Financial chat: Exlpanation of deletion of zeros ( part 3)
4. Mr. & Mrs. X tithe to their church, local charity etc. which stimulates activity in that sector. They pay off their debts, making currency available for re-lending by their creditors. They buy a new house and car which stimulates their local economy and set up a conservative investment portfolio which adds capital to the investment markets. They also pay their estimated taxes which increases the cash flow to the US Treasury.
5. The Federal Reserve under a controlled redemption plan supervised by the IMF, will use its foreign currency reserve IQD account to buy oil for the national strategic reserve, DOD reserves, other country reserves as part of international support agreements or resell it to private oil companies etc.
This gives the Federal Reserve a powerful market force capability to control the supply/price of imported oil which has far-reaching economic and national security implications.
The economics of this scenario look like this, using the exchange of a 10,000 IQD Note with a two-tier 2% bank exchange spread as an example:
1. Mr. & Mrs. X get $9,800 credited to their non-interest bearing checking account.
2. Bank Y gets a $10,000 credit to its Federal Reserve account, and by adding the $200 profit to their capital account, allows them to increase their lending cap by $2,000 under the 10% fractional banking model.
3. The Treasury gets $3,500 in estimated taxes in the quarter after the exchange, because Mr. & Mrs. X are now in the Ďrichí category and get to enjoy the 35% tax bracket. This lowers the net cost of the IQD exchange to the US financial system to $6,500 USD (i.e. $10,000 out - $3,500 in).
4. The Fedís designated agent, at some point, orders $10,000 worth of oil from Iraq. Payment will consist of a 10,000 transfer from the Fedís foreign currency reserve IQD account to the IRAQ Oil payment account at the CBI. Even though the world spot price of oil is defined in terms of USD, the actual transaction may take place in any internationally recognized currency agreed to by the parties. For example, Iran only accepts Yen from Japan for their oil orders, because they donít want USD in their foreign currency reserves.
5. The $10,000 order is filled with 200 barrels of oil based on the spot price on the date of the sale (for this example we used a $50 USD spot price). What does it cost Iraq to produce the oil to fill this order? Well they have negotiated productions agreements for $1.50 USD/barrel. From that price $.50 USD goes to the national Iraqi oil company who is the partner in the field the oil came from. Out of the remaining $1.00 the other oil field partners have to pay the Iraq government a profit tax of $.35 USD (35%). The net cost to Iraq to produce a barrel of oil used in this scenario is $.65 USD. (i.e. $1.50 - .50 - .35)