EHankins » August 22nd, 2016
.HOPE THEY PAY THIER TARIFFS AND TAXES...?
THE BUILDINGS BEING BUILT LIKE AIRPORTS OPENING IN SEPTEMBER, APARTMENT COMPLEXES, SHOPPING MALLS AND OF COURSE HOMES BY THE THOUSANDS.
IRAQ'S NEW GROWTH IN THIER COMMUNITIES AND CITIES ARE BREATH TAKING AND STUNNING, TO SAY THE LEAST. IMO THEY WILL OR ALREADY SURPASSED THE BEAUTY OF ANY CITY IN THE US.
IT'S POSSIBLE WHEN THEY HAVE THE MEANS TO GET IT DONE ALONG WITH THE ALMOST ENDLESS SUPPLY OF WILLING WORKERS WANTING AND NEEDING A VALUABLE JOB. THE CONTRACTORS HAVE BEEN WAITING IN A LONG LINE HOLDING ON TO MATERIALS READY TO GET THE JOB DONE.
IMO THIS IS WHAT WE WERE TOLD TWO WEEKS AGO TO PAY ATTENTION TO. IN FACT, I POSTED IN AGREEMENT WITH FRANK THAT WE WOULD SEE IRAQ GROW ON STERIODS IN THE NEAR FUTURE AND, HERE IT IS RIGHT BEFORE OUR EYES.......BOOM!!!
FRANK SAID WE WOULD SEE A SUDDEN OUTPOURING OF IRAQ'S WILLINGNESS TO GIVE US A PEAK AS IF THEY REALLY CARED. BUT INDEED THEY ARE WILLING TO SAY,"HEY, LOOK AT US WORLD."
I'M HAPPY FOR THEM.... IT'S BEEN A LONG LONG ROAD FOR THEM.
Samson » August 22nd, 2016
AUG 22, 2016, 7:42 AM
Some world currencies are pegged to the dollar. This is what that means.
Nigeria finally did the painful thing everyone said that it had to do.
On June 20, it unpegged its currency, the naira, from the US dollar and promised to pursue a flexible exchange-rate system. And what happens next begins the story of why countries tie their currencies together and what can go wrong.
The naira fell by about 30% against the dollar in a single day.
And then inflation surged to its highest level in over a decade.
Nigeria has plenty of examples of how this can spiral out of control.
In Thailand, the depegging of the currency triggered financial mayhem that spread, causing the Asian financial crisis.
And in Argentina, a peg was actually established to combat inflation that was so rampant that supermarkets were forced to read out prices over a loudspeaker to keep up.
Still, most analysts and economists argue that Nigeria did the right thing — that a de-pegged naira is good for the country in the longer term.
In order to understand why that is, you have to understand what a currency peg actually is, and why countries would manipulate markets to keep exchange rates stable.
If you had been planning a trip to England on, say, June 23, you might have looked at some hotels, shows in the city’s West End, and train fares to Stonehenge and found that all that fun will cost you about
A currency converter would show that those thousand pounds will cost you $1,480.
Then, Brexit happens. British voters unexpectedly choose to leave the EU. Overnight, the value of the British pound plummets and all of a sudden that $1,480 trip will cost you $1,390.
A few days later, it has dropped to $1,290, and it seems like everyone is booking those London holidays.
Here’s what this change looks like to a currency trader. The line is jagged because the value fluctuates nonstop:
But a currency peg is different
Simply put, the term “currency peg” describes when one currency’s value is fixed to another’s. It’s like they have been tied together with a rope. Where one goes, the other follows
What this actually means, in economics-speak, is that a country’s central bank artificially controls the value of its currency.
Travelling to Dubai from the US? You won’t have to worry about changing exchange rates.
This makes things more predictable. Consider, instead of London, a vacation to Dubai — to see an indoor ski slope and some unbelievably tall buildings.
The dirham, the local currency, is pegged to the US dollar at the rate of 3.67 dirhams. It means that a $1,000 trip to Dubai will cost the same in a week, a month, or a year — no matter what happens in the US, the United Arab Emirates, or the world economy.
Here’s what a currency peg would look like on a chart, featuring the Nigerian naira. Notice that, unlike with the pound against the dollar, the line on this chart is straight — until the nation finally broke the peg in June:
OK, so why would a country peg its currency?
Here are some reasons:
- It makes trade more predictable. If you rely heavily on exports — like a major oil producer does — then pegging your currency to another helps ensure neither you nor others have to worry about the exchange rate going up and down.
- It helps countries with low costs of production keep exports cheap. Basically, when times are good, the peg keeps the currency artificially cheap.
- To help address the problem of skyrocketing prices, which is called “hyperinflation.” A peg can bring back stability if the local currency is fixed to a relatively stable currency like the euro or the dollar.
How does a peg work?
Obviously, you don’t literally tie one currency to another. Rather, a country has to, in effect, offset the effects of the market by artificially controlling supply and demand for its own currency.
A widely watched currency peg is Hong Kong’s. The Hong Kong Monetary Authority keeps a watchful eye over the value of the Hong Kong dollar, which is pegged to the US dollar, and if it sees heavy demand — like before a big initial public offering in the city — then it will start selling Hong Kong dollars.
It’s the central bank, so it can just release more of its currency into the market and dampen its value.
In the opposite instance, where people are pulling money out of Hong Kong and selling Hong Kong dollars, the central bank taps its reserves and starts to buy.
In both cases, this offsets the effects of the market.
But things can go wrong
There are several problems that countries can run into if their currency is pegged, including but not limited to:
- Pegs mean a central bank loses control over some basic policy making. Interest rates in Hong Kong, for example, have to follow interest rates in the US, set by the Federal Reserve. It became a problem recently when the US was suffering through the great recession, but Hong Kong was enjoying a boom thanks to China’s growth. While the central bank would have liked to have seen higher interest rates to keep inflation down, it was forced to keep them low.
- Central banks need to hold a lot of foreign currency to keep the peg going. Central banks need a huge amount of reserves to maintain the peg, but these reserves can also lead to higher inflation. And — as you’ll see below — when they run out of those reserves, chaos can ensue.
- Pegging could incentivise the creation of a black market. An official peg may be something like 3 pesos for every dollar, but if there aren’t enough dollars, then you might find “unofficial” exchange rates on the street far different than the official peg. You might have to pay 6 pesos to get a dollar. That black-market price gives you a sense of what the exchange rate would be if the currency were not artificially fixed.
Arguably, the most infamous example of a recent fixed-exchange rate is the Thai baht, given that the government’s decision to de-peg it from the dollar precipitated the Asian financial crisis in the late 1990s.
Thailand was a star performer from the mid-1980s to 1996. The economy grew within a range of 8.1% and 13.3% from 1987 to 1995, according to data from the World Bank.
But things started to slow down around 1996, which then put some pressure on the government to devalue the currency. It resisted for some time, but when investors started betting that the currency would lose value in 1997, this prompted the Bank of Thailand to spend billions of dollars of its limited foreign reserves defending its currency.
Eventually, the BoT had to abandon the peg on July 2, 1997.
The baht ended up falling by as much as 60% against the dollar by October 24 of that year,according to data cited by the Federal Reserve Bank of San Francisco. Operations in 58 of the country’s 91 finance companies were suspended.
The depreciation of the baht was followed by a chain reaction of people speculating against other Southeast Asian currencies, including the Malaysian ringgit, the Philippine peso, and the Indonesian rupiah. By fall 1997, the turbulence then spread to South Korea, Hong Kong, and China. And then, in 1998, it spilled into Russia and Brazil.
“It is apparent in hindsight that this dilemma could have been avoided by allowing the currency to appreciate during the earlier period of capital inflows, when there was no threat of a sudden loss in value in the currency,” argued Ramon Moreno, at the Federal Reserve Bank of San Francisco.
Argentina’s use of the peg to combat hyperinflation
In 1989, prices in Argentina were rising so quickly that supermarkets didn’t even bother to update price tags. Instead, they just read out the prices over intercoms, according to Reuters.
That’s how insane Argentina’s hyperinflation was from in the late 1980s to the early 1990s. In fact, a New York Times report from June 1989 estimated the annual rate at 12,000%.
Argentines took to the streets to protest the soaring prices.
In Buenos Aires, “bands of angry youths, armed with sticks, steel bars and in some cases firearms, roamed poor neighbourhoods burning tires, battling the police and looting food stores,” reported James Brooke in The New York Times on May 31, 1989.
Domingo Cavallo was the guy who had to try to solve this. As minister of the economy in 1991, he came up with a plan known as “Covertibilidad” — or “convertibility.” It pegged the Argentine austral — now called the peso — at 10,000 to the dollar.
Over the short-run, the strategy worked and helped bring inflation from 2,314% per year in 1990 to 4% by 1994. But, eventually, Argentina ended up running into the negative effects of having a fixed-exchange rate.
This was evident when the Asian financial crisis bled into Brazil, and the Brazilian real plunged. The peso, still linked to the dollar, did not. This left Argentine exports significantly more expensive relative to those of Brazil, taking a toll on Argentina’s economy and making it harder for the government to repay its debts.
“Lower export takings have limited the country’s ability to earn the foreign currency needed to repay dollar-denominated debts,” reported the BBC. And “a decline in world prices for farm product, and the global economic slowdown of recent months, only worsened Argentina’s problems.”
Although one might think that devaluing the currency would solve the export problem, Argentina’s other issues made this a difficult choice. As The Economist explained in June 2001:
“The obvious solution, a devaluation, is a non-starter. Less than a tenth of the government’s debt is denominated in pesos, so devaluation would bring financial ruin to it as well as to private-sector borrowers. A big refinancing early this month of $29 billion-worth of commercial debt, through a swap for longer-dated bonds, bought a respite. But the shadow of a potentially catastrophic default still hangs over Argentina.”
And so, things got worse. Eventually, the government enacted the “corralito” in November 2001, which froze bank accounts and allowed withdrawals of only $250 per week.
Riots escalated across the country in response in December 2001.
Ultimately, the government was left with no choice but to de-peg its currency from the dollar in January 2002.
By February 2003, the peso had fallen by about 70% against the dollar, according to figures cited by a BBC report from that month. Inflation rose again after the currency was de-pegged, although, on the positive side, it didn’t skyrocket to the levels of the late 1980s.
“The currency board [which managed the peg], although it initially played an essential role in achieving disinflation, was an inherently risky enterprise; it changed over time from being a confidence-enhancing to becoming a confidence-damaging factor, as the policy orientation shifted from a ‘money-dominant’ to a ‘fiscal-dominant’ regime,” the International Monetary Fund noted.
The Nigerian naira and the collapse of oil prices
Nigeria’s currency, the naira, has had an “erratic, (un)predictable, violent and full of heartbreak and tears” relationship with the dollar and other foreign currencies since the mid-1980s, wrote Feyi Fawenhimi in an excellent piece for Quartz.
The last couple of years saw oil prices collapse from about $100 a barrel in June 2014 to around $40 to $50 a barrel in the second quarter of 2016.
Nigeria, an OPEC member and one of the world’s biggest oil producers, heavily relies on the commodity.
The country pegged the naira to the dollar a few years ago to help stabilise the currency. But amid lower oil prices, the Central Bank of Nigeria had to spend about 20% of its foreign reserves defending the peg from late 2014 to June 2016, according to figures from the bank, which were cited by The Wall Street Journal.
Economists and analysts had long been arguing that Nigeria will eventually have to capitulate and devalue its currency, given that the government’s controversial agenda of currency and price controls exacerbated economic stresses in its economy.
Finally, in June 2016, the Central Bank announced that it would abandon its peg of 197 to 198 naira per dollar. When trading opened on the day of the devaluation, the currency collapsed to by about 30% to over 280 per dollar.
Plus, inflation spiked in the aftermath, which prompted the central bank to hike rates up to 14% from 12% in July in order to avoid a cycle of rising inflation and a weakening currency.
“This is one reason why devaluations can be so painful, as central banks typically jack up interest rates afterwards. Recessions are often seen post-devaluation,” Marc Chandler, the global head of currency strategy at Brown Brothers Harriman, said in a note in June.
But although the situation has gotten ugly in the short term, things should eventually start to pick up.
“Over the long-run, a weaker currency will help Nigeria’s economy by encouraging import substitution and attracting foreign investors, who have shunned the country for fear of a devaluation,” wrote John Ashbourne, Capital Economics’ Africa economist, in a note in June.
That being said, the currency’s devaluation alone is not enough to solve all of Nigeria’s problems, which continue to suffer lower oil prices, ongoing oil-production disruptions by the Niger Delta Avengers, and a shrinking economy.
Plus, several economists, including Nonso Obikili and Ashbourne, have argued that the currency may not actually be as free as promised.
But at least it was a step in the right direction, according to most economists.
Don961 » August 22nd, 2016
4:17 AM ADMIN
Baghdad/ Iraq TradeLink: Iraqi economists disclosed that a meeting shall be held at the end of this month with the World Bank to discuss 2017 national budget and its "abidance" with the recommendations made by the Bank.
The meeting is expected to be held on 28 August, 2016 with the participation of the Iraqi Finance Ministry.
The World Bank conditioned, for granting loans to Iraq, the activation of the taxes and minimizing waste, as well as increasing non-oil revenues".
It is expected that the talks will concentrate on the price of oil barrel to be calculated in the coming budget and the necessity "not to be higher than expected in the market".
The economists believe that minimizing expenditures will assist the national budget with more un-spent funds, thus minimizing the expected deficits.
Governmental reports disclosed, on 16 August, 2016, that the Iraqi Finance Ministry completed the draft budget of 2017 and shall be submitted to the Iraqi Cabinet by September next, with the amount of 82 billion dollars, where the oil barrel was calculated to reach 40 dollars, but other opinions suggested that it should be calculated with the figure of 35 dollars per barrel.
Don961 » August 22nd, 2016
Mon, 22 Aug 2016 06:48:39 # Almgmehorah_uz
Parliament plans to investigate the file "Development Fund for Iraq," the private oil revenues, the center of information on the disappearance of billions of dollars it received after the administration of local authorities in 2013.
The fund known as the "EDF" any form under Security Council Resolution 1483, to protect Iraqi funds from international claims and pirated after the American invasion in 2003, and deposited the oil sales funds to be used in the budget and reconstruction, at the request of the government and the approval of the management of the Fund and the Central American Bank.
Economy Commission for parliamentary and investment confirmed the words of its president Nora Salem Albjara that Alganە open Iraqi assets file abroad, after receiving information about the disappearance of some of them, and seize the creditors on the other under the pretext of compensation, mostly untrue, and explained:
When delivery of Fund Portfolio of Iraq in 2013 was the most $ 18 Mlیard year later dropped to below 10 Mlیard disappeared and the remainder in the fund without any Jhە announce the assets of the Fund or its destiny.
And suffering Iraq, since 2014, resulting from the drop in oil prices in global markets monetary crisis, high government expenditure, which it secured about $ 60 Mlیard employees and retirees salaries and numbered 5.2 million, as well as other expenses sovereign.
News Economists including economic adviser in the cabinet appearance of Mohammed Saleh made it clear that Iraq is spending on the rise, and was unable to achieve the level of export as planned, because of a stopover of the NOC and the control of the militants on sites in Kirkuk and Nineveh, what caused the balance of the decline in the Development Fund.
The Global Center for Development Studies in London, warned in 2015 of the "bankruptcy of Iraq within three years because of the budget, which now threatens the oil sector in a clear deficit", especially since the military operations in Anbar alone cost $ 7 million a day.
Iraq exports deposited funds per month in the Development Fund, the only year in which the funds accumulated in the fund was in 2012, according to parliamentarians.The Security Council has committed the Iraqi government the end of 2010, a plan for the funds, "the fund", to let her in Federal Bank to protect the American presidential law from creditors.