DECISION MATRIX AND MODEL
(Iraqi Dinar 2011)The following information is compiled from many, many hours of research. I have taken what some of you have found and quoted on this site and researched it in depth. I have been looking for several indicators in an attempt to come up with a knowledgeable model to be applied to the idealism of Revaluation not only in this instance but for the future as well. The significance of this model would be that it is based on historical fact as opposed to speculative analysis alone.
I first noticed Iraq Dinar market fluctuation during the closures of the Central Bank of Iraq (CBI) this past Christmas and I attempted to start mapping a trend type chart or program starting at this point and moving backwards. The CBI was closed for the holidays from Dec. 23rd thru January 3rd. CBI remained closed for several weeks after this scheduled closure in an attempt to create a shortage, however, According to the CBI this attempt only created about a 20% increased demand for the currency. In my evaluation this did not create any new demand and I can find nowhere that indicates it did. The only claim of increase was from the CBI alone. With this reported increase you would think the CBI would have held out a little longer however, if you look at the record provided by CBI the 20% increased demand did not touch the overall volume of sales and this classic supply and demand sales tactic back-fired as the lost revenue from sales versus the demand for Dinar increase was so out of proportion had they continued to hold out they would have lost the bank. I learned two very important things in this tiny piece of the puzzle. First you can’t believe anything being generated by the CBI. And it is impossible to work this scenario in as a trend or chart, let alone backwards.
So we are now starting with the plummet of the Iraqi Dinar. This will be the beginning of the point by point model that I believe can be used in the future to determine whether or not we would want to get involved in another one of these types of investments but more importantly, when we should get involved in this type of investment.
On August 6th 1990 the United Nations Security Council (Resolution 661) announced economic sanctions and it was those sanctions that plunged the value of their Dinar from $3.22 to as low as 1/4000 of a cent. It always remained a local currency, of course, but one could not spend it in any other country, since no bank would take it in exchange for another type of currency. I believe this is where the clear differences in the Iraqi Dinar and the Kuwaiti Dinar Revaluation begin.
These sanctions truly have teeth. What I mean by this is that before anything can happen as far as economic and eco-sociological changes, the sanctions must be lifted. How do you get a sanction lifted? Under normal circumstances the United Nations provides a list of “must completes”. If the sanctified Country complies, the compliance is reviewed and the sanctions are lifted. Are the sanctions lifted in Iraq? The United Nations lifted all sanctions on the 15th December 2010 allowing Iraq to make monumental moves towards the rebuilding of their Country. Also noted is the fact that the oil for food (OFF) program will end on June 30th 2011 the end of Iraq’s fiscal year.
On May 12 2003, Brookings’s reported the following in regards to Iraq’s oil reserves “Over the past several months, news organizations and experts have regularly cited Department of Energy (DOE) Energy Information Administration (EIA) figures claiming that the territory of Iraq contains over 112 billion barrels (bbl) of proven reserves—oil that has been definitively discovered and is expected to be economically producible. In addition, since Iraq is the least explored of the oil-rich countries, there have been numerous claims of huge undiscovered reserves there as well—oil thought to exist, and expected to become economically recoverable—to the tune of hundreds of billions of barrels. The respected Petroleum Economist Magazine estimates that there may be as many as 200 bbl of oil in Iraq; the Federation of American Scientists estimates 215 bbl; a study by the Council on Foreign Relations and the James A. Baker III Institute at Rice University claimed that Iraq has 220 bbl of undiscovered oil; and another study by the Center for Global Energy Studies and Petrolog & Associates offered an even more optimistic estimate of 300 bbl—a number that would give Iraq reserves greater even than those of Saudi Arabia.”
Iraq’s oil has fueled and will continue to fuel the importance of its successful transition and recovery to emerge as an active player in the World Market. Iraq has produced very limited oil throughout this historic transition, pursuant to the United Nations Security Councils program (Oil For Food), to a semblance of modern Democracy. With the lifting of the sanctions on Iraq, we can expect the large volume production of oil in the very near future.
Iraq has several other Natural Resources beyond their oil these include natural gas, sulfur, phosphates and hydroelectric development opportunities. Provided the Country can keep the political system together this initial currency investment will produce a fraction of what an investment in the Country itself will produce. Iraq’s resources are both abundant and for the most part untapped.
Iraq made application to the World Trade Organization on 30 September 2004, this began the long journey toward their acceptance into the WTO. For obvious reasons Iraq could not be a member at this time if not for the UN sanctions alone. However, the process still requires a Countries application so that the WTO can produce a “WTO punch list “ that goes hand in hand with the demands of sanctification produced by the UNSC. 13th of December 2004, The first working party was established. On 16 September 2005 the first Memorandum of intent was issued. On 28 November 2006 Question and Replies forum was held. On 25 May 2007 the first working party meeting was held. On 2 April 2008, another working party forum was held. On 8 December 2008 the first of required documentation for section a, accession (a-f) was filed and on 8 February 2008 documentation for sections a,d,e,f. Documentation for section c. has been received but is not yet posted on the WTO Accession page. Iraq is currently in Negotiations with WTO in the offered goods portion of the membership. In recent news article the following was stated and it clearly shows that Iraq is an observing member of the WTO now and desires full membership. The director of economic relations in the Federal Trade ministry said on Monday that” his ministry backed the World Trade Organization (WTO)’s decision to enter into a third round of negotiations over granting Iraq permanent membership. Hashem Hatem told AKnews that Iraq is working to a well-prepared plan to raise its status from observing member to permanent member of the WTO without affecting the country’s internal economic situation.” http://www.wto.org/english/thewto_e/acc_e/a1_iraq_e.htm
Iraq has an adaptation of the old Parliamentary government with a Democracy twist. The transition from the traditional Dictatorship to this type of government is very difficult. Add this to the fact that the Country is ready to implode and has been for since its existence the process takes even longer and is straining to the limit at best. What seems to happen is that the will of the people shine through the worst adversity provided the majority wants some semblance of personal freedom. Once freedom has been tasted it is a very difficult thing to forget. I believe that World interests are vested in seeing this Country make it. For that reason the ultra conservative or the hesitant need not ponder as I believe their opportunity for fortune will be here and gone before a decision to invest is rendered. This is truly fly by the seat of your pants investing, however, we are going over a very strong list of indicators that makes not only your currency investment solid, but also paves the road for some long term high yield plays. I am not going to include any links to qualify this portion of the analysis, as it is obvious that this portion is more than confirmed.
Note: I am in no way qualified nor am I attempting to give investment or financial advise of any kind. I am simply sharing with you my conclusion of research I have performed in hopes of making some sense out of the Revaluation experience.
At a time when nongovernmental economic establishments called for expediting approving of the next year’s (2011) budget and cutting down the operational expenditures to reach the lowest rate of deficit, Othman al-Juhayshi, member of the Iraqi parliament for the Al-Iraqiya list, said that the political blocs have agreed at the meeting held last Saturday to complete the formation of the parliamentary committees and authorize the Financial Committee to study the budget for next year to approve it within the next few weeks after the blessed Id al-Adha.
The Iraqi Finance Ministry has already announced that it worked out the budget for next year at $86.4 billion, which is more by $14 billion than the current budget.
A statement by the Economic Media Center, a copy of which was obtained by Asharq Al-Awsat, said that “at a time when the Center welcomes the convening of the Council of Representatives, the next task that it is supposed to shoulder is to expedite the formation of its committees to carry out their missions, including the Economic Committee which shoulders the responsibility of studying the general budget and working out the suggested amendments to its articles, which have become necessary to be discussed and approved to avoid the delay that is taking place in the budget of last year, in addition to making it binding for the Finance Minister to prepare a closing balance after each fiscal year to show the size of the financial transactions and the volume of the real expenditures and the mechanisms for offsetting the budget deficit, which are right mechanisms that should be followed in accurately working out the budget to estimate the deficit in a real and objective way.”
It added: While the Center urges the Council of Representatives to quickly approve the budget, it is at the same time calling for further scrutinizing the articles of the operational spending and to trying to cut down the operational expenditures in a manner that does not have an impact on the state general performance in order to reach the lowest possible budget deficit in light of the advance announcement about the possibility that the budget deficit may reach about 18 trillion dinars (more than $15 billion) this year in spite of the expectation of a rise in Iraq’s oil exports, and subsequently, a growth in the revenues from oil sales. In earlier statements, Fadil Nabi, undersecretary of the Finance Ministry, said that his country “has suggested a budget for next year by $86.4 billion.” Nabi added that “Iraq has submitted an initial draft budget for 2011 at 102 trillion dinars ($86.3 billion)” assuming that the international price of oil is $70 per barrel.
Iraq depends on its oil revenues to finance about 95 percent of its budget. Iraq, an OPEC member state, signed agreements with international oil companies that may increase its output capacity within 6-7 years to 12 million barrels a day from the current 2.5 million barrels a day, which would make it a competitor of Saudi Arabia, the largest crude producer in the world. According to the assurances of the Finance Ministry’s undersecretary “the budget is currently at the Council of Ministers and will be sent to the parliament after the formation of its committees.”
For his part, Dr Othman al-Juhayshi, the deputy for the Al-Iraqiya list, told Asharq Al-Awsat that “the budget of next year should have been approved one month before now, but the delay in the parliamentary sessions and the crisis of forming the government prevented this. As all know, approving the budget requires enough study by the Financial Committee to amend, add, and delete [whatever is necessary] and then it should be subjected for the first and second readings at the Council of Representatives before a vote takes place on it. These articles certainly require time, and this is what the new parliament does not have.”
He disclosed that “all the [political] blocs have agreed at the last session on the need for expediting the formation of the committees after Id al-Adha, and to send a message from the Council of Representatives to the government to ask it to submit the budget to the parliament to approve it. Hence, the budget is one of our priorities at present in light of its importance and to prevent obstructing the government’s work in all that is related to the citizens, pointing out that delaying approving the budget of 2011 has taken place due to the problems between the blocs because the elections were about to be held. The government became a care taker government, and the delay has negatively affected all state institutions, and we do not want to repeat this again.” The parliament last January approved the 2010 budget at $72.4 with a deficit by $19.6 assuming that the oil price is $62.50 per barrel.
For his part Mazhar Muhammad Saleh, expert of the Iraqi Central Bank, said in a statement to Asharq Al-Awsat that “the issue of estimating Iraq’s budget for next year is a very complicated issue and depends on several scenarios, including the daily anticipations, such as the rates at the financial markets and the oil markets, and the international expectations for the next stage was between $80-85 per barrel within the framework of OPEC market. In Iraq, the price is lower by $7 than the expectations for the international market.”
He said that “Iraq’s budget mainly depends on oil sales, which means that it has one source, and last year it was expected to sell 2.15 million barrel a day, and the current output is still low and below 2 million barrel for several reasons that deal with exports, transportation lines, and others.”
On the anticipated figures in the budget of next year, Salih said: “There are two articles in the budget, which are the operational and investment allocations, and hence, we should think of how much can we reduce the first and increase the second for the purposes of development and investments in particular. We have expected a growth rate by 9.4 percent, which is an ambitious rate that is close to that of China.”
The current government is facing a wave of criticism because it has not submitted its closing accounts of the government budgets since 2005 and until now, and there are demands to refer the issue to the monitoring and judicial quarters because these accounts should have been discussed and approved by the parliament. The Electricity Ministry demanded allocating a sum of 7 trillion and 806 billion dinars ($6.7 billion) from the budget of next year to cover the spending on its projects in the field of developing the electricity sector, which were approved by the government.
This was announced by Musab Siri al-Mudarris, the official spokesman for the ministry, who added that the Ministry of Planning has proposed allocating 5 trillion, 266 billion, and 650 million Iraqi dinars ($4.5 billion) as an investment budget for the Ministry of Electricity, and considered it a large budget compared with the previous years. He stressed that these funds are not enough to achieve the investment projects of the ministry, pointing out that there are funds that are due to be paid by the ministry within the framework of the projects that have implemented this year and the previous years, including 2 trillion and 925 billion dinars from the treasury; therefore, they should be returned to the state treasury next year, and the ministry is bound to pay other funds that will be due in 2011.
“ Iraq is not spending much of its own money, despite soaring oil revenues that are pushing the country toward a massive budget surplus, U.S. auditors told Congress on Tuesday.”
Iraq has a solid Financial base infrastructure in place. Although Central Bank of Iraq is difficult to pin down in regards to accurate information they are in fact a going concern. The Bank of Baghdad has recently signed an agreement to partner with Citi Bank. If we are looking at the banking industry in Iraq for solidity in the beginning of a new Iraq it doesn’t get any better than this.
With the United States of America at the top of the list as foreign investors it assures us that we will more likely than not prevail in this initial investment. The US has gone so far as to hire a private law firm to assist Iraq with claims against them for debt owed under the old Hussein Regime. The United Kingdom is also vested in the new Iraq. There are many more but I feel these to super powers more than suffice as the indicator needed to make solid decisions. Couple that with the former Presidents involvement and I really don’t need anymore. I am having a difficult time establishing solid proof that Mr. Bush was in Iraq in March 2011. I have however included the link establishing Mr. Bush in Iraq last October. In that article it becomes clear that he is there, taking care of his interests via Halliburton Inc. where former Vice President **** Cheney is still seated as Vice Chairman.
My evaluation of an investment in foreign currency Revaluation
1. When did the Currency Devalue and what was its value prior to the Devalue?
2. Are there United Nations Security Counsel Sanctions? If so how long have they been in place and when are they up for a review to be lifted?
3. What is the Country’s Gross National Product and are they producing? If no is the answer, what is stopping them? If yes is the answer, are they growing.
4. What is the Country’s Natural Resource situation, dependent on others, co-dependent, or independent?
5. Is the Country trading on the World Market? Are they Members of the World Trade Organization? If not, have they completed an application for Membership?
6. What political system is in use? Parliamentary, Democracy, Dictatorship and so on? Is it solid? If not, where in the particular respected Governments process, is it?
7. Is the Country operating under a budget? If so how long has it been in place? If not when is one anticipated.
8. What’s the Countries Financial Infrastructure look like? Banks in play?
9. What Countries are involved? What significant investors are involved?
10. What is the anticipated return on the investment? Is the projected return consistent with the historical examples found in other Countries
Returns on this investment seem to be indicative of the past Revaluations I have historically researched. I believe that the Iraq Dinar must revalue at its original 3.22 USD to 1 IQD plus regional inflation and cost of living. Here is how I came to this rate. Historically no devalued currency falling into the Iraq scenario has ever revalued less than it’s worth prior to the devaluation. As a matter of fact no currency that I can find has ever, in this scenario, come in at the old rate prior to devalue, but rather it has revalued at a higher rate. Take this information and couple it with some speculative factors to include the following. The Iraqi people had money in the bank when this devalue of their currency occurred. Do we really think that the Iraqi people would accept a loss? I do not. I see them rioting in the streets, a complete chaotic cue. No Iraq must bring the value to the currency back the original rate at the very least. Lastly consider the amounts of oil that Iraq has. They will be bringing this oil to market. This said, the Iraqi currency must have parity with the rest of the Oil producing Nations. There will be global market disruptions and turmoil. To attempt to bring Iraq forward with anything other than consistent competitive pricing just simply will not happen. To do this would be irresponsible and again it just wont happen. Expect a rate consistent with the rest of the top producing oil Countries.
The Iraq Dinar is a once in a lifetime opportunity to achieve financial freedom. With this simple but historically factual model, coupled with reasonable speculation, you can easily draw a clear picture of the outcome of this incredible opportunity. In laying the model next to the Kuwaiti Revaluation you will find that if you remove the UN sanctions from this scenario the RV’s time lines are synonymous, This being said get ready for the official announcement very, very soon and understand clearly that the RV we have all been waiting for is not a one day event but rather is a process that began when the UN Sanctions were lifted. That’s right the RV is in progress….. We are waiting for it to finalize. Your investment is already in play.
I want to be the first to congratulate you on your success.
God bless all of you.
Monday, June 20, 2011