"Open market operations" are monetary policy tools that affect directly the monetary base; the monetary base can be expanded or contracted using an expansionary policy or a contractionary policy, but not without risk.
The monetary base is typically controlled by the institution in a country that controls monetary policy. This is usually either the finance ministry or the central bank. These institutions print currency and release it into the economy, or withdraw it from the economy, through open market transactions (i.e., the buying and selling of government bonds). These institutions also typically have the ability to influence banking activities by manipulating interest rates and changing bank reserve requirements (how much money banks must keep on hand instead of loaning out to borrowers).
The monetary base is called high-powered because an increase in the monetary base (M0) can result in a much larger increase in the supply of bank money, an effect often referred to as the money multiplier. An increase of 1 billion currency units in the monetary base will allow (and often be correlated to) an increase of several billion units of "bank money". This is often discussed in conjunction with fractional-reserve banking banking systems.
So now we know there are monetary tools that affect directly the monetary base. Monetary Base are the notes & coins that are in circulation. The monetary base can be expanded or contracted using two different methods.
First Method: "Expansionary Policy" (Expanding / Printing More Money)
http://en.wikipedia....monetary_policy
"In economics, expansionary policies are fiscal policies, like higher spending and tax cuts, that encourage economic growth.[1] In turn, an expansionary monetary policy is monetary policy that seeks to increase the size of the money supply. In most nations, monetary policy is controlled by either a central bank or a finance ministry." We already know how a country can "expand" their monetary base / currency in circulation. They print more money. This is exactly what Iraq has done ever since 2003 when they released the new IQD's and put them into circulation. I believe they started with about 6 trillion Dinars back in 2003 but for arguments sake we will stick with the facts. In 2004 IndexMundi states that they had 10,244,220,000,000.00 Iraqi Dinars in circulation. That is a little over 10 trillion dinars.
http://www.indexmund...acts/iraq/money
Now we know that the CBI has the ability to "expand" and has in fact "expanded" their monetary base from 10 trillion Dinars to 30 trillion Dinars in a matter of 4 years! That is a lot of printing...
Second Method: "Contractionary Policy" (Contracting / Decreasing Money in Circulation)
http://en.wikipedia....monetary_policy
Monetary base
Contractionary policy can be implemented by reducing the size of the monetary base. This directly reduces the total amount of money circulating in the economy.
A central bank can use open market operations to reduce the monetary base. The central bank would typically sell bonds in exchange for hard currency. When the central bank collects this hard currency payment, it removes that amount of currency from the economy, thus contracting the monetary base.
Iraq's Currency Auctions They sell U.S. dollars to the banks and receive Iraqi Dinars. This happens ALL THE TIME. When the central bank collects this hard currency payment, it removes that amount of currency from the economy, thus contracting the monetary base. This is our key to a significant RV, PERIOD!
Effectively DESTROY BASE MONEY: Process
Since most money is now in the form of electronic records rather than cash, open market operations are conducted simply by electronically increasing or decreasing ('crediting' or 'debiting') the amount of base money that the bank has in its reserve account at the central bank. Thus, the process does not literally require new currency. (However, this will increase the central bank's requirement to print currency when the member bank demands banknotes, in exchange for a decrease in its electronic balance.)
When there is an increased demand for base money, action is taken in order to maintain the short term interest rate (that is, to increase the supply of base money). The central bank goes to the open market to buy a financial asset such as government bonds, foreign currency or gold. To pay for this, bank reserves in the form of new base money (for example newly printed cash) is transferred to the sellers bank, and the sellers account is credited. Thus, the total amount of base money in the economy has increased. Conversely, if the central bank sells these assets in the open market, the amount of base money that the buyer's bank holds decreases, effectively destroying base money.
I have provided tons of links and facts for the naysayers or for those who base their decisions off of logic and reasoning. I've provided this information as I believe it proves that a significant RV is probable. It proves all of the "naysayers / LOPsters" wrong. The biggest argument (which is valid and played a huge role in all of this) is the amount of currency in circulation. Well this thread proves that by using Contractionary Policy the CBI can decrease the Money Base (currency in circulation) through Open Market Operations which also can be referred to as Currency Auctions.
Thank you for taking the time to read through this.
Monday, May 21, 2012
Sunday, May 20, 2012
Iraq Halts Plans To Drop 3 Zeros From Dinar
Iraq Halts Plans to Drop 3 Zeros from Dinar
Posted on 20 May 2012.
Iraq has decided to hold off on a plan to knock three zeros off the nominal value of bank notes of its currency because it does not believe the economic climate is suitable, reports Reuters.The central bank said last August that it planned to redenominate the Iraqi dinar to simplify financial transactions in an economy that is still heavily centralised and dominated by oil, and where deals are often carried out in cash.
The proposal to restructure the dinar to bring more liquidity into the market has been awaiting parliamentary approval since last year.
On Thursday, a statement on the website of the cabinet secretary said the cabinet had decided to halt all procedures relating to the redenomination of the dinar “until further notice”.
“The economic committee discussed this issue and so did cabinet … There is a possibility that it could cause some problems in the economic situation. Besides that, this operation is so big that cabinet sees circumstances are not right to control this,” cabinet secretary Ali al-Alaq told Reuters.
“We have more than 30 trillion dinars in circulation. To withdraw this amount from the market and then to examine them and to dispose of them is a huge process. Even the technical and the monetary capabilities to control a process like this, we consider as insufficient and it is not seen as a priority currently,” Alaq said.
The central bank says Iraq’s large foreign reserves, which have risen to a record $60 billion on the back of high oil prices, will shield it from any damage to its financial system on the national level.
Wednesday, May 2, 2012
What You Should Know About Iraqi Dinar Speculation
What You Should Know About Iraqi Dinar Speculation
As Iraq continues to recover and experience tremendous growth, many individuals are beginning to wonder if speculating in Iraqi Dinar would be wise. At the present time, the dinar holds very little value, which means it can be purchased for very little money. It is indeed legal to purchase this currency, and sell it whenever you wish. If you decide to make a purchase, you will of course want to hold onto the currency until the value increases and you can make a profit.Are there any guarantees that the dinar will increase in value? No. As with any currency type, there are various conditions that will determine the eventual value outcome of the dinar. Those who follow the news out of Iraq will however be able to note the improvements that are taking place in Iraq right now. For many, these improvements alone are a strong indicator as to what the dinar may do next. You may think of it in the same manner as the US dollar, which has lost ground due to declined economic conditions.
Should you decide to purchase dinar, the amount you would like to purchase will be entirely up to you. There are fakes in existence, so it will be to your advantage to perform some research on the source you plan to purchase from. Once you have it, you may want to store it in a safe place, such as a bank deposit box, or other secure facility.
Iraqi Dinar Revaluation
Iraqi Dinar Revaluation 2012
In order to track the value of the dinar, log into www.loot4gold.blogspot.com. You will want to monitor value changes on a regular basis, as you will want want to miss the chance to sell your dinar should it spike in value.
If at any point you wish to sell your dinar, you will find that plenty of companies will purchase them from you.[HINT: Loot 4 Gold]. Again, you will want to select a reputable company to ensure a smooth transaction, and the best rate for your dinar. Both buying and selling are easy tasks, so long as you take the time to consider those you wish to conduct this business with.
Predicting the Future of the Iraqi Dinar
It may seem that predicting the future of the Iraqi dinar is impossible. While it is true that the value of this, and all types of currencies, are subject to change at any times based on specific events or conditions, there are ways to determine where the dinar may be headed. Knowing the facts will help you determine if you wish to purchase dinar, and if so, how much money you wish to speculate with..Consider following the most current Iraqi dinar news if you wish to make predictions about the future of this currency. New is the absolute best source, as it is based on fact and not speculation. The events that are going on inside Iraq at this moment do make a difference. Many of the predictions about the sharp rise in value of the dinar are based on the amazing growth that is taking place within Iraq at this time. The United States is playing a role in this, and there is no denying that when help is being received, more progress can be made.
Iraqi Dinar in 2012
Many feel that the dinar is currently undervalued by a substantial amount. The price to purchase dinar is indeed, quite low at this time. It will be up to you to determine the potential risk and reward ratios. However, the low price of dinar will allow many to take a chance without risking a great deal of funds. Some investors are purchasing millions of dinars, while others are taking a more cautious approach and purchasing smaller speculative amounts. There is no right or wrong here, only what you feel comfortable with.
There are no laws that state this currency can be purchased. Therefore, anyone who wishes to purchase dinar at this time may do so.
Dinar information is available from many sources online. Those who are considering this purchase will want to read as much information as possible in order to try to determine what the value of this currency will be in the future. As with any investment, there will be risks. Minimizing risks is simply a matter of being as educated as possible prior to risking your money. Once you sort the fact from fiction, you will be able to have a clearer picture of what to expect from the dinar in the near future.
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