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Your proving my point. You’ve shown me two articles that state that the government changed a law that will allow citizens to invest in the dinar. I have never said that was rumor, I knew about it the first time they did it and the second time when they extended it.
My point is, and neither article disproves it, is that it is pure rumor and speculation to say that any government is invested in dinar.
Yeap… and there are plenty more articles talking about people buying huge sums of dinar… but I have yet to see one single report that states a government has bought even 1 dinar.
What’s absurd is when rumor stuff gets posted as if it’s a fact... like that the US, GB, Israel, and other countries are holding dinar. That is pure speculation and rumor. There never has been anything to substantiate that claim.
The Israeli law was to allow their CITIZENS to invest in dinar. It never mentioned anything about the Israeli government buying any dinar.
Does anyone else find it a bit interesting that Iraq is announcing they are going to 1:1… but at the same time the Budget is staying exactly where it was with the 1200:1 rate? They are “supposedly” going to increase the value of the currency 120,000%, but yet the budget will remain the same???
The Central Bank influences the exchange rate by buying or selling dinars. They are having to purchase dinar (sell dollars)to maintain the rate.
Here is what the CEO of Warka had to say about it. He probably understands it better than I.
This interview was from June of 06.
AC Question:
What is your opinion on the current rate of the Iraqi Dinar? Do you think an increase in value will occur and if you do when do you think it will happen? What would the economic conditions in Iraq be like for the increase in value of the Iraqi Dinar?
CEO Al-Bunnia:
As you well know, any currency rate in any country depends on the stability of that country in terms of political and security. We hope everyday that both the political and the security situation in Iraq will be more stable than what it is at the present time. The current exchange rate is, in my personal opinion, not a true rate because the dollar exchange rate in Iraq depends on the supply and demand of the said currency. If it was not for the daily intervention of the central bank of Iraq in selling in the range of 500 million dollars per month, one would expect the exchange rate to reach as high level as 5000 dinars to the one dollar. I believe that an increase in value of the Iraqi dinar will not be seen in the short term as the Iraqi government depends on the sale of the dollar to pay the expenses of the government from salaries to the internal contracts. Also, due to the high salaries which are being paid now to the public sector, most government employees will not accept a decrease in their salaries as they were very deprived in the days of the old regime. If this magic wand be struck on Iraq, then I am sure that we will over come all the neighboring countries in their standard of living .
Where was that reported?
Rasica... You posted many times that Iraq would never lop because of the overlapping problem.
Now that they are removing the coins that is no longer an issue at all. In fact... that might be the reason they are removing the coins. I can't think of any other reason they would be in such a rush to pull them from circulation. Gotta get rid of them before the meeting that is supposed to happen in the next 3 months.
What do you think?
Exit options…
If the dinar revalues, to 1:1 lets say.
You will have to have an account at any bank to exchange. There is no way whatsoever that you will walk into a bank with a couple million dinars and walk out with a couple million dollars in your pocket. Banks simply don’t have that much cash sitting around. They also will not just cut you a check on the spot. I would guess with any sum of money that large they will require that the currency you are turning in be validated and they probably will not credit your account until they have exchanged the currency and recieved payment.
When your talking to your bank about exchanging… run that 1:1 scenario by them.
Now then… I’m sure it’s not a shock when I tell you I don’t think it’s going to revalue to 1:1.
I believe it will be a new currency and you will get 1 for 1000 when you exchange. If Iraq announces a new currency and a two year exchange period, my guess is that banks MIGHT help you out. If they only give a two or three month exchange window, I don’t think the banks will take the risk of getting stuck with the currency so you might be relying on the dinar dealers to get your exchange done. Problems there are… 1. They are going to charge you for it, and 2. If it’s a short exchange I doubt the dealers have the resources to purchase back all the dinar it took them 3 years to sell. They will be swamped.
The length of the exchange period will be key.
Why are they only allowing one month to exchange coins?
Dry run maybe?
I’m not sure they are going to introduce any new bills at this time.
“The Bank announced in a statement that he will be replaced Akiem currency mineral equivalent paper currency to the banks and branches scattered in Iraq without charge or commission.”
They already have 50 and 100 bills correct. It may just mean that you take your 25,50, and 100 coins in and they will give you equal amount back in bills, just 50s and 100s. If you have an extra 25 coin left over, it’s no big deal, it’s like two cents. This would leave them with the 50 as the lowest denomination… being worth 4 cents right now.
I would be VERY surprised if they introduce a new 25 dinar bill at this time.
What I find very interesting is that they are only allowing 1 month for this to happen. Why the RUSH to get rid of the coins? I think this could be a sign that something very substantial is going to happen pretty soon.
LOL… as Emma said a year ago… it may truly apply now. “You better have an exit strategy worked out.”
I would have different plans for different scenarios, one for a revalue and one for a lop.
Maybe the new dealer onboard here could tell us…. Just in case there is a lop and people need to get their currency back to Iraq for an exchange. Is he, and other dealers, prepared and equipped to buy back, IN A SHORT TIME FRAME, all the currency that they have sold over the last 3 years.
Currency auctions are a way for the central bank to intervene in the exchange rate.
Iraq’s central bank is buying much more of their currency than they are selling, so that puts pressure on the currency to appreciate.
Vietnam’s central bank is intervening by doing the exact opposite. They are selling much more of their currency then they are purchasing, causing the currency to depreciate.
Currency is basically supply and demand.
The economy does play a part. It is the "demand" side of the equation.
The supply side of the equation is the money supply. Vietnam, last I checked had 810 trillion dong in supply. With an exchange rate over 16000 to 1, that means Vietnam has about $50 billion worth of currency floating around to service a $260 billion economy.
Iraq has 21 trillion in supply at 1230 exchange, so $17 billion worth of currency for a $80 billion economy.
But remember, most of Iraq’s economy right now is oil sales, dollar denominated.
They really need to grow the rest of the economy to drive up the demand side of their equation.
Dilution will lower value if all else remains static.
As in most cases there are multiple components to an equation.
If a company dilutes their shares 4 times, you might expect the price per share to drop 4 times. But what if they also increase earnings by a factor of 10 during the same time frame. Well.. the price per share would rise... all while they are also diluting.
Yes... the Iraq Central Bank does compile and report the numbers.
http://www.cbiraq.org/key%20financial.xls
Line 70 is the money supply. (M2). It has clearly gone up. Notice it was 21 trillion last December, then the numbers came down all of a sudden. The CBI reported there had been an error in reporting from some of the banks. If theses numbers were fake, why would they admit to errors and make corrections.
Pegged currencies of developing countries are required/expected to maintain very high levels of foreign currency reserves. Iraq currently has over 100% backing and as long as they maintain that, they can continue to slowly lower the exchange rate.
Iraq has been able to increase their exchange rate as they have increased money supply because they have increased Foreign Currency Reserves at a faster rate.
Look at line 34. Gross Foreign Assets of CBI.
LOL... that all sounds good. But none of it has one bit to do with the value of their currency.
If it did... then why do people constantly talk about the fantastic exchange rate that Iraq had under the DICTATOR Saddam Hussein? He and Iraq were everything you have in your post... but they had a great exchange rate... how? how? how?
You can't have it both ways.
"Off bank notes or currency bill(s) = LOP"
Has happened 70 times in recent history.
"Off of value is reval."
Has never happened
Why would a top oil producer due such a thing?
I’ll put my DD up against anyones.
Personally… I think you should be ashamed of yourself.
Are the “big dogs” still predicting a $5 to 1 dinar revalue?
That would give Iraq, a country with a $10 billion economy, when dollar denominated oil is removed from the figure, 5:1 would give them a money supply of over $100 trillion.
The US has 7 trillion and the European Union has about $9 trillion. So 16 total. My educated guess is they make up about 2/5 of the worlds currency. So $40 trillion is probably about all the money in the world. So overnight, Iraq will magically produce a money supply 2 and ½ times the rest of the world combined. All with a need of a tiny $10billion economy.
With all your DD I’m sure you can explain to everyone how this could be possible.
It appears that around March Iraq is going to announce a 1000:1 lop. I’m sure you think not. But I promise you this. Whatever the decision is, I will come here and take all the heat anyone can dish out if I’m wrong.
Will you do the same?
Remember...
MONEY SUPPLY IS A LIABILITY TO THE GOVERNMENT.
SPECULATING ON A CURRENCY IS NOT, NOT INVESTING IN A COUNTY. IT'S QUITE THE OPPOSITE.
I know who you are... you've used many many screen names over the years on dinar boards.
Tell Susie, Dave Dinar say hi
LOL... Hey SecretKey
What rumors or mass misinformation are you and Shotgunsuzie working on these days?
How many more reval parties have you guys attended?
Is uncle Larry still pulling the strings?
We really need to catch up.
Trinity… that would be a good thing for the dinar.
When the Fed, or in this case the CBI raises reserve requirements that’s known as “Tightening the Monetary Policy”.
A tighter monetary policy has the effect of reducing, slowing the increase, of the money supply.
But… I’m not sure that a tight monetary policy is the best thing for a budding economy. They need access to credit, this will hamper that.
So, like most things, it’s a double edged sword.
That link is blocked for me. Could you cut and past the pertinent info for me?
Otherwise I’ll take a look when I get home this afternoon.
Yes....
http://www.iraqdevelopmentprogram.org/idp/news/new680.htm
He said the dollars had been accumulated by the Iraqis since the creation of the new Iraqi dinar and not sold to them by Washington.
The Fed Reserve bank is about as private as the IRS.
And there is ZERO proof that the Fed Bank has one single dinar.
Iraq built up a large amount of dollars by selling dinars, to who it is not know for sure, but probably mostly to currency dealers who then sold them all over the world.
They took the dollars that they received for those dinars and put it in the Fed Bank in New York for safe keeping and to draw interest.
That is a far far cry from saying it's a fact the Fed is invested in dinar.
Logic and Common Sense and the FACT that there is NO hyper-inflational in IRAQ as there was in Turkey
That is only a fact in dinar fantasy land. In the real world it is preferred that countries get their inflation under control prior to lopping.
Many will wait years after inflation has subsided before lopping.
It is explained perfectly here if you take the time to read it.
http://convention2.allacademic.com/getfile.php?file=apsa05_proceeding/2005-09-05/40104/apsa05_proceeding_40104.pdf
Turkey lopped in 2005. From the liknk as stated by Turkey's central bank.
"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."
So imagine that. Iraq is practically just like Turkey. In fact the following sentence would make perfect sense if issued by Iraq's Central Bank, just change the name of the country and the year.
Indeed, 2007 was the first year of single-digit inflation in Iraq since 1981, making 2008 an apt time to reinforce the commitment to low inflation
http://www.cbiraq.org/Binder4.pdf
Year.........M2............Exchange Rate ID/US$
91.............24.6B.......10
92.............43.9B.......21
93.............86.4B.......74
94.............238.9B......458
95........….705.1B......1674
96........….960.5B......1170
97........….1.03T........1471
98.........…1.35T........1620
99.............1.48T........1972
00.............1.72T........1930
01.............2.15T........1929
02.............3.01T........1957
03.............3.78T........1459
If that is not hyperinflation then nothing is.
The FACT that the U.S. Government and Great Britan Gov't are highly invested in Iraq Currency
That is anything but a fact. Pure speculation backed by nothing. Show anything that states that the US, Britain, or any country for that matter is holding dinar.
Obviously my post wasn’t meant as an absolute.
How about if I had used “bill pay day”. A lot of people will sit down and pay all their bills for the month in one day. Yeah Yeah… do Iraqis really have lot’s of bills?? I don’t know. I was just pointing out that a large revalue would create MASS CHAOS.
I’m glad you said what you did though… because I have read hundreds of post from people saying Iraq would never lop due to the cost of reprinting new currency and having to do another swap, and then in the next breath they claim a large reval is right around the corner. As you seem to have realized… a lop and/or a revalue will both require printing of a new currency and an exchange of such currency.
So in other words… the AVG IRAQI CITIZEN won’t gain a thing from a large revalue. Only the wealthy citizens and all the foreign speculators will become millionaires. That ought to go over real well.
You guys have to get a story and stick to it. I’ve seen hundreds of post’s saying that Iraq just has to revalue so poor Joe Iraqi can have some spending power.
But now the story is they have no money, so where would this spending power come from? Why do they have to revalue to help the poor people if they have no money to start with. 1:1 means nothing if they have nothing.
Imagine Joe Iraqi gets his 200,000 dinar pay for the month. He takes the family to the market the next day and spends all of it buying supplies to last until the next payday. Then the next day he wakes to see that the $200 worth of dinar he spent the day before would have been worth $200,000 if he had just waited a day. If only the family mule had come down with diarrhea forcing a postponement of the trip. Poor Joe… maybe next time.
I think Joe would be out for blood at that point.
LOL… and imagine the next day at the market. With security lacking, Iraqis everywhere walking around with 10s or 100s of thousand of dollars in their pockets… trying to buy a loaf of bread… and the shopkeeper trying to give then change for their 25,000 dinar/dollar bill. The shopkeeper will need millions just to give out change for the day.
I didn’t forget it. It is reported in the CBI financials which I have taken into account.
The amount they have is irrelevant. It’s a mole hill on a mountain.
So you guys are convinced that Iraq with essentially no economy other than oil, which is transacted in dollars, is going to have and support a money supply that is the equivalence of twice the United States and the Euro Zone combined?
The US has a $13 trillion GDP
The Euro Zone has about $13 trillion GDP
Iraq has a $80 billion GDP and 90% of it is represented in dollars.
So in essence your saying that Iraqs $8 billion dinar economy (take away the 90% dollar denominated oil sales) should have 3 times more money at a 1:1 exchange rate than the United States and their $13 Trillion dollar economy.
That’s like saying an $8 billion economy is equal to a $39 Trillion economy.
They can’t elaborate because there is nothing to add. It’s a little game that a lot of the dinar forum participants like to play to garner attention. Put little cryptic messages out there as if you know something that no one else knows, but you can’t possible reveal the whole story or your source because it would endanger the world as we know it. It’s been happening for 3 solid years on the dinar forums, and for 3 solid years every one of them, 100%, has been proven to be full of it.
The source more than likely is a brain damaged hippy pot head chic living up in Alaska.
A lop or RV???
Some think this talk means a revaluation to 1:1, some think it’s a lop of 3 zeros with a new currency and a new value of 1:1.
Let’s look at the two in comparison.
For reference
Kuwait has a money supply of 16 Billion dinars, with their exchange rate that equals a money supply of 52 Billion dollars.
Saudi Arabia has a money supply of about 500 billion riyals, which equals about 130 billion dollars.
The US has a money supply about 7 trillion
The European Union has about 9 trillion dollars in money supply.
So… Iraq has a money supply of 21 trillion dinars as of now.
If they go with the RV no lop plan, they end up with a money supply that equals 21 trillion dollars. That’s 5 trillion more than the US and European Union combined.
A lop with a new value for the new currency would leave them with a money supply of 21 billion dollars. Close to half of what Kuwait has and about 1/6 what Saudi Arabia has.
Looking at Iraq’s economy, which scenario fits better? The size of the Euro Zone, plus the U.S., plus the U.S. almost again???
Or
Half of Kuwait and 1/6 of Saudi Arabia?
Seems pretty clear.
You obviously prefer the lies continue to spread. Not surprising.
All I was doing was showing Trinity, with facts published by the Central Bank of Iraq, that we did not destroy the value of the Iraqi currency.
But you would rather I "shut up" and let the misinformation continue.
Don't let the facts get in your way.
Trinity… you say you disagree with me, but then you state “the biggest impediment to this is all the notes that have been printed”
That is exactly what my opinion is based on. I posted this on here back in March.
http://www.cbiraq.org/Binder4.pdf
Year.........M2............Exchange Rate ID/US$
91.............24.6B.......10
92.............43.9B.......21
93.............86.4B.......74
94.............238.9B......458
95........….705.1B......1674
96........….960.5B......1170
97........….1.03T........1471
98.........…1.35T........1620
99.............1.48T........1972
00.............1.72T........1930
01.............2.15T........1929
02.............3.01T........1957
03.............3.78T........1459
These are figures that the CBI has put out now that they are allowed to publish them. Saddam would not allow it during his reign, and we can see why.
Back in the early eighties when the oft mentioned 1:3 exchange actually existed Iraq’s money supply was probably less than 20 billion. During the eighties Saddam burned through the countries currency reserves, that destroyed the value, then as you can see, during the nineties Saddam turned on the printing presses and really put the hurting on the value of the currency.
It was not us that trashed the value of their currency, that is one of the big lies that keep on circulating on dinar boards. It is totally not true.
When we invaded and they did the exchange to the current dinar…. The Swiss dinar was being used in the North… The entire rest of the country was only using two different notes. A 200 dinar note and a 10,000 dinar note. This is documented in many different places. If as the lie goes… and Iraq really had a 1:3 exchange rate at that time then Iraqis were walking around doing their business with only $600 and $30,000 dollar bills.
It’s just not true.
A large reval is out of the question.
It is an economic impossibility. No country has ever increased their money supply 1000x causing their currency to loose value by 1000x… (That is MASSIVE Inflation and that is exactly what has happened in Iraq.)… well, no country has ever or will ever simply revert back to the old exchange rate without also reverting back to approx the same money supply. NEVER NEVER NEVER… more than 100% sure. Large revalue absolutely will not happen.
They would not be discussing a plan to lop 3 zeros and also have a plan to just simply revalue to 1:1 without the lop. The difference in those plans is MONUMENTAL!
The revaluations that already happened in Kuwait were less than 1%. The current talk of pressure for Oil countries to revalue is talking about increases of 1 to 5%... and note that a 1-5% increase is driving them batty thinking speculators may take advantage of it.
Iraq could revalue 1-5%... maybe they could get crazy and revalue 10%. But a 50-100% increase is almost surely not gonna happen and a 125,000% increase, to 1:1, is pure nonsense.
The talk of 1 dinar to $3… there are no words to describe that. Iraq’s money supply at that point would be larger than the rest of the world combined. A dirt poor country with no economy outside of oil which is sold for dollars, meaning practically no demand for dinars, would have a larger money supply than the rest of the world combined.
If they go through witht this plan
"The Central Bank of Iraq is contemplating rebasing the Iraqi dinar and issuing new banknotes"
The new banknotes will be valued at .81. The banknotes held now will have the current .00081 value.
Since 1960 SEVENTY currencies have lopped. How many have "made the news"?
Perspective… debt is commonly measured against GDP.
Yes… the US has a large debt, but when measured against GDP it is less 100%. There are many countries with a debt to GDP ratio of over 100%.
Do you not consider a $13 Trillion GDP an asset?
Iraq with all that oil. It's a great thing for Iraq to have it, but again a little perspective is in order here. At 2 million barrels a day x $100 it will take Iraq 178 years, yes, that's One Hundred Seventy Eight years to equal one year of The United States GDP.
I posted this the other day… maybe you missed it.
The amount of oil OPEC sells on the world market is somewhere around $1.5 billion per day, said Jeffrey Currie, the head of commodity research at Goldman Sachs in London.
Compare that, he said, to the more than $3 trillion that change hands in currency markets every day.
"You're talking about a value that's just too small to show up on the radar screen," said Currie. "It isn't enough to materially change the currency markets."
The original Paris club debt reduction plan was to have the final %20 of Iraq’s debt written off in Dec of 2008. That was all based on Iraq following IMF protocol. That’s where the Stand By Arrangements come into play. Iraq’s current SBA expires this December… but look for them to apply for another year, they may do it in 6 month increments, but I expect they will remain under a SBA until next December. I would not look for anything significant to happen before then, Dec of 2008.
JMO
Interesting take… 40-50 billion is peanuts. Do you have a link that shows a substantial increase in the US money supply?
According to the stats compiled here the US money supply is growing no faster than other countries.
http://en.wikipedia.org/wiki/Money_supply
My real question for you is if you truly believe what you posted, and feel an increasing money supply is bad for a currency (which I agree with) then how can you possibly see the dinar as a sound investment? The money supply for the dinar has gone up near 100% each of the last 3 years.
With supply and demand being the main contributor to currency values. The US dollar has a supply of about 7 trillion M2 and 10 trillion M3. There is a tremendous demand for the dollar… a $13 trillion GDP proves that.
Iraq on the other has a money supply of 20 trillion, twice that of the US… and I have to ask where is the demand for it, other than speculators. Sadly… there is practically no demand for the dinar. Iraq’s GDP is about 70-80 billion and 90% of that is generated by oil sales which are in dollars.
Don't forget to think about this also....
1.00 USD = .274300 KWD Kuwait(15 BILLION MONEY SUPPLY)
1.00 USD = 3.72997 SAR Saudi Riyals(500 BILLION MONEY SUPPLY)
1.00 USD = 1224.6000 IQD Iraq Dinars(20 TRILLION MONEY SUPPLY)
They’re all fairly similar when you take supply into account. Same as a stock, the float obviously effects the value. If two companies have the same value and one has 10 times more stock then the share prices will differ by about 10 times. In this case, Iraq has a float of currency about 1000 times higher than the other countries. Kinda explains the 1000 times higher exchange rate.
The last time Iraq had a legitimate 1 dinar to $3 exchange rate was around 1980. They also had a money supply (float) of about 20 billion, or 1000 times less than now, at that time.
Still waiting to cash in on Iraq's oil
http://money.cnn.com/2007/11/08/news/international/iraq_oil/index.htm
Ditching the dollar
http://money.cnn.com/2007/11/19/news/international/oil_opec/index.htm?postversion=2007111915
"The dollar is like the Microsoft Windows of the oil world," said Tertzakian. "It's just hard to switch out of it."
And even if OPEC did switch its oil pricing to another currency, some doubt whether the dollar would really take a hit.
The amount of oil OPEC sells on the world market is somewhere around $1.5 billion per day, said Jeffrey Currie, the head of commodity research at Goldman Sachs in London.
Compare that, he said, to the more than $3 trillion that change hands in currency markets every day.
"You're talking about a value that's just too small to show up on the radar screen," said Currie. "It isn't enough to materially change the currency markets."
Oil is sold for dollars. Iraq’s exchange rate has nothing to do with how much they get for oil.
Iraq sells oil for $100 a barrel, they can then spend that $100 or they can convert the $100 into about 120,000 Iraqi dinars.
Kuwiat sells their oil for the same amount, $100. They can spend the $100 or they can convert the $100 into about 27 Kuwaiti dinars.