Azerbaijan sets its currency on free float

Go Lean Commentary

Imagine one day you have $100 in your wallet. You put the wallet down at night, and then pick it up the next morning and now that money is only worth $70.

Depressing, isn’t it?!

CU Blog - Azerbaijan sets its currency on free float - Photo 4This is not just “make believe”. This is real! This has happened a number of times in the Caribbean past, and just happened today in an Eastern European/Western Asian country, and former Soviet Republic of Azerbaijan; with their manat currency; see Appendix. This is not “Economics 101”, but rather “Economics 901”.

This is a commentary on the frailties of the modern banking system, and the need for mastery in this field of endeavor. The banking community, in the Caribbean and elsewhere, have to master the agents-of-change in this troubling world. Factors such as: Globalization, Technology, and Climate Change. But, we will see that it’s not just banks, but consumers – the man on Main Street – as well that needs to better understand and manage these dynamics.

This introduction vividly demonstrates how banking fortunes, and misfortunes, easily affect people, all around the world. This point aligns with the book Go Lean…Caribbean; and the underlying movement by the publishers SFE Foundation; these were launched as a direct result of the banking crisis referred to as the Great Recession of 2008. One purpose of the book was to apply lessons learned from the 2008 experience in the quest to empower and optimize Caribbean life and society. In addition to the banking dysfunctions that year, global petroleum prices also wreaked havoc on the world’s economy. (The demand for crude oil is now a “wild card” with the new thrust to adapt Green Energy solutions to arrest Climate Change).

There is now a new set of challenges facing the international (central) banking community. This time with currency valuations, as in this case of Azerbaijan; see the news article here and the Appendix below for detailed definitions:

Title: Azerbaijan sets its currency on free float

Azerbaijan Floating Rate

BAKU, Azerbaijan (AP) — Oil-rich Azerbaijan has let its currency float freely, leading to its sharp depreciation as global oil prices hit new lows.

Azerbaijan’s Central Bank said Monday’s move to let the manat fluctuate was made to “preserve hard currency reserves … and ensure the national economy’s competitiveness on the international arena.”

Following the move, the manat fell by 32 percent. One manat, which was worth around $0.95 Friday, was now trading at $0.65.

The ex-Soviet nation has spent more than half of its hard currency reserves so far this year in an attempt to shore up the embattled currency.

Financial analyst Oqtay Akhverdiyev said the decision to let the manta float was “a necessary measure … what we’re now seeing is the real value of the manta.”


AUDIO-VIDEO – Azerbaijan unpegs currency from dollar devalues 30% –

Published on Dec 21, 2015

While this foregoing article relates to international currencies and central banking, this is more than just a Wall Street issue; this is a Main Street issue. This relates fully to the laws of Supply-and-Demand. A central bank must constantly buy-and-sell foreign currencies to regulate the supply in the general market so as to stabilize the “home” currency. As economic drivers for foreign currency become challenged – such as the decline in crude oil prices for Azerbaijan – it’s takes more and more foreign “cash” reserves to regulate the international prices for “home” currencies.

This foregoing article is in consideration of the Go Lean book; it serves as a roadmap for the introduction and implementation of the technocratic Caribbean Union Trade Federation (CU) and Caribbean Central Bank (CCB) to provide better stewardship, to ensure that the economic/currency failures of the past, in the Caribbean and other regions (like Azerbaijan), do not re-occur here … again in the homeland. This all relates to foreign currency exchange (fx), an advanced subject in the field of Economics.

Economics 901 also asserts that there is now interconnectivity of the financial systems; bank/currency troubles in foreign countries easily become trouble for the Caribbean region. The assumption embedded in the Go Lean roadmap is that while there could be elasticity from these foreign financial contagions, the Caribbean is big enough (42 million people in 30 member-states, as opposed to 9.6 million in Azerbaijan alone) so as to streamline its own viable currency/financial/securities market.

There are lessons to apply from the foregoing news story. In a previous blog-commentary, these fx technical points were detailed:

Capital Controls – This is a necessary responsibility of Central Banks. The Go Lean book dives deeply into the discussion for Capital Controls; consider this direct quotation from Page 315 of the book:

Capital controls are residency-based measures such as transaction taxes, other limits, or outright prohibitions that a nation’s government can use to regulate flows from capital markets into and out of the country’s capital account. Types of capital control include exchange controls that prevent or limit the buying and selling of a national currency at the market rate, caps on the allowed volume for the international sale or purchase of various financial assets, transaction taxes, minimum stay requirements, requirements for mandatory approval, or even limits on the amount of money a private citizen is allowed to remove from the country.

Currency Manipulations – The Central Bank of Azerbaijan has the heavy-lifting tasks of manipulating the supply-and-demand equations to try and keep their currency fixed, against an international standard, like the US dollar. Most Central Banks must undertake this strategy to prevent other parties, “bad actors”, from manipulating the currency themselves. Currency manipulators can inflict harm on a country’s resources for their own personal financial gain.

Human & Capital Flight – When a country’s currency is in distress, there is the threat that citizens may flee with their capital so as to secure the value of their savings and investments. This normally means a loss of future economic activity for the educated and productive segments of society; this results in negatives on the national economy in the short-term and in the long-term. The Caribbean has been plagued with this occurrence again and again. Even now, the region has an alarming 70% brain drain rate among the college education populations of Caribbean heritage.

These lessons must be applied in the technocratic administration of the Caribbean Union Trade Federation, and the Caribbean Central Bank’s (CCB) oversight of the Caribbean Dollar (C$). The Go Lean roadmap calls for the CCB to be a cooperative entity of the existing Central Banks in the region; this will foster interdependence from the political entities allowing the motivation of the regional Greater Good. This need for regional stewardship of Caribbean currencies was pronounced early in the book, in the opening Declaration of Interdependence (Page 13) with these statements:

xxiv. Whereas a free market economy can be induced and spurred for continuous progress, the Federation must install the controls to better manage aspects of the economy: jobs, inflation, savings rate, investments and other economic principles. Thereby attracting direct foreign investment because of the stability and vibrancy of our economy.

xxv.  Whereas the legacy of international democracies had been imperiled due to a global financial crisis, the structure of the Federation must allow for financial stability and assurance of the Federation’s institutions. To mandate the economic vibrancy of the region, monetary and fiscal controls and policies must be incorporated as proactive and reactive measures. These measures must address threats against the financial integrity of the Federation and member-states.

So the planners of the new Caribbean sympathizes with the Central Bank of Azerbaijan. We have learned hard lessons on the issue of currency, as many CU member-states have had to endure painful currency fluctuations over the past decades – on more than one occasion. So we now understand that any attempt to reboot the Caribbean economic landscape must first start with a strenuous oversight of the proposed regional C$ currency.

The Go Lean book, and previous blog/commentaries, stressed the key community ethos, strategies, tactics, implementations and advocacies necessary to establish a strong Caribbean financial eco-systems and strong currency. These points are detailed in the book as follows:

Community Ethos – Economic Principles – Economic Systems Influence Individual Choices Page 21
Community Ethos – Economic Principles – Voluntary Trade Creates Wealth Page 21
Community Ethos – Economic Principles – Consequences of Choices Lie in the Future Page 21
Community Ethos – Economic Principles – Money Multiplier Page 23
Community Ethos – Governing Principles – Lean Operations Page 24
Community Ethos – Governing Principles – Return on Investments Page 24
Community Ethos – Ways to Impact the Future – Count on the Greedy to be Greedy Page 26
Community Ethos – Ways to Impact the Greater Good Page 37
Strategy – Mission – Fortify the Stability of the Securities Markets Page 45
Strategy – Provide Proper Oversight and Support for the Depository Institutions Page 46
Strategy – e-Payments and Card-based Transactions Page 49
Tactical – Growing the Economy – Minimizing Bubbles Page 69
Tactical – Separation-of-Powers – Depository Insurance & Regulatory Agency Page 73
Anecdote – Turning Around CARICOM – Effects of 2008 Financial Crisis Page 92
Implementation – Assemble Caribbean Central Bank as a Cooperative Page 96
Implementation – Ways to Better Manage Debt – Optimizing Wall Street Role Page 114
Planning – 10 Big Ideas – Single Market / Currency Union Page 127
Planning – Lessons Learned from 2008 Page 136
Planning – Lessons Learned from New York City – Wall Street Page 137
Planning – Ways to Measure Progress Page 147
Anecdote – Caribbean Currencies Page 149
Advocacy – Ways to Grow the Economy Page 151
Advocacy – Ways to Control Inflation Page 153
Advocacy – Ways to Better Manage Foreign Exchange (fx) Page 154
Advocacy – Reforms for Banking Regulations Page 199
Advocacy – Ways to Impact Wall Street Page 200
Advocacy – Ways to Impact Main Street Page 201
Appendix – Tool-kits for Capital Controls Page 315
Appendix – Lessons Learned from Floating the Trinidad & Tobago Dollar Page 316
Appendix – Controlling Inflation – Technical Details Page 318
Appendix – e-Government and e-Payments Example: EBT Page 353

As related in previous blog commentaries, there is an ebb-and-flow associated with national/regional economic stewardship. This stewardship constitutes the prime directives of the CU/Go Lean roadmap:

  • Optimization of the economic engines – “Economics 901” – in order to grow the economy and create 2.2 million jobs.
  • Establishment of a security apparatus to protect the resultant regional economic engines.
  • Improvement of Caribbean governance/administration/oversight to support these engines.

The best practice for effective stewardship of an economy’s ebb-and-flow is agile management, the ability to “plan, do and review”, adjust course, then “plan, do and review” again. The points of effective, technocratic banking/economic stewardship, were further elaborated upon in these previous blog/commentaries: Venezuela sues black market currency website in US Lessons from Iceland – Model of Recovery A Lesson in History – Panamanian Balboa European Central Banks unveils 1 trillion stimulus program Lessons from the Swiss unpegging the franc Trinidad cuts 2015 budget as oil prices tumble Understanding Global Crude Oil Prices – Why Gas Prices Drop Below $2 Why India is doing better than most emerging markets ‘Too Big To Fail’ – Caribbean Version The Depth & Breadth of Remediating 2008 One currency, divergent economies Analyzing the Data – What Banks learn about financial risks

The Go Lean quest is to elevate our society and economy from the parasite role we have assumed in the world trading cycles. We want to be a protégé not a parasite! This mastery of “Economics 901” is not easy; it is heavy-lifting. Yet still, success is conceivable, believable and achievable.

We have so many lessons to learn from this case study in Azerbaijan. Let’s pay more than the usual attention to this, and other case studies in “Economics 901”.

The Caribbean’s 30 member-states are urged to lean-in to this Go Lean roadmap for the CU, CCB and C$. This roadmap applies the best-of-the-best in terms of best-practices. It serves as turn-by-turn directions to move the region to its new destination: a better homeland to live, work and play.   🙂

Download the book Go Lean … Caribbean – now!


Appendix – Azerbaijani manat

The manat (code: AZN) is the currency of Azerbaijan. It is subdivided into 100 qəpik. The word manat is borrowed from the Russian word “moneta” (coin) which is pronounced as “maneta”. Manat was also the designation of the Soviet ruble in both the Azerbaijani and Turkmen languages.

The Azerbaijani manat symbol,                         , was assigned to Unicode U+20BC in 2013. A lowercase m. or man. can be used as a substitute for the manat symbol.


The Azerbaijan Democratic Republic and its successor the Azerbaijani Soviet Socialist Republic issued their own currency between 1919 and 1923. The manat replaced the first Transcaucasian ruble at par and was replaced by the second Transcaucasian ruble after Azerbaijan became part of the Transcaucasian Soviet Federal Socialist Republic.

The second manat was introduced on 15 August 1992[1], following the dissolution of the Soviet Union, it had the ISO 4217 code AZM and replaced the Soviet ruble at a rate of 10 rubles to 1 manat.

From early 2002 to early 2005, the exchange rate was fairly stable (varying within a band of 4770–4990 manat per US dollar). Starting in the spring of 2005 there was a slight but steady increase in the value of the manat against the US dollar; the reason most likely being the increased flow of petrodollars (US dollars earned through exports of petroleum crude oil) into the country, together with the generally high price of oil on the world market. At the end of 2005, one dollar was worth 4591 manat. Banknotes below 100 manat had effectively disappeared by 2005, as had the qəpik coins.

On 1 January 2006, a new manat (ISO 4217 code AZN, also called the “manat (national currency)”) was introduced at a value of 5,000 old manat. [Thus the .95 US Dollar exchange rate as of late].

CU Blog - Azerbaijan sets its currency on free float - Photo 1

CU Blog - Azerbaijan sets its currency on free float - Photo 2

Source: retrieved December 21, 2015.

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