Seeing in Iraq, the financial economy .. with a comprehensive reserve banking business in the light

Seeing in Iraq, the financial economy .. with a comprehensive reserve banking business in the light of the cash dystopia

May 9, 2016 in Reports Add comment

Iraqi provide reports of the Institute for Regional and International Studies (IIR) analysis on the ground of the most pressing issues in Iraq. It aims to supplement and expert research and analysis Court on Iraq policy decision-makers. These reports unique to being manufactured in Iraq, based on field work in the country as well as the open-source research. Iraqi reports of the Institute for Regional and International Studies, is the brainchild of both "Ahmed Ali" and "Christine Van Den Torn" and both have years of experience in research and writing about Iraq. As is the case in many economies that are in the case of an existing conflict or post-conflict, said that the private sector in Iraq is based primarily on cash resources. Banking and finance is not available to everyone with the exception of major companies that bank financing is limited to only a short drag facilities. While the use of checks is often among companies within the same city, and controlled transfer of money through money transfer is paper or through money transfer payment system companies. Most Iraqi families do not have a bank account, people who have financial savings keep them mostly in bundles of cash in US currency (dollar) in special cabinets. That case put huge restrictions on the financial system because they practically exclude the role of the banking system with partial reserve. The business model for the Iraqi institutions are quite different from those of banks in developed countries, normally reserved for a small amount of the deposit base as reserves in the form of money saved in the bank or in the form of a reserve account at the Central Bank, and most of the money that has been deposited easy withdrawn, because depositors money is likely to withdraw small amounts of this money at any time. The private banks and money transfer companies that serve the cash economy in Iraq is not able to work the same banks in developed countries the way. Civil banks are subject to the withdrawal of huge amounts of money quantity and unexpected depositors, whether individually or collectively, and the money transfer companies are not receiving financial deposits at all, and as a result, the financial system has become in Iraq to achieve the bank reserve schemes is miserable, those schemes proposed by scientists that Austrian economy as a means to eliminate the investment cycles for a period of boom and bust. This is similar to a large extent, "the perfect model of the financial system in a free society" proposed by Huerta de Soto, where the deposit reserve support 100%, and the banking system is free (irregular) and the freedom to choose the currency. While all privately owned banks in Iraq does not possess the proportion percent percent of their deposits of cash, and those deposits listed on the Iraq Stock Exchange (ISX) were cash deposits ratio which combined stands at 97% at the end of 2014, a very high figure compared with their counterparts from the states. At the system level, the total transfer of funds and money held in private lockers companies banking system parallels with the overall reserve where the different entities responsible for the functions of booking and payment there. The money transfer companies is an example of the ideal of the model (free banking system) due to the lack of systems to interfere in their field and influenced "Karma" on their discipline at work dramatically. Finally, the dollarization (the Iraqi currency is converted to the US dollar) partial economy process that allows great freedom for Iraqis in handling currency. It is important implications for the deposit reserve percent percent is that demand deposits are not available to fund the loans, which must be covered by the central bank. For the Austrians, this is undesirable because it precludes the possibility that the banks in money creation that will investment boom fueled by credit, and in fact this is not a problem in Iraq. The events in Iraq, which led to increased investment ratio is the result of high oil prices and not the result of excess credit. In reality it is not so, as Iraqis complain sometimes that of the overall reserve accounts or cupboards are not available to the real economy. A blind eye to the form it takes money, it does not flow in material goods. As trade and investment Tqoman not change the way the transfer of funds into commodities, as they are simply converted from buyers to sellers. Cash plays the same role in the payments system, regardless of whether they are available or not available to be pulled. It does not stand idle all. What makes the reality of Iraq bitter is not a monetary utopia proposed by Huerta de Soto and other Austrian economists that policy, it is the absence of the rule of law, the absence of effective control over the banks lead to uncertainty depositors money that their money in a safe place, which makes it difficult for the banks to be a protector of money its customers. It has led to a rise in related guarding the money transfer transaction costs. Without reliable implementation of the contracts it is impossible for financial intermediation to take place through the Consolidated Investment Funds which Austrians claim that it is possible to be a substitute for bank loans in the destruction of the reserve system. Instead, it must average funding and long-term largely confined to between the parties that know each other personally, while the proposal Huerta de Soto might be the perfect scenario in a country that has a strong legal and regulatory institutions, the Iraqi version of this proposal what is only a last resort. The best that can be achieved is through the "special orders" in the absence of reliable government department. As for the remainder of this report, it shows how the banking business with the overall reserve has become a basic rule in the private sector in Iraq and explore some of the implications of the policy-making process. The first part explains why mile Iraqi private sector banks to hold higher levels of reserves to deposits than their counterparts from developed countries despite the absence of any formal conditions to support the overall reserve. The second part of it shows the possibility that companies will allow the transfer of funds to the private sector who have the money to control the role played by the deposits usually in the payments system, allowing for those who keep their money in private that serve as a kind of "domestic reserve stores." Part III looks at the central bank and explain the reason for the lack of effectiveness of traditional monetary policy and prudential oversight, and anti-money laundering systems in the light of the current situation in Iraq. Finally, Part IV concludes with a "second-best" proof of the ideal model of an Austrian Huerta de Soto.