Don961: (See Article Below) The Appearance is saying there is no advantage for Iraq to have a low exchange rate …. or holding down the value of their currency to get a trade advantage and attract business … because Iraq’s main exports are oil and raw materials … i.e. minerals , etc. …….. and those commodities’ prices are determined by world demand and world markets with a one-price system ….
it’s not like they can manufacture something cheaper like TVs , cell phones , cars ,whatever and purposely keep their currency devalued to attract customers … what Iraq has to offer is a whole different animal … imo
Samson: Reduction of exchange rate: costs and benefits
11th October, 2017
Dr. Mohammed Saleh appearance
Financial and economic adviser to the Iraqi prime minister
In the various export-oriented countries, the devaluation of the currency due to the balance of payments difficulties leads to competitive advantages that increase the value of exports and reduce the flow of imports according to the elasticity of commodities, as do Turkey, Iran, China and others. Positive in the current account balance of payments improvement towards the balance and overcome the deficit, which is one of the functions of monetary policy in achieving external balance.
When the deficit in the current account rises to a ratio of more than 3%, the monetary authorities devalue the currency in proportion to a more flexible interest rate policy to improve the balance of payments financial account by attracting foreign investment and Direct promise is accompanied by the imposition of balance or external stability.
In the single economies, which are exported exclusively to the main raw materials such as oil, copper or others, where these economies rely entirely on meeting the domestic demand for a great variety of imports, mainly in diversifying their commodity supply, the goods imported from abroad, Prices will be inflated immediately and directly because of the fall in the exchange rate accompanied by a rise in inflationary expectations (due to the deterioration of the external value of money)
and this imposes a pressing social and economic burden on fiscal policy requires the support of prices reflected in increasing The general budget, especially the cost of foodstuffs, medicines, raw materials and basic imported and subsidized prices and others to address the problems of low consumer welfare or increasing the burden of living and then address the deterioration of individual savings potential, which erodes the strength of inflation (due to the devaluation of the currency)
But what is the benefit of fiscal policy? Differences in financial benefits and costs can be identified as follows:
1 – The fact that export revenues from raw materials such as oil or other primary raw materials are often sovereign in nature and because of the devaluation of the currency to provide the state budget with the proceeds of the new inflation, the budget deficit will address the same E. Achieving revenues through additional inflationary In other words, additional financial benefits will be achieved through the returns resulting from the low exchange rate of the local currency against foreign returns, and obtaining cash checks in the local currency to go to the budget, called transfer revenues. They are thus equivalent to the exchange rate declines.
2. However, this advantage in inflationary returns will remain a partial advantage in the interest of fiscal policy. Monetary policy and its measures to address the balance of payments deficit by reducing the exchange rate do not exempt at the same time fiscal policy from carrying additional costs managed by the state budget administration through the development of allocations Additional basic hedging equivalent to the amount of the lower exchange rate itself to compensate for the cost that will rise in the value of foreign government transactions, which will adversely affect the reduction of the local currency exchange rate against foreign currency.
For example, all government imports or the value of government commitments to the world M external (debt and services such as payment of dues and arrears and other obligations). As well as the high cost of internal government procurement, which will be affected by inflation caused by the decline in the external value of money, the low exchange rate of the local currency and the rise in prices of consumer goods and intermediaries imported in the local markets, which represent government procurement.
This compensation to government financial burden due to negative monetary effects of monetary policy will increase The costs of fiscal policy or government budget burdens in general. For example, through a so-called cost-benefit calculation, a 10% reduction in the exchange rate, for example, will cause inflation in the prices of goods, services and wages, possibly up to 10% or more.
The general level of prices is usually driven by the dynamics of inflationary expectations that will affect the cost of stocks and all contractual obligations. And that this compensation to government bailiffs due to negative monetary effects of monetary policy will increase the costs of fiscal policy or the burden of the government budget in general. For example, through a so-called cost-benefit calculation, a 10% reduction in the exchange rate, for example, will cause inflation in the prices of goods, services and wages, possibly up to 10% or more. The general level of prices is usually driven by the dynamics of inflationary expectations that will affect the cost of stocks and all contractual obligations.
And that this compensation to government bailiffs due to negative monetary effects of monetary policy will increase the costs of fiscal policy or the burden of the government budget in general.
For example, through a so-called cost-benefit calculation, a 10% reduction in the exchange rate, for example, will cause inflation in the prices of goods, services and wages, possibly up to 10% or more. The general level of prices is usually driven by the dynamics of inflationary expectations that will affect the cost of stocks and all contractual obligations.
3. Although the budget is partially benefiting from the benefit of devaluation due to the increase in the value of its dollar revenues and its ability to replace it with a cheap dinar in which the nominal budget is used to bridge its deficit as an inflationary tax levied at the expense of the standard of living, In all cases, the ratio is often less than 50% of the cost of the reduction process. Which means that the results of the reduction on the budget proceeds will remain partial in such economies and may not compare to the expression (tax) price disturbances or price deflation
In conclusion, in the economies of the countries exporting raw materials, the results of the reduction is not reflected at all on the improvement of external demand for exports, whether oil or raw materials because the prices of those raw goods are determined in the world market and according to the so-called price system one price system.
Walkingstick: Iraq is the fifth most borrowing country from the International Monetary Fund
These loans are out of the 15 agreements approved by the International Monetary Fund (IMF) under the non-concessional financing facility with a total value of US $ 134.7 billion during fiscal year 2017
Economic Stability, Restoring Sustainable Economic Growth, and Managing Balance of Payments Problems play a number of roles at the heart of the International Monetary Fund’s lending activity in helping member countries deal with their economic crises
Unlike development banks, It does not provide IMF loans to finance specific projects, but to countries that may face a shortage of foreign exchange to give it the time needed to correct economic policies and to restore growth without the need to resort to actions harmful to themselves or the economies of other members.
this is clearly evident in the righteousness of The loan program signed with Egypt in 2016, with a duration of 3 years, in return for its association primarily with economic reforms, including the reduction of subsidies and the increase of taxes and the floating of the pound.
However, it was noteworthy that Egypt had acquired a significant share of the total loans granted during the fiscal year 2017, with a loan of $ 11.8 billion, ranking second in the list of the 15 countries, after Mexico, “85.5 billion dollars.”
Colombia is third with a loan of $ 11.22 billion, Poland and Iraq fourth and fifth respectively with loans of $ 8.9 billion and $ 5.2 billion.
These loans are out of the 15 agreements approved by the International Monetary Fund (IMF) under the non-concessional financing facility with a total value of US $ 134.7 billion during the fiscal year 2017.
Samson: Parliamentary Finance: We will not cancel the budget of the Kurdish people and the pieces will be limited to separatists
12th October, 2017
The parliamentary finance committee confirmed that it will not cancel the share of the Kurdish people in the budget. Member of the Committee Hossam Al-Aqabi explained that cutting the budget of the people of northern Iraq will negatively affect the livelihood of the Kurdish citizen, pointing out that the pieces will be limited to funds allocated to separatist leaders for violating the Constitution to hold the referendum and the sale of oil illegally
Samson: Egypt announces a state of emergency for three months starting tomorrow
12:55 – 12/10/2017
Egyptian President Abdel Fattah al-Sisi announced Thursday a state of emergency nationwide for three months from Friday.
“A state of emergency is declared throughout the country for three months from 1 am on Friday, October 13, 2017,” the republican decree, published in the official gazette, said.
According to the decision, “the armed forces and the police force take the necessary measures to counter the threats and financing of terrorism, to maintain security throughout the country, to protect public and private property and to save the lives of citizens.”
Samson: China Will “Compel” Saudi Arabia to Trade Oil in Yuan
12th October, 2017
China will “compel” Saudi Arabia to trade oil in yuan and, when this happens, the rest of the oil market will follow suit and abandon the US dollar as the world’s reserve currency, a leading economist told CNBC.
Carl Weinberg, chief economist and managing director at High Frequency Economics, said Beijing stands to become the most dominant global player in oil demand since China usurped the US title of “biggest oil importer on the planet.”
Saudi Arabia has “to pay attention to this because even as much as one or two years from now, Chinese demand will dwarf US demand”, Weinberg said.
“I believe that yuan pricing of oil is coming and as soon as the Saudis move to accept it—as the Chinese will compel them to do—then the rest of the oil market will move along with them.”
In recent years, several nations opposed to the dollar being the world’s reserve currency have progressively sought to try and abandon it. For instance, Russia and China have sought to operate in a non-dollar environment when trading oil. Both countries have also increased their efforts to mine and acquire physical gold if, or perhaps when, the dollar collapses.
In recent years, China has sought to ratchet up the pressure on Saudi Arabia over the form of currency in which their oil trade is conducted, with Riyadh now enjoying less and less oil purchases from Beijing.
When asked what it could mean for the dollar should the oil market move trade out of the US currency and into the yuan, Weinberg said the world’s transaction currency would suffer “lesser demand for US securities across the board”.
“Moving oil trade out of dollars into yuan will take right now between $600 billion and $800 billion worth of transactions out of the dollar … (That) means a stronger demand for things in China, whether it’s securities or whether it’s goods and services. It is a growth plus for China and that’s why they want this to happen.” https://goo.gl/jC7vyG
Don961: US Treasury Secretary: “Support for states can not continue”
Munchin: I will urge Donald Trump to choose Jay Powell as a successor to Janet Jellen (Yellen)
12 October 2017 03:27 PM
Direct: The US Treasury Secretary said that the removal of state tax deduction is still an important part of the tax reform plan targeted by the government.
“The US government can not continue to support the states,” Stephen Munchin told CNN’s Squawk Box on Thursday. “This is a big gap that we are trying to close by simplifying taxes, .
Donald Trump said last month that the tax reform plan would require 20 percent corporate tax cuts, with a tax-free limit of $ 24,000 and $ 12,000 for married couples and individuals respectively.
Munchi said Trump had clearly said he wanted 20 percent tax cuts on companies. “This part is not negotiable.”
On the decision to appoint a Fed chairman, Motion said he urged Donald Trump to choose Jay Powell as Janet Yellen’s successor.
Janet Yellen’s term is due to expire in February, where Kevin Warch and Jay Powell are now on the run. link