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Mar 08, 2010
Iraqi investors to put money where mouth is
DUBAI - Investors eyeing Iraq’s economy are expected to put their money where their mouth is in the coming months as the current election solidifies legitimacy in the country’s young democracy, a leading fund manager said on Sunday.
“This election will drive legitimacy for the government and international investors will feel more comfortable,” Dara Maghdid, who manages the $30 million Babylon Fund for Godvig, told Maktoob News.
Millions of Iraqis braved rocket, mortar and bomb attacks that killed dozens of people over the weekend to cast their ballots in the second parliamentary election since U.S.-led forces ousted dictator Saddam Hussein in 2003.
Maghdid said investors have taken a wait-and-see approach until the election, but expected improvements in political and social stability after the vote could pave the way for an economic boom in the oil-rich country.
Iraq’s stock market has the potential to “rise three times in three years, ten times in ten years”, Maghdid forecast.
The Babylon Fund has 40 to 50 investors, most of them European, and invests their money in the Iraq Stock Exchange, which has fallen about 10 percent in the first two months of this year.
The Iraq bourse has fallen about 20 percent since September 2009 when companies in the index were reweighted.
The Babylon Fund has returned about 28 percent to investors since it started in 2006, Maghdid said. While the return is not stellar, Maghdid expects steep returns in coming years.
Iraq has the world’s third largest oil reserves after Saudi Arabia and Iran, according to figures from UK energy firm BP. Foreign direct investment soared in 2009, rising more than 240 percent to nearly $157 billion in capital commitments by November.
NORTHERN STAR
Godvig plans to start a new company, Kurdistan Investment Co (KIC), in the country’s oil-rich northern region in the coming months. It has already garnered $1 million from a few investors and hopes to increase that to $50 million.
“We have two Kurdish investors and two Europeans. They live in Iraq. We’ve spoken to some big investors and they also want to come to this company and waiting for the company to be completed.”
KIC will invest in shares of foreign oil companies that are setting up operations in the region. Maghdid hopes to list KIC on the Stockholm bourse once it gets the minimum 100 investors needed.
While Iraq’s real gross domestic product is expected to rise 6.3 percent a year on average in 2010-2011, according to the Economist Intelligence Unit, Maghdid said growth in Kurdistan should exceed 20 percent annually.
“Our investors worry about the election,” he said. “But this tension is a healthy phenomenon that will create a more democratic environment in the region.”
Analysts expect four key groups to take the bulk of 325 seats in the country’s parliamentary election and attempt to form a coalition government.
These parties include: The Iraqi National Alliance, the country’s largest Shi’ite coalition; the nationalist group al-Iraqiyah led by Iyad Allawi; Prime Minister Nur al-Maliki’s State of Law party; and a coalition of two Kurdish parties.
Maghdid said that “while the security situation is not good ... things are headed in the right direction”.
The Economist Intelligence Unit said in a recent report that while it expects “the political situation in Iraq to remain unstable ... we do not expect a repeat of the sectarian conflict that engulfed Iraq in 2006 and early 2007”.
Maliki on Monday emerged as a front-runner after the election. However, estimates from the Baghdad region, which could swing the results of Sunday's poll, were not yet available but local officials said Maliki was leading in nine of Iraq's 18 provinces.
business.maktoob.com
http://articlesofinterest-kelley.blogspot.com/2010/03/iraqi-investors-to-put-money-where.html
Fareed Zakaria analyzes what's at stake in Iraq's second legislative election since the US toppled Saddam Hussein.
http://cnn.com/video/?/video/world/2010/03/07/gps.take.saddam.cnn
OVERNIGHT GLOBAL REALIGNMENTS? PAST EVENTS LEADING UP TO THIS MOMENT - PART 1 ...
Overnight Global Realignment Of Currencies? Not Quite. It's Taken Years Of Preparation. Are We There Yet? Maybe So.... It looks like we might see an unexpected realignment of multiple currencies around the world. The middle east (*Iraq) seems to be the "lynchpin".
While researching and collecting articles over the past few years, all information is coming together slowly but surely. The possibility of regional currencies realigning with one another is very great. This a Major undertaking ...
http://articlesofinterest-kelley.blogspot.com/2010/03/overnight-global-realignments-past.html
IMF Provides $3.6 Billion Loan to Iraq March 04, 2010
March 4, 2010 · Posted in NEWS ·
The IMF approved a $3.6 billion loan to help Iraq as it struggles with high deficits and falling government revenues due to lower than anticipated oil prices, the organization said.
The money will help Iraq implement its two-year economic plan, which includes
• Improved public financial management and budget implementation
• Increased transparency and accountability in the oil industry
• Banking sector reforms.
Iraq’s economic growth slowed to 4 percent in 2009, but is expected to climb to 8 percent in the coming years as oil production increases gradually, according to the IMF.
“The economic program for 2010 and 2011 aims at providing a sound macroeconomic framework during a period of economic and political uncertainties. Consistent with this program, the 2010 budget adopted by parliament seeks to contain current spending while increasing investment to address Iraq’s large rehabilitation needs and improve public service delivery,” said IMF Deputy Managing Director Takatoshi Kato.
The loan comes just ahead of parliamentary elections in Iraq, scheduled for the first week of March.
Savings funded a difficult year
Iraq’s economy has been seriously affected by the drop in oil prices from their peak levels in 2008, the IMF said. With oil revenues accounting for the bulk of the country’s export receipts and government revenues, both the balance of payments and the budget saw large deficits in 2009. Thanks to savings built up in earlier years, these deficits could be financed.
In 2010 and 2011, the funds from the IMF will be used to support Iraq’s budget and to help pay for imports. Current government spending will be contained over the next two years in order to make room for higher investment and gradually reduce the deficit, and Iraq is expected to begin running a surplus again in 2010, the IMF said.
Turnaround hinges on oil prices
Oil prices have been climbing in recent months, and may turn out to be higher than expected over the course of the next two years.
If this is the case, Iraq’s funding needs will likely be temporary and the Iraqi government has said they intend to treat the loan as precautionary if it becomes evident oil revenues would increase to levels that would make the funding unnecessary. Iraq’s medium-term outlook remains favorable as oil production is projected to increase in the coming years, as domestic and foreign investment will start to bear fruit.
http://www.imf.org/external/pubs/ft/survey/so/2010/car030410a.htm
Iraqis abroad begin voting in homeland's election
AP
DAMASCUS, Syria – Iraqis living abroad began casting ballots in their homeland's crucial parliamentary elections Friday, a constituency Iraq's Sunni Arab minority hope will boost their showing.
Thousands stood in lines at polling stations in Syria and Jordan, home to the largest Iraqi expatriate communities. Voting was also being held in more than a dozen other countries around the world, from Australia to the United States.
The United Nations refugee agency estimates that around 2 million Iraqis are living abroad — the majority of whom fled violence following the 2003 U.S.-led invasion.
A large proportion of those — particularly in Jordan and Syria — are Sunni Arabs who fled the fierce wave of sectarian killings at the height of the Iraq war.
http://news.yahoo.com/s/ap/20100305/ap_on_re_mi_ea/ml_iraq_elections
Iraqi election goes multimedia
Thu Mar 4, 4:35AM PT - Reuters 1:34 | 490 views
Big money election songs and Facebook messages are the latest campaign tools being used by Iraqi politicians.
http://news.yahoo.com/video/tech-15749651/iraqi-election-goes-multimedia-18453303
10:00 am SCC Security Council Meeting about IRAN ~ maybe Iraq too? hmm
March 3, 2010
United Nations Security Council to meet Thursday morning. Non-Proliferation review for Iran is scheduled. Is it possible that Iraq could be discussed since the IAEA reported on Iraq's letter ~
"the Agency received a letter from the Republic of Iraq informing us that it will begin implementing its Additional Protocol on a provisional basis, with immediate effect, until the protocol formally enters into force"?
"Iraq" IAEA Statements of the Director General March 1st ~ IAEA Board of Governors...
THURSDAY, 4 MARCH 2010
Click here to view TODAY's Media Alerts
10:00 am SCC Security Council Meeting:
Non-proliferation Briefing by the Chairman of the Security Council Committee established pursuant to resolution 1737 (2006).
Title Resolution 1737 (2006) Non-proliferation
Publisher UN Security Council
Country Islamic Republic of Iran
Publication Date 27 December 2006
Citation / Document Symbol S/RES/1737 (2006)
Cite as UN Security Council, Resolution 1737 (2006) Non-proliferation, 27 December 2006, S/RES/1737 (2006), available at:
http://www.unhcr.org/refworld/docid/45c30c6f0.html
[accessed 4 March 2010]
Comments Adopted by the Security Council at its 5612th meeting, on 23 December 2006
Related Link: http://www.un.org/Docs/sc/
Iraq and the United Nations ~ February 27, 2010
U.N. may weigh lifting Iraqi sanctions
UNITED NATIONS — Iraq picked up momentum Friday in its bid to remove the U.N. trade sanctions that have been hampering its economy for nearly two decades in punishment for Saddam Hussein’s invasion of Kuwait.
With Iraq preparing for March 7 elections and U.S. combat troops getting ready to withdraw in August, the Obama administration has been pushing for the U.N. Security Council to provide a boost to Iraq’s economy by lifting sanctions affecting billions of dollars in annual trade.
After a brief meeting Friday, the Security Council pledged in its unanimously adopted U.S.-drafted statement "its readiness, once the necessary steps have been taken, to review, with a view towards lifting, the restrictions” on trade in chemicals and other items that it first imposed in 1991, under two sanctions resolutions.
link ~ "Iraq" IAEA Statements of the Director General March 1st ~ IAEA Board of Governors...
Those include chemicals such as pesticides that are used in Iraq’s agriculture but also could be used in weapons-making.
The 15-nation council’s statement read aloud by French Ambassador Gerard Araud, who holds the rotating presidency of the U.N.’s most powerful body this month, indicated that such a review would come only after Iraq’s safeguards against acquiring weapons of mass destruction are demonstrated to be sufficient.
Iraq also must demonstrate that it is in compliance with treaties against developing biological, chemical and nuclear weapons.
The action came in response to a request by Iraq’s Foreign Minister Hosyar Zebari last month, in which he assured the council that Iraq opposes the spread of nuclear and chemical weapons and ballistic missiles and "is committed to taking additional steps to comply with nonproliferation and disarmament standards.”
Zebari called the trade sanctions "among the constraints that continue to prevent Iraq from regaining its status as a responsible and active member of the international community and, at the same time, deprive it of the benefits of technological progress and scientific research.”
Iraqi U.N. Ambassador Hamid Al-Bayati said lifting the sanctions would help ease some $24 billion in annual trade in agriculture and other industry.
The council also requested an assessment from the International Atomic Energy Agency about "the quality of Iraq’s safeguards-related cooperation” with the U.N.’s nuclear watchdog agency, including how well the country is complying with treaties against nuclear, biological and chemical weapons-making.
Such a report from the IAEA could prompt a council resolution to lift the sanctions, which were intended to prevent Iraq from acquiring so-called weapons of mass destruction. None were found after the U.S. invaded Iraq in 2003.
If the council were to do so, that would not affect other U.N. sanctions requiring Iraq to compensate Kuwait and others for billions of dollars in damages from the 1990 invasion.
Saddam was executed in 2006. The United States now hopes that a credible election can help strengthen the war-battered nation and improve conditions for its combat forces to go home by the end of August and the rest by the end of next year.
http://newsok.com/u.n.-may-weigh-lifting-iraqi-sanctions/article/3442650
Sources: Central Bank recovered $ 10 billion, and implement a plan to equalize the Iraqi dinar in U.S. dollars
03/03/2010 Wednesday 18 - the first spring -1431
Financial sources familiar with the "home" for the restoration of the Iraqi Central Bank to more than $ 10 billion and deposits from the former regime seized in international banks, There are efforts to restore the funds other than the value of contracts and deals signed under Saddam Hussein's regime was supplemented after the war for the invasion of Kuwait in 1990.
The financial sources familiar with "Al-Watan that" the United Iraqi Alliance bloc that nominated Bayan Jabr Zubaidi the next prime minister after the election, betting on the disclosure of such information described terms to augment the Iraqi National Coalition election, especially with the assurances of the Iraqi Central Bank study revalue Iraqi by deleting the 3 zeros from the nominal value of the current, and the U.S. dollar equivalent of one Iraqi dinar.
Mudhir Mohammed Salih, adviser to the central bank raising project yellowing of the currency promoted by the government in 2007, "Central Bank Itboukh on the backburner" and expected to see the end of 2010 or early 2011 on the development project. "
In the meantime, the central bank will continue the policy of stabilizing the exchange rate dinar to the dollar, "Al-Watan" that the central bank seeks to raise the value of the Iraqi dinar of 1180 dinars per U.S. dollar to 1000 dinars per U.S. dollars, within the month of June, and on the extent of conflict this policy with the policy of economic reform, followed by Iraq since 2003, under which the installation is a departure from the principles of capitalism Judge freely exchange rate liberalization, the central bank adviser said that "Iraq is in transition toward a market economy as it targets the central bank has worked to achieve the stability of the dinar exchange rate after The fluctuation is a concern for the citizen. "
In response to the indictment of the central responsibility of rising inflation, despite the policy followed by the installation, Saleh said that "the Central is not interested in lower prices in the marketplace but is responsible for the overall level of prices, and inflation declined in the country and income for the first time arranged to one decimal place, a 6% after was 60% even though there is no price in the world series back to back, but important that the price hikes under control. "
For its part, said an economic expert, Dr. Salama Smeisim for "home," said the leaked information from sources close to the Central Bank of Iraq can put things in different scales and different, and is considered central bank's ability to retrieve these funds from large international banks, each claimant to intervene in monetary policy, which it is exclusively the prerogative of the central bank, particularly because a lot of economic advisers in the Iraqi government demanded to borrow from Iraq's financial deposits at the central bank to cover the deficit in the general budget of the government, said Simasim must "stop such claims at a certain without encroachment on the powers of the monetary authorities. "
She stressed the importance of "keeping the rule of the dinar, above all, because the existence of such quantities of cash allows the authorities concerned to use this cash to address the liquidity shortage faced by the Iraqi budget and is the argument or excuse invoked by some in his allusions to demand the seizure of the existing stockpile of Central Bank
Editor: AlMarsad
http://www.baghdadtimes.net/Arabic/index.php?sid=58968
http://translate.google.com/translat...68&sl=ar&tl=en
This is the original story ( Al-Watan is a Kuwaiti newspaper ) :
http://www.alwatan.com.kw/ArticleDetails.aspx?Id=11140
http://translate.google.com/translat...40&sl=ar&tl=en
Iraq is named its first ambassador in Kuwait for two decades
Kuwaiti newspaper quoted Tuesday in the Iraqi Foreign Ministry official as saying that Baghdad named Mohammed Hussein Bahr al-Ulum ambassador in Kuwait for the first time since Iraqi troops invaded the country in 1990. The newspaper quoted Deputy Minister of Foreign Affairs of Iraq Mohammed al-Haj Hammoud said Baghdad was waiting for approval of the Kuwaiti authorities on this label as a protocol.
The new ambassador is the son of Shiite mark veteran Mohammed Bahr al-Ulum and the brother of Iraq's former oil minister Ibrahim Bahr al-Ulum.
Said Mohammed al-Haj Mahmoud, Ambassador-designate "descended from a prominent family in Iraq and well-known combativeness against the Baath party against the regime of Saddam Hussein" and "contribute to a solution of outstanding issues between the two countries."
Kuwait was named chief of staff to the insured as an ambassador in Iraq almost a year ago
http://alcauther.com/html/modules.php?name=News&file=article&sid=12680
UN Security Council Ready To Lift Saddam-Era Sanctions
February 26, 2010
UNITED NATIONS (RFE/RL) -- The United Nations Security Council has indicated its readiness to lift remaining economic sanctions against Iraq, provided Baghdad complies with its international obligations.
The sanctions were imposed in 1991 in response to the occupation of Kuwait by Saddam Hussein's regime.
Council members adopted unanimously a presidential statement drafted by the United States that requests that the International Atomic Energy Agency (IAEA) assess Iraqi cooperation on nonproliferation.
Speaking on behalf of the council, the French ambassador to the UN Gerard Araud said Iraq is now compliance with its obligations not to produce or use chemical weapons.
"The Security Council underlines its readiness, once the necessary steps have been taken, to review with a view towards lifting the restrictions in resolutions 687 of 1991 and 707 of 1991 related to weapons of mass destruction and civil nuclear activities," Araud said.
The lifting of the sanctions would allow Iraq to boost its economy, particularly in its agricultural sector. Under the current sanctions, Iraq is prohibited from producing pesticides.
Iraq's ambassador to the UN Hamid Al-Bayati said lifting sanctions has the potential to generate up to $24 billion in trade.
The Security Council did not address sanctions related to compensation payments Iraq owes to Kuwait.
http://www.rferl.org/content/UN_Security_Council_Ready_To_Lift_SaddamEra_Sanctions/1969626.html
MID-MICHIGAN (WJRT) -- (02/24/10)--Some say it's an investment with big returns; others say it comes with big risks.
Either way it's a growing trend: exchanging American money for the Iraqi Dinar. People are banking on the money being worth more if the Iraq government stabilizes.
If you enjoy the sheer luck of playing the lottery or the roller coaster ride of the stock market, then your new fix could be the Iraqi Dinar.
They are colorful bills that some investors are buying in bulk at local banks or online. They're banking of big pay out down the line.
http://abclocal.go.com/wjrt/story?section=news/local&id=7295663
IMF to provide 3.6-billion-dollar loan to Iraq AFP/File – The International Monetary Fund in Washington, DC. The International Monetary Fund on Wednesday approved …
2 hrs 32 mins ago
WASHINGTON (AFP) – The International Monetary Fund on Wednesday approved a 3.6-billion-dollar loan to Iraq to help the war-torn country meet pressing finance needs.
The IMF executive board approved a two-year so-called Stand-By Arrangement for Iraq for about 3.6 billion dollars "to cover the country's balance of payments needs," the Washington-based institution said in a statement.
The action makes about 455 million dollars "immediately" available to the Iraqi authorities, it said.
The new loan follows a 15-month program supported by a Stand-By Arrangement initially approved on December 20, 2007 and which expired on March 18, 2009.
"The successor arrangement is designed to support Iraq's economic program over the next 24 months through February 23, 2012," the IMF said.
http://news.yahoo.com/s/afp/20100224/wl_mideast_afp/imfpublicaidiraq_20100224214829
Iraq oil income in February reached $4.416 billion, Oil official
Wednesday, February 24, 2010 08:46 GMT
Iraq Ministry of Oil Spokesman Assem Jihad said on Tuesday that the country’s oil income in February reached 4.416 billion dollars. Iraq exports oil thru Zubair and Khor Al Aammieh in the South and Ceyhan port in Turkey.
???? ??? ?????? ?????? ????????
http://www.alsumaria.tv/en/Economics-News-Iraq/3-45352-Iraq-oil-income-in-February-reached-$4.416-billion,-Oil-official.html
Dear Warka Investors,
We would like to bring to your kind attention that Iraqi Engineering Work will be issuing 30% free shares and 70% paid up shares at the price of IQD (1) per share for those shares owned prior to holding its general assembly meeting.
Eligible Shareholders are kindly requested to submit their signed authorization letters to purchase the paid up shares by March 1st 2010 noting that any request received after this date and Warka business hours will be considered null and void by our bank and disregarded accordingly.
Best regards,
ISX Department
Warka Bank for Investment and Finance
http://www.warka-bank.com/inner.php?type=3&id=67
IMF Executive Board Calendar
As part of the Fund's increased transparency, the tentative calendar of the formal meetings and seminars of the Executive Board for the next seven days is shown below.
Please note that the calendar is subject to change, and that the agenda for each meeting is typically finalized the day before the meeting. The calendar posted below contains the latest available information.
An IMF Executive Board Calendar Archive is also available.
Last Update: February 23, 2010 15:49:03 ET
Sort By: Date | Country
February 24, 2010
Country: Myanmar
Title: 2009 Article IV Consultation
Country: Iraq
Title: 2009 Article IV Consultation and Request for a Stand-By Arrangement
March 1, 2010 Go to top of page
Title: The Fund's Mandate- The Size of the Fund
http://www.imf.org/external/np/sec/bc/eng/index.asp
Large denominations of United States currency
From Wikipedia, the free encyclopedia
Today, the currency of the United States is the U.S. dollar, and is printed on bills in denominations of $1, $2, $5, $10, $20, $50, and $100.
At one time, however, it also included five larger denominations. High-denomination currency was prevalent from the very beginning of U.S. Government issue (1861). $500, $1,000, and $5,000 interest bearing notes were issued in 1861, and $10,000 gold certificates arrived in 1865. There are many different designs and types of high-denomination notes.
The high-denomination bills were issued in a small size in 1929, along with the $1 through $100 denominations. The designs were as follows, along with their 1929 equivalents in current purchasing power (except for the $100,000 bill, which uses the 1934 equivalent):
* $500: William McKinley, equal to $6,220 in 2010 dollars
* $1,000: Grover Cleveland, equal to $12,440.55 in 2010 dollars
* $5,000: James Madison, equal to $62,202.73 in 2010 dollars
* $10,000: Salmon P. Chase, equal to $124,405.46 in 2010 dollars
* $100,000: Woodrow Wilson, equal to $1,591,521.2 in 2010 dollars
The reverse designs featured abstract scrollwork with ornate denomination identifiers. All were printed in green, except for the $100,000. The $100,000 is an odd bill, in that it was not generally issued, and printed only as a gold certificate of Series of 1934. These gold certificates (of denominations $100, $1,000, $10,000, and $100,000) were issued after the gold standard was repealed and gold was compulsorily purchased by presidential order of Franklin Roosevelt on March 9, 1933 (see United States Executive Order 6102), and thus were used only for intra-government transactions. They are printed in orange on the reverse. This series was discontinued in 1940. The other bills are printed in black and green as shown by the $10,000 example (pictured at right). Although they are still technically legal tender in the United States, high-denomination bills were last printed in 1945 and officially discontinued on July 14, 1969, by the Federal Reserve System.[1] The $5,000 and $10,000 effectively disappeared well before then: there are only about two hundred $5,000 bills, and three hundred $10,000 bills known, of all series since 1861. Of the $10,000 bills, 100 were preserved for many years by Benny Binion, the owner of Binion's Horseshoe casino in Las Vegas, Nevada, where they were displayed encased in acrylic. The display has since been dismantled and the bills were sold to private collectors.
Circulation of high-denomination bills was halted in 1969 by executive order of President Richard Nixon, in an effort to combat organized crime. The Federal Reserve began taking high-denomination bills out of circulation that year; as of May 30, 2009, there were only 336 of the $10,000 bills in circulation; 342 remaining $5,000 bills; and 165,372 $1,000 bills still being used.[2] Due to their rarity, collectors will pay considerably more than the face value of the bills to acquire them.
For the most part, these bills were used by banks and the Federal Government for large financial transactions. This was especially true for gold certificates from 1865 to 1934. However, the introduction of the electronic money system has made large-scale cash transactions obsolete; when combined with concerns about counterfeiting and the use of cash in unlawful activities such as the illegal drug trade, it is unlikely that the U.S. government will re-issue large denomination currency in the near future. According to the US Department of Treasury website, "The present denominations of our currency in production are $1, $2, $5, $10, $20, $50, and $100. Neither the Department of the Treasury nor the Federal Reserve System has any plans to change the denominations in use today.
http://en.wikipedia.org/wiki/Large_denominations_of_United_States_currency
The Iraqi Dinar is the currency of Iraq. The currency code for Dinars is IQD, and the currency symbol is ?.? . Below, you'll find Iraqi Dinar rates, a currency converter, Iraqi Dinar News and more. You can also subscribe to our currency newsletters with daily rates and analysis, or take IQD rates on the go with our XE Mobile apps for your iPhone, BlackBerry, or even your regular phone.
The Central Bank of Iraq has announced their plans to redenominate the Iraqi Dinar to ease cash transactions. By the end of 2010, they intend to drop three zeros from the nominal value of bank notes. It should be noted that the actual value of the dinar will remain unchanged. That means that 1,000 IQD (pre-redenomination) and 1 dinar (post-redenomination) will both be worth the same amount in US Dollars. As stated by the Central Bank of Iraq, their mandate is to "ensure domestic price stability and foster a stable competitive market based financial system." For more information about the redenomination, read "Iraq plans to slice three zeros off currency notes."
http://www.xe.com/currency/iqd-iraqi-dinar
A Crude Look at Iraqi Wealth
Henry Thompson
Iraq is a wealthy country and every Iraqi is a present value millionaire and wealth in the world has shifted toward the owners of crude oil. Over the next two decades, total world energy consumption will almost double and serious alternatives to oil are decades away. In the US, oil consumption is expanding, production declining, and imports climbing. Oil prices and the energy share of national income will increase over the coming decades. Alternative energy sources are available but expensive and certainly will not lower the energy bill.
Monopoly resource profits will be going to the owners of oil and other energy resources. Owners of oil reserves will profit as the price of oil rises due to scarcity. Oil extraction and refining are very competitive with profits slightly higher than the average industry but with high risk. The owners of the oil, however, will enjoy rising profits. Oil is owned primarily by governments around the world.
The price of a barrel of crude oil at the wellhead now jumps around between $40 and $150 while extraction cost in the Middle East is under $5. The owners of the oil in the ground get the difference as profit.
The Arab Gulf has 65% of the world’s proven oil reserves and Iraq has 12%. Oil in the ground is like money in the bank and that makes the Iraqi government, and perhaps the Iraqis themselves, wealthy.
Iraq can easily produce 6 million barrels of oil a day which is 2 billion barrels per year. At only $50 per barrel, that oil would sell for $100 billion. The population of Iraq is 24 million and that oilincome translates to $4000 per person.
Suppose Iraq sells a quarter of its potential reserves at an average price of $50 per barrel over the next 20 years. That would generate 90 billion x $50 = $4.5 trillion. If the population of Iraq grows to 30 million, that would be $150,000 per capita for 20 years, or $7,500 annual income per capita. Price will be rising but the Iraqi government will waste a good deal of the profit.
If instead of wasting the income it is invested, Iraq will become wealthy. Estimated productive capital assets in the US are $60,000 per capita and $5,000 for the entire world. If Iraq invests only 1/4 of its oil revenue for the next 20 years, it will match current US productive assetsper capita.
The total value of Iraq potential oil reserves at an average profit of $75 per barrel over next 100 years would be 360 billion x $75 = $27 trillion or $900,000per capita , making every Iraqi a millionaire. These calculations do not include natural gas revenue, lately about equal to oil revenue for producing fields. Also, most of Iraq has not be explored for gas and oil.
In the Persian Gulf region, proven oil reserves are 195 trillion barrels. Selling this at an average profit of $75 per barrel over the next 100 years would generate $15,000 trillionincome . If half of that is invested, it would amount to $7,500 trillion or 1/4 of the present total capital assets in world. And this is only proven reserves. Due to political uncertainty most of the region has not been explored for gas and oil.
http://www.auburn.edu/~thomph1/iraq.htm
U.S. Seeks to Spur Iraq’s Economy by Ending UN Trade Sanctions
By Bill Varner
Feb. 20 (Bloomberg) -- The Obama administration wants to boost Iraq’s economy by lifting United Nations trade restrictions on items such as chemicals, including pesticides, that are considered capable of being used for military purposes.
The U.S. yesterday gave the UN Security Council a draft statement calling on the International Atomic Energy Agency to assess Iraq’s compliance with treaties barring development of nuclear, biological and chemical weapons.
“The Security Council underlines its readiness, once the necessary steps have been taken, to review, with a view towards lifting,” the restrictions, the statement says.
The UN sanctions, imposed in 1991 in response to Iraq’s invasion of Kuwait, were designed to prevent then-Iraqi leader Saddam Hussein from acquiring materials that could be used to create weapons of mass destruction. An IAEA report would trigger a resolution to lift the sanctions.
Lifting the restrictions would help Iraq’s agriculture, industry and education development and might yield as much as $24 billion a year in trade, according to Hamid Al-Bayati, Iraq’s ambassador to the UN.
“This is the legacy of a long time ago,” Bayati said. “We have to report to the UN what we want to buy. There are delays due to bureaucracy. We want to get rid of that.”
Iraq’s Foreign Minister Hosyar Zebari asked for the action in a Jan. 19 letter to the Security Council.
“Outstanding issues related to disarmament obligations are among the constraints that continue to prevent Iraq from regaining its status as a responsible and active member of the international community and, at the same time, deprive it of the benefits of technological progress and scientific research,” Zebari said in the letter.
Security Council action wouldn’t lift sanctions that compel Iraq to compensate Kuwait, other countries and entities for damages stemming from Hussein’s 1990 invasion of Kuwait.
To contact the reporter on this story: Bill Varner at the United Nations at wvarner@bloomberg.net
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aASUvfcxM0fQ
Joe Biden update: Another closed day
February 19, 2010
work schedule from the White House:
In the morning, at 9:45 AM, the Vice President will receive the Presidential Daily Briefing in his office at the White House. This briefing is closed press.
At 11:00 AM, the Vice President will chair a regular meeting of senior officials to assess progress in Iraq. This meeting is closed press.
Later, the Vice President will meet with senior advisors. This is closed press.
http://latimesblogs.latimes.com/washington/2010/02/joe-biden-update-1.html
The only OFFICIAL source of the true historical rates for the Iraqi Dinar is the IMF.
.30 was the "black market rate" and not the official exchange rate as recorded by the IMF.
The only OFFICIAL source of the true historical rates for the Iraqi Dinar is the IMF.
Stay away from the black market value stories and stick with the facts from the IMF site.
IMF historical rate for the Iraqi Dinar:
Please not the values are listed in SDRs and 1 SDR = 1.53132
Link:
http://www.imf.org/external/np/fin/tad/exportal.aspx?memberKey1=460&date1key=2008-08-31&category=EXCHRT
Link to SDR Valuation:
http://www.imf.org/external/np/fin/data/rms_sdrv.aspx
Exchange Rates for Iraq IMF:
2010 stats
http://www.imf.org/external/np/fin/tad/exportal.aspx?memberKey1=460&date1key=2010-01-31&category=EXCHRT
History of Iraqi Dinar and Iraq Dinar Stock Exchange
1932
Currency unit consisting of 1,000 fils or 20 dirhams. When officially introduced at the end of the British mandate (1932), the Iraqi dinar was equal to, and was linked to, the British pound sterling, which at that time was equal to US$4.86.
http://www.edinarfinancial.net/history.php
IMF Executive Board Calendar
As part of the Fund's increased transparency, the tentative calendar of the formal meetings and seminars of the Executive Board for the next seven days is shown below.
Please note that the calendar is subject to change, and that the agenda for each meeting is typically finalized the day before the meeting. The calendar posted below contains the latest available information.
An IMF Executive Board Calendar Archive is also available.
Last Update: February 18, 2010 16:24:15 ET
Sort By: Date | Country
February 19, 2010
Country: Malawi
Title: 2009 Article IV Consultation and Request for a Three-Year Arrangement Under the Extended Credit Facility
Country: Romania
Title: Second and Third Reviews Under the Stand-By Arrangement, Request for Rephasing and Waiver of Nonobservance of Performance Criterion
Country: Zimbabwe
Title: Restoration of Voting and Related Rights and Termination of Ineligibility to Use the General Resources of the Fund
Country: Gambia, The
Title: Sixth Review Under the Arrangement Under the Extended Credit Facility and Request for Extension and Augmentation of the Arrangement, and Waiver of Nonobservance of Performance Criterion
February 22, 2010 Go to top of page
Title: The Fund's Mandate: An Overview; The Legal Framework
Country: Lesotho
Title: 2009 Article IV Consultation
Country: Swaziland, Kingdom of
Title: 2009 Article IV Consultation—Staff Assessment and Recommendations
Country: Czech Republic
Title: 2010 Article IV Consultation
February 24, 2010 Go to top of page
Country: Myanmar
Title: 2009 Article IV Consultation
Country: Iraq
Title: 2009 Article IV Consultation and Request for a Stand-By Arrangement
http://www.imf.org/external/np/sec/bc/eng/index.asp
I want good news! let's see want happen...
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That's the only info on that link...
Minister of Finance for the "Radio Tigris": remove three zeros from the Iraqi currency
Minister of Finance
2010/2/12 18:00 Mecca
The Central Bank took a decision to remove three zeroes from the Iraqi currency in order to be an easy comparison currency in U.S. dollars.
He said Finance Minister Baqir Jabr Al-Zubaidi, told Radio Tigris that the currency does not Change and remain the same.
"Now, saying:
http://translate.google.com/translate?hl=es&sl=ar&tl=en&u=http://news.maktoob.com/article/3314123/%25D9%2588%25D8%25B2%25D9%258A%25D8%25B1-%25D8%25A7%25D9%2584%25D9%2585%25D8%25A7%25D9%2584%25D9%258A%25D8%25A9-%25D9%2584%25D9%2580%2522%25D8%25B1%25D8%25A7%25D8%25AF%25D9%258A%25D9%2588&rurl=translate.google.com.pr&twu=1
From a friend
There have been a tremendous number of inquiries about the recent news that Iraq will be increasing the value of their currency and, at the same time, introduce new denominations into the Iraqi economy sometime in 2010 (currently planned). Specifically, it has been reported that the Iraq Finance Minister issued a statement saying they have prepared a plan to increase the value of the dinar against the dollar and will introduce 25, 10, 5, 1, 1/2, ¼, and smaller (possibly 1/10 or 1/20) dinar banknotes and/or coins. He said that successful fiscal policies pursued in Iraq have contributed to increasing the value of the Iraqidinar against the dollar, noting that the U.S. Dollar dropped significantly in value during the current year. Of note, he also said in a press statement that the bank has been following with great interest the phenomenon of low demand for the U.S. Dollar in the local Iraqi currency exchange markets.
Please click here to find out what the Iraqi Dinar Redenomination means for you.
Sincerely,
The Dinar Banker Team
Gambling on Iraq Currency
Grant Stinchfield, NBCDFW.com
Some North Texans are buying up Iraqi currency, the dinar, in hopes of striking it rich.
http://www.nbcdfw.com/station/as-seen-on/Gambling_on_Iraqi_Currency_Dallas-Fort_Worth.html
The Ministry of Finance announces the arrival of 1500 ATM for the distribution of sal
The Ministry of Finance announces the arrival of 1500 ATM for the distribution of salaries of employees and retirees in Iraq
Wednesday, 10 ???? 2010 16:55 GMT
Alsumaria News / Baghdad
The Ministry of Finance of Iraq, on Wednesday, the arrival of 1500 ATMs to a provision for the smart card will be distributed to private banks and banking offices to facilitate the receipt of retirees and staff salaries.
The Iraqi Finance Minister Baqir Jabr Al-Zubaidi on the sidelines of a meeting with managers of bank branches to discuss the problems the Iraqi government banks in Iraq in an interview with "Alsumaria News", that "the ministry received the1500 ATM is dedicated to smart card free of charge from the company's global smart card project implemented in Iraq. "
"Now that" these devices will be distributed to private banks, bureaux de change and some markets (supermarkets) in order to facilitate the receipt of pensions and state officials throughout Iraq. "
The Minister of Finance that "the number of beneficiaries of the smart card until the day arrived in Iraq to more than 600 thousand people, were first awarded for the retirees to be expanded on to include all state employees," noting that "the ministry had approached some of the Iraqi ministries on the extension staff card Smart. "
He pointed out that al-Zubaidi "smart card project is a qualitative leap in the work of Iraqi banks, with advanced technology introduced for the first time in Iraq for the work of banks, Iraqi government through the rapid disbursement of salaries of employees and retirees of any bank at any time," indicating that "it was disclosed recently a lot of fraud in the cards for older retirees, and they receive through their pensions. "
The government banks of the Rivers and sub-Rashid, began in February of the year the Past 2009 the distribution of pensions through thesmart card for more than 50 thousand retired and Iraq banks 50 A retired bank governance. "
It is supposed to provide about 250 smart card service to its subscribers, including recording the entry and exit for the government officials and the payment of water bills, electricity, telephone and the rest of the tax cuts, but he had not been used in Iraq until today only to receive pensions.
The Iraqi banks did not keep pace with developments in the work of international banks, continued to be linked through the use of telephones and fax machines, did not enter the Internet only after 2004, and seeks the Ministry of Finance to the development of banks associated with them, through the introduction of new technologies and linking banks world-wide automatic, to facilitate the transfer of funds to and from Iraq.
Link: http://www.alsumarianews.com/ar/3/29...%A7%D9%82.html
Iraq Hopes for U.N. Sanctions to Be Lifted as Maliki Arrives in U.S.
By Nina Donaghy
- FOXNews.com
Iraqi Prime Minister Nouri al Maliki is visiting the United Nations on Wednesday in hopes of getting assurances that sanctions against Iraq will be lifted.
Maliki is meeting with U.N. Secretary-General Ban Ki Moon one day ahead of his first meeting with President Obama since U.S. troops withdrew from Iraqi cities at the end of June.
While Iraq faces U.S. pressure to speed up efforts for national reconciliation and provide assurances that Iraq's security forces are capable of protecting their own urban populations, Iraqi Foreign Minister Hoshyar Zebari told FOX News on Monday that Iraq will soon be released from all 73 U.N. resolutions and "Chapter 7" sanctions.
Zebari said Ban would present his report to the Security Council next week and he was confident that Iraq would be released from its obligations "by this summer."
Remaining sanctions were impeding progress in certain government ministries such as health and education, preventing vital equipment from being imported, Zebari said.
The international body imposed sanctions on the country after its 1990 invasion of Kuwait. Among its requirements is restitution to Kuwait for the invasion.
The foreign minister suggested that releasing Iraqi from its commitment would not be a problem for its neighbor.
"Coming out of Chapter 7 will not disadvantage our Kuwaiti brothers," Zebari said.
In fact, Zebari, who was in Washington, D.C., ahead of Maliki's arrival, said diplomatic regional relations with Iraq's neighbors are "in a new phase," and noted that most Gulf Cooperation Council nations had re-appointed their ambassadors to Baghdad. The long-promised ambassador from Saudi Arabia has not yet arrived, but Zebari said Iraq's ambassador in the Saudi kingdom was very active.
As for Iran and Syria, which share lengthy borders with Iraq, Zebari said Iraq supports U.S. engagement efforts with both, adding that Iraq has a "role to play."
He said Iran has shown signs of greater transparency on the issue of cross-border arms smuggling.
"We have been very direct," Zebari said, noting the issue has been on the table in all discussions with his Iranian counterpart.
As for Syria, that country has made a start by stemming the flow of insurgents across its previously porous border.
"Syria has cooperated by controlling the numbers of foreign fighters by imposing certain restrictions on airports, checking IDs. The numbers of have gone down, but more needs to be done," he said.
Relations with the United States also require maintenance, he said, emphasizing the need for the Obama administration to help smooth some internal strife.
"There are problems in Iraq that could turn into crises. The administration needs to keep its focus," he said.
Zebari said while it welcomes U.S. involvement, Iraq wants to accelerate the Strategic Forces Agreement, the document that outlines the pullback of U.S. forces until its withdrawal by 2011. The Iraqi army and police had "matured and proved themselves," he said, though the possibility of a resurgence of the Sons of Iraq and other militias remains.
Zebari also called upon the United States to play an active role in resolving the country's stalled negotiations over oil profits. A version of the oil law had been approved by leaders of various political groups but leaders of Kurdistan, where 100,000 barrels of oil are produced each day, are reluctant to put their oil profits straight into the national budget.
"We need America and other bodies to mediate," he said, noting that the oil law is not the only source of tension between the Kurdish regional authority and Iraq's central government in Baghdad.
"There are political difficulties. There is definitely tension, there are delays, as people are selectively interpreting the constitution."
But the foreign minister downplayed the notion of intractable tensions saying that Baghdad hosted visits from Kurdish officials and that in his view the situation would improve after Kurdistan provincial elections, which he predicted would take place at the end of this year ahead of Iraq's own general elections in January 2010.
http://www.foxnews.com/politics/2009/07/21/iraq-hopes-sanctions-lifted-maliki-arrives/
Iraqi Dinar Redenomination and Exchangeability
There have been a tremendous number of inquiries about the recent news that Iraq will be increasing the value of their currency and, at the same time, introduce new denominations into the Iraqi economy sometime in 2010 (currently planned). Specifically, it has been reported that the Iraq Finance Minister issued a statement saying they have prepared a plan to increase the value of the dinar against the dollar and will introduce 25, 10, 5, 1, 1/2, ¼, and smaller (possibly 1/10 or 1/20) dinar banknotes and/or coins. He said that successful fiscal policies pursued in Iraq have contributed to increasing the value of theIraqi dinar against the dollar, noting that the U.S. Dollar dropped significantly in value during the current year. Of note, he also said in a press statement that the bank has been following with great interest the phenomenon of low demand for the U.S. Dollar in the local Iraqi currency exchange markets.
Mudhhir Muhammad Salih, a member of a Central Bank advisory panel, said by the end of 2010, new banknotes will be fully introduced while the current banknotes will be gradually removed from circulation. He did not specify when the new banknotes would be issued. Both (current and new) denominations will be legal tender in Iraq until the current banknotes are completely withdrawn over a period of time.
Economic analyst Hilal al-Tahhan was quoted as saying “the bank's move is overdue.” He said he expects the currency change to go smoothly because of the decision to allow both the current and new banknotes to coexist during an extended exchange period, leading to less turbulence in the economy.
What does all this mean? Overall, this news appears to be very positive and possibly points to some significant changes in the value of the Iraqi Dinar. It has long been the opinion of many Iraqi Dinar investors that the Iraqi Government must introduce new lower denominations into their economy before the value of their currency increases. If the value (buying power) of the dinar increases significantly or rapidly, the largerdenominations currently in circulation would be impractical for use during everyday transactions in the Iraqi economy. If the Iraqi Dinar increased in value to 10 cents (.1 USD), the smallest banknote in Iraqi would have a value of $5 USD. There would no practical way to purchase everyday items inthe economy and no way to make change---the currency would be impractical and unusable. If a soda in Iraq has a value of 50 cents now, it will still have a value of 50 cents if the value of the dinar increases---there has to be a denomination in the Iraq economy to pay for it. The current problem is that Iraq doesn’t have any currency in circulation to pay for normal day-to-day products if the dinar rises significantly in value---Iraq must have smallerdenominations moving forward.
Also from the recent news, it appears as though all denominations (current and soon to be issued) will be in circulation at the same time and no immediate exchange will be necessary. Hopefully, theIraqi Dinar will be on the world exchange market soon to allow for even easier exchange in the near future. Expectations are that Iraq is moving as fast as they can to rebuild their economy and wealth, and join the international economic community.
There have also been rumors about the future exchangeable value of some current Iraqi banknote denominations, and limited time periods for exchange of current Iraqi banknotes. It has been falsely rumored that perhaps the 25,000 dinar banknote will be exchanged at a different exchange rate than current smaller Iraqi banknotes. Another false rumor suggests there will be a very short period (days or weeks) of exchange for the current Iraqi banknotes after a significant change of value and introduction of lowerdenominations . Well, to address these rumors, let’s look at currency from a basic level: Countries issue their own currency. They issue their currency with a responsibility to honor it and redeem it. The currency must be accounted for. When a country issues currency (the US as an example), they borrow against the currency and issue debt to support it. The US recently printed a significant amount of currency in order to finance stimulus funding. In order to do this, the US government had to borrow the money with an obligation to pay it back.
One of the main functions of the US Treasury Department is to manage the U.S. national debt (the amount of money which the federal government owes to its creditors). China owns much of our debt as do US citizens and other countries---we must honor our issued currency and our debt. If a country doesn’t honor its debt, creditors (other countries and investors) lose faith in the defaulting country and a country will end up in financial ruins. Iraq, as a responsible member of the world economic community with a goal of getting their currency online with the rest of the world currencies, has issued currency with an obligation to honor it----all of it---not just certaindenominations. Throughout modern history, I can't think of one instance where a country honored some denominations , but not others---it doesn't make sense---people and other countries would lose faith in that country's responsibility to respect their debt and honor their issued currency---who would trade with them, exchange with them, or conduct business with them? To limit the time period for currency exchange in order to force the de-valuation of currency in circulation in order to reduce debt doesn't happen and wouldn't be tolerated by the world financial community. Countries have to be accountable for all of their currency and they can't play games with exchange timelines to try and prevent people for exchanging. Remember, in addition to individual investors, large governments and banks outside of Iraq hold Iraqi currency. Money from all over the world has flowed into Iraq through the purchase ofIraqi Dinar . The Iraqi Government will honor that investment in their economy, or there will never be faith in their economy and they will never be accepted by the world financial community.
DinarBanker.com owns a tremendous amount of Iraqi Dinar---we buy (any denominations) and sell our dinar. We see the introduction of the new lower denominations as a very positive sign. Furthermore, we expect to continue to trade the Iraqi Dinar no matter what happens to the value of it in the future. With our extremely large capitalization, we are prepared for any value changes in theIraqi Dinar and do not expect any exchange restrictions in the future or short time limits for exchange.
http://www.dinarbanker.com/informati...geability.html
Iraq
Table C. Data Integrity and Access by the Public
http://dsbb.imf.org/Applications/web/gdds/gddscountrycategorydiapreport/?strcode=IRQ&strcat=454
Iraq seeks strategic economic partnership with US
February 9, 2010 - 10:42:00
BAGHDAD / Aswat al-Iraq: Iraqi Trade Ministry said on Tuesday that Iraq needs the U.S. as an investor and strategic partner to form a developed economy.
“Iraq wants to expand its economic and trade relations with the U.S.,” the Ministry said in a release received by Aswat al-Iraq news agency.
It said that Iraq has the parameters to qualify as a strong and developed economy in the region.
MH (P) / SS
http://en.aswataliraq.info/?p=126700
Plan to increase the value of the dinar against the dollar and the deletion of three zeroes
Finance Ministry has prepared a plan to increase the value of the dinar against the dollar and then delete the three zeroes from the dinar's value to contribute to the advancement of the Iraqi economy during the coming period with the Iraqi central bank denied the rumors making the dollar worth 1000 dinars and said in a statement issued by the Ministry of Finance:, the Minister Baqir Jabr said During his recent visit to the Jordanian capital Amman, said the CBI chagrin financially estimated $ 22 billion and three tons of gold intended to support the Iraqi dinar. He said that successful fiscal policy pursued in Iraq have contributed to increasing the value of the Iraqi dinar against the dollar, noting that the dollar exchange rate dropped significantly during the current year, stressing that all efforts will be channeled to the deletion of three zeros from the value of the dinar.
On the other hand denied the authoritative source in the Iraqi Central Bank rumors making the dollar worth 1000 dinars, or a change denominations or raise zeros from the current currency.
He said in a press statement that the bank has been following with great interest the phenomenon of low demand for the dollar in the local exchange markets, stressing that such information or rumors surrounding the aim of achieving commercial gain emergency for some users at the expense of the public.
http://foratnews.com/paper.asp?id=8383
U.S. dollar in Iraq being reduced to stimulate local currency, economy
BASRA, Iraq — U.S. currency may soon become difficult to find in Iraq as part of an effort to protect Soldiers and increase the value of the Iraqi dinar. SGT Brittany A. Raimer, a dispersing manager with the 368th Finance Management Company, 36th Sustainment Brigade, 13th Sustainment Command (Expeditionary), said eliminating the use of U.S. currency on the battlefield will help to stimulate the economy of Iraq. The use of electronic fund transfers to pay vendors and contractors, and urging service members to rely on the Eagle Cash Card, rather than cash, are two major changes that have been implemented in Iraq to eliminate the use of cash, Raimer said.
http://www.ledger-enquirer.com/588/story/1002450.html
Reports
Monetary policy to delete the zeros of the Iraqi currency
02/02/2010
Mohammad Karim
Iraqi Central Bank is working on a strategy to delete the zeroes of the Iraqi currency in and out of their face value while maintaining the values of cash and purchasing power.
Central Bank of Iraq adviser to the appearance of Mohammed Salih said that this year will witness the launch of this strategy, stressing that the bank has completed 50% of the preparations that are working on since 2005.
Salih said the strategy was based on the principle of gradual substitution of the Iraqi currency with another is lower than in the nominal value, and pointed out that the positives of this strategy is that it will be less expensive and easier to trade.
For his part, sees Dr. Hilal Al-Tahan, that the application of such a strategy will not cause economic turmoil, or damage to the local market at the present time, while the economic analyst is willing to find satisfaction ????? that the timing of the launch of this strategy is not appropriate, noting that the country's economy must be in a position of strength before the application of such changes.
http://translate.google.com/translate?hl=en&sl=ar&tl=en&u=http%3A%2F%2Fwww.iraqhurr.org%2Fauthor%2F20785.html
Co-op playing key role as Iraq rebuilds farm sector
http://www.rurdev.usda.gov/rbs/pub/jan10/jan10.pdf
Fed’s Currency Swap Lines: A BIG deal for the Dollar
by Bryan Rich 01-30-10
The Fed met this week on monetary policy. It was a bit of a snoozer. What wasn’t a snoozer, however, was what they’ve included in their recent monetary policy statements regarding currencies.
Most market participants have been entranced by the Fed’s language about their target interest rates …
Will they say they’ll keep rates low for an “extended period” or not?
But the real story was buried in the last paragraph of the December Fed statement and reiterated in their latest statement.
Here’s what it said …
“The Federal Reserve will also be working with its central bank counterparties to close its temporary liquidity swap arrangements by February 1.”
Following the Fed’s statement this week, there was a coordinated release of comments from the European Central Bank, the Bank of England and the Swiss National Bank confirming that the swap lines were no longer needed.
For the currency markets, this is a big deal. Yet, few have thought the juicy details of the Fed’s plans on currency swaps are of interest.
But I do. I suspected it was a game changer for the dollar when I was studying the statement last December. And so far, the price action in the currency markets is confirming that.
Here’s a bit of background …
In September and October of 2008, the Fed announced that it would be opening temporary currency swap lines with central banks around the world in fixed amounts through April of 2009. As that expiry date neared, the Fed extended the period to October, and then extended it again until February of this year.
Here’s what that means: The Fed agreed to give foreign central banks U.S. dollars at a determined exchange rate for the currency of the respective foreign counterpart. And when the swap ends, the two central banks simply repay the same quantity of currency back. There’s no exchange rate risk and no impact on the demand for currency in the open market.
Why Did the Fed Offer Dollars to the Rest of the World?
When the credit crisis was at its peak, banks around the world were hesitant to do any short-term lending with other banks. As a result foreign bank-to-bank lending rates for dollars, the world’s primary business currency, shot up. That restricted access to dollar borrowing and pushed a lot of consumer interest rates higher in the U.S. and abroad.
By providing these currency swaps with other central banks, the Fed helped to inject dollar liquidity into banks around the world. And it was well needed.
In short, it was good for the global financial system because it helped reduce the fear premium that was causing market interest rates to soar.
You can see this clearly in the chart below. In panel A, while the Fed and other central banks were cutting benchmark interest rates to the bone (the white line), the Libor rate (the orange line), or the rates at which banks make short term loans between themselves, was going in the opposite direction.
Subsequently, when the dollar swap lines were rolled out, you can see in panel B how this divergence was reversed.
The Implication for Currencies
Most importantly for currencies, what these currency swaps did was increase the supply of U.S. dollars in the global markets — a negative drag on the value of the dollar.
So with the Fed announcing that it will close its currency swap lines with foreign central banks by February 1, the unlimited access to dollars by foreign central banks has come to an end.
This development is easily a positive for the dollar.
Let’s take a look at the timeline of these developments and the respective performance of the dollar …
As you can see from the chart, following the Fed announcement that the swap lines would be extended through October, the dollar has gone through a period of decline. Since December, when the Fed announced these facilities would be ending in a little more than a month’s time, the dollar has been on the rise.
When they opened these massive swap lines in late 2008, the goal was to alleviate the dollar liquidity crunch at banks around the world. However, in the process they increased the supply of dollars around the globe — a negative consequence for the value of the dollar. But now that these lines will be closed, it’s clearly a dollar-positive development.
And with the weight of evidence leaning in favor of the dollar at this stage, as I laid out here in my article last week, this latest announcement by the Fed provides more reason to believe in this dollar rally.
Regards,
Bryan
http://www.moneyandmarkets.com/feds-currency-swap-lines-a-big-deal-for-the-dollar-2-37557
China to develop Iraq's Halfaya oil field