* Enorrste’s latest and greatest: Stardogger 3/2/10
March 2, 2010 · Posted in CHATS / POSTS · 11 Comments
You are not going to believe this!
I must apologize to all for not having posted this yesterday afternoon. As it turns out I had made a commitment to drive 75 miles one way for dinner. Of course the dinner led to “after dinner drinks” and before you know it, I spent the night. Then today I was on the road all day until just now.
However, I am back and have a wonderful surprise for you all.
Let’s start with Maliki’s statement from 3 days ago:
28 February 2010
“Iraqi Prime Minister Nouri al-Maliki said on Sunday that the process to re-evaluate the Iraqi dinar has to do with economic conditions that have to be strengthened.
“’The Iraqi dinar has all the reasons to grow stronger thanks to an increase in revenues and development of the economy,’ Maliki said in response to some questions through the National Information Center.
“’The government would not rush matters but would rather work on finding all the guarantees to render this measure a success. The Central Bank of Iraq (CBI)Central Bank of Iraq (CBI) is currently entrusted with drawing up a study on the whole issue and would give its decision soon,’ said the Iraqi premier.
“The Iraqi dinar’s exchange rate is suffering from low value against foreign currencies as a result of decades of wars and economic embargo that brought the local currency’s exchange rate to the rock bottom from three dinars per dollar in the late 1970s and 1980s to 3,000 dinars per dollar after the 1990 invasion of Kuwait, followed by a 13-year crippling sanctions regime.
“The exchange rate fell even more after 2003 to reach 1170 dinars per dollar due to the CBI’s policy of daily auction, in effect for more than five years now.
“The policy was lambasted by several economists on the grounds that these auctions do not give the real value of the country’s local currency.
© Aswat Aliraq 2010
Now allow me to summarize this statement and set it up for Shabibi’s statement made yesterday morning.
Before I begin I want to commend gankans for his wonderful analysis of these statements and for correctly recognizing that they are positive indeed. I am going to tag along with his analysis but the ending I give you will knock your socks off!
First we need to understand that these two statements are being made by the two most important people in Iraq with respect to the dinar and its coming revaluation.
We start with Maliki’s statement that this is “the process to re-evaluate the Iraqi dinar”. As far as I know this is the first time that Maliki has made a direct statement on the possible revaluation of the dinar. We see that he is not only confirming that it will happen, a first, but also stating that this is a “process” that has been going on for some time. We know from my “Chronology” thread that this process began in 2005.
Next we see that Maliki is confirming something that has ALREADY OCCURRED: “The Iraqi dinar has all the reasons to grow stronger thanks to an increase in revenues and development of the economy.” We see two important points here; first, that he believes that the dinar needs to be revalued in order to make it “stronger”; and second, that the “revenues and development of the economy” are justification for this revaluation.
In the next quote we see that this GOI is in concert with the CBI and that they have put into place “guarantees to render this measure a success”. What this means is that Maliki is confirming that this process, as he calls it, is nearly completed.
Next, Maliki announces that he has instructed Shabibi to perform a study on this matter (the RV) and that Shabibi “would give its decision soon.”
Finally, we see that Maliki is definitely a supporter of the RV with his statement that, “The Iraqi dinar’s exchange rate is suffering from low value against foreign currencies.”
We now have the Prime Minister on record indicating that plans for a revaluation of the dinar have been worked on since 2005, that the dinar is in need of revaluation, that the CBI is entrusted with seeing that it takes place, and that the dinar needs to be increased in value substantially for it to compete with foreign currencies.
Let’s now look at the interest and yet short response made the very next day by Shabibi, the head of the CBI.
Sinan Al-Shabibi – CBI Governor says current exchange rate reasonable
“The governor of the Central Bank of Iraq (CBI) on Monday said that the current exchange rate is reasonable, adding that the bank has enough foreign reserves to defend the exchange rate.
“‘The CBI is adopting a managed floating policy of exchange rate, through which a reasonable exchange rate is fixed,’ Sinan Al-Shabibi told Aswat al-Iraq news agency.
“’The current exchange rate is reasonable and stable and can be defended by our vast foreign reserves, totaling $43 billion U.S. dollars at the moment,’ Shabibi explained.”
Now I promised you that you would all be surprised and I am going to deliver on that promise.
Here is the first quote from Shabibi. It needs to be seen as a “response” to Maliki’s statement from the day before.
“The CBI is adopting a managed floating policy of exchange rate, through which a reasonable exchange rate is fixed.”
In an effort to make this statement perfectly clear to you all I will add just one word to the statement that will make evident the intent of the statement. That word is “now”. Here is the revised statement:
“The CBI is now adopting a managed floating policy of exchange rate, through which a reasonable exchange rate is fixed.”
Before you all get in a huff because of my addition of this small word, let me just say that you will not be disappointed in a few minutes. I am proposing that Shabibi is referring to the NEW rate here, and not the OLD rate. He is stating that the CBI is NOW adopting a NEW exchange rate, that is will be on a “managed float” basis, and that it is “reasonable” and “fixed”. This is consistent with the actions of the CBI during the last few years in which the OLD rate was on a “managed float” and essentially “fixed”.
Here is the point: the OLD rate is not “reasonable”! We know this to be the case because Maliki himself said so the day before, and had instructed Shabibi to do a study to determine a rate that was “reasonable” and “sustainable”. Therefore we may confidently conclude that Shabibi is ANNOUNCING THE RV in this statement, and that he is referring to the NEW rate. I will now show with the next quote that this is the correct understanding of his statement.
[COLOR=”red”]“The current exchange rate is reasonable and stable and can be defended by our vast foreign reserves, totaling $43 billion U.S. dollars at the moment,’ Shabibi explained.”[/COLOR
Here I would also like to change just one word in this translation from the Arabic. In doing so you will see that the meaning of Shabibi’s statement is not only clear, as well as a response to Maliki from the day before, AND is consistent with prior statements from the CBI regarding the coming RV.
“’The new exchange rate is reasonable and stable and can be defended by our vast foreign reserves, totaling $43 billion U.S. dollars at the moment,’ Shabibi explained.”
The word changed is from “current” to “new”. Is this reasonable? Yes, it is. The “current” rate is placed in juxtaposition to the OLD rate in this statement. How do I know? Because, if the word “current” actually referred to the OLD rate, the remainder of the sentence wouldn’t make sense. The IQD has been defended quite adequately for the last few years; but it is not “reasonable”, as Maliki AND Saleh of the CBI AND Zubaidi of the Ministry of Finance have stated since 2005.
Therefore we now see that Shabibi is not only echoing the Prime Minister’s statement from the day before; he is also ANNOUNCING THAT THE RV IS DONE! And furthermore, against his critics, he states unequivocally that the country has adequate reserves to support the new rate.
I believe that the rate will be announced within either the next 24 hours, prior to the election, or immediately after the election.
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