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GDP is a reflection of the size of an economy. The more GDP the more currency required to support that GDP. One thing to be careful about Iraq and other oil countries though. Iraq's GDP is currently about $90 billion a year. But about 90% of that is from oil sales. Oil sales are in dollars, so 90% of Iraq's GDP doesn't even involve dinars. Economics at it's most basic... Supply and Demand. Iraq has a HUGE supply of dinar, and very little demand.
Inflation comes in many forms and could be a long long discussion. A lot of countries get in trouble when they try to answer inflation by printing more currency. That's like throwing fuel on a fire.
It's a myth that the Iraqi currency dropped dramatically with this war. The "official" rate remained at around $3 per dinar, but that meant nothing, it was not honored, the "real" rate had dropped to about 3000:1 prior to the war. That 3:1 rate was back in the early eighties before Saddam took over. In the early eighties Iraq had a money supply of 20 billion dinars (all Swiss dinar at that time, no Saddam Dinars) and probably 50-60 billion in foreign currency reserves. Saddam came into power and got into a war with Iran and then the first gulf war with the US. He spent/stole all the reserves and then started printing more currency, the Saddam dinars. He increased the money supply to somewhere around 5 trillion dinars. That was a 20 year process and it was over that time the value diminished.
Kuwait:
Another myth. Kuwiat had less than 400 million dinars in circulation when Saddam invaded. Saddam broke into the central bank and stole Billions of un-issued dinars. That destroyed the value of the currency. When the war was over... only one month after the war, Kuwait issued a new currency right back to their official rate. Total of 7 or 8 months from start of war to new currency. When people exchanged for the new currency, every bill serial number was checked. The ones Saddam stole were not honored. So they started with less than 400 million dinars and ended with kess than 400 million dinars. Very easy to return to the old rate.
The Indian Rupee... I know nothing about it.
Historical precedent? Not that I've ever seen. People like to talk about Kuwait... but it is nothing like the dinar... not even close. One started and ended with same money supply. One has increased it's money supply 1000 times.
What do I think.
Well... there have been a few articles out that that talk about the dinar going to 1000:1 and then lopping. That would mean a new currency. Cash in hand could be at risk, depends on how long the exchange period is. Dealers will go into reverse mode buying back dinar, at a large markup of course.
I don't promote sending cash to Iraq to sit in a bank account... there are risk involve for sure, but that seems like it might be the way to play this. I think you avoid the big dealer mark up that way.
I think eventually Iraq will introduce a new currency. The Minister of Finance has been pushing it for 2 years now. The CBI has been holding off. Recently an article surfaced with an Advisor to the CBI stating that they will lop 3 zeros, but he wouldn't say when. Sounds to me like they all agree, it's just a matter of timing now. They could lop and make a substantial increase to 1000:1 all at one time. Or they could lop and not change the value... .00083 for this dinar, and .83 for the new dinar.
Summing up... 1000:1 is about the best I think this dinar will do.
LOLOLOL.... that's hilarious. A certain person has posted that info "The CBI uses 1 to 1.5 Billion a month" probably close to 30 times. Haven't seen you warn him.
Projections are from Iraq and the IMF
http://www.imf.org/external/pubs/ft/scr/2008/cr0817.pdf
More economy and currency.
These are the least valued currencies
http://en.wikipedia.org/wiki/Least_valued_currency_unit
Here is a list of GDP rank. Same as economy rank.
http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)
Notice that Indonesia has the 4th most worthless currency, but they have the #20 economy in the world.
Vietnam is #2 on worthless currency, but yet #60 economy.
Iran is #5 worthless #29 economy
Italy which is the #7 economy in the world... before it joined the Euro Italy used the Lira. The Lira exchnage rate was about 1500:1
Size of economy is very related to Money Supply... but it really has nothing to with exchange rate.
Economy size and currency.
The larger the economy the more currency it requires.
That can be accomplished by increasing the money supply or the value of the currency.
In almost all cases, countries simply increase the supply.
This is Iraq's projection for currency growth.
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=30932985
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=30933230
And where are the PUT options?
They'll simply set an unreasonable price and then only take one side of the action.
Well... lol.. maybe some won't see it as an unreasonable price.
LOLOLOL... IRAQI DINAR CALL OPTIONS 2008
http://www.iraqidinars.com/infobargains/iraqidinarcalloptions.html
Now this is priceless.
Hey... they except credit cards.
Jeffrey Frankel, a Harvard economics professor
To critics, the fact that the dinar’s resale value relies on the enthusiasm of other speculators makes it little more than a collectible—or worse, the central element in an elaborate pyramid scheme. Jeffrey Frankel, a Harvard economics professor, calls the activity “pretend currency trading.” “I’ve received a large number of e-mails from people saying, ‘I understand you’re an expert on Iraq. Do you have any views? Can you advise me?’” he says. “I get the feeling that all these people doing this shouldn’t be. They’re little people, they don’t know what they’re doing, and they’re going to lose a lot of money.”
http://www.bostonmagazine.com/articles/a_fistful_of_dinars/
That PR is a year old now. It was isuued Aug 9, 2007. That wasn't noted for some reason.
Do a search on Danial Duffy. He is a know scammer. Sabastian River is just his latest of many scams.
Monetary and exchange rate policies
http://www.imf.org/external/pubs/ft/scr/2008/cr0817.pdf
19. The key objectives of monetary and exchange rate policies in Iraq are to reduce inflation and counter dollarization in order to enhance the central bank’s control over monetary conditions. The appreciation of the exchange rate has succeeded in increasing the demand for dinars and contributed significantly to the drop in inflation. The CBI will continue to gradually appreciate the exchange rate until annual core inflation (excluding fuel and transportation) has come down to near single-digit levels, from 16 percent in October.
We will continue to keep a close watch on the effects of this policy on inflation and adjust the pace of appreciation as needed. Once our inflation target has been achieved, the CBI will return to its previous policy of maintaining a stable exchange rate as the nominal anchor for the economy. The CBI will continue to provide the full amount of foreign currency
demanded at the cut-off rate on the daily auctions.
So... stated goals are to counter dollarization. Which blows away the theory of them buying back all the dinar. That would be a total 180 from stated goals.
And... They will continue to GRADUALLY appreciate the rate until they get to single digit inflation and then return to a stable rate.
That is exactly what we have seen. As inflation has dropped, the exchange rate movement has dried up.
More projections
Broad Money... 54 Trillion by 2009.
Currency issued and projections
That looks like almst 20 trillion by 2009.
It’s ovbious that you either refuse to read the study done at the University of North Carolina that I have linked probably 20 times, or you don’t have the ability to comprehend what it is saying.
It is a study of all the lops done since 1960. One of the conclusions from the study is…
“Redenomination is more likely following a period of high inflation and a subsequent stabilization.”
Now I know those are some big words for you… but that means that lops are more likely to happen after high inflation has been bought under control.
That is exactly what Iraq has done.
There was an article out recently that was titled something to the effect of… “Low inflation, good for raising zeros”. I’m sure you misinterpreted the meaning of that one also.
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=30825515
"Dr. Brown holds a Ph.D. from the University of South Carolina. His degree is highly prized by academic faculties because of chronic shortage… only about 150 doctoral finance degrees from accredited research schools are awarded each year worldwide."
You had me banned from your board... but now you feel the need to try and debate me?
LOL... PHD... Doctorate... get it. Apparently not. One of the most educated economist around comes out and speaks ill of the dinar and you guys attack him and call him a scammer. Yet... a well know stock pumper comes on this board and starts making crap up about the dinar and you guys bow down and kiss his butt like he's a god. It judgment like that true scammers live for.
Are you kidding?? Or are you really incapable of understanding that Sat when I posted, it was the #1 story. It is still the number 3 story. Two new stories being posted since Sat.
It states this about the chart.
The table lists the country-years in the dataset during which annual inflation exceeds 100 percent; some of these country-years are clearly hyperinflationary, while others are more moderate instances.
In other words... the chart only list the years that were over 100%. That's what they studied... contries that had inflation of over 100%, did they lop or not. Most all of the countries that lopped got inflation under control before doing it. If you go through the list of countries that lopped, you will see that they lopped a year or more after those 100% or higher inflation year. The only countries that don't are a situation like Zimbabwe. Where their inflation is astronomical. They put out huge dinominations... they have to lop while inflation is raging or they would have a 1,000,000,000,000 bill.
These are the hypotheses of the UNC study.
Here is a better link. http://www.unc.edu/~lmosley/APSA%202005.pdf
Hypothesis 1: Both authoritarian and democratic governments may have political reasons for redenomination. Democratic governments are likely to redenominate in response to high inflation. Authoritarian governments may redenominate even without high inflation, particularly in the presence of civil conflict.
Indeed, Mas (1995) suggests that authoritarian governments will choose confiscatory currency reform rather than direct inflation as a strategy of financing.
No real relevance to Iraq
Hypothesis 2: Redenomination is more likely following a period of high inflation and a subsequent stabilization. A dramatic downward movement in inflation increases the probability of a redenomination. This is particularly likely in countries that are more open to international capital flows, that are under an IMF adjustment program, and that have politically independent central banks.
That one describes Iraq perfectly
Hypothesis 3: Redenomination is more likely immediately after an election (or with many years remaining until the next election), less likely immediately before an election, and more likely in more fractionalized political systems.
When are Iraq's next election? Doubt it's a big factor
Hypothesis 4: Redenomination is less likely, all else equal, when left-leaning parties are in office, and more likely when right-leaning politicians hold office.
are they left or right, not sure, again... probably not a huge factor
Hypothesis 5: Redenomination is more likely in nations where it has been used in the past. The total past experience with redenomination increases the hazard of its use.
Don't think Iraq has done it in the past, but certainly dosn't mean they wont
Hypothesis 6: Redenomination is more likely, all else equal, where foreign currency substitution is more prevalent in the domestic economy. This is more likely in nations with high inflation, with high local currency/dollar ratios; and foreign currency substitution is more likely after 1989 (as financial globalization expands) than before.
That sounds like Iraq
Hypothesis 7: Redenomination is a more likely response to economic problems in more heterogeneous societies, and in younger nation-states.
I think Iraq would be considered a "younger nation-state"
LOL... Dig? It's the #1 story on Google news search if you type in Iraqi dinar.
http://news.google.com/news?hl=en&tab=wn&ned=us&q=iraqi+dinar
It's an artcile about the dinar. This is a dinar investment discussion board. Shouldn't dinar related articles be brought to the attention of anyone here looking for info to help them decide to invest or not. It's simply information.
Practically all the lops were done that way. It was talked about in that paper done by the University of North Carolina, where they examined all the lops in last 30 years or so.
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=27106003
"Indeed, 2004 was the first year of single-digit inflation in Turkey since 1972, making 2005 an apt time to reinforce the commitment to low inflation."
"Similarly, in August 1997, the Russian government announced that the ruble would be redenominated as of January 1, 1998, with three zeros removed from the currency. This was intended to assure the public that Russia's economic crises were behind it; inflation was on the decline, falling from 875% in 1993, to 200% in 1995 and further, to 15%, in 1997"
Finance professor Scott Brown, Ph.D. gives warning.
http://www.prurgent.com/2008-07-07/pressrelease14468.htm
"A very strange Ponzi scheme is evolving in Puerto Rico regarding a small, instable currency called the (New) Iraqi Dinar."
"At some point the government would be forced to throw in the towel and stem the inflation by retiring the New Iraqi Dinar and reissuing new currency."
Finance professor Scott Brown, Ph.D. gives warning.
http://www.prurgent.com/2008-07-07/pressrelease14468.htm
"A very strange Ponzi scheme is evolving in Puerto Rico regarding a small, instable currency called the (New) Iraqi Dinar."
"At some point the government would be forced to throw in the towel and stem the inflation by retiring the New Iraqi Dinar and reissuing new currency."
There could be a rumor floating around Iraq that is pushing the street rate down.
Late last year when the Minister of Finance talked about going to 1000:1 and then lopping... the street rate dropped to near 1000 almost immediately. They thought it would soon be worth 1000:1 so people were willing to pay near that for it. The CBI had to come out and deny the statement so that the street rate would move back closer to the official rate.
Could be something similar here.
Sorry Johnny Rico... the comment wasn't directed at you. It was just a play on the 20 or so post recently accusing me of doing that.
Allow me to twist the truth.
http://www.banknotes.com/iq.htm
right below the gold ad, 1973 10 dinar
http://www.banknotes.com/IQ65.JPG
But who can trust me?
Why don't you point out what truths were twisted.
Fact is the guy who was twisting stuff left the board because the mods will no longer allow him to delete post that prove him wrong.
Iraq's total debt at the start of this thing was about $300 billion. That was a crushing amount they had no way to pay back.
But somehow you guys think Iraq will revalue to 1:1 making 26 trillion dinar worth 26 trillion dollars.
Currency is a LIABILITY. That would put Iraq $26 trillion in debt. They couldn't handle $300 billion, how can they handle almost 100 times that amount??
If it's as easy as some claim. Why didn't Iraq reval to 1:1 before. With 20 some trillion dinars that 300 billion debt would have been peanuts.
LOL... If they had revalued the 26 trillion to 1:1 they could have paid off the $300 trillion debt and still had $25.700 trillion left over.
Latest Financial statement from the CBI
April number for M2 has been posted. Line 71. Now 26.081 Trillion. That's an increase, not a reduction.
Currency in circulation, Line 65. 15.182 Trillion for April and the weekly numbers for may out to the right show the number growing to 15.788 through June. No reduction in sight.
Just a little logic.
With a M2 of 27 Trillion, there is no way at all they can just remove zeros from the rate.
A little more logic.
Never ever has a country done anything near what you are proposing.
70 times in recent history zero lops have happened as I have described.
To say it is just as likely... is illogical.
Don't take the word of anyone here. But you might want to listen to an Adviser to the Central Bank of Iraq.
http://translate.google.com/translate?hl=en&sl=ar&tl=en&u=http://iraqalaan.com/bm/Economy/-2007--2.shtml
June 26th, 2008
" On the other hand, revealed adviser Central Bank Governor "sought to delete the bank and raising the number of zeroes for the future Iraqi dinars, after the Iraqi dinar rose to 20%" He refused to identify the roof of a timetable for lifting these zeroes, but he indicated at the same time that " This will lift the zeroes are rational, reflects well on the Iraqi society and without negative impact upon "as he put it."
Only an Idiot would ignore those words.
A lop is to remove inflation generated zeros from the currency. That's why Iraq has such large denomination bills. They suffered from massive inflation through the eighties and ninties. The lop will remove the results of that inflation.
I wrote this a while back in response to a similar question.
If they lop, the old currency doesn't really change. They will introduce a new currency, the 1, 5, 10, and 20 maybe. The two currencies will exist side by side for a period of time. The old currency will have the old $.0008 exchange rate. Only the new currency would have a new rate of 1:1 (or whatever rate they set). People in Iraq could take their old currency to an exchange site, or retailers/shops may do the exchange for them, take a 25000 in payment and give change back in smaller denoms. Will depend a lot on how the government sets it up, how much time they allow for the exchange will be key.
Deletion of three zeroes soon
http://translate.google.com/translate?hl=en&sl=ar&u=http://www.bintjbeil.org/index.php%3Fshow%3Dnews%26action%3Darticle%26id%3D7225&sa=X&oi=translate&resnum=4&ct=result&prev=/search%3Fq%3D%25D8%25A7%25D9%2584%25D8%25AF%25D9%258A%25D9%2586%25D8%25A7%25D8%25B1%2B%25D8%25A7%25D9%2584%25D8%25B9%25D8%25B1%25D8%25A7%25D9%2582%25D9%258A%26start%3D10%26hl%3Den%26lr%3D%26sa%3DN%26as_qdr%3Dd
The Iraqis well aware that the most important thing the American effort to link the Iraqi economy globalized U.S. economy, and turned totally to the capitalist market economy, and even transform the Iraqi currency to the dollar, and this is what is being gradually, by reducing the price of the dollar against the dinar to stabilize at 1000 dinars to the dollar. ;... Some economists are confident the deletion of three zeroes soon
That's cool how you answer your own question.
Hey... who left the door unlocked. :)
I don't really have an MO. Everyone should make up their own mind.
I spent a lot of time researching the dinar and many many other currencies. I got out of the investment, but I'm still very interested in the subject and it doesn't consume much time to search for the latest articles. I am not here to antagonize anyone. I would like to think that I'm informing people and I especially dislike it when I see someone blatantly misleading the board as was happening lately.
Someone posted about opening a bank account in Iraq. If you insist on playing this out to the end... I think it's a wonderful idea to open an account. It seems like it would be the perfect way to protect yourself from a lop. I stop short of a full recommendation for that because I have never fully researched Iraqi banking laws and such. I don't know exactly what you would be exposing yourself to. I can think of a few risk right off.
Obviously I wasn't negative when I bought 10 million dinar.
Of course this is the same $70 billion. What other $70 billion do they have.
The articles where about Iraqs revenues growing to 70 billion a year becuase of the Oil price increases.
Iraq is now saying they want to raise the yearly budget to $70 billion.
Look at the last 20 or so posts. Most are personal attacks against me. I have not reported one of them. I have never reported posts for TOS with the exception of one time I went through and reported 6 or 7 at the same time to make a point. I could care less about personal attacks on here.
I am DaveDinar. I posted on IFF but I certainly never pumped dinar. I bought into the dinar blindly thinking it was going to happen at any second... sound familiar. At the time, most on IFF were hoping for a penny reval. 10 cents per dinar was laughed at as being crazy, but hey... we dreamed. It was months later when a group called the Fab 5 started these crazy rumors of a 40 cent reval. Then they stretched it to 1:1. That's when people really started digging into facts. Could those numbers, 40 cent, 1 dollar... could they be possible. Once the m2 numbers were discovered, it was over. The fight was on. The m2 guys against the pumpers. The m2 guys gave up or got banned, the pumpers ruled.
There are about 200 currencies in the world. Most you've never heard of. I researched about a quarter of the worlds currencies. Compared their M2 numbers to the GDP and foreign currency reserves. There was a very identifiable trend. Countries with Trillions for a M2 number, like Iraq, had a very low/bad exchange rate with the exception of the dollar and the euro. But they are both supported by 12 or 13 trillion dollar a year economies. Iraq's economy is 1000 times smaller, that's why with trillions in M2 they have an exchange rate 1000 times lower than the euro or dollar. Iraq has to do one of two things if they want a 1:1 exchange rate. They either have to increase their economy up to 10 to 12 trillion. Which is obviously not going to happen within the next 100 years if ever. Or they have to reduce their M2 buy 1000 times. There is a very except able mechanism to do this. It's been done 70 times in recent history and it is what Iraq will do if they want to return to a 1:1 (or close) exchange rate.