Friday, June 25, 2004
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Actual financial reform in Iraq
Of course, that last paragraph is kind of important -- and that goes back to the CPA's mistakes. Bill Powell and Aparism Ghosh are the latest to dissect Paul Bremer's errors in Time.posted by Dan on 06.25.04 at 12:59 AM
“It is also possible that the new bank laws will one day be overturned altogether, because of nationalistic bias against foreign ownership or their lack of reference to Islamic teaching.”
The odds are that the Iraqi leadership will continue to desire a modern and affluent society. I sense that the religious extremists are already being marginalized. The only real risk to a bright Iraqi future is if the United States and its coalition partners get cold feet.posted by: David Thomson on 06.25.04 at 12:59 AM [permalink]
I no sooner posted my earlier comments of some ten minuts ago when I found this bit of good news via Andrew Sullivan:
“A large majority of Iraqis say they have confidence in the new interim government of Prime Minister Ayad Allawi that is set to assume political power on Wednesday, according to a poll commissioned by U.S. officials in Iraq.
Things are indeed looking better in Iraq. Knock on wood, let’s hope that it continues. I just don’t see the Iraqi majority tending toward Islamic extremism.posted by: David Thomson on 06.25.04 at 12:59 AM [permalink]
Muslims have some pretty strong opinions regarding the payment of interest. Many go to great lengths to avoid it, and have created Islamic financial instruments which are more like equity than debt. It wouldn't surprise me if a government influenced by Sistani required more "reference to Islamic teaching" when it comes to financial instruments.
“It wouldn't surprise me if a government influenced by Sistani required more "reference to Islamic teaching" when it comes to financial instruments.”
I doubt this very much. The Iraqi leaderships seems to take religion with a certain degree of salt. They appear economically astute enough to realize the harm caused by usury laws. A society enforcing such ridiculous statutes---are inevitably poverty stricken. The Protestants had to push the Catholic Church into the modern age. It’s time for the Muslims to also have their reformation.posted by: David Thomson on 06.25.04 at 12:59 AM [permalink]
Here is another take on our success in Iraq.posted by: MWS on 06.25.04 at 12:59 AM [permalink]
Banks that operate on Islamic principals don't charge "interest" or offer "interest" on deposits. However, dividends on investments are perfectly okay, so they often describe their revenue-generating activities in those terms.posted by: Scott Ferguson on 06.25.04 at 12:59 AM [permalink]
I think Dan's post on Iraq's currency is a little too optimistic.
First of all, I wouldn't call a rise from 1600-something to 1400-something a 25% upvaluation - it's a bit less than that, if we are using the same CPA weekly reports on the business.
But even with the moves in the exchange value of the currency, I think it's not because it's a stable currency, with roughly the same numbers of buyers and seller, but because it's a dead currency. There are only about a dozen open market tranactions each day, after all, and it's not a whole lot of money. When I call it a dead currency, I mean that people don't really use it. It's a warzone, after all, and in warzones, no matter what country, or what war, you use the dollar. You don't take your chances on toilet paper money. The currency is stable because no one uses it. It's stable for the same reason the Taliban's afghani was stable. What it means is that other currencies were more important (opium and dollars). Iraqis use dollars for serious stuff and dinars to pay taxes and shopkeepers. I doubt anyone working for CPA would swap their dollar-salary for this creation of theirs. This scrip is strictly for powerless peasants who can't demand dollar salaries of the CPA and the NGOs, and they aren't going to like the eventual result in store for them with this toilet paper money.
And Dan is right about the last paragraph being important: Steve Hanke has written that the central bank will start printing money when the budget shortfall of the Iraqi government became evident - there would be no other way to do it. So much for the independence of the central bank. But by then, the US will be out of there and can blame it all on Iraqi 'incompetence' when push comes to shove and the money finally shows its true worth.
And then a new war of some kind will follow. Name a war, any war, and notice that currency devaluation was there first.posted by: Coral on 06.25.04 at 12:59 AM [permalink]
When they were setting up the new currency, why didn't they move the decimal point, making it 1.6 dinars to the dollar?
new iraqidinars very low rate why?1USD=1450IRD tell meposted by: nadeem on 06.25.04 at 12:59 AM [permalink]
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