Thursday, December 10, 2015


Article quote: “but who got to the monetary authority continued to approach raising the value of the dinar against the dollar (ie reduce the value of the dollar denominated in dinars) after the decline in the rate of inflation and to control it and install the official exchange rate at a level may not necessarily reflect the level of equilibrium in the market.”
The author appears to be asking the rhetorical question:  Who decided to place the rate artificially low at 1166 to 1?
His unstated answer is clearly that the CBI itself has done this.
His opinion is that the time has come to let market forces begin to work through the Iraqi economy so that the value will rise, which he clearly expects will happen.
It is my opinion that this is, therefore, a “setup” argument for what the IMF/CBI plans to do shortly after the beginning of the new year:  float the currency officially
Some laws still need to be in place andinvestment won’t come in prior to changing the exchange rate regime.
It’s like the chicken and the egg story:  which do you do first?  It seems to me that without a floating and internationally recognized currency the investment won’t come to Iraq in any significant way.
At the same time, it is the foreign investment that will be the driving force to raise the value of the dinar.
Thus I conclude that the IMF/CBI has concluded that they will have to have a “dirty exit” in order to get the investment started.
Let’s just hope I’m right.

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