A Movement To List Government Bonds In The Markets, 29 FEB
Market Economy News – Baghdad On Monday, the Iraqi Securities Commission explained the importance of government bonds, stressing that they provide financial liquidity for investment projects, while indicating that there is a movement from the Central Bank to list government bonds in the markets.
The Chairman of the Authority, Faisal Al-Haims, said in a statement reported by the official news agency and seen by Al-Iqtisad News, that “three issues of government bonds were issued, as the first and second issues were launched, and now there is the third issue.” He pointed out,
"There are requests from the Central Bank of Iraq to list these bonds on the market," indicating that
"those bonds are debt securities owed by the Iraqi government, in exchange for interest given to the owner of this bond."
He stressed, "This measure will provide financial liquidity for the investment projects launched by the Prime Minister and his government," suggesting that they "will be crowned with goodness and success for the Iraqis."
Government bonds are a type of debt-based investment, where you lend money to the government in exchange for an agreed interest rate.
Governments use them to raise money that can be spent on infrastructure or new projects, and
investors can use them to obtain set returns that are paid at regular intervals.
How Countries Can Successfully Reinstate a Gold Standard
On February 27, 2024 By Awake-In-3D
In recent discussions around monetary policy and financial stability, the idea of returning to a Gold Standard has resurfaced as a topic of considerable interest.
Historically, various nations, including the United States, Britain, and Japan, have adopted and then moved away from the Gold Standard at different points in their economic histories.
The process, while not new, presents a range of methods and implications worth exploring in today’s economic context.
Here I would like to demystify the process and implications of reinstating a Gold Standard, breaking down the complex subject matter into understandable terms.
Discussing the deeper GCR mechanisms, such as global gold unit of value and purchasing power parity between currencies, is beyond the scope of this article.
Understanding the Gold Standard
Simply put, a Gold Standard is a monetary system where a country’s currency has a value directly linked to gold. Countries that adopt the Gold Standard agree to convert paper money into a fixed amount of gold upon request.
The benefit of such a system lies in its ability to provide a stable and reliable currency value, contrasting sharply with the fiat currencies most countries use today, which are not backed by physical commodities.
The Three Roads to a Gold Standard
Historically, there have been three primary methods to transition back to a Gold Standard, each with its own set of considerations.
Returning to a Prior Parity: This method involves reinstating a gold value that was used in the past. It’s feasible only when the currency hasn’t strayed too far from this historical value. A prime example is the United States in 1879, which reverted to its pre-Civil War gold parity after a period of devaluation. This approach offers a straightforward transition under specific conditions but is limited by the extent of currency devaluation that has occurred since the last parity was used.
Adopting a Figure Close to the Current Trading Value: When returning to a historical parity isn’t viable due to significant currency devaluation, a country might set a new gold value close to the market’s current trading rate. This approach was taken by France after World War I. It allows for a more practical transition but requires careful consideration of economic impacts, including potential inflation or deflation as the market adjusts to the new standard.
Introducing a New Currency: In cases where the existing currency is severely devalued or destabilized, a country might opt to introduce a completely new currency with a gold value chosen at will. This method effectively starts the monetary system from scratch, offering a clean slate after economic crises such as hyperinflation. While it signals a fresh beginning, it’s typically a measure of last resort, reflecting profound economic disruptions.
Economic Implications for Returning to a Gold Standard
The transition to a Gold Standard, regardless of the method chosen, is not without its economic challenges.
For instance, setting a gold value significantly higher than the current currency value could lead to prolonged periods of price adjustment and potential recession, as seen historically.
However, examples from France in 1926 and Russia in the early 2000s demonstrate that with strategic tax reforms, countries can mitigate recessionary impacts and even achieve economic booms.
Ultimately, the decision to return to a Gold Standard involves balancing historical precedents with current economic realities.
The principle of stable money and low taxes emerges as a guiding formula for success, suggesting that a strategically planned approach to reinstating a Gold Standard would lead to substantial economic benefits for all nations.
The major consideration today, given how global trade and financial networks are all interconnected, is how each country’s gold-backed currency would be relative to each other in the context of currency exchange rates.
This is important, because never in the history of world has the entire planet orchestrated an interconnected system of different gold-backed currencies.
It’s also why the GCR is very complex and requires a highly sophisticated system of processes and management.
Historical Examples of Nations Reinstating Gold Standards
United States (1879): Returned to pre-civil war parity at $20.67/oz after the Civil War devaluation, where the dollar’s value had dropped but was still relatively close to its original value.
France (1926): Adjusted to a new parity after the franc’s value decreased significantly, reflecting a pragmatic approach to severe currency devaluation. The franc was successfully repegged to gold at a rate that reflected a 5:1 devaluation but combined this with tax rate reductions and infrastructure development, leading to economic growth.
Russia (post-1998 devaluation): Stabilized the ruble against the dollar at the prevailing rate after introducing a flat tax in 2001, which led to a period of economic improvement.
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THE Reserve Bank of Zimbabwe’s (RBZ) latest tokenized gold sales have mopped up a whooping ZW$ 5, 24 billion.
Synonymously known as Zimbabwe Gold (ZiG) was launched in October 2023 following the successful issuance of physical gold-backed tokens in 2022. The digital tokens can be stored in either e-gold wallets or e-gold cards and are tradable for peer-to-peer and business transactions.
ZiG value is at par with the value of the physical Mosi-oa-Tunya gold coin and remains informed by the international gold price.
In a statement Tuesday, the RBZ revealed that a significant chunk of ZW$ was mopped up after the latest sales.
“The RBZ would like to notify the public of the results of the RBZ Gold Backed Digital tokens Issue No 22 /20/2024 held on Tuesday 27 February 2024. The bank received 12 applications valued at ZW$5,24 billion to purchase GBDT and the full amount was allotted,” the bank said.
Total Milligrams of gold purchased during the sales amounted to 4,86 kgs of gold and cumulatively a total of 736,5 kgs of equivalent gold has been purchased to date.
The southern African country now joins other African states like Nigeria, Ghana and South Africa that have introduced digital currencies, even as several others have plans in the works.
The ZiG introduction is part of a wider plan by the central bank to stabilise the country’s local unit, which has been faltering against the US dollar, by mopping up excess liquidity in the market.
🇺🇸💥❤️🇺🇸. Iraq has a rate! Great news! 💥💥💥. $3.22-3.55 and will float upwards! 💥💥💥. Our Event should occur when the rate stabilizes on the Forex! 🇺🇸💥🇺🇸👇👇👇
Ex. The key equation governing this is: Value = Exchange Rate x Face Value
Where:
Exchange Rate: The value of one currency unit against another (e.g. Dinar vs Dollar) Face Value: The number printed on the banknote (e.g. 10,000 IQD printed on a 10,000 dinar bill) When 3 zeros are removed from the Face Value via redenomination, the New Face Value becomes 10 IQD. Remember all of this is happening internally in Iraq. For their domestic market.
So if you already have the IQD this has nothing to do with anyone outside the country. The central bank will adjust the Exchange Rate proportionally at the same time. For example: Old Face Value: 10,000 IQD Old Exchange Rate: 0.00085 dollars per 1 IQD New Face Value: 10 IQD New Exchange Rate: 0.85 dollars per 1 IQD So in both cases: Value = (Exchange Rate) x (Face Value) = 0.00085 x 10,000 = 0.85 x 10 = 8.5 dollars Thus the Value in dollars is conserved, keeping real purchasing power constant in the economy. Only the numeric aesthetics change essentially.
Banks will implement this across deposits, loans, bills, salaries, prices etc simultaneously via the issuance of new banknotes/coins. Timing and Logistics: A key challenge is smoothly swapping old dinars for new dinars without economic disruption. So the Central Bank of Iraq will set a specific exchange period – let’s say 1 month. During that time, citizens can bring old cash and account balances to banks/financial institutions to exchange directly for newly issued bills/coins based on the adjusted exchange rate and face values. Old 10,000 dinar note x 0.00085 exchange rate –> New 10 dinar note x 0.85 exchange rate Banks do this incrementally to scale. They will likely bring in newly printed money (with 3 less zeros) in stages to swap for old money until the full money supply is transitioned. The central bank monitors and manages money supply inflation indicators throughout.
Additional new bills can be printed if needed to meet transactional demand during the swap. But care is taken not to devalue by overprinting recklessly. Accounting Impacts: All reporting like financial statements and accounts must reflect the changes as well during this time. It means scaling accounting balances like: Prices of goods and services Salaries Market capitalizations House values Bank balances With three less zeros appropriately. Proper protocols will govern this for auditability and truthfulness.
After the Transition: After the exchange period closes, the old dinars would likely no longer hold legal tender status as a vintage collectors item. The new dinar serves all money functionality at appropriately denominated scales for ease of use. So if you bought your Iraqi Dinar before this redenomination you will not be effected. Your currency will be honored.
Only people who purchase the Dinar after it goes international on the Forex will not see any significant returns no matter how much IQD they have purchased. Which is why you those who already have IQD are now top priority for Tier-2 exchanges. But hey’ do not take my word for it. Here is an economists from Iraq confirming everything I just told you officially.
Once again you all need to stop listening to people who get their info from Western media outlets.
Please share this with people who may be confused.
Now do you see why I told you all how important it us to have your receipt? The banks will need to know if you bought the currency before the “Deletion Of The Zeros Project”. This is not to say they may not do your exchange. But this will make the process more difficult for you. Because you will have to go through additional steps to prove you got the currency through legitimate means. But when you read the article that explains thar your currency will not lose any value you are hearing it directly from an Iraqi official who made it clear that whoever may hold IQD at this particular moment do not have to worry about your holdings not being honored as the value they will be worth once the currency is on the Forex. Because everything about the “Deletion Of The 3 Zeros Project” is for the Iraqi economy. This has nothing to do with what you hold outside the country. So everyone that has Iraqi Dinars now are is great shape.
1. It’s a currency conversion or scale change more than anything else. Simply changing numerical representations rather than economic fundamentals.
2. The redenomination aims to keep the dinar at the same real foreign exchange conversion rate with US dollars and other global currencies. For example:
Pre-Redenomination: 1,300 IQD could buy $1 USD when exchanged Post-Redenomination: 1.3 New IQD would exchange for that same $1 USD Still the same real purchasing ability.
3. Domestically within Iraq, all prices, wages, savings etc would be scaled down proportionally when denominated in new dinars. Preserving individual real buying capacity.
Do you all understand now? The value of the currency will not change. Overall it’s mostly an ease of use change in numeric scale. The currency itself does not lose economic value or power intrinsically through this conversion process if executed properly by Iraq’s central bank. It would still buy the same amount of goods or other currencies.