Sunday, March 16, 2008

Boycott of Danes and Oman Central Bank confess helplessness

Todays News.

Oman Backlash against those naughty Danes begins
Finally a story in the press here on the response to the cartoon saga. It seems Al Jadeeda stores are going to boycott Denmark and the Netherlands. Nothing said about including all the other countries that reproduced the cartoons in sympathy (Spain, UK, France, USA, Australia, New Zealand, Canada…), naturally, as that would leave few countries to buy anything from. Also no mention in their press release of the nasty Mr Wilders. Al Jadeeda Stores to boycott items from Denmark, Netherlands. (I'm not sure they were selling much Danish stuff anyhow, but hey, free advertising!)

The Iranians have also told the Dutch Government they should stop the publication of the short film.
''I think they can stop the movie,'' Mehdi Safari told reporters after meeting with Dutch Foreign Minister Maxime Verhagen. ''The government is responsible.''
Again, it seems beyond the ability of the ME to understand that freedom of expression really means freedom of expression even when you don’t like something. I would hope the Dutch Government responded by telling the Iranian Government to fuck right off, get their own shit together and stop encouraging the beating of innocent women in the street, the killing of journalists, the encouragement of anti-semitism, the support and funding of Hezbollah, and the violent suppression of a liberal opposition. But, hey, that's just me, a great loss to the Diplomatic Service.

Central Bank admits it can do fuck all about inflation in Oman
In other news, the Central Bank again moved to squash rumours of a revaluation and to point out that inflation isn’t their fault (because of the fixed peg). Well, sort of. The report, as in previous attempts, is careful to only stress the commitment to maintain the peg to dollar, but never commits to the level of the peg. This still leaves the door open for the rial to be revalued to a new (but still fixed) level vs the dollar, but of course even that would only provide a temporary respite if the dollar continues to slide further.
…no plans to drop the rial’s peg to the US dollar… Oman remains “firmly committed” to pegging the rial to the dollar, and any speculation in the rial is “unwarranted,” Sangour said yesterday. The rial has been pegged to the dollar for the past 35 years.
Despite the limited role for monetary policy under a fixed peg, the CBO has increased the volume of absorption of liquidity from the market.

CBO using fiscal policy to curb inflation
The article goes on to list the (limited) ways taken so far to address inflation by fiscal means already commented on below. The so-called absorption of liquidity was achieved by telling the banks to hold more cash, but there is a limit to how much more of that can be achieved. Market operations, whereby the Central Bank would issue bonds to reduce the money supply are almost impossible, as the interest rate is essentially fixed by the Federal Reserve and the market for bonds in Oman is small and immature.

Meanwhile, Omani blend oil price broke the $100 mark for the first time ever. As a result money is pouring in to the Governments coffers right now, to the tune of more than a third of a billion dollars a week. Nice, but its hardly going to help reduce inflationary pressures.

The same article says December's inflation was 8.3%, which still seems a real low ball estimate if you ask me.

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