SITREP from Deep Source(s) - Tuesday Morning
Short Message from Deep Source:
"My people have been with the waiting parties in Reno and lawyers for several days. Start paying 1April. Finally happening."
Fire Bird: Revaluation of Currency Can Be Anticipated
Gold and the Revaluation of Iraqi Dinars
Posted by Iraq News Journal on Mar 29, 2014
Surprising the economists all over the world, the Central bank of Iraq has purchased 36 tons of gold worth $1.52 billion this month in order to help the Iraqi dinars to get stabilized against the foreign currencies.
The purchase has been recorded as bigger than the purchases that have been taken place in the year of 2013. It helped Iraq to move at the 15th spot.
But anyone following the recent history of Iraq’s dinar is left scratching their head, as this month’s purchase more than doubled Iraq’s gold reserves from 27 tons to 63 tons for an increase of over 133 percent. Despite transacting the 15th largest annual gold purchase in the world, there was absolutely no move in the value of Iraq’s money – holding steady at approximately 1,165 dinars per USD, where it has been for more than two years and three months.
Revaluation of Currency Can Be Anticipated
Since the year of 2010, economists and lawmakers of Iraq are talking over omitting the three zeros from Iraqi currencies. Should it ever happen, the move is expected to be accompanied by a simultaneous revaluation of the dinar by inflating its value overnight, which is seen as necessary in order to properly account for the nation’s vast increase in wealth through oil revenues since the end of the 2003 war?
Thanks to the country’s enormous oil reserves which rank 5th in the world, and its steadily increasing oil production which ranks 7th, progress has been remarkably quick. According to Trading Economics, Iraq’s GDP has grown an average of 6.625 percent per year since 2005, reaching 8.58 percent in 2011 and a stellar 10.2 percent in 2012 – ranking 14th highest in world according to The World Bank. Iraq is in the best shape it has been in years, and is well on its way to mounting one of the greatest economic recoveries since Japan and Germany of post-World War II.
But many believe that all this progress is not being reflected in the value of the dinar, which is being kept pegged to the USD at artificially low levels. As noted in the graph below tracking the value of the dinar (inverse to the graph above), the CBI did inflate the dinar from the end of 2006 to the end of 2008. But it has since then kept the dinar stubbornly suppressed.
Is this why the CBI purchased so much gold this month? Is it preparing to increase the dinar’s value for a second time, as everyone has been expecting? The answer is most likely no.
Increasing a currency’s reserves – through acquiring more U.S. dollars, U.S. treasury bonds, gold, etc. – will strengthen a currency. But if Iraq already has more than 10 years’ worth of economic progress that has yet to be priced into the dinar, then the CBI does not need to buy more gold to increase the value of its money. Ten years of oil wealth would be enough to justify an upward revaluation of the dinar all by itself. If the CBI really wanted to revaluate its currency, it doesn’t need more gold to do it.
Given the CBI’s relentless pressure on the dinar for so many years, it is unlikely to raise the value of its money any time soon. A cheap currency stimulates business activity, creates jobs and lubricates the gears of the economy. It is precisely what western nations have been doing for the past five years since the 2008-09 financial crisis.
Explaining the Need for Extra Gold
While extra gold in its vaults does give the CBI room to increase the value of the dinar, it is likely that the CBI would rather use that extra room to print more money instead. The CBI has been steadily expanding the money supply for years. The extra gold gives it the ability to keep doing so.
In the case of Iraqi money, the CBI would rather have quantity over quality. Using the extra gold to expand the money supply instead of boosting the value of the dinar affords benefits which are much more urgently needed – especially while reconstruction is still ongoing.
The Economic Chain Reaction
The most urgent problem that Iraq faces is a growing population and not enough jobs, as noted by the following graphs.
Iraq’s population has grown by 25 percent since the war ended 10 years ago, while the unemployment rate has been cripplingly high. While fixing this problem is not as easy as I attempt to make it, we could condense the process into one basic objective – create jobs and increase the citizens’ personal wealth.
A series of remedies have been triggered by this though, and they are:
A) Make money cheaper. A cheaper currency is cheaper to borrow, stimulating business expansion and job creation, putting money in people’s pockets which is then spent to further stimulate commerce and growth. But how do we make money cheaper?
B) Increase the money supply. The more money there is circulating through the economy, the cheaper it is to borrow, which empowers businesses, expands commerce, creates jobs, and increases personal wealth. As shown in the graph below, the CBI has been printing money with gusto, steadily increasing the amount of dinars in circulation for years.
But that created a problem. Such a rapid expansion of the money supply caused the currency to fall in value too quickly, eroding purchasing power, making prices more expensive, and creating hyper-inflation – as noted in the graph below where inflation in Iraq reached an incredible 76.55 percent by August of 2006.
C) Increase the interest rate. By increasing interest rates on government bonds, a central bank increases the value of its currency, allowing it to catch-up with runaway prices and brings inflation down. Thus, as noted in the graph below, the CBI increased the interest rate from 7 to 20 percent over 2006 and 2007.
But that created a problem of its own, since rising interest rates make money too expensive to borrow, impeding business expansion, job creation and commerce. To make matters worse, high interest rates make a currency stronger, as noted in the graph below of the dinar’s rapid increase in value from the end of 2006 to the end of 2008 – mostly due to high interest rates that surpassed 14 percent during that entire period.
By 2009, interest rates at 14 percent were way too high to stimulate growth. It ran opposite to what the government wanted to achieve, namely job creation and increased wealth. So the challenge remained: How can you bring interest rates down to make money cheaper, and pump more dinars into the economy to make money more available – without collapsing the dinar and triggering hyperinflation all over again?
Boost in Economy from Gold Purchase
Because keeping interest rates low and pumping more dinars into the economy through daily auctions puts downward pressure on the value of the dinar which leads to inflation, the CBI needs to counter that downward pressure by increasing the nation’s reserves, exerting upward lift to the value of money and helping to keep the dinar steady.
By boosting its gold reserves, the CBI gains some room to play with. It can use that extra room to either increase the value of the dinar, or to print more dinars and release them into the economy without depreciating the dinar and triggering inflation. In the interest of job creation and economic stimulation, it has chosen the later, as most central banks have done worldwide.
Fire bird: So the CBI was speaking truthfully after all. It did buy the gold to help stabilize its currency. But not to make it stronger rather, to prevent the dinar from collapsing and to prevent hyper-inflation as it prints more money to finance its continuing reconstruction.
April Fools' Day 2014 Facts And Trivia: Why We Celebrate The Prank Holiday, Historical Myths & More
Posted by EXOGEN on April 1, 2014 at 12:16pm
By Rebecka Schumann on March 31 2014 5:55 PM
April 1 marks the one day a year where all bets are off and pranks are to be expected. But why do we celebrate April Fools' Day, and what is the significance of setting aside one day per year to prank one another? In honor of April 1, 2014, here are five facts, trivia and myths about April Fools’ Day:
Why do we celebrate?
While the exact history behind April Fools’ Day is unclear, there is one widely believed theory for how April 1 became an annual day of trickery. According to Discovery.com, the holiday stems from people who refused to adopt the Gregorian calendar in favor of the older Julian calendar when it was established in the 16th century Europe. While most adjusted to the new calendar, which moved the New Year from April 1 to Jan. 1, those who refused to recognize the change were reportedly subjected to pranks and ridicule and were rumored to have been called “April Fools” for observing the holiday months later.
America isn’t the only country to celebrate every April 1. While France, England and Canada also join in on the sneaky festivities, other countries take the annual holiday more seriously. According to one report, April Fools’ lasts for two days in Scotland, with the second day focused on children pulling pranks “involving the backside.”
Different names in different places
While Americans know April 1 as April Fools’ Day, other locations celebrate the day under a different moniker. In France, where the day of pranks is rumored to have originated, the pranking day is referred to as “Poisson d’Avril” (April Fish), occurring to a report from CNN. Scotland’s participants reportedly call the holiday “Hunt-the-Gowk” (Cuckoo) Day and the following day, “Taily Day.” The ancient Roman version of April Fools’ was Hilaria. Meanwhile, Hindus celebrate the arrival of spring with the color festival of Holi.
Best hoax of all time?
According to the Museum of Hoaxes “Top 100 April Fool’s Day Hoaxes of All Time,” the BBC’s successful attempt to trick their viewers over five decades ago grabs the top spot. The prank, which took place in 1957 on the network’s show “Panorama,” reportedly pranked viewers by airing a segment on a false, burgeoning spaghetti harvest in Switzerland. According to the site’s report, the prank resulted in hundreds of inquiries as to how they could grow their own spaghetti trees.
First literary references
Despite its unconfirmed origins, April Fools’ Day is mentioned in literature that dates back to 1392. According to the Museum of Hoaxes, the holiday is believed to have been first referenced in Chaucer’s “Nun’s Priest’s Tale." The day of trickery is also thought to have been mentioned in the Eloy d’Amerval poem “Le Livre de la Diablerie” (The Book of Devilry) from 1508, among other works of literature.
For comment section, please scroll down. Thank you.
This website uses marketing and tracking technologies. Opting out of this will opt you out of all cookies, except for those needed to run the website. Note that some products may not work as well without tracking cookies.Opt Out of Cookies