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Government Advisor Explains The Possibility Of Using The Dinar Instead Of The Dollar In Oil Sales, 19 AUGUST

 Government Advisor Explains The Possibility Of Using The Dinar Instead Of The Dollar In Oil Sales

Money and business  Economy News – Baghdad  The Prime Minister's Advisor for Financial Affairs, Mazhar Mohammed Salih, clarified today, Sunday, what is being circulated in some media outlets regarding the possibility of using the dinar instead of the dollar in oil sales.

Saleh said in an interview with the Iraqi News Agency, followed by "Al-Eqtisad News", that "the adoption of the dinar in the pricing of oil, or what is called (petro dinar), especially when the national currency is not one of the international reserve currencies, requires the availability of foreign reserve currencies or gold, as Russia did when it bought Russian oil with gold-backed rubles, which caused problems that we will come to later."

He added that "these foreign reserves must be available (as a necessary condition) and operate according to a high standard of efficiency that guarantees the stability of the exchange rate linked to oil (the petro dinar) in order to hedge against oil price fluctuations to ensure the stability of the exchange rate (the petro dinar) itself from the beginning."

He added that “linking oil sales to the dinar on a fixed basis with oil prices instead of the foreign reserves base means linking the dinar to the oil asset cycle first, and that oil is sold according to global oil prices. If the exchange rate of the dinar (petrodinar) against the (petrodollar) is fixed, for example, and oil prices fall, then the demand for the dinar for accounting purposes will certainly fall, and the dinar will be exchanged for oil in larger quantities and the demand for the (petrodinar) will be lower, and vice versa.”

He pointed out that "any deviation between oil prices (petrodollar) and the exchange rate (petrodinar) according to international market data will be considered a cost that requires compensation by paying fewer dinars or collecting a higher dinar in the opposite case," indicating that "international reserve currencies are foreign currencies held by central banks and global financial institutions as part of their cash reserves.

 These currencies are used in international transactions and settling debts between countries, and are a standard for international payments and facilitating global trade."

He explained that "Russia suffered a lot when it priced its exported oil in rubles (petrorubles) and the ruble is a non-reserve currency and committed to a value for the ruble that was initially denominated in gold to ensure the stability of oil revenues. Here (petrorubles) were subject to two asset cycles at the same time (which complicated the scene of selling oil in local currency and stabilizing the value of the petrorubles)."

He pointed out that "the first cycle: is the result of the impact of what is called the gold assets cycle and its impact on the value of the (petroruble) or the local currency denominated in exported oil, while the second: is the oil assets cycle, and its impact on the value of a barrel of oil outside the global price and the reflection of that on oil revenues priced in that currency."

He stressed that "the two cycles are asset cycles that are linked and contradictory at the same time on the value of (the currency priced in the exported oil, such as the petroruble), which made pricing Russian oil in rubles as a local currency and according to the data of the global oil market a very complex issue."

He added that "the principle of using the dinar as a local currency in international oil exchanges (petrodinar) is not without many challenges, which is why those potential challenges must be carefully considered, especially the issue of the flexibility or stability of the value of the (petrodinar) itself to change and fluctuation, especially since we in the oil market are not price makers in it, but rather price takers."

He noted that "the global oil market will control the fluctuation of the local currency (petrodinar), in addition to the importance of international recognition of it, and the financial infrastructure necessary to support such operations of (petrodinar), in other words, the strategy of relying the value of the currency directly on oil exports may make the value of the local currency vulnerable to fluctuations in the global market."

Saleh added that “the proposal to sell oil in dinars as a local currency must take into account an important theory in global trade called the Law of One Price, which is an economic concept that assumes that the same commodity must be sold at the same prices in all markets when the price is expressed in the same currency, provided that there are no transportation costs or trade barriers such as customs tariffs and others.

The Law of One Price is the basis for many economic and trade models, and the theory is based on the assumption that markets operate efficiently.”

He added: “The single price theory is the basic path to understanding the pricing mechanism in foreign exchange markets, as the theory seeks to explain that currency exchange rates always reflect the difference in prices between two countries, and when oil is priced in dollars (petrodollars), the exchange rate of the dinar (petrodinar) should be consistent with oil prices without fluctuation and at the same time consistent with the (petrodollars) and also steadily,

and these are two issues that are difficult to control because they are external international factors that determine the value of the local currency so that it operates regularly and in a stable price compatibility with the oil market and international foreign currencies at the same time.”

“For example, if a barrel of oil is sold in the United States at $76 and in Europe at 72 euros, the single price theory predicts that, taking into account the exchange rate between the dollar and the euro, the price of a barrel of oil should be equal after adjusting the currency, provided that there are no transportation costs or trade barriers.

 This requires that the value of oil sold to Europe and America be consistent with the fluctuations in currency prices in order to ensure that the single price theory is in place.

Thus, adopting the local currency in global trade is a very complex issue to ensure the stability of oil prices consistent with the value of the Iraqi dinar (petrodinar), especially in a fixed exchange rate system (exchange rate), unless discounts are granted or differences are charged in oil marketing operations or floating (petrodinar).

Then, for example, the Oil Marketing Company (SOMO) will play a dual role in oil and monetary policies, whether in the field of oil pricing or pricing the oil dinar exchange rate (petrodinar),” he continued.

He added: "The strength and stability of the Iraqi dinar will remain linked to the factors of real growth and diversity in the national economy, in addition to achieving an appropriate surplus in the current account of the balance of payments, and linking the national currency to a basket of foreign currencies that provides stability in the value of the dinar itself.

In light of the above, introducing mechanisms for stabilizing the dinar exchange rate into a single rentier economy exclusively based on the oil dinar is an economic trend with ambiguous results and is very vague, in addition to entering the (petrodinar) system, which requires risks (the aforementioned single price theory) to ensure its stability in light of the fluctuations in the oil assets cycle and a single rentier economy, not to mention not knowing the adopted exchange system (petrodinar).

Will it be a fixed exchange system supported by foreign reserves or will it be a flexible exchange system in which the (petrodinar) changes with the change in oil prices? These are paths that have no answers on the ground and are really very ambiguous." Views 56 2024/08/18 - https://economy-news.net/content.php?id=46433

GINGER NOTE ABOUT 2024 FARM CLAIMS LIQUIDITY, 19 AUGUST

 GINGER NOTE ABOUT 2024 FARM CLAIMS LIQUIDITY

Thurs. 15 Aug. 2024 Farm Claims liquidity, Ginger’s Liberty Lounge

Reports regarding Farm Claims settlements being paid are accurate; and this is a very nice item which we can happily check off our “non negotiable list”. I was unable to share the exact details from my own confirmed contact, so I am sharing this other news passed along from someone else. 8.14.24. 

Lamb: “I just got off the phone with a friend of mine, she told me that her friend that had registered with the farm claim packages … He woke up to $500,000 in their bank account with no explanation, no nothing, he showed her the bank statement and knows this other person had “no pot to piss in” before (per se). So the statement about farm claims being paid is 100%.”

DINAR REVALUATION : Iraqi Dinar Should We Remove Zeros?

THE DISCUSSION ABOUT REMOVE THE ZEROS OF THE IQD: " IT MAY BE PRUDENT TO WAIT UNTIL THESE CONDITIONS ARE MORE FAVORABLE" BY DINAR REVALUATION, 19 AUGUST

The discussion on removing zeros from the Iraqi dinar (a process known as "redenomination") involves balancing the immediate economic benefits against the potential social and logistical challenges. Here’s a summary of the key points from the analysis:

Advantages of Removing Zeros

1. Reduction in Monetary Mass: By removing zeros, the currency’s face value is simplified, reducing the total volume of banknotes in circulation. This can make transactions more manageable and less prone to physical issues like theft or damage.
2. Ease of Handling: It simplifies accounting and cash handling by making amounts easier to work with, which can be beneficial in daily transactions and financial record-keeping.

Disadvantages of Removing Zeros

1. Public Confusion and Resistance: The process could lead to widespread confusion among the public, particularly if there is a lack of understanding about the true value of money post-redenomination. People are often accustomed to seeing and dealing with large numbers, and sudden changes can be disorienting.
2. Social and Economic Disruption : The transition may lead to disagreements in commercial and personal agreements as people adjust to the new currency format. This could impact contracts, pricing, and economic stability during the adjustment period.

Conditions for Successful Implementation

1. Electronic Payment Infrastructure: The analysis suggests that implementing redenomination would be smoother once electronic payment systems are widely adopted. The higher the percentage of electronic transactions, the easier it will be for the public to adapt to the new currency format without significant disruptions.
2. Public Awareness and Education: A successful transition requires comprehensive media and advertising campaigns to educate the public about the redenomination process and its benefits.
3. Control and Regulation: Authorities need to ensure robust measures to prevent fraud and manipulation, and to make electronic payment systems widely accessible and cost-effective.

Current Status and Recommendations

• Readiness: Given the early stage of electronic payment adoption in Iraq, the consensus is that it may be too soon to implement redenomination. It is suggested that the process should be considered once electronic payment usage becomes more widespread and integrated into everyday transactions.
• Incremental Approach: Starting with state institutions and gradually expanding the use of electronic payments can help build the necessary infrastructure and public acceptance for redenomination.

Overall, while removing zeros from the Iraqi dinar could offer long-term benefits, the current state of electronic payment adoption and public readiness means it may be prudent to wait until these conditions are more favorable.

Is It Time To Remove The Zeros?, 19 AUGUST

 Is It Time To Remove The Zeros?

Economic  2024/08/18  

There is an economic principle in the free market economy, capitalism, or whatever you call it, to treat the defect or distortion in the economic structure as a result of the shock.

That is, accepting the financial, economic and social effects of this measure in the hope of improving the economic reality.

In order to clarify this principle and analyze its effects as a means of spreading economic culture, we will address the issue of deleting zeros from the currency in order to reduce its effects on the size of the monetary mass and the value of money.

The more difficult and complex the solutions to reduce the dollar exchange rate between the official and parallel rates become, the more calls for the necessity of deleting zeros increase, believing that it is one of the solutions.

Here, if the decision is made to remove zeros, this means treating the defect with the shock effect, but we must first present the most prominent advantages and disadvantages of removing zeros and compare them to reach an optimal solution and a sound decision.

This is the best way to spread the culture of discrimination among the public, rather than addressing specialists because they are aware of the optimal solution.

 One of the most prominent advantages of removing zeros is reducing the size of the monetary mass, not its value (simply the number of banknotes used in circulation).

This advantage results in the ease of carrying cash amounts and protecting them from theft or damage.

As for the disadvantages, deleting zeros will create countless social problems that we can do without at this stage due to the inability to convince the public to accept the decrease in the size of the monetary mass while acknowledging that the real value of the money is not affected.

The issue is related to the mind and the memory’s preservation of large amounts, and then the solution of commercial and personal contracts and agreements creates disagreements and an inability to reach an understanding.

From the above analysis, it is clear that the procedure of deleting zeros is not appropriate at the present time. However, with the use of electronic payment operations, the environment will be mature and acceptable for the idea of ​​implementing the decision to delete zeros, and the process will be automatic without the citizen feeling it. But is it time to issue the decision?

We see that it is too early due to the recent introduction of electronic payment technology in commercial, market, official and private transactions.

 The experience is still limited to absorbing such a transformation, and when the percentage of acceptance and use of electronic payment tools reaches 90 percent of citizens, then the decision to delete zeros can be implemented easily and smoothly. It takes time to spread the culture of electronic payment, and it is required to intensify media and advertising campaigns to focus it in the citizen's memory and accept it.

In such a case, the concerned authorities should reduce the costs of using electronic payment and impose strict control over fraud and manipulation, and then expand and diversify electronic payment companies throughout the country.

Those concerned should start with state institutions in using electronic payment for all transactions, and then the culture of electronic payment will expand.    https://alsabaah.iq/101197-.html

NOTE FROM Free and Easy Missouri on Telegram , 19 AUGUST

Sat. 17 Aug. 2024 Free and Easy Missouri on Telegram Fri. 16 Aug. 2024:

 On Fri. 16 Aug. we were told it would go between 12 noon and 12 midnight.

 It did go through so you know some people got paid yesterday. Banks were putting it in to make sure it would go.

 This morning Sat. 17 Aug. there are people getting paid. Certain people have privileges that you don’t have yet.

 Some will be elevated there by Mon. 19 Aug. Should have 800#s tonight after 5 pm. The system is live and it’s working.

 If not tonight, then we’ll start tomorrow morning.