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My opinion is not a very popular one around here.
I’m afraid the amount of currency in circulation is a factor… if it wasn’t then why would any country have ever lopped zeros in the past? They would have all just simply raised their exchange rates. There is not one single example of a country ever removing inflation generated zeros from their currency without doing a lop. It is a fact that the zeros on the dinar are there because of inflation.
I think the CBI has reached a target rate of 1250. I look for it to stall here… maybe for the rest of the year. Over the next 2 years I think the will move toward 1000:1 but will not better that amount. My guess is before they reach the 1000:1 figure they will issue a new currency, do a 1000 old for 1 new swap, and set the exchange rate for the new currency at 1:1
I would be VERY aware of that possibility if I was holding physical notes.
I’m not promoting opening a Iraqi bank account. I see the potential to make about 20% off this over the next couple years but I’d worry about the hoops you might have to jump through to get your money back out of an Iraqi bank account… especially if they were to lop and 95% of all those people holding dinar in accounts over there see that as a sign to bail and they all want their money back at the same time.
I do think the ISX could see some tremendous gains…. But that’s if everything goes good, which is certainly not a given at this point, and I’m not comfortable with the proxy situation that people are currently set up in to purchase stocks. Once the ISX is truly open to foreign investors I may throw some money at it.
A good way to measure a countries debt is to look at their debt to GDP ratio.
US debt 9 trillion, GDP 13 trillion. So that’s a ratio of 69%.
Iraq’s debt was over $300 billion when this all started and I think their GDP was about $50 billion.
That’s a ratio of 600%. That’s why debt relief was considered essential.
Latest numbers I’ve seen. The debt is down to about $100 billion and their GDP is about $100 billion…
So their debt ratio is now down to about 100%.
The average Iraqi has no savings and lives paycheck to paycheck, and that’s if they are lucky enough to have a job. The average Iraqi makes about $2000 dollars (or about 2.5 million dinar) a year. If they were to magically revalue to 1:1 the average Iraqi would still make about $2000 dollars a year, which would now be 2000 dinars also. A massive increase in the exchange rate would not force employers to pay a higher wage. It would be no tangible change in income no matter what currency they are paid in.
Example: Say I own a bike shop in Iraq. I import bikes from the US… lol… excuse me… China. These bikes cost me $100 a piece from China. I sell the bikes for 162500 dinars ($130) a piece. I have two Iraqi bike salesmen. By time I pay all my expenses I’m able to pay my average Iraqi guys 2.5 million dinar a year.
If the exchange rate moves to 1:1... The bikes still cost me$100. How much can I sell them for? Certainly no longer 162500 dinars… I will be able to sell them for 130 dinars. My two bike salesmen will not all of sudden make $2.5 million a year.
The only ones that would make out would be the ones with savings and of course all the speculators. I don’t think the “average Iraqi” falls into either of those categories.
Perspective.
If 2.2 trillion of the original 4.5 went to speculators. It’s pretty safe to say that at a minimum 2.2 of the additional 15 trillion introduced is with speculators.
So… 4.4 trillion dinars sitting with speculators.
That’s 4.4 times more than the total amount of US dollars in circulation.
4.4 trillion is almost equal to the entire amount of the US M2. In other words cash and all electronic monies.
Currency in the hands of speculators.
Always been a lot of talk about currency in speculators hands. Some... Have argued that the number is in the low billions.
This was posted over at American Contractor
http://www.msnbc.msn.com/id/4052400/
"According to Ahmed Muhammad, a deputy governor of Iraq's central bank, roughly half the 4.5 trillion new dinars have been removed from domestic circulation, either stashed away at home or smuggled out for sale abroad."
WOW.... half of the original 4.5 went to speculators.
How much of the additional 15 trillion do you think is in the hands of speculators?
Someone might want to inform c a… since he has his head buried in the sand.
Currency speculation is not investing in a country.
The facts are just the opposite. Excessive currency speculation can destroy an economy.
Getting close.
http://www.investorshub.com/boards/read_msg.asp?message_id=19622657
In last months meeting in Amman Jordan at the Iraqi Banking conference the target rate for the the Iraqi currency is 1250.
Posted by American Contractor on May 11, 2007 8:00 AM | Permalink
Dinar makes a not so good list.
The List: The World’s Worst Currencies
http://www.foreignpolicy.com/story/cms.php?story_id=3880
There are rich people walking around in almost every country. I still don’t understand what they are taking advantage of. The people of Iraq are poor because they have no jobs and the jobs they do have pay low wages. It has NOTHING to do with the exchange rate. As Iraq’s economy grows so will incomes… and that is what will improve the lives of the average Iraqi. It doesn’t matter if the exchange rate is 1:1 and they make 30 thousand dinar a year, or if the exchange rate is 1000:1 and they make 30 million dinar a year. It’s the exact same thing.
Can you give me a few examples of how people/countries will be allowed to milk the people dry at this exchange rate while they build the infrstructure and capitalize on their exchange rate????
HCL and revalue of the dinar.
There’s a lot of talk lately about the HCL triggering a revalue of the dinar. I just don’t see it.
The dinar is valued where it is today because the money supply is at 23 trillion and their currency reserves are at $21 billion. The HCL will not effect either of those numbers. In fact it could be seen as detrimental. Currently all money from oil sales go to the government… who allocate it as desired… some to the budget, some to currency reserves. The HCL will dedicate oil revenues… large amounts to oil companies and large amounts back to the local area governments. So there will be less money available to add to currency reserves.
What the HCL will do is tremendously expand Iraq’s oil business. It will create many Jobs. The more jobs created the higher salaries go, higher salaries mean more spending which will lead to more jobs, higher salaries, more spending, more jobs, higher salaries…. In other words a growing economy. It takes time… lot’s of time.
HCL…. Could be great for the economy… but I don’t see any impact to the exchange rate.
Kuwait didn’t do anything earth shattering.
They were pegged to the dollar.
Now they are pegged to 4 currencies…. One being the dollar… the others being the euro, the sterling, and the Swiss franc.
While doing this they increased their exchange rate by .37 percent... one third of 1 percent.
If Iraq did the same they would go from 1259 to 1254.
Kuwait info
Kuwait was invaded Aug 2nd 1990, they were liberated on Feb 27th 1991,
That’s 7 months. One month later on March 24th, they rolled out a new currency at the new rate.
From wiki: After the liberation, a fourth series was issued on 24 March 1991 with the aims of replacing the previous withdrawn series as quickly as possible and guaranteeing the country's swift economic recovery. This fourth series was legal tender until 16 February 1995. Denominations were ¼, ½, 1, 5, 10 and 20 dinar.
The Kuwait Central Bank only reports back to 1994… but at that time, in 1994, Kuwait had a whopping total of 371 million… not trillion, not even billion… dinars in circulation.
Also from the Central Bank website… Exchange rates.
Average Exchange Rate of Kuwait Dinar Against U.S. Dollar (Fils)
Period Exchange Rate
1986 290.53
1987 278.86
1988 278.94
1989 293.74
1990 291.24
1991 289.19
1992 293.30
1993 301.32
1994 297.62
1995 298.46
1996 299.42
1997 303.36
1998 304.79
1999 304.38
2000 306.79
2001 306.54
2002 303.97
2003 298.046
2004 294.07
2005 292.00
As you can see… that 10 cent exchange rate people like to quote… it wasn’t even a blip on the screen.
In fact… I’ve never seen where the exchange rate officially changed. (Other than dinar dealer claims) The only thing that happened was the people lost confidence in it, panicked, and sold it off at a street value something less than the official value. Unless you were walking around on the streets of Kuwait with money willing to buy peoples dinars, you didn’t make out.
Iraqs situation… Currency has been out for over 3 full years, 10 trillion in circulation, another 10 trillion in banks, 20 trillion total that has to be supported…. It replaced a currency that Saddam had destroyed by increasing the supply from 20 billion to over 4 trillion.
Kuwaits situation… 7 month conflict, loss of confidence in currency, street selloff, less than 400 million dinars…. Well… it's not a good comparison.
$5 billion and the Fed Reserve.
http://www.infowars.com/articles/iraq/iraq_deposits_5_billion_into_us_fed_reserve.htm
Taylor said the five billion dollars had built up from the currency transactions since the introduction of the new Iraqi dinar.
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.
http://en.wikipedia.org/wiki/Federal_Reserve_System
The 12 regional Federal Reserve Banks (not to be confused with the "member banks"), which were established by Congress as the operating arms of the nation's central banking system, are organized much like private corporations—possibly leading to some confusion about “ownership.” For example, the Reserve Banks issue shares of stock to "member banks." However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock by a "member bank" is, by law, a condition of membership in the system
Letter of Intents are submitted by countries seeking a Standby Arrangement with the IMF (line of credit)
Iraq’s latest letter of intent was filed in February and was done so because they were asking for an extension of the Stand By Arrangement
http://www.imf.org/external/np/loi/2007/irq/022307.pdf
To allow more time to reach the objectives and
complete the reforms under the SBA, we request an extension of the current SBA by six months to September 28, 2007.
Within the Letter of Intent a country might explain their intentions for the exchange rate. Like Iraq did in theirs.
11. To help curb inflation the CBI will continue its tight monetary policy stance and
allow the exchange rate to appreciate gradually, assuming the inflationary situation warrants
a continuation of this policy. The CBI also stands ready to further increase its policy interest
rate, if needed and effective to bring inflation down.
I’ve seen nothing about a new letter of intent for article 4.… it really makes no sense because per IMF procedures a Letter of Intent is not part an IMF review of article IV.
If you have links to this info I’d love to see it. Not trying to challenge you here... just that I would love to see where this info came from.
I do agree that it was a very positive sign that they reduced Money Supply over the last couple reported months…. Yikes…
Just checked the CBI Key Financial document… it’s now shows 23.5 trillion
I would be way more scared of this...
This is new... the 23% interest rates and 21 billion in reserves are current numbers.
http://www.almalafpress.net/index.php?d=126&id=35868
Google translation
He said the Iraqi Central Bank Governor Sinan Al-Shabibi that the goal of monetary policy is to achieve price stability and be done by enhancing the effectiveness of the work of all sectors in order to meet the social needs of goods and services, and explained that the Central Bank is issuing new currency and did not want to fall, and there are important economic implications behind the monetary policy, especially at the level of stability in Iraq economically. Shabibi and pointed to inflation, which rose to record rates in past years have witnessed relatively stable in this year amounting to 45%, and the Central Bank has succeeded in forming a high cash reserve amounted to 21 billion dollars. he is a good sum could in turn contribute to the creation of a stability reassuring. And statements come in light of the opposition expressed by the broad economic circles, particularly in the private sector, as well as experts and specialists about the tight monetary policy, and tried to prevent the activation and revitalize economic sectors because of raising interest rates to more than 23%. and the rate is unprecedented in any nation at the regional and global levels, The inflation indices to be calculated incorrectly, so that the results seem positive formality while inflation rises in practice as prices remained volatile for the major commodity groups involved in the account.
I don’t vouch for the source or the accuracy of the translation… but it’s more talk of a new currency.
Who's mad… I’m quite calm in my beliefs. How about you dispute the numbers. Find one… just one currency, excluding the Euro, that has an M2 number comparable to Iraq, but yet still has an exchange rate anywhere close to 1:1.
I only need one out of the approx 200 currencies out there and I’ll be a believer.
Iraqs M2 numbers is about 1000 times higher than all the countries with a near 1:1 exchange rate. That’s why their exchange rate is 1000 times worse. It’s also why they will reissue new currency and lop 3 zeros if they want an exchange rate near 1:1.
Just as was stated here.
http://www.iraqdevelopmentprogram.org/idp/news/new1297.htm
Iraq is considering redenominating the dinar, printing new banknotes to remove inflation-generated zeros from its currency, the finance minister said yesterday.
Senior government and central bank officials have said the proposal has been under consideration for some time to make one new dinar equal to 1,000 current dinars, a move that would bring the currency closer to parity with the US dollar.
That is the plan. Either to lop to get to 1:1 or no lop and have a rate around 1000:1 at best.
They would not have a plan to lop and get to 1:1 And also a plan for no lop and get to 1:1... It just doesn’t compute.
It’s like you and your wife sitting down and figuring out your finances and saying we can afford to buy this 100 thousand dollar house. Then looking at the same finances… and saying we can afford this 100 million dollar house.
One currency… one out of 200 and I’ll never bring up M2 on this board or any other.
Heck…Show me one… and I’ll never post at all on this board again.
LOL... So all would be good if I cracked a joke at the beginning of each post…
For that would surely prove that I’m a happy, jovial person with lot’s of friends.
This is a dinar board, that’s what I post about here.
You know nothing about me… and are being extremely judgmental.
I will not answer to your baseless accusations about my personal life… simple as that.
Believe as you will.
You keep going personal if that’s what makes you feel better.
I’ll keep informing about the dinar…. And that includes pointing out when ridiculous rumors don’t come true.
I remember someone pushing a rumor about this page…
http://www.imf.org/external/np/fin/tad/exportal.aspx?memberKey1=460&date1key=2007-04-30&cate...
Iraq: Exchange Rate as of April 30, 2007
The SDR is an international reserve asset created by the IMF in 1969 and serves as its unit of account. The currency value of the SDR is determined by summing the values in U.S. dollars of a basket of major currencies.
(in SDRs per Currency unit)
Date Exchange Rate
April 30, 2007 0.000516326
April 28, 2006 0.000460244
April 29, 2005 0.000451682
September 22, 2004 0.000466938
September 08, 2003 2.53758
April 30, 2002 2.53758
April 30, 2000 2.43852
April 30, 1999 2.38074
April 30, 1998 2.38881
April 30, 1997 2.3558
April 30, 1996 2.21848
April 30, 1995 2.04504
April 30, 1994 2.26323
April 30, 1993 2.26004
April 30, 1992 2.34852
April 30, 1991 2.39924
April 30, 1990 2.46985
April 28, 1989 2.48283
April 29, 1988 2.32407
April 30, 1987 2.46269
April 30, 1986 2.73556
April 30, 1985 3.24557
That puts to rest the $1.26 rumor.
Like there ever was a chance of it.
It may have a recent date, but that’s an old article. It was written last July, when the exchange rate was about 1450... Prior to the increase we’ve already witnessed.
Iraq raised it’s interest rates to 12% last July and have increased them a couple times since. They have been at 20% since about Jan on this year.
Not sure what you're saying.
My point is that no matter what Iraq's exchange rate... be it $.0007 or $3.50, they still get the going rate for a barrel of oil... 60 to 70 US dollars.
Iraq's exchange rate has absolutly nothing to do with how much they get for oil. Iraq sells oil for dollars.
The same guy that wrote those “articles” will gladly sell you some more dinar while your over there.
His no lop analysis is so poorly done.
If Afghanistan was lopped simply because they had 4 types of currency in circulation… then why in the world did they do a 1000 for 1 exchange. Why didn’t they just lift the exchange rate. They exchanged 13 trillion old for 13 billion new. Why did they do that if the only concern was 4 types of currency.
As for Russia and inflation…
Iraq’s inflation may not be supper high now, but it was in the 90’s
Year......... M2............Exchange Rate ID/US$
91.............24.6B....... 10
92.............43.9B....... 21
93.............86.4B....... 74
94.............238.9B......458
95............ 705.1B......1674 Iraq starts printing 250 dinar notes
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 Iraq starts printing 10,000 dinar notes
03.............3.78T........1459 (3)
Currency value can not and will not recover from that type of inflation without doing a zero lop.
There are absolutely no examples of it ever happening before.
Countries try to get inflation under control before they lop.
The overlapping currencies is silly. There is a 25,000 note and a 25 coin… I’m sure Iraqi businesses and citizens can figure out that an old 25 dinar coin worth about a penny befor a lop would not be about 25 dollars after a lop.
I love how he uses the Jeffrey Frankel article. I wrote to Jeffrey Frankle… I suggest you do the same.
http://www.investorshub.com/boards/read_msg.asp?message_id=17514055
1260 is the exchange rate that the budget was set on. According to this source they are now targeting 1250. The $1.26 rumor is ridiculous. It’s based on the budget number of 1260. Coupled with the Minister of Finance's suggestion last June of raisng 3 zeros from the Dinar.
There is a whole lot wrong with that though.
First… even if it was the exchange rate they were going to remove the zeros from it would be the $.00079 number and not the 1260 number.
Second… the Minister of Finances suggestion was to raise zeros from the dinar… there were many articles that all interpreted it as a zero lop from the currency, your 25000 note would be worth 25 new dinars.
There were ZERO articles that interpreted the other way.
http://www.iraqdevelopmentprogram.org/idp/news/new1297.htm
Iraq is considering redenominating the dinar, printing new banknotes to remove inflation-generated zeros from its currency, the finance minister said yesterday.
Senior government and central bank officials have said the proposal has been under consideration for some time to make one new dinar equal to 1,000 current dinars, a move that would bring the currency closer to parity with the US dollar.
CEO of Al-Warka Bank Mr. Saad al-Bunnia
http://www.americancontractor.com/2007/05/american_contractor_email_inte_1.html#more
“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.”
“It has always been the case since many decades ago that Iraqi currency is not allowed to be exchanged or exported outside Iraq. The law is still on now. Nothing deters the Iraqi businessman(smuggler ) from looking at an opportunity and grasping it which will generate him huge profits. Even with sadam stringent fist and control could not stop the smuggling of the Iraqi dinar before the invasion of Kuwait (as after wards there was no value to the Iraqi dinar).My advise to those Iraqi dinar speculators is that they are taking the risk of by buying Iraqi dinar because I really do believe that the currency will be changed in the near future once the government is stabilized and settled and also there is a large number of fraudulent currency moving in the economy in which it will be difficult to control. The reason for that falls in two points. The first point is that the central bank of Iraq is putting an RFP to the supply of printing money machines. The second point, there is no signature of the governor of the central bank of Iraq on these notes which by law is not acceptable.”
The target Rate Announced in Amman Jordan
http://www.americancontractor.com/2007/05/the_target_rate_announced_in_a.html
1250
Beginner's Guide to Exchange Rates
http://economics.about.com/cs/money/l/aa022703a.htm
Also… if your going to believe in this mythical 3 decimal place lop off the exchange rate, which would defy all known economic standards by a factor of 1000 times, at least get the math right.
1260 is the number of dinars to a dollar.
Magically moving the decimal place over three places results in 1.26 dinars to a dollar.
That would be $.79 per dinar.
Must be new math.
Dong, Rial, Dinar.
Vietnamese Dong.
........2001... 2002...2003.… 2004... 2005
M2...251.... 284....378....495.....649
Read an article that they expected a 25% increase in 2006, so that would be m2 of about 810 trillion dongs.
YES… 810 TRILLION Dongs about 40 times more than Iraq.
Exchange rate 16112/.000062 or 12.7 times higher than Iraq
“The International Monetary Fund has estimated Vietnam's reserves, including gold, would rise 33.9 percent to $11.46 billion this year from $8.56 billion in 2005.”
So Vietnam is currently only backing their M2 at about 25% with reserves.
Iranian Rial.
Saw this little tidbit about Iran…
“Monetary policy aims to manage money supply, inflation and interest to affect output and employment. Inflation is decrease in value of a specific currency over time and caused by dramatic increases in money supply. The interest rate is an important tool used to control inflation and economic growth in monetary economics.
The Central Bank is responsible for monitoring and controlling money supply, interest rates and banking.”
“For instance, liquidity was around 170,000 billion rials in year 2000, 500,000 billion rials in 2005 and 950,000 rials in 2006.”
Notice: those numbers are in thousands of billions, so that’s trillions.
Iran has 950 trillion M2
“TEHRAN, Oct 16: Iran’s foreign currency reserves held in foreign banks have risen by almost 40 per cent to $52.3 billion due to high oil prices, the press on Monday quoted a central bank report as saying.”
Iran has 950 trillion M2
Iran has 52 billion in foreign currency reserves.
Exchnage rate 9256/.0001
Looks like Iran backs their M2 at 50%.
Just a couple observations.
Iran and Vietnam, M2s of 950 trillion and 810 trillion, exchange rates of 9256 and 16112.
Iraiq Dinar, 18/19 trillion M2, 1263 exchange rate.
I once did a chart on IFF. It was of all the exchange rates higher or equal to 1 US dollar.
They all had an M2 amount of between 10 and 30 billion.
Just all a big coincidence I guess.
How do you come about that conclusion? Do you really think there is only 600 million dinar in the hands of the public/speculators? There have been numorous reports of buying frenzies all over the world. There's 100 million for sale at any given moment just on e-bay. There are numorous single investors on IIF and Rolclub that claim to have 100 million. LOL... Here is one dealer site
http://www.gidassociates.com/
Right there at the top of the page.
We are registered with the US Department of Treasury
Better Business Bureau Member
Tens of billions sold!
Year/M2/Exchange Rate, 250 and 10,000 dinar notes
Lot of talk about Iraq not suffering from hyper inflation. Currently no, but in the 90’s and early 2000,s they did go through massive inflation.
This document also blows the dealer line of 30 cent exchange rates prior to the war right out of the water.
Those high exchange rates were back in the early eighties and were only kept on the books by Saddam’s fist.
In the IBOX the exchange rates for April 02 is shown as 2.53. Could a country with about 2.75 Trillion dinars in 250 and 10,000 dinar notes really have a an exchange rate of 2.53?
These are the true exchange rates as reported by the now free to speak CBI.
http://www.cbiraq.org/Binder4.pdf
Year.........M2............Exchange Rate ID/US$
91.............24.6B.......10
92.............43.9B.......21
93.............86.4B.......74
94.............238.9B......458
95........….705.1B......1674 Iraq starts printing 250 dinar notes (1)
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 Iraq starts printing 10,000 dinar notes (2)
03.............3.78T........1459 (3)
1.Starting in 95, by the end of 02 Iraq had issued 2.4 Trillion dinars in the form of 250 dinar notes.
2. Starting in Aug 02, in 5 months Iraq issued 239 billion dinars in the form of 10,000 dinar notes.
3. Had gone up to 3500, went down 1459 because people started hording the currency because of the invasion, currency speculators.
http://www.cbiraq.org/cbs7.htm
The Department of Research and Statistics was always the one to publish statistical information about various Iraqi economic activities. This put key information into the hands of researchers and economists for analysis and economic studies, to say nothing of the importance of formulating national monetary and fiscal policy, with benefit of the quarterly bulletins and the annual reports which the Central Bank of Iraq issued. However, the negative conditions that the country experienced and the harsh constraints on publishing any information that were imposed by the previous regime caused the Central Bank to halt publishing any information, thereby reducing its statistical and research activitie At present, with the end of those circumstances and with the desire of the Central Bank to have full transparency in publication, the environment has become conducive to the Central Bank’s conducting research and publishing relevant information in a timely manner.On this occasion, the Department of Research and Statistics is pleased to publish this Special Issue of the Statistical Bulletin of the Central Bank of Iraq, to provide information available for the period of 1991 through June 2003. This is the starting point for regular publication of the Quarterly Bulletin and the Annual Report of the economy of the new Iraq
You can certainly compare exchange rates, money supplies, foreign currency reserves, and GDP. You don’t have to use Afghanistan as an example, pick any other comparable country and look at those figures and it becomes crystal clear that Iraq’s exchange rate is set at a fair amount right now and if they want to better it by 1000 times than no doubt, absolutely, must do, no other way around it… they HAVE TO reduce their money supply 1000 times… LOP.
With 318 times the currency. They will need 318 times the Foreign currency reseves.
Afghanistan currently has about $1.8 billion in currency reserves, that’s nearly twice their $1.1 billion money supply.
Iraq has 318 times more currency, so they would need 318 x $1.8 billion or about $580 billion to support their currency at the same exchange rate, .02, and at the same ratio reserves to currency as Afghanistan.
Iraq currently has about $20 billion.
Revenue wise… Afghanistan has a GDP of about $21 billion, so Iraq would need a GDP of 6.7 TRILLION to match Afghanistan’s .02 exchange rate using that ratio.
Here’s an analogy for you Bob.
You’re fed up, you succeed from the United States and declare your house the nation of Bob.
You have a girl and a boy and decide to put them on different monetary systems.
You give your boy a stack of blue paper, you tell him each piece is worth 1 dollar.
You give your girl a stack of pink paper, you tell her each piece is worth 1/10 of a dollar.
Would she get mad because hers is worth less… maybe… but I bet she would count it first.
So they count it.
You gave your boy 10 pieces of blue paper, he has 10 dollars.
You gave your girl 1000 pieces of pink paper, she has 100 dollars.
Who’s happy now?
All of you guys are too caught up in the absolute value of each monetary unit. It’s relative…
The amount of monetary units is just as important in the value equation.
Iraq with all that oil had a GDP of $87 billion in 06.
Afghanistan with whatever they do had a GDP of $21 billion.
https://www.cia.gov/cia/publications/factbook/rankorder/2001rank.html
So before Afghanistan lopped 3 zeros and had 13 trillion in currency, only about 70% of what Iraq has, they had an exchange rate about 3 times higher.
So… with ¼ the GDP of Iraq
And with only about 70% of the currency Iraq has
An exchange rate about 3 times higher sounds just about right.
Now currently Afghanistan has an M2 figure of about 58 billion.
Compared to Iraq 18.5 trillion, that is 318 times less currency.
Afghanistan’s .02 exchange rate times their 58 billion results in a money supply worth $1.116 billion.
Iraq’s .00078 exchange rate times their 18 trillion results in a money supply worth $14.43 billion
So Iraq’s currency has about 13 times more value than Afghanistan‘s.
Iraqs GDP is only 4 times more.
One could argue that Iraq’s currency is overvalued compared to Afghanistan’s.
I just posted this on strongs board in response to a question about Afghanistan.
Afghanistan did a 3 zero lop to get where they are.
They had 13 trillion old Afghani that were exchanged for 13 billion new.
Iraq can do the same thing if they want to.
When Afghanistan had the 13 trillion Afghani out there, which is very comparable to what Iraq has now, the exchange rate was 3000:1
http://www.usaid.gov/stories/afghanistan/fp_afghan_money.html
Due to war, U.N. sanctions, and looting by the retreating Taliban, the value of Afghanistan’s currency – the Afghani– had fallen so low that boxes full of bills were needed to buy just a farm animal or an article of clothing. The old Afghanis could not be exchanged for foreign currency or used abroad - making it difficult for Afghans to conduct business, travel, or import goods. Even worse, warlords in the north and the west actually issued their own currencies.
USAID provided $8.3 million to help collect an estimated 13 trillion old Afghanis and replace them with new Afghanis, printed by Afghanistan’s central bank and each worth 1,000 times the old currency. USAID provided currency counters, shredders, helicopters, and planes to move the currency to remote sites, and more than 2,400 personnel to staff forty-two exchange points throughout the country.
Despite the winter of 2002 and poor transportation in the country, trillions of old Afghanis were turned in and destroyed. To prevent fraud, the old bills were shredded, burned, or dipped in carpet dye and replaced with the new bills, which were flown or trucked throughout the Texas-sized country.
Afghanistan did a 3 zero lop to get where they are.
They had 13 trillion old Afghani that were exchanged for 13 billion new.
Iraq can do the same thing if they want to.
When Afghanistan had the 13 trillion Afghani out there, which is very comparable to what Iraq has now, the exchange rate was 3000:1
http://www.usaid.gov/stories/afghanistan/fp_afghan_money.html
Due to war, U.N. sanctions, and looting by the retreating Taliban, the value of Afghanistan’s currency – the Afghani– had fallen so low that boxes full of bills were needed to buy just a farm animal or an article of clothing. The old Afghanis could not be exchanged for foreign currency or used abroad - making it difficult for Afghans to conduct business, travel, or import goods. Even worse, warlords in the north and the west actually issued their own currencies.
USAID provided $8.3 million to help collect an estimated 13 trillion old Afghanis and replace them with new Afghanis, printed by Afghanistan’s central bank and each worth 1,000 times the old currency. USAID provided currency counters, shredders, helicopters, and planes to move the currency to remote sites, and more than 2,400 personnel to staff forty-two exchange points throughout the country.
Despite the winter of 2002 and poor transportation in the country, trillions of old Afghanis were turned in and destroyed. To prevent fraud, the old bills were shredded, burned, or dipped in carpet dye and replaced with the new bills, which were flown or trucked throughout the Texas-sized country.
For 3 full years now the reval has been a sure thing done deal once this meeting takes place, or once this document is signed, or on this historical date, or coinciding with this election. There will be more meetings, more votes, more conferences, more document signings, more holidays and a many more things for the dealers to start rumors about to keep sales up. They’ve done it for 3 full years and will have no problem keeping buyers for a couple more.
Things that will slow down the dealers:
1. The dreaded lop.
2. Joining the GGC common currency (three years minimum for that one)
3. Lack of supply.
4. The magical large revalue.
It‘s gone down 10 to 15 times that I can remember.
Every time it has been a sure sign of a revalue.
"Iraq has the potential to become a $70 billion dollar a year economy"
So Iraq has the POTENTIAL for a $70 billion a year economy.
America HAS a $13 trillion a year economy.
So Iraq has the POTENTIAL to have an economy 185 times less than the U.S.
That couple with the fact that Iraq has 3 times MORE currency than the US…
So 185x3 = 555, So Iraq has the POTENTIAL for a 555:1 exchange rate. Potentially not a bad return from the 1200-1000:1 that most purchased at.