More News, Rumors and Opinions Wednesday Afternoon 6-7-2023
TNT:
Harambe: The Reserve Bank of Zimbabwe (RBZ) announces new measures to stabilise prices, exchange rate (6/7/23)
THE Reserve Bank of Zimbabwe (RBZ) will from today start selling foreign currency on the interbank market through commercial banks, with the foreign currency auctions now limited to US$5 million a week and transactions of between $1,500 and US$50,000, largely in a price discovery process.
This comes after Finance and Economic Development Minister Professor Mthuli Ncube late last month announced a set of policy measures to upgrade the whole foreign currency trading and pricing system, including minimising the auctions as a method for importers to access foreign currency so the burden moves to banks and direct earnings.
As part of the reforms, the bank’s Monetary Policy Committee (MPC) met yesterday and came up with fresh interventions.
RBZ governor Dr John Mangudya said the new measures were calculated to ensure that the interbank forex market became the primary source for foreign exchange needs in the economy. This overtakes the auctions that have carried the burden for just under three years since the middle of 2020.
In taking measures to address issues affecting the economy, the MPC noted that the prevailing volatility in the exchange rate emanated from both supply-side and demand-side factors.
Dr Mangudya said the supply-side factors reflected the transitory reduction in foreign currency inflows, while the demand factors reflected the sustained value-preservation demand for foreign currency in the economy.
The Zimbabwe dollar fell roughly 42.5 percent to a weighted average $3,673.7718 against the United States (US) dollar on the RBZ weekly foreign currency auction yesterday.
The auctions will largely be a mechanism for price discovery but will also help cope with some of the smaller demands. Yesterday’s auction saw the highest rate on the successful allotments for both the main auction and the SME auction at $4,100. The lowest successful rate was $3,555 on the main auction and $3,500 on the SME auction.
There were just 38 allotted bids for a total of US$4,158 million on the main auction and 82 successful bids for almost US$830,000 on the SME auction. The very small number of successful bidders means that most importers now need to use their own earnings or interbank purchases, but with the exchangerate set by the auctions.
“Thus, in order to ensure that the interbank forex market is self-financing the 90-day liquidation requirement on export proceeds will fall away,” said Dr Mangudya.
“The current interbank maximum trading limits shall be reviewed upwards from US$100 000 to US$500 000, consistent with the current auction limits,” said Dr Mangudya.
These far larger and wider limits for single transactions on the interbank market will dwarf the auctions where the main and SME auctions are to be merged, with just US$5 million a week as ordered by Minister Ncube recently on offer, and now with the MPC setting bid limits of a minimum of US$1,500 and a maximum of US$50,000.
Trading margins charged by banks on foreign exchange transactions will be aligned with international best practices, Dr Mangudya said.
To address the demand-side factors, the MPC resolved to increase the bank policy rate from 140 percent to 150 percent per annum in response to the recent increase in inflation.
This makes borrowing to play foreign currency markets more expensive and helps curb speculation.
The bank policy rate determines the minimum lending rates charged by commercial banks.
The MPC also resolved to increase the Medium-term Bank Accommodation interest rate from 70 to 75 percent per annum and increase the statutory reserve requirements on local currency demand and call deposits from 10 to 15 percent, while maintaining savings and time deposit requirements at 5 percent.
“The bank remains committed to continuing with the current tight monetary policy to restore and sustain the exchange rate and inflation stability.
“The issue of gold-backed digital tokens to augment physical gold coins as a value preservation instrument has gone a long way in mopping up excess liquidity from the market,” said Dr Mangudya.
To date, the central bank chief said, the bank has sold $31,8 billion of gold coins and $35,2 billion worth of gold-backed digital tokens.
Digital tokens can soon be used for transactions in the second phase, which is projected to start this month as part of stabilisation measures.
On its part, the Finance Ministry, last month increased the retention on domestic foreign currency sales to 100 percent to allow domestic businesses more foreign currency from the market and drive growth in US dollar deposits in the banking system.
The ministry also adopted to ensure that all external liabilities are funded transparently through the national budget. It is a legal requirement that all State debt, along with State service pensions and the salaries of judges, MPs and the President are budgeted at the top of the budget, before money is voted to run the Government.
Import duty and taxes on 10 basic commodities were lifted to clear restrictions on the importation of basic goods, so as to promote competition thereby resulting in a reduction in prices.
Minister Ncube also said the Treasury would promote the use of domestic currency by Government agencies, which is expected to further increase the demand for the local currency.
https://www.herald.co.zw/rbz-announces-new-measures-to-stabilise-prices-exchange-rate/
Courtesy of Dinar Guru
Mnt Goat The IMF just told us “The International Monetary Fund praises the policies of the Central Bank in supporting the national economy”. ...Remember...that the petro-dollar from Iraqi oil revenues is still being processes through the US banks, exec order 13303 was renewed...The CBI also implemented since January 3 packages of measures to curb and eventually eliminate the use of the US dollar in Iraq. Folks, common sense alone tells us that all these measures were not for nothing...if we look into the Dr Shabibi plan of 2011 we can clearly see that this is not random but following the last stages of the plan, step by step. [post 1 of 2....stay tuned]
Mnt Goat Remember also that this 3-year budget saga has significance on the RV in the fact that none of it effecting Iraq so much that it can’t pull the trigger on the reinstatement at any time being that the IMF and the US both stated many times recently that the Iraqi corruption is under control and the country is STABLE and SECURE. They are ready. Not to mention the extent of wealth and reserves...This is a perfect timing to reinstate. WOW! [post 2 of 2]
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Why "The Market Will Always Go Up" is Such a Scam
Heresy Financial: 6-7-2023
What if I told you the stock market does not always go up? Of course, everybody knows there will always be periods when the stock market goes down.
And, of course, if you hold long enough, those stocks will recover. But that does not do you much good if you retired, let us say, in 1929 because it took 26 years before the stock market finally got back up to its previous all-time highs.
Very possible you might have already even died by then. And extended periods with subpar returns are not isolated to the Great Depression.
Take the Japanese stock market, for example, which peaked in 1989 and still has not recovered 34 years later.
So, it is not helpful to say, just hold on to your stocks, and someday they will recover. But is it even possible to know whether you are entering a period with subpar returns for potentially decades to come?
And more importantly, how can you protect yourself even if you know that?
Timecodes
0:00 Introduction
3:13 Extreme Breadth
5:01 Passive Income is a Bubble
9:27 Trend Reversal
10:28 What to Do About It