Here is the recording for todays call.
Archive for October, 2010
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T-Bill Growth In Iraq In 2010
An increase of Iraq treasury bill (Iraq t-bill) activity in 2010 will help to fill up the gap of continuing budget deficits and promote a secondary treasury market.
A tbill is a government obligation which may be sold at a discount. It matures in one year or less and pays no interest prior to maturity. It is originally used in reference to US government debt issued by United States Department of the Treasury through the Bureau of the Public Debt. The treasury security acts as a debt financing instruments of the US Federal government. The Central Bank of Iraq allows bidding on these investments to improve foreign exchange markets in Iraq.
Iraq is not only emerging from sectarian clash, but also battling a revolution, and wants to develop its foreign exchange markets outside the framework. This activity is currently conducted by the Central Bank of Iraq. This notion included the establishment of an interbank foreign exchange market and dinar forward market. Iraq held its parliamentary election in March 2010 since the 2003. A letter of intent submitted to the International Monetary Fund (IMF), said for a $3.6 billion standby arrangement which can be accessed here. The Central Bank said that they will try to mobilize domestic financing through the Treasury bill market as 2010 is still important.
The cancellation of t–bills in June 2010 was purely temporary. It is like an engine sputters or misses when turning the throttle up on a lawn mower. The Central Bank of Iraq has big plans for t–bill bidding in the year 2010. The banking sector has been dominated by the state for decades. It is after years that such invasion has followed which needs the government’s financing needs. It will set the interest rates also. There is no secondary market. They are going to make a local market and get benefits from the oil industry. The loan-to-deposit ratios are very low and they cannot make cash from these markets.
The Central Bank Governor Sinan al-Shibibi and Finance Minister Bayan Jabor said that the country is planning to launch sales tax as a precursor to a Value Added Tax in years to come. The GDP growth of Iraq increased in 2009 by 4 percent, which is a 10 percent hike as compared to previous years. This year the GDP is expected to rise as high as 7 percent and to 7.5 – 8 percent in 2011 and 2012, as said by the Governor and the Finance Minister. This improvement would be rooted in an increase in Iraqi oil output to 3.1 million barrels per day by 2012, from around 2.5 million barrels per day now. If all the plans work in, then Iraq will have the oil capacity soar up to 12 million barrels per day in 6 – 7 years of time.
Considering other things the IMF submission said that Central Bank of Iraq has planned to create foreign exchange markets outside the framework of regular dollar auctions. The bank uses this auction to set the exchange rate. This exchange rate has been held at 1,170 dinars per dollar for several months. Iraq is also planning to develop organized exchange markets outside the Central Bank, to improve the foreign exchange auctions. Thus the aim should be to establish an advanced market in Iraqi dinars in the near future.
Written by Darren Chabluk for http://DrDinar.com
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