I would like some input on Revaluation/RI vs. Float

[Texxas777]

Good afternoon all!  Things seem to be rapidly moving to an economic end that will benefit Iraq and their citizens and us as investors. (WE ALL HOPE!!!)

 

As an 8 year veteran of this investment I've seen/heard/experienced a lot.  Lately, there's been renewed talk and rumors on a Float vs. RV/RI.  Over coffee this morning my wife and I had this discussion and I would like to pose a question to you wonderful "Dinarvetinarians!"     

 

Question: "There is obviously a planned rollout of the "event" by the economic leadership of Iraq …Does Iraq benefit more economically/politically from a gradual FLOAT of the currency or from a RV/RI?

 

Looking forward to your comments and input.

 

Thanks Adam and all.

 

Texx 

 

[SnowGlobe7]

[Luigi1]

RV is a revaluation of a nation's currency upward or downward in comparison to a fixed locked in basket of currencies such as the USD & Euro.

 

RI is a reinstatement of the old rate before UN sanctions were imposed on a nation's currency value.

 

A Float is unlocking of a nation's currency upwards or downwards in respect to another nation's currency. When locked in, their currency will rise or lower to the same rate of movement as the currency it is tied to.

 

 A managed Float is usually approved by the IMF. The currency can move up or down in much larger approved increments in a short amount of time.

 

A Fixed Float such as the USD can only revalue at no more than 2.5% a per quarter.

 

I hope this clears up some questions. In the case of the IQD...we are looking for an RI or RV. A LOP or Re denomination is a change in a currency by removing or adding zeros without changing it's values to other currencies it is locked into. We do not want a Re-denom.

[maverick101]

Just testing the waters anybody looking for 25000 dinar notes up to 4 million uncirculated

[jeepguy]

the idea at first that  I was thinking ,   -------  the currency , to  re-value  at  best  1 too 1 ,  was going to be a feasible program,  { as  I have read, a few of us had ideas that this would  or could  start out higher around  the ball park of 2 .oo   too  3.oo  dollar range }   but this rate  might been  a real strain on the economic picture of the new Iraq,  as  they would have more dinar coming in and way too much  reserve going out to sustain the  dinar title wave ...... mr adam montaina has spoken of values in the .10 cent range  which also at this time , of Iraq politics and troubles  might  not be  that far off ,,,,,  as isis  ,had or has it own  bank { which I think is  a farce  , to  recruit   new  terrorist }  but the fact still is present ,,they are there and a thorn in the  policies of Iraq  and not to mention the  lively hood  of  the average Iraqi ....... now having said this  the  re-calling of the 50 dinar note ,  they bring in a 50 dinar note  and  they either give money or credit in exchange ........  so they are hoping , they bring in such an amount  that they will need  to open bank accounts ! ......  how much can one person carry too open  an account  with  a note  that is worth  .004  cents    { to me  I have chatted with other s    there is something  a foot  ---  going on ----   }   sorry about the long banter  ...........   but with what I was saying  ties in with the float -------  bring in lower notes  and the values might start low  enough  to in courage  banking  activities  though out Iraq ,,,,  the 10 cents per  dinar as adam   mentioned .......but is that still enough too get dinar too roll in ?????????  I think  we better wait  and see what  the turn around time table  for the 50 dinar note will be !   2 months , and or extended { extended because no-one is worried about  a worthless  paper ,  to  go to the bank }  so the extend  { we hope  and increase the rate  of  the dinar too even close  too 1 penny  }  then  they float  ----  it seems to be on what will motivate  the average Iraqi  too get off the couch and go to the bank !   so in short  the float  from 10 cents   will take  a little longer to take hold , and not use much in reserves !    but   ,  give them  50 cents too 1 dollar  value on each dinar   ------  and the dinar will  flow  like the river back too central bank   !     just  my   opinion   although it was long  -------  and the dollar will take a little more  of the reserves  but  then again ,  they did just  buy in  36 or so  tons  of gold  !   thanks

[truepatriot]

Good afternoon all!  Things seem to be rapidly moving to an economic end that will benefit Iraq and their citizens and us as investors. (WE ALL HOPE!!!)

 

As an 8 year veteran of this investment I've seen/heard/experienced a lot.  Lately, there's been renewed talk and rumors on a Float vs. RV/RI.  Over coffee this morning my wife and I had this discussion and I would like to pose a question to you wonderful "Dinarvetinarians!"     

 

Question: "There is obviously a planned rollout of the "event" by the economic leadership of Iraq …Does Iraq benefit more economically/politically from a gradual FLOAT of the currency or from a RV/RI?

 

Looking forward to your comments and input.

 

Thanks Adam and all.

 

Texx 

 

 

I would love a straight up RV 1/1.

In my mind that would be the best case scenario.

But hey..even if there is a float;by the time it reached even 5-10 cents,I will be sorely tempted to bail out.

It's like one of those rigged games people play.Like the old mountain climber game on price is right.

Only this one is rigged by the banksters.

 

I see my profits steadily rising as the cardboard yodeler climbs the fake mountain

1,000,

2,000,

4,000,

8,000,

12,000 etc etc

 

Should I hit the buzzer now,cash out,and hurridly diversify my wealth before the coming financial crash?

Or should i let greed rob my better judgement?And potentially see the Yodeling man climb over 500,000,

1 million and possibly even more?

 

I know that the man could suddenly fall off the mountain (collapse) at any time,and I take home nothing home as well,

What to choose..what to choose...

[FlyHi]

To attempt to answer the OP question, my take (as a failed 1 year vet student  ) is this.

 

If a significant RV or RI event occurs, then yes, Iraq gains politically as they are able to strut with a strong currency and feel good about themselves and state they did as they told very one they would. This is a big cultural thing for them in the ME. Economically I believe this would be a backward step for them as it will hurt all exports agricultural and of course oil which is king for them. Which country would want to pay top $ for oil after a decade of cheap oil following an RY/RI event? However, if the rumors of S for oil is true even after this "RV/RI event", then the outcome is not so bad economically as they don't have to fork out reserves to pay for the IQD coming home to roost and they will have flagged to the world that we are "open for business"...which is the reform we all want to see in Iraq. The Banking sector and supporting Laws need touching up and implementing so confidence grows to invest.

 

Good afternoon all!  Things seem to be rapidly moving to an economic end that will benefit Iraq and their citizens and us as investors. (WE ALL HOPE!!!)

 

As an 8 year veteran of this investment I've seen/heard/experienced a lot.  Lately, there's been renewed talk and rumors on a Float vs. RV/RI.  Over coffee this morning my wife and I had this discussion and I would like to pose a question to you wonderful "Dinarvetinarians!"     

 

Question: "There is obviously a planned rollout of the "event" by the economic leadership of Iraq …Does Iraq benefit more economically/politically from a gradual FLOAT of the currency or from a RV/RI?

 

Looking forward to your comments and input.

 

Thanks Adam and all.

 

Texx 

 

 

A float on the other hand assuming it starts off with current rate 1165 IQD/USD would allow better economic stimulus as confidence grows in the stability and opening up to the world markets and banking sector as we would see heaps of savvy companies throw themselves at Iraq to get a foot in the door. Over time the IQD would appreciate significantly. 

Another option is to RV to say 0.01 to 0.10 range and float up from there...similar effect but kick starts the fenzy for investment into Iraq. They will still gain kudos (political) over time for the strengthening currency.

 

Disclaimer.... I've gone troppo already  ....I am no economic eggspurt   My comments above are purely for debate by others above my pay scale!

Edited March 2, 2015 by FlyHi

[Artitech]

HOOKEM!!

[SnowGlobe7]

BEVO its whats for dinner

[tattooman1]

Just testing the waters anybody looking for 25000 dinar notes up to 4 million uncirculated

wanna trade some 50 notes for something else ?

[King Bean]

Texxas777 I will give it a try:

 

Although a float and actual straight up RV will be managed by the CBI, they each mean a lot in terms of economic stability. The CBI states they have a lot of reserves, gold etc., to support the dinar. After all these years at an imposed rate of 1166 or more, they are dipping their toes into financial reality and world markets. IMO a straight up RV is a high risk to start out. If they RV, they have to hold an equal amount of reserves basically "locked up" to support that rate, so those reserve funds can not be used to support any other economic moves in the rebuilding of Iraq. I'd love to see them come out at $2+ or $3+, cash out my dinar and walk away.

 

On the other hand, a float is less of a risk for the CBI. The dinar would rise (or fall) based on demand, economic growth and the strength of the other currencies it is "tied" to, like the US dollar. The CBI reserves wouldn't be locked into supporting a risky high RV rate and could instead be free to support the country and growth projects. At the same time, they can continue to funnel off some of their assets to buy more gold etc. Thus building strength of the CBI, reserves, dinar value, and continued upward growth. IMO it will come out at 1:1 and market forces will allow dinar to become strong, in demand, eventually growing to 3:1 or more, which I think "could" happen in a years time.

 

IMO the UST would be on board with a 1:1. They get a lot of folks to cash in, get taxes too, then sit on the dinar until it eventually goes 3+ where they will use it to buy oil, which again is sold to US consumers, thus making their profits and additional gas taxes. Win Win for the US government.

 

Disclaimer: Im going on what I have understood in 5 years of this "speculation". There are much more educated folks in these forums, whom I hope will add to my thoughts. And I like that you're discussing with your wife. Mine just wakes up and asks "are we rich yet?"   

[skrappyone]

I must say I am impressed by the responses everyone has given.  I can tell most have done their homework and not only listened, but soaked in what what said.  I have to give all of you an A+ for the job you did on the explainations.  Good job folks.   

[TrinityeXchange]

Just thought I would paste a really good speech/address from the central bank governor of nigeria back in 2004 to the Nigeria-British Chamber of Commerce.  He does a great job spelling out the benefits and drawbacks of the different exchange regimes.  Enjoy -

 

Brief Overview of Exchange Rate Regimes

 

5. Numerous exchange rate regimes are practiced globally,

ranging from the extreme case of fixed exchange rate system,

such as the currency boards and unions to a freely floating

regime. In practice, countries tend to adopt an amalgam of

regimes such as adjustable peg, crawling peg, target

zone/crawling bands, and managed float, whichever suit their

peculiar economic conditions.

 

6. A fixed exchange rate regime entails the pegging of the

exchange rate of the domestic currency to either a unit of gold,

a reference currency or a basket of currencies or the SDR, with

the primary objective of ensuring a low rate of inflation. The

advantages and disadvantages of the fixed regime, have been

well documented in the literature. They include amongst

others, the reduction of transaction cost in trade, increased

macroeconomic discipline, possibility of increased credibility

due to stability in the exchange rate and increased response to

domestic nominal shocks. A major drawback of the

fixed/pegged regimes, however, is that it implies the loss of

monetary policy discretion (or monetary policy

independence).

 

7. The floating exchange rate regime, on the other hand,

implies that the forces of demand and supply will determine the

exchange rate. This regime assumes the absence of any visible

hand in the foreign exchange market and that the exchange

rate adjusts automatically to clear any deficit or surplus in the

market. Consequently, changes in the demand and supply of

foreign exchange can alter exchange rates but not the

country’s international reserves. In this arrangement, the

exchange rate serves as a “buffer” for external shocks, thus

allowing the monetary authorities full discretion in the conduct

of monetary policy. The disadvantages of the freely floating

regime have been documented. These include persistent

exchange rate volatility, high inflation and transaction cost. By 4

far, the greatest advantage of the floating regime on the other

hand, is monetary policy independence, defined in terms of a

country’s ability to control its monetary aggregates and

influence its domestic interest rate and inflation.

 

8. A variant of the freely floating regime, managed floating

regime exists when government intervenes in the foreign

exchange market in order to influence the exchange rate, but

does not commit itself to maintaining a certain fixed exchange

rate or some narrow limits around it. The central bank ‘gets its

hands dirty’ by manipulating the market for foreign exchange.

Depending on the central bank’s intervention, changes in the

demand and supply of foreign exchange might then be

associated with changes in the exchange rates and/or

changes in international reserves. Under the system, fiscal and

monetary policies are used to promote internal and external

balance.

 

9. Several factors influence the choice of one regime over

the other. A major consideration is the internal economic

conditions or fundamentals, the external economic

environment and the effect of various random shocks on the

domestic economy. Thus, countries like Nigeria which are

vulnerable to unstable internal financial conditions and external

shocks, (including terms of trade shocks, and excessive debt

burden), which require real exchange rate depreciation, tend

to adopt a regime which ensures greater flexibility. Overall,

there is a general consensus that a fixed exchange rate regime

is preferred if the source of macroeconomic instability is

predominantly endogenous. Conversely, a flexible regime is

preferred if disturbances are predominantly exogenous in

nature. It is, nevertheless, becoming increasingly recognized

that whatever exchange rate regime a country may adopt, the

long-term success depends on its commitment to the

maintenance of strong economic fundamentals and a sound

banking system.