KTFA Members "Monday News" 4-13-2020

KTFA:

Don961:  Triple phone conversations between Putin, King Salman and Trump

Sunday 12, April 2020 22:19 | Economic

Baghdad / Nina /

Russian President, Vladimir Putin, held a trilateral phone conversation today, Sunday, with the Saudi monarch, King Salman bin Abdul Aziz, and the American President, Donald Trump  LINK

Samson:  America declares its welcome the political consensus that Al-Kazemi obtained

04/13/2020 17:46:27

 The US State Department revealed today, Monday, Maen, who was in charge of forming the government, Mustafa Al-Kazemi.

Secretary of State Mike Pompeo said, "America welcomes the political consensus that the Iraqi prime minister candidate has obtained."   LINK

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Samson:  Pompeo comments for the first time on Al-Kazemi's candidacy 

13th April, 2020

US Secretary of State Michael Pompeo said on Monday that the United States is looking to form a new Iraqi government capable of facing the new Corona epidemic, addressing the economic plight of Iraq and placing weapons under state control

In a statement, Pompeo welcomed "what appears to be a consensus among Shiite, Sunni and Kurdish political leaders to form a government

He expressed the hope that the new government will put the interests of the Iraqis first and meet the demands of the Iraqi people

The American minister said that the Iraqi people are demanding real reform and trustworthy leaders, stressing that these demands deserve to be addressed without violence and repression

 Pompeo affirmed that the United States stands with the Iraqi people while seeking a sovereign and prosperous Iraq free from corruption and terrorism   LINK

Don961:  The Iraqi dinar is falling apart: Corruption and Corona are jumping in dollars

3 Hours Ago

The turmoil in the Iraqi dinar exchange rate against the dollar recently led to negative effects, which directly affected the business sector and commodities in the markets, which led to the loss of confidence of dealers and investors in the monetary authority.

The decline of the dinar came after the Central Bank of Iraq stopped its activities related to pumping liquidity in foreign exchange to meet the needs of banks and their customers, as it was pumping an average of 140 million dollars or more per day to maintain the value of the currency and support its stability, and stopping the pumping of liquidity led to a jump in the exchange rate of one dollar from 1200 to 1280 Iraqi dinars, amid warnings of the continuation of this rise due to the curfew imposed by the authorities as part of the procedures to face the outbreak of the Corona epidemic.

In the midst of the financial crisis experienced by the world in general and Iraq in particular in light of the collapse of oil prices and the large deficit in the budget for 2020, the government faces great economic challenges, most notably the difficulty that the central bank can maintain the value of the dinar against the dollar because of the corrupt control of the auction of selling currency, according to What officials and economists see.

In an interview with "The New Arab," an official in the caretaker government said that "the central bank cannot maintain the value of the Iraqi dinar against the dollar by continuing to pump the hard currency to the market, because of the lack of public revenues due to weak demand for oil and the decline in its price." That "the central bank will have to legalize the sale of the currency for a certain period until oil prices rise again."

And Iraq, the second largest producer of crude oil in the Organization of Petroleum Exporting Countries (OPEC), with an average daily production of 4.5 million barrels per day.

The official, who preferred to remain anonymous, added that "continuing to hold auctions to sell currency and pump tens of millions of dollars per day to preserve the value of the dinar leads to great risks for the country's economy, and it is better for the central bank to cancel the currency auction and install its local currency, since most of the beneficiaries are Of these auctions are not businessmen and merchants, but banks, banks and private sector companies dominating the market, a large part of which has been transferred out of Iraq.

He pointed out that the central bank has succeeded in recent years in achieving the stability of the dinar exchange rate and improving it in relation to the dollar and other currencies by stabilizing the price of the local currency and defending it, but the current collapse in oil prices, and consequently, the country's financial returns are completely different from the crises of past years.

According to the official, "There are daily discussions to reach a road map that enables the country to maintain an acceptable exchange secret of the dinar against the dollar."

The central bank sells between 140 and 160 million dollars to public and private companies and banks, as part of a plan adopted since 2004 to control the exchange rate of the dinar and prevent its collapse in the market. The central bank only allows companies and limited banks to enter the auction and buy dollars, amounting to less than 50 banks and financial companies that are licensed by the central bank, all of which are private or private.

For his part, Professor of International Economic Relations at the Iraqi University, Abdul Rahman Al-Mashhadani, said in an interview with "The New Arab" that "canceling the currency auction is very difficult, because the goal of the currency window is to finance imports in the private sector."

According to Al-Mashhadani, 90% of the country's consumer needs are secured by import by the private sector, which means that canceling the currency auction will lead to a major disruption in the prices of imported goods.

Al-Mashhadani stressed that "the currency auction is a drain on foreign exchange due to its association with prominent political figures," pointing out that 15% of Central Bank sales through the auction go as money laundering in various ways and methods and are transferred outside of Iraq.

He pointed out that the best way for the central bank to follow is to legalize the sale of hard currency as much as possible to maintain the value of the dinar and foreign exchange reserves.

For its part, Ayat Muzaffar, a member of the Iraqi parliament from the "victory" coalition led by former Prime Minister Haider al-Abadi, attributed the causes of the economic collapse and the value of the dinar against the dollar to the wrong financial policies pursued by the Adel Abdul-Mahdi government.

Muzaffar said, in an interview with the "New Arab", that "bad management and fiscal policy floundering the head of the caretaker government, Adel Abdul Mahdi, and its indiscriminate spending on the state budget, is one of the main reasons that led to the economic collapse of Iraq, and to an unprecedented financial deficit is expected to It is, if oil prices continue to decline, about 80 trillion dinars.

She explained a member of the Iraqi parliament that the central bank spent a large part of the cash reserve for the purpose of stabilizing the dinar price against the dollar, which led to the depletion of the cash reserve, and then the central bank will lose over time its ability to maintain the par value of the dinar.

She added that "the confusion in the government's performance seemed clear when the head of the crisis cell spoke about the possibility of Iraq resorting to printing the currency", noting that the printing of the currency is based on three reasons, either that there is a frayed currency to print as a substitute for it, or because of an economic recovery that is printed An easy amount until there are surplus sums that increase the demand for goods and services so that the producers increase the production.

As for the other reason, according to Muzaffar, the printed currency must be equal to the national product, while stressing the need to preserve the monetary reserve of the central bank through its reliance on a flexible policy that takes into account the emerging political and economic conditions of the country.

And at the end of last March, the rapporteur of the Parliamentary Finance Committee, Ahmed Al-Saffar, said that "the central bank reserves reached 87 billion dollars, and it does not include cash and foreign currency only, but it includes gold bars."

Ammar Hamid  New Arab  link

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Don961:  Will the Chinese yuan compete with the US dollar for the throne of currencies?

- 10 Hours Ago

With the Chinese yuan gaining the US dollar's reputation for stability, which is backed by the large and liquidity of US treasury bonds, China is striving to convert its yuan into a “global currency,” which will give it more control over its economy, as its economic strength grows, as the second largest economy in the world. At a time when many analysts and investors believe that the transformation of the Chinese currency into a "global currency" trend has become inevitable with the growing influence of China.

And it seems that the project of competing other currencies for the dominant US dollar has already begun. Over the past 600 years, six different global reserve currencies have been found, controlled by the world superpowers, in which the US dollar has dominated global currencies for about 88 years.

Finally, the International Monetary Fund gave the green light to officially accept the Chinese currency, the yuan, in the foreign exchange basket of the fund, and according to Reuters, this step paves the way for the fund to place the yuan, perhaps "on an equal footing" with the US dollar, noting that this is It is the latest in a series of global developments that threaten to possibly compete with the US dollar as the world's reserve currency.

Some warn that any move by the International Monetary Fund to replace other currencies with the US dollar may be "catastrophic" for US investments. Now, the International Monetary Fund has taken the first step.

According to the Wall Street Journal, the IMF’s decision to officially give the green light for the Chinese currency, the yuan, to be accepted into the fund’s foreign exchange basket will be the first time in history that the fund has expanded the number of foreign currencies, meaning that China’s currency may It is now a viable global alternative to the US dollar.

5 Benefits that will accrue to China
The yuan will be used to pricing more international contracts, and China will export many of the goods that are usually priced in US dollars, as then it will be priced in yuan. The demand for the yuan will also be higher, and this would lower interest rates on bonds denominated in Chinese currency.

As for Chinese exporters, they will have lower borrowing costs, and China will have more economic influence over the United States, and its time will support China's economic reforms.

The yuan slowly traded in foreign markets,
and Chinese leaders began to facilitate the yuan's trading in foreign exchange markets, although this was a risk of more open financial and political systems. Since 2015, China has supported the Americas Renminbi Trade Center (another renminbi for the yuan), making it easier for North American companies to conduct yuan transactions with Canadian banks, and Beijing has opened similar trading centers in Singapore and London.

Former New York mayor Michael Bloomberg, who is also the chair of the US Renminbi Clearing and Trade Working Group, is making great efforts to establish a Renminbi business center in the United States. The group includes former US Treasury ministers Hank Paulson and Tim Geithner. This center will reduce the costs of US companies trading with China, and will allow US financial firms to offer hedges in yuan and other derivatives.

In June 2016, China granted the United States a share of 250 billion yuan, or $ 38 billion, under the eligible Chinese institutional investor RMB program, and appointed a Chinese and a US bank to conduct renminbi clearing business in the United States.

Can the yuan exchange dollars?
"China has $ 5 trillion in unearmarked central bank reserves, and this could be in yuan," Stewart Oakley, general manager of Nomura, said in an article written in 2013. With the creation of more bilateral swap lines and Beijing moving more in its path to liberalize the capital market, central banks ’appetite to own this currency will increase.”

He added, “The most important question: Could China’s ambition to make the yuan the global currency cause the dollar to collapse? Most likely not. Instead, it will be a long, slow process that will lead to a fall in the dollar, not a crash.

Rules of the game and change
According to Juan Zarate, who helped implement financial sanctions while serving with the Treasury Department in the George W. Bush administration, “Once (the other currency) becomes an alternative to the dollar, the rules of the game begin to change.”
"The dollar alternative is likely to change the financial landscape in the next five to ten years," said Leung Singh Xiong, assistant managing director of a major central bank.

Currency specialist Steve Seo Girud warned, “I have been active in the markets for more than two decades now, but I've never seen anything that could move a lot of money very quickly. The announcement will start with the influence of dominoes, which will mainly determine who becomes wealthy in America in the coming years. ”

“If you have any US paper assets, which include stocks, bonds, or just cash in a bank account, you should be aware of what will happen and know how to prepare,” he says.

A number of experts believe that the recent rise in gold and silver prices is a direct result of the IMF's actions, as precious metals rise when the US dollar falls, which has been covering gold for more than 100 years.

In October 2016, the International Monetary Fund added the Chinese yuan to the basket of special drawing rights (SDR) currencies, and the inclusion of the yuan at the time of drawing rights was an important milestone in the path of integrating the Chinese economy into the global financial system.

Independent Arabic   link

Don961:  Is the world economy heading for a rapid recovery after the Corona crisis?

- 10 Hours Ago

The global economy is lying in the brink of measures to contain the Corona virus, which has been reflected in unprecedented bankruptcy and public debt. However, some economists view with optimistic view that a rapid recovery after the storm is possible.

It is no longer favorable in light of this crisis compared to the financial crisis of 2008, as the current distress numbers are enormous, as between corporate losses, the numbers of the unemployed, and the amounts of recovery plans in many countries, billions accumulate in a way that exceeds the strides that the world witnessed a decade ago. It is more beneficial in light of the current stalemate to return to the Great Depression in 1929 to make the comparison straight, says the Director-General of the International Monetary Fund, Kristalina Georgieva, who considered, on Thursday, that “global growth will be negative at a great level in 2020”. The year 2021 could be worse than this year if the epidemic lasts longer.

Despite this bleak picture, some economists estimate that the global economy will experience a rapid recovery once people get out of their homes and work again. 

The results of this crisis are similar to those caused by a natural disaster, such as a hurricane, more than similar to a financial and economic crisis in the traditional sense, as economists from the Regional Central Bank in New York drew, and the researchers Jason Bram and Richard Dietz explained on Friday that “recession crises develop gradually and by passing Time. ”

The blow to the economy

On the other hand, the Corona virus crisis “resolved suddenly and severely hit the economy in less than a month.” The first victims of the epidemic that affected nearly 1.7 million people and killed more than 100,000 so far were the tourism and travel sectors, just as they happen when hurricanes hit. Contrary to what natural disasters cause, the epidemic has not resulted in material damage, "which could facilitate a rapid economic recovery," according to the researchers.

For his part, explains the researcher at the "Oxford Economics" for economic analysis Gregory Daco, that "despite the massive public spending, which is necessary to secure rapid growth of the economy, the job losses will be shocking, and recovery after the virus phase completely will require between 12 and 18 months."

When will the right moment come to revitalize the economy?

When China released residents of regions most affected by the virus after two months of quarantine, and European countries began to consider when to lift isolation measures, US President Donald Trump considered that a similar decision would be most important in his life. And the former US Treasury official, Karen Dinan, finds that "we will have to slowly start lifting measures for fear of facing setbacks."

In early 2020, the United States, the first economy in the world, experienced a prosperous economic situation, with unemployment at its lowest level since 2020, and growth at enviable levels. But the crisis caused by Corona has made the situation worse, with 17 million people without work in just three weeks.

The economy is expected to decline by 20 percent in April and 20 percent in May, Karen Dinan warned, which held that the rate of deflation in 2020 will be 8 percent. For the world as a whole, I expected a decline of 3.4 percent, which is a more pessimistic estimate than previously published. With a jump of 7.2 percent for the global economy in 2021. At the same time, she acknowledged that a number of her colleagues at the Peterson Institute who participated in preparing the semi-annual forecasts do not share her optimism.

In the United States, the massive injection of liquidity into the economy will lead to a large fiscal balance. This is not yet shown in the figures published by the US Treasury on Friday for the month of March, but that the spending is lower than the 2019 spending, while the revenues are slightly higher. The first results will not appear on the budget until this April.

Bad expectations for South Asia

On the other hand, the World Bank said today, Sunday, that India and other countries in South Asia are likely to see the worst performance of economic growth in four decades this year, due to the outbreak of the Corona virus. In a report, the bank expected the eight-nation region to grow between 1.8 and 2.8 percent this year, down from 6.3 percent in its previous forecast six months ago.

The bank said in the report, India's economy, the largest in the region, is expected to grow between 1.5 and 2.8 percent in the fiscal year, which started April 1. The bank estimates that it achieved growth between 4.8 and 5 percent in the fiscal year that ended on March 31. The report pointed out that "the buds of recovery that were noticeable at the end of 2019 were overshadowed by the negative effects of the global crisis."

Regarding other countries, the bank expected that Sri Lanka, Nepal, Bhutan and Bangladesh will experience a sharp decline in economic growth. And the bank mentioned in its report, which is based on data at the level of each country until the seventh of April. The other three countries, Pakistan, Afghanistan and the Maldives, are expected to enter into recession.

The measures adopted by the countries of the region to combat the Corona virus have disrupted the supply chains in South Asia, which recorded more than 13 thousand cases, which remains a level much lower than other regions in the world.

India announced a comprehensive closure of its 1.3 billion people, causing millions to lose their jobs, disrupted small and large companies, and pushed millions of migrant workers to migrate from cities and return to their villages.

And the bank warned that if measures to suspend activities continue for a long time, on a large scale, the worst possibility indicates that the entire region will suffer an economic downturn in the current year.

In order to alleviate economic hardship in the short term, the World Bank called on countries in the region to announce financial and monetary measures to support migrant workers who have lost their jobs and debt relief to companies and individuals.

India has unveiled a $ 23 billion economic plan to provide direct cash transfers to millions of poor people affected by the general isolation measures. In Pakistan, the government announced a $ 6 billion plan to support the economy.

"The priority for all South Asian governments is to contain the spread of the virus and protect its people, especially the poorest who face the most severe health and economic consequences," said Hartwig Scheffer, senior World Bank official.

Agencies   link

Don961:  Dr.. Mazhar Muhammad Salih *: The Shanghai Cooperation Organization and the new international monetary system: a forward-looking vision

04/09/2020

The revitalization of the SCO agreement (originally signed on June 15 of 2001 between China, Russia and other Asian countries today, numbering eight countries), by activating the cooperation agreement in accordance with international economic developments and their developments after the Coronavirus 2020 epidemic that seeks birth A semi-closed trade and investment exchange system for a large economic zone that constitutes about 50% of the population of the earth, seeking to construct alternative payment systems to finance inter-trade and Eurasian investment opportunities. 

E Group (geo-economic and Eurasian wide). This will take time, as local currencies as an alternative to the role of leading international currencies and the existing component of the international monetary system to the current performance of its role in the financing of trade, investment and building systems and other independent payments.

Second, how much is the value of intra-trade and investment exchanges within this block and its percentage of the total value of global trade and investment, and according to the calculations of economic attraction between them, compared to the profit and loss opportunities in its international trade? The third is the extent to which this group or economic bloc needs a stable general equivalent of values ​​in the future called in all cases numeraire and means choosing a commodity to equal the value of goods and services produced locally and exchanged between the countries of the Shanghai Group (i.e. the monetary value of the monetary value to assess and perform inter-trade and investment within the group countries themselves ).

In light of the foregoing, we see that this group may eventually resort to two neutral options that avoid inflation problems, high prices, and the difference in the comparative advantage in determining the value of goods and services produced in each country, as well as problems of dumping, commercial domination, capital movement flow, direct and indirect investment in the markets Finance within the group countries. As these options are based on two alternatives:

The first is represented by resorting at this early stage (in which local currencies will be adopted in settling inter-commercial exchanges and investment) to adopting a special system of settlements and exchanges between the countries of the same group and with mechanisms called: equivalent transaction. 

As the central bank predominantly in each country within the Shanghai Group itself to maintain a cash balance from the currencies of the other country equivalent to the intra-regional trade and expected annual investment towards the other country or other countries to conduct matching and settlement at the end of the fiscal year, until that the adoption of a general equivalent of the unified values ​​and reach a stage Monetary union and the emergence of a new currency for the new (Eurasian) bloc.

This also comes to launch a signal of financial independence and the gradual move away from the current international monetary system or any existing international currency from the SDR basket currencies until the stability of the internal financial and monetary policies of the group countries and building homogeneous customs fences and according to stability criteria that may come close to criteria ( Maastricht) signed in 1992 when the European Union established and established the European monetary system (i.e. in terms of the ratio of public budget deficits and public debt to gross domestic product and the amount of the current account deficit in the balance of payments to the said output) Commitment standardized access Kmarkip systems to Alkmarki Union Alioroasewe Eurasian Custom Union as a necessity for the necessary condition market economic homogenized performance and adoption of the monetary union.

If the United States dollar today constitutes about 83% of the currency of the settlements in trade, payments and investment in the world, then this Eurasian system of interchange and another general equivalent of numeraire will be at the expense of changing the components of the existing global monetary reserve system and its role in settling trade and international payments Where the US dollar and the European currency / euro take the lead in this system. 

Intra-regional trade within this large economic group - numerically expanding and geographically expanding, which occupies more than a third of Eurasia and is economically strong - will constitute a new transformative outlook for trade, finance and international investment prospects and an important input into the low demand for currencies in international trade in proportion and in a manner that we might appreciate ( Reservation) by at least 8-10% ؜ at the time of its adoption. 

In addition, the substitution of the Afro-Asian currency will be accompanied by a significant degree in the exchange of components of the official foreign reserves of the countries of the world and in the interest of the new international currency, in addition to the rise in its role in the global credit activities in which the dollar occupies today more than 60% of the total bank credit in the world. In addition to the high dollarization of the main capital markets. 

It is important to note that the Eurasians token market, denominated in the new Eurasian currency, may emerge in a highly changing world.

In conclusion, the success of the Shanghai Cooperation Group with its monetary characteristics (outside the scope of the topic of security and international policy) will necessitate the establishment of payment systems in the aforementioned Eurasian currency, to be within the existing international currency basket, and counting it as an introduction to the bilateral polarity in the political economy of nations and a sensitive introduction to the division of economic globalization and its transformation towards the emergence of a vital field Another influential economist in a highly dualistic world.

(*) Researcher, economist, and financial advisor to the Iraqi government

Copyright reserved for the Iraqi Economist Network. Republishing is permitted provided the source is indicated. April 9, 2020

To download a PDF file, click on the links below

The appearance of Muhammad Salih - Shanghai Cooperation Organization - Editor

http://iraqieconomists.net/     link

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DELTA:  I JUST CHECKED THE CBI ARABIC SITE...IT LOOKS LIKE THIS AUCTION IS COVERING THE PERIOD OF 03/22 UNTIL 04/01...

The results of the foreign currency sale window on Sunday 3/22/2020, executed today

 Advertisement No. 4168

Sale date -   Sunday 22/3/2020, executed today

the details

    The amount

Total sale for purposes of enhancing balances abroad (transfers, credits) 220,887,967

Total cash sale 0

Total sales 220,887,967

Note that: The sale price of the sums transferred to the accounts of banks abroad ( 1190 ) dinars per dollar.

Cash sale price ( 1190 ) dinars per dollar.

» The Central Bank of Iraq sales schedule of foreign currency (amounts in thousands of dollars) for Sunday 3/22/2020 and executed today