural forces come into play however, here's another reason for diversification. The government is spending and receiving 90% of its money from oil now -- how does that impact the local economy when all the oil jobs are farmed out to foreign workers.
Tthe money isn't staying in the local economy and so what happens to supply and demand ? if the demand isn't there, supply will follow . So to relate this to the IQD you can follow the money trail and determine yourself my hope is that this will change and change quickly . ok -- does that make sense regarding supply and demand on the currency ?
[campdav] How could Kuwait have the most expensive currency in the world and what is their economy outside of Oil?
[Scoooter] KU has several items that don't get discussed often enough, one is that KU population , it's small and they are educated and the money gets multiplied within thier country
[campdav] 3 Million. yep 1/10 Iraq
[Scoooter] the other item they use a different equation to value their currency
[campdav] Each KU $80,000 per year citizen
[Scoooter] the other GCC countries are looking to adopt this equation they moved from the peg to the dollor moved away to a more free market approach there's several other reasons for KU's delta but we'll get to that over time
[BondLady] I have a couple of things to add per what shredd and scooter were talking about too. This was something I pulled from our archives here at BLC. Just to make you aware, sometimes to see the future or present situation you must look back in history or the past.
The Iraqi dinar has all reasons to grow stronger,' says Prime Minister Source: BI-ME with Aswat al-Iraq , Author: Posted by BI-ME staff Posted: Fri March 5, 2010 7:01 pm IRAQ. Iraqi Prime Minister Nouri al-Maliki said earlier this week that the process to re-evaluate the Iraqi dinar has to do with economic conditions which have to be strengthened, reported news agency Aswat al-Iraq.
"The Iraqi dinar has all the reasons to grow stronger thanks to an increase in revenues and development of the economy," Maliki said in response to some questions through the National Information Center.
"The government would not rush matters but would rather work on finding all the guarantees to render this measure a success. The Central Bank of Iraq (CBI) is currently entrusted with drawing up a study on the whole issue and would give its decision soon," said the Iraqi premier.
[BondLady] The Iraqi dinar's exchange rate is suffering from low value against foreign currencies as a result of decades of wars and economic embargo that brought the local currency's exchange rate to the rock bottom from three dinars per dollar in the late 1970s and 1980s to 3,000 dinars per dollar after the 1990 invasion of Kuwait, followed by a 13-year crippling sanctions regime.
[BondLady] please take note of the date 3/5/10
[BondLady] The exchange rate fell even more after 2003 to reach 1170 dinars per dollar due to the CBICBI's policy of daily auction, in effect for more than five years now. The policy was lambasted by several economists on the grounds that these auctions do not give the real value of the country's local currency.
[BondLady] The policy was lambasted by several economists on the grounds that these auctions do not give the real value of the country's local currency.
[BondLady] Like I said I brought these out of the archive crypts to show you the future plan here
[tlm724] outstanding !
[campdav] BondLady Great points!!!!!!!!!!!!
[Scoooter] Exceptional points!
[BondLady] and we're seeing so many things from 2 to 5 years ago finally coming to pass. I have a few more things to offer as well... shredd you or scooter have any coments per that article before i proceed ?
[Scoooter] Nope -- I think Maliki's comments are dead on
[BondLady] Let me grab the next thing. Speaking of Maliki these words are his as well...
PM: Iraqi dinar re-evaluation has to do with economic conditions Text size 28 February 2010 Iraqi Prime Minister Nouri al-Maliki said on Sunday that the process to re-evaluate the Iraqi dinar has to do with economic conditions that have to be strengthened.
"The Iraqi dinar has all the reasons to grow stronger thanks to an increase in revenues and development of the economy," Maliki said in response to some questions through the National Information Center.
"The government would not rush matters but would rather work on finding all the guarantees to render this measure a success. The Central Bank of Iraq (CBI)Central Bank of Iraq (CBI) is currently entrusted with drawing up a study on the whole issue and would give its decision soon," said the Iraqi premier.
The IQD is in the forex market (un- marketable) It obviously will not... by Mark Duncan More Comments by the Community The Iraqi dinar's exchange rate is suffering from low value against foreign currencies as a result of decades of wars and economic embargo that brought the local currency's exchange rate to the rock bottom from three dinars per dollar in the late 1970s and 1980s to 3,000 dinars per dollar after the 1990 invasion of Kuwait, followed by a 13-year crippling sanctions regime.
The exchange rate fell even more after 2003 to reach 1170 dinars per dollar due to the CBICBI's policy of daily auction, in effect for more than five years now. The policy was lambasted by several economists on the grounds that these auctions do not give the real value of the country's local currency http://www.zawya.com/story/ZAWYA20100301063801/
[BondLady] thats from 2/28/10
[Scoooter] yep -- their whole middle class that was formed from the 50's to the 70's was completely demolished -- there was no consumption occurring in their economy -- hence the reason he's referring to economic conditions have to be strengthened
[Shredd] Scoooter yes but a hard number to define (strengthened economic conditions)
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