This is Parts 4 & 5 added later - If you wish to read and refresh your thoughts from Parts 1 -2 & 3 they can be found here at Recaps from 8-22--2012 SWFG POST
8-22-2012 SWFloridaGuy (Part 4): Similar to fixed exchange rates it would provide a transparent nominal anchor, would promote integration into world markets (initially a great move) and would have an advantage over floating exchange rates with an automatic accommodation of fluctuations in world markets for the export commodity.
Best of both worlds. They should peg directly to the relevant commodity which is oil or do a hybrid solution. As I mentioned though, they would have to stabilize the real price of oil domestically.
This would be beneficial not only within Iraq but regionally. If Iraq's economy is developed and integrated into the rest of the world it would help if the monetary anchor for Iraq were the same as the monetary anchor for the Gulf states.
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If they shared a commonality it would boost their trade with each other substantially. I'm simply stating that Iraq has options and I do believe a drastic change in the monetary system is required for Iraq to accomplish what we believe they will. I certainly don't pretend to have the answers, just offering another point of view.
8-22-2012 SWFloridaGuy Part 5 : It's far more complex than I had hoped it would be that's for sure. I did sign up for this under many false pretenses. gurus love to simplify this and pretend that similar revaluations have happened many times in the past but of course they have not.
I do think Iraq presents a unique situation though and has come along at a very opportune time as we see the global monetary system struggling. Many institutions and regulators on an international level are all collectively searching for a solution. Another option for Iraq's monetary policy would be to target a basket of basic mineral and agricultural commodities.
A broad-based commodity standard, one that's not just limited to a single commodity such as gold which would help average out fluctuations. These are complicated issues that are heavily debated by professional economists who actually have a good understanding of this, which I certainly do not.
This is way ablve my pay grade and all we can do is hope that whatever solution they choose, it benefits the country of Iraq and anyone holding their currency. As far as what IQD is currently pegged to, the CBI has held the value of the IQD against the USD for the past 3 years as a defensive measure that supports the IQD as Iraq rebuilds. The auctions supply the market with dollars and stabilize the IQD exchange rate.