Basilthyme

Certainly a valid question. I'd have included it in my previous post, but it was already on the long side. Firstly, according to http://www.cbi.iq/index.php?pid=Statistics, M2 in Iraq was 73.6 trillion IQD at the end of April, with "Currency outside banks" representing 29.8 trillion IQD. So someone definitely holds IQD. It's helpful to think of who that might be in terms of Iraqis. Either: 1) Most Iraqis hold some IQD; or 2) Some Iraqis hold some IQD; or 3) Almost no Iraqis hold any IQD. 1) I'd find it hard to believe that most Iraqi households don't at least hold some IQD, and at 100,000% appreciation, some is all it would take. Average income in Iraq is $4,200 (USD), or $350 per month (according to https://www.cia.gov/library/publications/the-world-factbook/rankorder/2004rank.html). If on the day of a $1 RV the average Iraqi just happened to be holding $50 worth of IQD (which is only 1/7th of his monthly income), he would be left with $58,139.53, or more than he makes in 13 years. 2) Now assume that most Iraqis don't hold IQD, only some. What would anyone expect to happen to those few in a country where people are killed en masse on a regular basis merely for religious differences? Again, it would be pretty irresponsible of any central banker charged with ensuring stability to induce robbery/conflict/murder for a randomly distributed segment of the populace. 3) If almost no Iraqis hold IQD, then most of the $63 billion worth of it in circulation must be held by foreigners. If this is the case, the CBI definitely knows it, and so definitely knows that the net effect of an RV would be to enrich a bunch of foreigners at the expense of Iraq itself. Why on earth would they want do that? They may have liked us during Saddam days, but I don't think they liked us that much. In neither 1), 2), or 3) does it seem even remotely likely that the CBI would choose to enact an RV. Convoluting the analysis of whether an RV is possible by adding discussions of balance of payments or oil production is absolutely unnecessary. That the RV everyone is hoping for, one on the order of 100,000%, would produce massive amounts of wealth is tautologically true. It's exactly why everyone here is buying IQD, and it's also exactly why it can't happen. Just for reference, at a $1 RV, the 73.626 trillion IQD in circulation would have a value of $73.626 trillion. As it is currently worth only $63.318 billion (at .00086), the amount of wealth suddenly springing into existence would be $73.562 trillion. $73.562 trillion is: 1.05 times the GDP of the entire planet Earth 4.87 times the GDP of the entire United States Enough to create 73,562 new billionaires (there were 1,210 in 2011) Enough to create 73,562,000 new millionaires (there were 10,000,000 in 2010) Enough to give 294,248,000 people (4.28% of the world's population) $250,000 Enough to give every human being on planet Earth $10,548.43. Anyone who believes any of this to be possible, let alone likely, is not only not an investor, they test the very limits of the term "speculator".

I suspect that many posters on this site are not who they portray themselves to be. If you know what to look for, there is strongly consistent trend in behavior and characteristics among new registrants that goes beyond the typical groupthink "anything can happen" mentality. What amazes me most about the rv-WILL-happen crowd is the complete flight from reason. For those who insist on referring to their speculation as an "investment", realize you are doing so because of the negative and positive connotations associated with the words "speculation" and "investment", respectively. Those connotations are the result of the underlying rationale behind each philosophy: one implies some kind of analysis of current value, the other does not. Given so many IQD holders fancy themselves investors, rather than speculators, I'm quite surprised that none of them have "analyzed" the consequences of their beloved RV: the millions of Iraqi's who hold IQD would instantly become rich. Do you really think their economy would continue to function with virtually every one of its citizens becoming wealthy overnight? None of them would continue working. After all, isn't that the dream of everyone here, to get rich from an RV and quit their dayjobs? When faced with the decision of whether or not to revalue the currency, what central banker would decide "yes" given the above? The stated purpose of a central bank is to stabilize currency and economy, that's why the IQD is pegged to the USD in the first place, why they hold reserves, and why they facilitate currency exchange. If your response to this line of thought is anything in the range from "Yeah, but they have OIL!" to "Anything can happen!", understand that you are not an investor, and as such have no need analyze anything or to monitor events regarding the IQD, because you have no concern for risk or time horizons. You therefore have no reason whatsoever to read any commentary on this site or any other. You treat your holdings as a lottery ticket, and you wouldn't read winning number predictions, would you?

Dear Stupids, Holding currency is not the same thing as holding stock certificates: currency bestows no ownership claims to any assets upon its holders. By owning IQD you aren't "investing" in oil production or even in the general economy of Iraq, you're speculating on central bank policies. And just for reference, the kinds of returns you all seem to be implicitly hoping for vastly exceed 20%: $.01 RV = 1,063%, $.10 RV = 11,528%, $1.00 RV = 116,179% Even to most successful hedge fund managers in the world don't make these kinds of returns. The OP is correct in his assessment.

I had prepared a longer response demonstrating that what you've said so far is correct, but after reading what's been posted since I decided there was no point. No amount of explaining monetary dynamics to the hysterical "GO RV" crowd will spur any rational inquiry. This board is rife with magical thinking, fueled by confusion over fractional reserve banking, electronic payments, exchange rate regimes, fiat money, and currency "investing". You're literally addressing a cult here, so don't bother casting your intellectual pearls before swine unless you enjoy the process.

Oh, ok then. In that case I'll just take it on faith. Faith makes for the best investments, right? Funny, that's what I thought I was doing. SS or it didn't happen? Could you please tell me where I can get a subscription to Sooper Secret Armchair Master Spy Ultra Mega Truth Weekly then? Er, wait, you mean you're reading the exact same crap as me? I guess I need to start saving box-tops for some badass xray glasses so I can see what's really going on. I don't even understand what you've written here, so obviously I'm scratching my head over how it illustrates some inherent flaw in economics. Wait, you're screwing up my investment philosophy here. First you said there's some secret financial alchemy being perpetrated behind the scenes (the implication being that buying Dinar will enable me to ride the economics coattails of the Illuminati to wealth), and now you're saying what's going on is too complicated for anyone to manage (or ****, maybe I should buy gold because everything's going to hell)? So, just to recap: 1. I should ignore everything I know about economics because "smokes and mirrors". 2. There is a major monetary conspiracy. 3. There isn't a major monetary conspiracy. 4. If there is a major monetary conspiracy, you've outsmarted all the central bankers in charge of it (all whom have PhD's in economics and whom are using economic theory to either guide their actions or disguise them), with, drum roll please....................................... the internet. ****, very compelling case for currency speculation! I come out to play when I hear economic arguments, as that's what interests me about this whole scenario. I usually take a break from this site when I read enough of the "economics is wrong" and "everything you think you know is wrong but what I know is right" mantras.

Okay, well as long as you think it I guess you can have a hall pass from the holy golden spider monkey. I mean, economics is really just a pleasant way for long-dead, mustacheod Frenchmen to pass the time anyway, you don't actually have to pay attention to it.

This overview of fractional reserve banking is entirely correct. And also totally irrelevant. The mere existence of fractional reserve banking and its layers of complexity doesn't mean that anything at all can happen, even if you squint really hard. Iraq already uses fractional reserve banking and its money supply is what it is, and the central bank can either increase it or decrease it. Arguing that money is created out of "thin air" all the time and Iraq should just get on the bandwagon is an empty argument; they're already doing it. Lowering reserve requirements, buying foreign reserves, buying government bonds increases money supply. Raising reserve requirements, spending foreign reserves, selling government bonds decreases the money supply. Increasing the money supply does not have the effect you want - rather it increases inflation, which eventually causes the currency the depreciate. Decreasing the money supply would serve to appreciate the currency, but it also causes deflation. Not to mention the size of the reduction would have to be enormous to cause a 1,000fold increase in the exchange rate (which, by the way, is a separate thing, and is not the same as money supply). Any economist can tell you deflation wrecks economies, and relatively quickly. To put things in perspective, the Federal Reserve increased the federal funds rate from 6% to 6.25% on June 29th, 2006. From June 2006 to December 2006, M1 decreased from 1376.2 Billion to 1365.9 Billion. That's a seven tenths of one percent reduction (.7%) for one quarter of a percent in interest. If you look at the USD/CAD (the CAD being one of the most stable currencies in the world) exchange rate during the same period, it appreciated from 1.1091 on June 5th to 1.1607 on December 31st, for a 5.16% gain. Inflation for the same time dropped from 4.32% to 2.54%, a 176 basis point decrease June to December. So, a 5% exchange rate appreciation requires a .7% reduction in M1, which can be effected by a .25% interest rate increase, which costs 1.76% in economic slowdown. To go from .00086 to 1 IQD/USD, 116,279% appreciation is required. Assuming (for simplicity) that the above relationships are linear, and that they would hold for Iraq (no reason to think they wouldn't, not even "oil"), the required money supply reduction would be: 116,279% / 5% = 23255.8 * .7% = 16,279.09% 25,000,000,000,000 / 16,279.09% = 153,571,238,000 And entail an interest rate hike of : 116,279 / 5 = 23255.8 * .25 = 5813.95% (I'd buy those bonds, wouldn't you?) With a cost, in terms of deflation, at: 23255.8 * 1.76 = 39,170.20% (So a car that costs 20k today would cost about 51$ at the end of the year.) Even if you covered your ears really tightly and shouted as loud as you could, it highly doubtful that it would even be possible for the CBI to undertake this kind of action, let alone desirable. Torch the economy, Zimbabwe style, for the benefit of foreign currency speculators? That sound like its going to happen to anybody? --------------------------------- Of course none of the above analysis is required to understand why this will never happen, regardless of any fractional wizardry. All you really need to understand is the concept of a bank run. Many of you are clinging to the hope that I'm wrong and that Iraq can just "announce" what the IQD will exchange for because, after all, that's what Saddam did, isn't it??? Think about it like this. The IQD is pegged to the USD. Oil is denominated in USD. If the USD crashes, so does the IQD. Likewise, the IQD's value is established by the amount of USD the CBI is currently holding. If the CBI announces tomorrow that a million Dinars are now worth a million American dollars, how many Iraqi's who have been suffering for decades under corrupt governments are going to believe it? If they don't believe it, they will immediately want to exchange IQD for USD, and in very short order foreign reserves would be completely depleted. Of course, the CBI could refuse redemptions, but then, it wouldn't really be worth anything would it? Ironically enough, this is exactly what Saddam did: only certain individuals were able to receive his announced redemption rate. He was essentially rewarding whomever he pleased out of his own pocket. It's not hard to imagine. What if the Fed announced tomorrow that every US dollar would now buy 1000 Euros from here on out. Do you think you could beat me to be first in line for that exchange?

No, it will not. Purchasing foreign reserves is a tactic used by central banks to prevent currency appreciation. Domestic currency held by a central bank is not counted as being in "circulation," so Iraq's current money supply doesn't include dinar being held by the CBI. The corollary to this is when the central bank ends up selling that domestic currency it's holding it then enters circulation, thereby increasing the money supply. From here I'm sure you all know the drill, money supply up = inflation up = currency depreciation. So, why then, someone will immediately ask, can't the CBI do the opposite and sell foreign reserves to prop up the value of its currency? It's that pesky money supply thing again. Using its foreign reserves to buy domestic currency and thereby simulate an artificial demand for it has the effect of decreasing the money supply (remember, if the bank is holding it, it's not in circulation). Decreasing money supply drastically enough to significantly affect the exchange rate has very strong deflationary effects, which can very easily bring an economy to its knees (The reason being is that in a deflationary environment, spending is shifted to future periods because prices tomorrow will be less than prices today, which is obviously very, very bad for business). Iraq currently has very low amounts of inflation - 4.2% (2010 est.) https://www.cia.gov/library/publications/the-world-factbook/geos/iz.html,'>https://www.cia.gov/library/publications/the-world-factbook/geos/iz.html, so putting any deflationary pressure on it whatsoever is probably not the kind endeavor the CBI wishes to embark on, and certainly not for the sake of some foreign speculators. Moreover, shifting exchange rates very quickly and very strongly affect the trade balance (imports vs. exports), and really I'm surprised no one ever mentions this in reference to a possible rv. When the value of the domestic currency is low relative to a given foreign currency, it makes domestically produced products attractive to that foreign country, so exports are stimulated. Conversely, when the value of the domestic currency is high relative to a given foreign currency, it makes foreign products produced in that country attractive domestically, so imports are stimulated. Iraq 2010 Exports: $49.1 billion (est.) https://www.cia.gov/library/publications/the-world-factbook/geos/iz.html 2010 Imports: $42.56 billion (est.) https://www.cia.gov/library/publications/the-world-factbook/geos/iz.html ----------------------------------------------------- Balance of Trade (Exports - Imports): 6.54 billion 2009 Unemployment Rate: 15.3% (est.) https://www.cia.gov/library/publications/the-world-factbook/geos/iz.html Now I ask you, why in hell would a country consistently suffering from massive unemployment while consistenly running a trade surplus intentionally cause its currency to appreciate? To kill off the few burgeoning non-oil industries they have? For the sake of speculators?

Who cares if ex-cons have dinar? I think someone needs to inform langley that ex-con =/= escaped con. Not that any other part of this story is plausible anyway.

So the treasury holds 5.81 quadrillion (5,810,000,000,000,000) dinar? And those dinar are going to appreciate to 40.67 quadrillion usd ($40,670,000,000,000,000)? Or do you mean to say the treasury holds 5 trillion dinar, and after appreciation that currency will be worth 35 trillion usd, A.K.A. 700x Iraq's foreign currency reserves A.K.A. 2.47x yearly USA gdp A.K.A. 16.42x yearly USA tax revenue? Pretty scary thought considering how pessimistic most of you are about the fiat status of the USD, like this guy: Hate to rain on your parade, but all currency is fiat currency, even dinar. What's more, the dinar is pegged to the USD, so I fail to see how you're in any way better off holding one currency vs. the other. I'm glad I'm not the only one who noticed that.

You're insinuating that those of us who are rightly skeptical of "spirituality" should be humbled and change our ways in the event a prediction pans out. However, I strongly doubt you'd be willing to do likewise - will you stop believing in god if this "prophecy" doesn't turn out to be correct? No, you won't, so you have no basis make your assertion. You'll merely say, "oh, well he was a false prophet" and continue with your beliefs. The logical equivalent for atheists/"naysayers", should a prophecy actually come "true", would be "oh, well given the copious amount of things prophesied by everyone and their mother, the probability of someone getting something right every now and then is reasonably high enough to ignore it when it does happen." But isn't all of this moot anyway? What good is an RV in June when you guys are all getting beamed up tomorrow? God kinda gave you the short end of the stick on that one, didn't he?

Hmm well considering the bank run, complete depletion of foreign currency reserves, runaway inflation, and subsequent economic collapse that would occur in the event of a sudden RV, id say somewhere between $0.00 and -$1,000,000,000,000.00

God is my fund manager! LOLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLL

This gave me a good laugh. Treasury bonds are not callable.

I'll go out on a limb and say the problem with the story isn't in the semantics of how its related or in the moral arguments against government-induced economic-stimuli. The problem as I see it is that the narrative fails to illustrate accurately who the recipients of are of stimulus dollars and who bears the costs. Seeing as the recent "wall st. bailout" wasn't a true stimulus but a crisis-management package of loans, the most relevant example would be the Bush-era stimulus, wherein most taxpayers received a refund of some 300-1500$. The recipients were members of the lower to middle income brackets; as one's reported income increased the amount of the refund decreased, eventually down to nothing. Government spending is financed only through taxation, or through borrowing, which in turn is repaid with funds from taxation or from inflation (printing money). Bush didn't match his stimulus spending with increased taxes, nor to my knowledge was the government running a surplus at that time, so that particular stimulus was financed through inflation. When financing through inflation, money becomes less valuable, so the cost of the stimulus is borne by everyone who owns dollars. In the example, the motel/hotel owner was both the recipient of the stimulus dollars and the bearer of its cost (he paid the $100 he received from the prostitute). To make the story a more accurate reflection of real life, a larger swathe of the local economy would have received money from the traveler (maybe he drops his wallet in the street where its found by a group of Pumphandlers) and the whole town would have had to repay it (they discover he is an IRS employee, and rather than bringing the wrath of an audit down upon all of Pumphandle, everyone coughs up a few cents on the dollar and his missing wallet is returned fully restored).