Is this Floating Orbit of exchange that Iraq is using by means of the CBI daily auctions coming to an end?
To understand when, how and why the CBI started these auctions please read this:
Here is an article that helps us understand and may even give some of us a clear answer of YES!
Specialists warn of causing the continued volatility of the local currency against the foreign currency higher rates of inflation in the country
Read More Link On Right
I have provided quotes from it to help make my point.
QUOTE: that the circulation of foreign currency-sized return for the withdrawal of the Iraqi dinar led to high inflation in Iraq
OK, I will add the word (in) to make it easier to understand:
QUOTE: that the circulation of foreign currency-sized (in) return for the withdrawal of the Iraqi dinar led to high inflation in Iraq
The reason that the currency in circulation numbers (M2 growth (YoY): JAN 2013 8.43%) have increased over the years according to the CBI website is because they must keep up with salaries, etc.. Dinars must get into the market by these means so they can be used to purchase the dollars through these daily auctions right, right.
Petrodollars go into Iraq from oil sales so then they must leave by the way of these auctions for the use of purchase of imports, etc ...
It is depleting the market of both hard dinars and electronic dinars. The real question that no one can tell us is, what is the real number in circulation in country? If it is real low after one of these mega auctions like on Monday, people are forced to use the dollar thus inflationary issue happen like they are talking about here.
The higher the auctions the more dinar it takes to cover these auctions:
QUOTE: central bank auction of foreign currency in Large led to a large movement of cash produced inflation
QUOTE: caused by a factor New cash large compared to little benefit for the national economy It is a cycle to artificially control inflation but it does not work anymore and the figures that the Minister of Planning and Development are not fact:
QUOTE: Not that these indicators are considered speculative and are not indicators of the fact.
So what does this mean?
Well it is another indicator that change is needed because these auctions do not seem to be working any longer to control inflation according to Director of the Association of private banks Abdul Aziz Hassoun.
Three big auction days so far this week starting with Monday at $356,842, Tuesday $268,659 and now today at $283,553
Monday was one of the largest days on record I believe, so what to do?
It is obvious that they need change but until they have stability they cannot implement currency reform.
The management side has finally come together, meaning the top leaders of the country Prime Minister Maliki, President Barzani and Speaker of the House Najafi. This is great as it gives a real perceived impression that they have finally decided to work for the good of all Iraqi's, the world currency speculators and investors love a good management team.
But until they have their laws reflect the stability we wait, IMO.
So to summarize:
Inflation is starting to rise and that must never get over 10% or that brings yet another crisis in to play.
We/they know they need to implement currency reform because the old way is coming to an end
We/they know that things need to be in place before they can get their international status back
They need a few more debt issues resolved before they can really control their funds and without control of their funds they can’t implement currency reform. You can’t be international but yet have your funds protected.
These auctions are controlling an artificial economy which is meant to control an undervalued rate and an artificial inflation number but both are not working out under this framework any longer. Iraq is having a hard time controlling the market rate and had to add another day to the auctions, they now operate 6 days a week as of several weeks ago.
Thursday (tomorrow) will be interesting if we/they finally see these stalled laws come in front of parliament.
These are just my views and are meant to be taken that way, it is up to you to come up with your own opinions. Have a great day, Stryker