MilitiaMan Saturday PM "The Clock is Ticking" 11-3-18

11/3/2018
 
MilitiaMan:  Interesting items in the news of late and descriptions found in an encyclopedia ~ MM 

"Iran braces for oil sanctions after currency crash, protests

2nd November, 2018

The renewed sanctions have already taken a heavy toll, with the rial losing half its value since April and the prices of fruit, poultry, eggs and milk skyrocketing." 

MilitiaMan:  Check this out.. And think about what you're seeing between Iraq and Iran..

Where I may disagree with Iran being specifically included now or into the future basket of middle east currencies matters not, the basket (AMF who btw  participates with the IMF / SDR) has been calculated now per WS (evedidence from recent meetings, imo) and that means to me they have risk on the table and thus, a timeline for to expose that calculation to the world is on the table now.
....



We all know things can get volatile in the ME on a drop of a dinarius.

Therefore, those  part of the boat load of entities in Iraq last month were there for significant time frames and they were not there counting beans for an evening burrito, however, they may have had them for  lunch and dinner.. lol   

They were there for the valuation of currency and advance training of the trainers for the Iraq Currency imo, just as there was a preceding symposium weeks before in regard to the Iraq currency.

So since the currency has been a main topic fo about 30 days or more now, it would suggest that since the timing of REER (Real Effective Exchange Rate) is an issue, the final roll out on the new small currency would be expected to be along quite shortly.. imo.

It was mentioned that REER was established on Monday last for a basket, it has almost been a week for REER..imo The clock is not just ticking.. lol.. ~ MM

FRANK26 Quote :   "SOMETIME AROUND SUNDAY OR INTO NEXT WEEK THE CBI HAS TO MAKE A MOVE WITH THE AUCTIONS BECAUSE IMO……….ON SUNDAY THE SANCTIONS AGAINST IRAN START" "

THE THIRD QUARTER……..IMO……..HAS BEEN TO TELL THE INTERNATIONAL WORLD THAT THEY ARE ABOUT TO LIFT THE 000’S

AND IN THIS MONTH OF NOVEMBER……….GOD WILLING IN THE NEXT TWO WEEKS………

THE TIME FRAME WHERE THE EDUCATION TO THE CITIZENS WILL COME TO A CRESCENDO !!!   ~ Frank26


"Speculation"

The movements so far considered are of a precautionary nature. It is sometimes suggested, when there is a big movement of funds out of a currency, that those prompting it are actuated by some motive hostile to the suspect currency. This is usually quite wrong.

Such large movements of funds are often referred to incorrectly as “speculative.” This gives a false impression of what is happening. Speculation can, and often does, occur when a currency becomes suspect; but the word speculative should be confined to movements of funds made not to protect positions but purely in the hope of gain.

A person may believe that the euro is likely to be valued upward and decide to buy euros, not because he has any commitments denominated in euros but because he wants to resell them afterward at a profit. He will probably buy the euros forward.

Such speculation plays only a minor role in the early movements of funds in anticipation of a change of parity. It may, however, mount up very strongly in the last stages when an upward or downward revaluation has become almost certain.

A big outward movement of funds may precipitate a change of parity, desirable or undesirable in itself, simply because there are not enough reserves to finance the withdrawals. Even if the country in trouble is assisted by international credits, in certain cases these may not be large enough to avert the need for devaluation.

A great movement of funds from a particular country may occur because it is thought likely that it will have to devalue.

There may also be a great movement into a country thought likely to value upward.

The latter kind of movement will cause difficulties for other countries, since the funds must come from somewhere. This adverse effect may be concentrated on one other currency, as in the classic crisis centered on a possible upward valuation of the Deutsche Mark in November 1968, where the drain was mainly from the French franc; or it may be more widely diffused, as in the crisis of the mark in September 1969." 

https://www.britannica.com/topic/international-payment/Foreign-exchange-markets#ref125823


Real Effective Exchange Rate – REER   

What is the 'Real Effective Exchange Rate - REER'

The real effective exchange rate (REER) is the weighted average of a country's currency in relation to an index or basket of other major currencies, adjusted for the effects of inflation. The weights are determined by comparing the relative trade balance of a country's currency against each country within the index.

This exchange rate is used to determine an individual country's currency value relative to the other major currencies in the index, such as the U.S. dollar, Japanese yen and the euro.

BREAKING DOWN 'Real Effective Exchange Rate - REER'

The real effective exchange rate (REER) is used to measure the value of a specific currency in relation to an average group of major currencies. The REER takes into account any changes in relative prices and shows what can actually be purchased with a currency. This means that the REER is normally trade-weighted.

How the REER Is Measured

The REER is derived by taking a country's nominal effective exchange rate (NEER) and adjusting it to include price indices and other trends. The REER, then, is essentially a country's NEER after removing price inflation or labor cost inflation. The REER represents the value that an individual consumer pays for an imported good at the consumer level. This rate includes any tariffs and transaction costs associated with importing the good.

A country's REER can also be derived by taking the average of the bilateral real exchange rates (RER) between itself and its trading partners and then weighing it using the trade allocation of each partner. Regardless of the way in which REER is calculated, it is an average and considered in equilibrium when it is overvalued in relation to one trading partner and undervalued in relation to a second partner.

Benefits of Analyzing and Using the REER

A country's REER is an important measure when assessing its trade capabilities and current import/export situation. The REER can be used to measure the equilibrium value of a country's currency, identify the underlying factors of a country's trade flow, look at any changes in international price or cost competition and allocate incentives between tradable and nontradable sectors.

A country can positively affect its REER through rapid productivity growth. When this happens, the country realizes lower costs and can reduce prices, thus making the REER more advantageous for the country.

Understanding a country's REER is extremely important when conducting economic analysis and policymaking. Therefore, the World Bank, the Eurostat, the Bank for International Settlements (BIS) and others all publish various REER indicators. These world institutions combine to provide the public with REER analysis on 113 countries around the globe.

https://www.investopedia.com/terms/r/reer.asp