Standby Agreement Ends, sequestration, fiscal cliff, budget cuts… smoke and glass

copy right Dr. Israel Molina Coincidence or fact? The United States employs numerous strategies in dealing with countries. Grand Strategies are Diplomatic, Economic and Military. Diplomatic strategies involve negotiation, reasoning resolving issues to the equal benefits of all nations. Economic Strategies involve sanctions devaluing a country’s currency to affect the county’s ability to wage war against the U.S. Military Strategies involve the use of military power against a nation. In 2003 the U.S. used the Economic Strategies against Iraq and through the U.N. and the IMF devalued the Iraq Dinar. Cutting the purse strings of a nation is critical in waging war; a country has no financial means to wage war against the U.S. As the U.S. destroyed Iraq’s military it also destroyed its economic infrastructure. In order to make the country whole again the U.S. agreed to a currency exchange securing 4 Trillion Iraqi Dinar. The U.S. and the E.U. currently make up almost 90% of Iraq’s Foreign Currency Reserves which for all practical purposes should put the Iraq Dinar at almost 1.5 to the U.S. dollar. To insure that Iraq rebuilds their economic structure both macro and micro the IMF impose a Stand By Agreement which will provide capital to the nation. In 2010 the Stand By Agreement (SBA) included a “Exchange Rate Program” which allowed the Central Bank of Iraq to revalue the Iraq Dinar to 1170 to one U.S. dollar although better than the 2000 to one U.S. Dollar but well under its real value. In July 2012 the IMF extended the Stand By Agreement to 23 Feb. 2013. 23 Feb. 2013 the Stand By Agreement ended, the U.S. faces Sequestration and major budget cuts that will bring down the debt. Will the budget be reduced because of cuts or is it that the U.S. is on the verge of profiting on its 4 trillion Dinar which will be worth $12 trillion U.S. Dollars? It’s all about the money, follow the money…

Statement by IMF Managing Director Christine Lagarde on G-20 Ministerial Meeting in Moscow

Ms. Christine Lagarde, Managing Director of the International Monetary Fund (IMF), issued the following statement today after the conclusion of the Group of 20 Finance Ministers and Central Bank Governors meeting in Moscow: “I would like to thank the Russian authorities for hosting us, including President Vladimir Putin, Finance Minister Anton Siluanov, and Bank of Russia Governor Sergey Ignatiev. They were instrumental in facilitating discussions among G-20 ministers and governors on the significant challenges facing the world economy, and helped everyone to continue deliberations over policy actions needed to strengthen the global economic recovery. “As emphasized by the G-20, global growth is still weak, with unemployment remaining unacceptably high in many countries. The weak global performance derives from policy uncertainty, private deleveraging, continued fiscal drag, as well as insufficient progress on rebalancing global demand. Implementation of the financial reform agenda to build a more resilient financial system remains a priority. Credible medium-term fiscal plans also need to be in place to provide flexibility while growth is more fully restored. “I welcome G-20 resolve to achieve a lasting reduction in global imbalances through joint actions to avoid persistent exchange rate misalignments, and the group’s commitment to refrain from competitive devaluation, to resist protectionism in all forms, and to keep markets open. It was heartening to see the G-20 reaffirmed its commitment to move more rapidly toward more market-determined exchange rate systems and exchange rate flexibility to reflect underlying fundamentals. “We think that talk of currency wars is overblown. People did talk about their currency worries. The good news is that the G-20 responded with cooperation rather than conflict today. “Lastly, I welcome G-20 support for completing the 2010 quota reform agreement, and I urge countries to quickly ratify the measures necessary to implement this important agreement. The G-20 continues to demonstrate its interest in global economic cooperation through the IMF. I know that the 188 member countries of the Fund are committed to reaching agreement on the 15th General Review of Quotas, including a new quota formula, by January 2014. “Many of the key issues discussed today will be reviewed at the Fund’s International Monetary and Financial Committee´s spring meeting in April, and at the next G-20 ministerial meeting, which will take place at roughly the same time in Washington. Until then, it is crucial that all countries continue efforts to strengthen global recovery

The SBA ends!!! Along with the "Rate Exchange Program"

IMF Approves Seven-Month Extension of Stand-By Arrangement for Iraq Press Release No. 12/286 August 3, 2012 The Executive Board of the International Monetary Fund (IMF) approved on July 20, 2012—on a lapse-of-time basis1—a seven-month extension of Iraq’s Stand-By Arrangement (SBA),to February 23, 2013. The SBA had been scheduled to expire on July 23, 2012. The extension, which had been requested by the Iraqi authorities, will provide them with time to implement the policy measures needed to complete the combined third and fourth reviews under the SBA. The extension will, in particular, provide time for discussions on fiscal policies for the remainder of 2012 and on measures to improve the functioning of the exchange regime. The two-year Stand-By Arrangement (SBA) in the amount of SDR 2.38 billion (about US$3.58 billion), was approved by the IMF's Executive Board on February 24, 2010 (see press release 10/60). The IMF's Executive Board completed the first program review on October 1, 2010 (see press release 10/373), and the second review on March 18, 2011 (see press release 11/90). At the time of the second review, the program duration was extended by five months to July 2012, along with a rephasing of program disbursements based on a shift in financing needs. Total resources currently available to Iraq under the arrangement amount to the equivalent of SDR 1307.24 million (about $1.96 billion). --------------------------------------------------------------------------------