The I.Q.D. Team Connection
  • Welcome
  • Iraq News Current
  • PRE & POST RV Information
  • Market Place
  • Twitter Feed
  • Join Our Mailing List
  • Future Of Iraq Project & Other Links
  • The IQD Team Connection Blog & Announcements
  • Quick Links
  • Conf Calls: Recordings
  • Contact Us
  • Financial Planning
  • How to Choose A Financial Advisor
  • Private Bankers: Contacts & Websites
    • Private Bankers - Articles of Interest
  • Computer Security
  • Dinar Dealer & Exchange Info
  • Public Record Sites - Background Checks FREE
  • Real Estate
    • Landlord Tenant Laws & Information
  • Documents: Gifting
  • In Loving Memory of Tim
  • Health & Wellness Blog
  • Health Wellness Products

Dinar Daddy: Article from the NY Federal Reserve regarding LOP or devaluation of currency

2/25/2012

 
Thanks to Dinar Daddy for this post

* (Article from the NY Federal Reserve regarding LOP or devaluation of currency): OOM 2/22/12

February 22nd, 2012 04:04 pm · Posted in CHATS & POSTS (Iraqi Dinar Info)
This article comes from the NY Federal Reserve.

http://www.newyorkfed.org/aboutthefed/fedpoint/fed38.html

Lets look at a few key points.

Under What Circumstances Might a Country Devalue? When a government devalues its currency, it is often because the interaction of market forces and policy decisions has made the currency’s fixed exchange rate untenable. In order to sustain a fixed exchange rate, a country must have sufficient foreign exchange reserves, often dollars, and be willing to spend them, to purchase all offers of its currency at the established exchange rate. When a country is unable or unwilling to do so, then it must devalue its currency to a level that it is able and willing to support with its foreign exchange reserves.

One of the things the CBI seems to be very proud of is that their foreign reserves are the highest in the history of the country so this point doesn’t seem to be one that would make Iraq want to devalue or LOP their currency.

A key effect of devaluation is that it makes the domestic currency cheaper relative to other currencies. There are two implications of a devaluation. First, devaluation makes the country’s exports relatively less expensive for foreigners. Second, the devaluation makes foreign products relatively more expensive for domestic consumers, thus discouraging imports. This may help to increase the country’s exports and decrease imports, and may therefore help to reduce the current account deficit.

Currently Iraq has no products to export other than oil and they don’t want their oil exports to be cheaper they want to sell them for the same price all the other countries are selling them for. Besides that Iraq has no manufacturing right now so they have no domestic products to consume meaning that if they make imports more expensive that is going to be a huge negative for the people of Iraq.

There are other policy issues that might lead a country to change its fixed exchange rate. For example, rather than implementing unpopular fiscal spending policies, a government might try to use devaluation to boost aggregate demand in the economy in an effort to fight unemployment. Revaluation, which makes a currency more expensive, might be undertaken in an effort to reduce a current account surplus, where exports exceed imports, or to attempt to contain inflationary pressures.

(The only comment I can make here is that inflation doesn’t seem to be a huge problem right now and devaluing their currency to fight inflation when it seems to be pretty much under control doesn’t make sense.)

Effects of Devaluation A significant danger is that by increasing the price of imports and stimulating greater demand for domestic products, devaluation can aggravate inflation. If this happens, the government may have to raise interest rates to control inflation, but at the cost of slower economic growth.

Iraq has no domestic products to speak of so why try to stimulate a greater demand for domestic products if there are none until they build their country up first? Oh and speaking of that, can they really afford slower economic growth? They want their economy to grow FAST not slower!

Another risk of devaluation is psychological. To the extent that devaluation is viewed as a sign of economic weakness, the creditworthiness of the nation may be jeopardized. Thus, devaluation may dampen investor confidence in the country’s economy and hurt the country’s ability to secure foreign investment.

OK, so we hear a lot of talk about how the GOI wants the people of Iraq to be confident in their country and their currency. A LOP does the exact opposite of that. Is this what they want to accomplish? I don’t think so. Oh and do they REALLY want to dampen investor confidence and hurt the country’s ability to secure foreign investment? NO, they want to encourage foreign investment, that is what they are trying to accomplish here folks!!!

Another possible consequence is a round of successive devaluations. For instance, trading partners may become concerned that a devaluation might negatively affect their own export industries. Neighboring countries might devalue their own currencies to offset the effects of their trading partner’s devaluation. Such “beggar thy neighbor” policies tend to exacerbate economic difficulties by creating instability in broader financial markets.

(I don’t see Kuwait devaluing their currency, but I guess Iran or Syria might, but oil is the main product these countries have to export and this type of devaluation usually occurs with countries exporting a finished product that other countries want to import like China does with all its manufacturing which is a completley different ball game than the one Iraq is playing in.)

You can go read the whole article for yourself but reading this tells me that Iraq does not want to devalue or LOP their currency because it is counter productive to everything they are trying to do here. Go ahead and beat me up if you want, but I don’t see a LOP as doing anything but going against everything Iraq is trying to accomplish here.

http://theiraqidinar.com/2012/02/22/article-from-the-ny-federal-reserve-regarding-lop-or-devaluation-of-currency-oom-22212/2/

Comments are closed.
    Health Products Favs
    Health Books
    Picture
    filterfluoride
    IGNITEChewable Energy
    Get younger skin the natural way with Chews-4-Health™
    Picture
    Picture
    Liquid Zeolite
    Health Books
    Health Products FAV
    Picture
    Get 50% off Vetisse Jimin Ointment

    Categories

    All
    Articles Of Interest
    Automobile
    Banking
    Banking Laws
    Banking Tools
    Books
    Budget Tips
    Business Start Up
    Calculators
    Calling Help Google
    Cashing In
    Cashing In Info
    Cdars
    Changing State Residency
    Charities
    Check Authenticity Of Dinars
    Computer Security
    Con Men
    Credit
    Credit Cards
    Currency Classifications
    Currency Exchange
    Currency Trading Forex
    Debt
    Delarue
    Dinar Dealers - Check Out License
    Dinar Information
    Email Accounts Set Up
    Entities
    Entities Help
    Fair Debt Collection Practices Act
    Financial Planning
    Financing
    Fincen
    Forex & Currency Converters
    Fractional Banking
    Free
    Free Calling
    Fun
    Gifting
    Health & Wellness
    Home Ownership Help
    Home Safety
    Identity Protection
    Insurance
    Internet Crime Center
    Investing
    Iraq Investing
    Iraq News
    Iraq Stock Exchange Isx
    Lop
    Misc
    Modern Money Mechanics
    Money
    Money Financial Planning
    Money. Financial Planning
    Mortgage Scams
    Mr Anonymous
    Music & Inspiration
    News Sources
    Phone Security
    Post Rv Checklists
    Preparedness
    Pre & Post RV Daily Postings
    Privacy
    Private Banking
    Questions To Ask Professionals
    Real Estate
    Retirement
    Rfid Be Aware
    Safes
    Scam & Fraud
    Scam & Fraud
    Security
    Self Help
    Sent In By Our Listeners
    Shopping
    Straight Talkin Mike
    Sudden Wealth
    Tag Account
    Taxes
    Telephone
    Travel
    Twitter
    Veterans Assistance
    Words Of Wisdom

    Garden of Life