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Monday, June 19, 2017

Enorrste Continued Discussion 6/19/17

The Central Bank Prepares Banks And Transfer 25 Million Per Month

LINK To Earlier Post

Enorrste :   Mike,  according to Keywords the "reserves" are $47 to $49 billion while you say they are $40 billion.  That's a big difference.  Who is right?
 
Also, Keywords says this in the link you provided:
 
the amount of foreign currency reserves in the bank exceeds the amount of local currency in Iraqi dinars.
 
Therefore, the money supply must be less than $47 to $49 billion, if Keywords is correct.  Yet you say it is $50 billion.  Who is right?  How can you be correct in saying that "Iraq's reserves do not cover outstanding M0 cash," when Keywords says just the opposite?  He is quite specific in the quote above.

Belittling Saleh is a straw man argument.  Neither he nor anyone on this forum claims that the dinar NOW is a world reserve currency.  Therefore, putting that statement in his mouth and then knocking it down is moot, since he has never stated it.
 
The Gross Foreign Assets number I quoted is directly on the CBI website under Statistics then under Key Financial Indicators.  This is an Excel spreadsheet, which is why I can't give you the link.  The numbers are on line 48 and 49 under Net Foreign Assets and Gross Foreign Assets.
 
You suggest that this is not synonomous with "reserves."  Yet when I look this up I get a clear picture that sure looks like reserves to me.  Here is the definition as used by Armenia, for instance:
 
Gross foreign assets of the CBA are defined based on residency criteria. All the CBA financial claims on nonresidents are included in gross foreign assets.
 
Unlike foreign assets, gross foreign reserves or international reserves are the most liquid part of foreign assets that are held by the Central Bank and can be used for direct financing of external and internal payments.
 
https://www.cba.am/Storage/EN/publications/statistics/monetary_stat_manual/features.pdf
 
If there is a different accounting method used for "reserves" versus Gross Foreign Assets I would like to be enlightened on that difference.
 
Punisher:   Enorrste, Mike is of the opinion that everyone (at least in the GOI) in Iraq is a liar and that everything that comes out of Saleh and Allaq's mouth (and Abadi too) is all lies. Mike do I have that correct?
 
On one hand I cant blame Mike for thinking the way he things regarding that...articles are often confusing or they flat out twist the truth. But on the other hand one cannot just pick and choose what to believe when someone says something.

Either someone is lying all the time or they are telling the truth but being sneaky about it. When It comes to Iraq, one must read between the lines.
 
Mike:    Like I said, I need confirmation before I believe much from Iraqi journalism. I don't believe in absolutes like they always lie or always tell the truth, but if Saleh or Keywords says something and the IMF Article IV consultations confirm it, then I believe it.
 
Let me ask you a question, do you believe the dinar is or will be in the near future a "hard currency" where the world feels safe holding it in reserves?
 
Mike:   Here you go Enorrste: "A member of Iraqi Parliamentary Economic and Investment Commission Mamouri issued a statement regarding a significant decline in the reserves of Iraqi Central Bank up to 40 billion U.S dollars." I didn't pull that number out of a hat, it's part of the equation. I'm betting we'll know more in the next couple of months where the reserves are.
 
http://www.iraqidinar123.com/reasons-behind-continuous-decline-in-the-reserves-at-cbi/
 
For the record, I'm not putting words in Saleh's mouth for a straw man's arguement, he said it:  "The dinar today has become a strong and like a hard currency through the Bank’s policy Central control of the cash raised in the local market."
 
http://www.ikhnews.com/news_view_32720.html
 
So, I've provided links that show roughly 60 trillion dinars in M0. I've also provided no less than three links from officials in the GOI that illustrate the CBI reserves are between $40-$49 billion dollars. The results show that Iraq does not have 100% coverage of their outstanding M0 money supply. Why does Keywords state it's covered?
 
Who knows, it's clear though that it's not. He's under a tremendous amount of pressure from the GOI for the dwindling reserves, people under pressure do weird things.
 
You asked for enlightenment regarding the difference between Net Foreign Assets and Foreign Currency reserves, please see below:
 
What are 'Net Foreign Assets (NFA)'
 
Net foreign assets (NFA) refer to the value of overseas assets owned by a nation, minus the value of its domestic assets that are owned by foreigners, adjusted for changes in valuation and exchange rates. A nation's Net Foreign Assets (NFA) position is also defined as the cumulative change in its current account over time.
 
The net foreign assets position indicates whether the nation is a net creditor or debtor to the rest of the world. A positive NFA balance means that it is a net lender, while a negative NFA balance shows that it is a net borrower.
 
An alternative definition of “Net Foreign Assets” from the World Bank is that it is the sum of foreign assets held by monetary authorities and deposit money banks, less their foreign liabilities.
 
and:
 
DEFINITION of 'Foreign Exchange Reserves'
 
Foreign exchange reserves are reserve assets held by a central bank in foreign currencies, used to back liabilities on their own issued currency as well as to influence monetary policy.
 
I'm not sure what the Armenian link was for but it's clear that the NFA doesn't cover M0 money supply, here's the links for the above definitions:
 
http://www.investopedia.com/terms/n/net-foreign-assets-nfa.asp
 
http://www.investopedia.com/terms/f/foreign-exchange-reserves.asp
 
Enorrste, what are your thoughts, is the dinar, or will it be in the next 20 years, considered a "hard currency?" -- Stay grounded...
 
mexia74:   Seems to me as an accountant that what is going on with this back and forth argument is the mixing of apples and oranges.  You either need to talk about the CBI balance sheet or the GOI balance sheet.  When you start to commingle the two is when it gets confusing. 
 
The latest CBI audited balance sheet that is available to the public is 2015.  That balance sheet shows issued currency of 38.585 trillion dinar.  Best I can tell from the footnotes to those audited financials, is that assets reserved in a foreign currency (mainly US dollars)  exceeds issued currency by more than 100%.
 
 Therefore Saleh, Keywords or whomever could truthfully say that there is more than 100% coverage by the CBI.  I don't recall anyone ever saying that the Iraq's (GOI) M0 coverage was 100%.  The CBI is responsible for the issued currency, not the entire money supply.
 
Punisher:    Mike, to answer your question in a nutshell....I think the dinar will be on the rise in the near term. That is my opinion. The CBI has been busy and Mosul will no longer be a factor. We shall see....
"The Guilty Will Be Punished"
 
Mike:   I think we all agree that the dinar will rise in value. Becoming a hard currency is a whole different ball game. Stay grounded...  

Enorrste:    Mike, I agree with Mexia74. Each of us is looking at a different set of numbers. In any case, I would personally take Keywords at his word, regardless of the numbers.
 
Saleh's statement is sort of like Trump's "I hope" statement. "Like a hard curency" is not the same as "world reserve currency" in my view.
 
From the alternative definition you gave on Net Foreign Assets it is clear that the World Bank refers only to "monetary" assets (as opposed to owning a company abroad, for instance). Therefore, the term refers to essentially the same thing as "reserves" in my view. I fail to see a significant difference in the terms. I guess I am just dense.
 
I believe that, unless Planet X wipes us out in the next year or so, the dinar will become a world recognized currency. When is another question entirely. I started this over 10 years ago and am still waiting for it to just start, let alone finish.
 
Mike:    lol, I know you're not dense, Enorrste. For me, the NFA is a measuring stick for assets abroad, the reserves are used to back liabilities on the issued currency. I too agree the dinar will be a world recognized currency, but not a hard currency. That's my problem with folks like Saleh, they stretch the truth and stray from the facts. Does he do it all the time? No. But he does it often enough to damage crediblity and require fact checking his statements.
 
Like you, I'm ready for these guys to get to work. No matter how we slice it, the reserves are dwindling and if they don't address the economy soon, there's going to be even bigger problems. You're one of the reasons I love DA, as well as other contributors.
 
We're able to have an educated debate about the details without someone ranking your comment as positive or negative, most here are searching for the truth, even when it gets thorny at times.    Stay grounded..
.

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