CHAT WITH HARLEQUIN3: " The cbi auctions stopped?", 7 JAN

 KTFA:

Kimberly:  Imo question so confused have the cbi auctions stopped? Or is the cbi running on a different system? Not understanding what is going on

Harlequin3:  IMO- Yes, the auctions have stopped. There is a currency window (the auctions) that was started in 2003. That window is closed. In those auctions the CBI directly sold dollars for dinars to the local banks INSIDE Iraq only -- basically, they traded money back and forth to each other, and that is how the CBI controlled the rate (what is called a programmed rate.)

The ForEx we watch only reflects those internal auctions because the dinar is not internationally tradable. This is what makes the ForEx curve look like castle walls, up, sideways, down, up, sideways, down, instead of a floating line like a heartbeat. The problem is, this is how the Iranian-backed banks would get USD and launder it through their fronts (money exchangers on the street) and it would get funneled into Iran. These auctions were supposed to only be a temporary thing for a couple years, but the crooks enjoyed skimming and laundering the dollars.

 In 2023, America said enough's enough. On Dec 30 the official announcement came to stop these currency auctions, on Dec 31 the final auction stopped. Now in Jan 2024, these metamorphosized (Frank's term) from out and out cash sales -- here's a dollar on the table for sale for real IQD on the table -- and switched to mostly an electronic platform (that's Saleh's 95% thing)

On Jan 1, the auctions stopped and became foreign reinforcements -- the CBI has nothing to do with this other than monitor and approve the transactions (with the UST, Ernst & Young, and K2 auditing the transaction BEFORE it happens, and ensures it goes where it's supposed to go -- not Iran -- and when it arrives.)

The CBI is NOT selling money to the banks anymore -- the banks MUST go get their money from OTHER banks outside the country (currency swaps, which is the essence of ForEx.)

So Bank A in Iraq is connected to Bank B in England, let's say, and they need foreign currency to cover their deposits, they request XYZ euros from Bank B -- for XYZ dinar at 1310 -- the money is ELECTRONICALLY wired back and forth.

There is a basket of currencies the banks can choose from: Euros, Yuan, Dirhams, Rubles, Jordanian Dinar, etc., etc. All the CBI is doing is watching this now, making sure it's legit.

On Jan 2, notice 7 banks in Iraq said, hey we need foreign currency! And 283m dinars' worth of that foreign currency electronically changed hands. No auction. This is how all banks all over the world operate. International standards.

It's audited on both ends, the request, and the completion. Today's exchange, had 279m dinar in the exact same fashion -- EXCEPT USD ARE allowed to be purchased (not in auction from CBI but from their international counterparts) from 5 (I think it's upped to 7 now) banks currently -- this dollar cash is permitted in Iraq for 3 purposes only: travelers request USD because they are traveling to the USA. They can't physically have the dollars until they've gone through airport security with their ticket, and they pick it up as they board the plane.

Second, the GOI IS allowed to use dollars for financing government approved projects -- audited by E&Y. (Building a bridge with an American company that requires American dollars, something like that.)

Or third, major medical procedures for citizens that require dollars -- that money is audited as it goes to the hospital for the procedure only.

Those are the only three legal uses for the dollar in Iraq. (Parliament wants a fourth for buying cars, so far Sudani says no, because that would be easy to launder.)

 This is effectively drying up dollars on the streets -- Parliament (who skims it) says, whoa, that will raise the demand for the dollar in the black market and the exchange rate will skyrocket -- Saleh/Alaq say no, this is a temporary inflationary bubble that is NOT real -- there IS no black market, you are pirates operating illegally with illegal currency -- there is only ONE currency in Iraq, the dinar, and it has an official rate of 1320 -- anything other than this is against the law.

Saleh says "this bubble" will burst -- which is why we're hoping to see a new rate by then, one higher than the dollar -- because then the citizens won't be looking for dollars illegally -- they'll have strong local national currency.

Without the auctions -- there is NOTHING manipulating and propping up the 1320 rate -- so.... what are they going to do? Raise the value.

 Eventually, the dinar will float in this basket, and ForEx will look like a heartbeat. But all that goes to say the auctions HAVE stopped. What you are seeing is "foreign currency reinforcements" not an auction -- the CBI has NOTHING to do with this money, it's between the two correspondent banks, and CBI is only auditing the transaction.