Charlie339

http://www.foxbusiness.com/markets/2012/02/22/iraqs-dinar-still-stuck-in-wild-west-currencies/

From a very close friend of mine ... "Over a year ago I put two and two together and thought of the #1 precious metal that is in Iraq, GOLD. It therefore seems plausible that in an unfolding RV, if anything would go up first, it would be Gold. So I have been watching the IQD and Gold on Coinmill.com for about a year. For a long time, and as of this past Sunday, 1,000,000 Dinar would buy .6 oz. of gold according to Coinmill. That is consistent with their long-standing currency rate of 1 USD = 1,174 IQD. However, since this past Monday, Coinmill has consistently been showing a very interesting (and very different) set of numbers … Go here http://coinmill.com. Under the “All Currencies” headline, select Iraqi Dinar. Enter a quantity of 1,000,000 (without the commas) and click on Convert. Scroll down, looking in the rightmost column until you find “Ounces of Gold (XAU)”. Notice that the value given is now 536.65 or so (it varies slightly). The exact same value appears under Special Drawing Right (SDR) in the leftmost column. If my math is right, this is equal to 86¢ US per Dinar (or $860,000 US per million Dinar)." Of course, this could be a new glitch that has persisted all week, but it sure is attention-grabbing!

This is just an opinion. I have no links to prove that this is what Iraq is doing, nor do I even have any confidence that this is even likely. It just makes a lot of sense to me. I think we can all agree that those in power in Iraq are focused on opportunities to benefit themselves – not us or anyone else. With that in mind, it makes sense to consider this whole currency issue from their point of view. Four of their objectives have been made quite clear … • Shabbi has repeatedly said that his goal is to keep their currency “stable” and to keep inflation under control. • The CBI has recently made numerous public comments regarding their intent to “delete three zeroes” from their present currency. Supposedly, there is a draft law “almost ready” to submit to their Parliament to this effect. • They have also announced their desire to deploy lower-denomination currency. • And there have been comments from them saying they want to raise the value of their currency. How can they achieve all 4 of these objectives without going broke in the process? Implement all 3 currency changes at the same time. Here’s a hypothetical of how that could work for them .. #1: Delete three zeroes from their present currency. This “devaluation” would make a 100,000 Dinar note equal in exchange value and buying power to a 100 Dinar note. Historical precedent tells us that this can be done: At the end of our Civil War, all Confederate currency became worthless. Iraq’s own currency was drastically devalued by the United Nations in 1990, and (more recently) Viet Nam voluntarily devalued their own currency. #2: Distribute lower-denomination currency. Some of us believe that these have already been printed, and they are being held until the proper moment to issue them. As soon as step #1 is done, the lower-denomination notes would logically be much more practical to use (making change, etc.) #3 Revalue. For this example, let’s say that Shabbi declares an RV where 1 IQD - $1.87 US. • This would have the effect of giving the Iraqi citizen the exact same purchasing power he has today, i.e. today a 100,000 Dinar note is worth $187 US, and after steps 1 and 3 occur, both a 100,000 Dinar note and a 100 Dinar note would each be worth $187 US. Thus, stability is perfectly maintained. • Those outside of Iraq (governments and investors like us) would see a small profit: A million Dinar would be worth $1,870 US, or roughly $600 more than we paid for it – a 33% profit for us (less exchange fees). • On the international market, the government of Iraq would have 1,000 times more buying power than they do today at a .00187 rate, and their currency would be accepted for worldwide trade at a rate of $1.87. Thus, inflation in Iraq is driven down. And all this could be done with very little or no cost to Iraq. Again, this is just a speculative scenario not based on any “Intel.” I am not a guru, but I do believe this is sound logic from Iraq’s point of view, and it could happen this way.

Many people are now wondering “What’s the holdup on the RV?” Here’s my take on where we stand … A few years ago, the Kurds received a verbal commitment from Maliki to implement their 5-item “wish list” in his governance. In exchange, the Kurds agreed to support him. Unfortunately, he didn’t come through on his promise, and now the Kurds distrust him powerfully. Then, shortly after the March 17th elections this year, the Kurds presented a new list of 19 items they wanted implemented in writing by the new government. Allawi agreed, but Maliki said he “would negotiate.” Primarily, these are items related to the level of oil revenue sharing the Kurds will receive under their new Hydrocarbon Law, which is directly tied to the 2011 budget. This past week, the 2011 budget has survived 2 of the 3 required readings in their Parliament before it can be formally voted on, and yesterday the Kurds decided to play their Ace: They walked out of the Parliament session, and late yesterday afternoon they announced that they were sending some delegates to Baghdad to meet with Maliki “in a few days” to demand that all of their 19 items be included in the 2011 budget. The Kurds know that they are holding the better cards, because if Maliki can’t get their participation in the new government by December 25th, then he will have failed to fully form a government within the required 30 days, and he will have to step down. Under this scenario, Allawi will assume the Presidency, and he will have the constitutional 30 days to form a government. Clearly, this is not an outcome that Maliki would want. I predict that Maliki will cave in to the Kurdish demands, then the budget will be revised accordingly, and they will start the required 3 readings again, probably resulting in the revised budget being adopted by the full Parliament. Since the budget will contain most of the key provisions to define their Hydrocarbon Law, it will be enacted shortly thereafter. At that point, Iraq will have a fully-formed government, a ratified 2011 budget, and their Hydrocarbon Law on the books. And this is when Shabibi will pull the RV trigger. These events will take a few more days to occur, but not many – fortunately for us, Maliki has a hard deadline of December 25th to have the government fully in place. I don’t think it will be much longer for us!

I laid awake last night thinking about this possibility … Do you think it just may be possible that we have known the future Dinar exchange rate for several years? As investors, we paid about $1,170 per million Dinar – which means that our “rate” was US .00017 per Dinar. Dr. Sinan Al-Shabibi, the Governor of the Central Bank of Iraq, has repeatedly said that one of his foremost goals is to “maintain the stability of the Dinar through 2015 and beyond,” and news articles have repeatedly mentioned discussions among Iraqi economists (and from Governor Al-Shabibi himself) regarding their intent to “lop” 3 zeroes from the face value of their currency. This notion just hasn’t gone away or been disproven by any authoritative source that I have seen. We believe that De La Rue printed lots of small denomination Dinar notes, but these have not yet been put into circulation. Simple reason: at the current rate (~1,170 Dinar per US Dollar), a 10-Dinar note would only be worth about US .001¢, and you can’t buy much with that even in Iraq. WHAT IF Governor Al-Shabibi decided to lop the 3 zeroes and RV by equalizing the rate at the same time? If 3 zeroes were lopped, then the new rate would be US $1.17 per Dinar, but the “face value” of our notes would be decreased 1,000%. The result would be that we would hold currency that has a face value that would be honored at 1,000% less, but which is worth 1,000% more than before – a wash. In other words, our 1-million Dinar that we paid US $1,170 for would now have a face value of 1,000 Dinar, which would be worth US $1.17 each – exactly what we paid for them! This would be consistent with Governor Al-Shabibi’s stated goals, it would make the small denomination Dinar notes practical, and it would have zero inflationary consequences for Iraq’s economy. Neither America, nor any other country which holds Dinars, would be enriched or disadvantaged – their Dinar would maintain its present value in relation to US$ and other currencies. This scenario would eliminate any transfer of wealth out of Iraq, because there would be no increase in cost for them to exchange Dollars for Dinar. And the Iraqi Dinar would have an exchange value roughly half that of the Kuwaiti Dinar, which is commensurate with the status of the infrastructures in these two neighboring countries. I hate to believe that our investment could be neutralized this way, but I suppose anything is possible. Meanwhile, we wait.

Clearly stating the obvious ... In a briefing to President Obama Wednesday, General Ray Odierno, the Commander of U.S. forces in Iraq said "... the main challenges left for Iraq’s independence are political unity and financial solvency." (emphasis added). At least now we have confirmation that Iraq's financial situation is a major item from the U.S. government's perspective. Link: http://en.aswataliraq.info/?p=134794

American banks keep US$ in their vaults. This money comes from depositors like us (savings accounts, etc.), and it comes from profits earned by the banks from their lending activities and fees. They also have access to working capital money that can be borrowed from the Federal Reserve Bank. WHEN the RV happens and we go to our banks to cash in, they will give us Dollars for Dinars. The Dollars we will receive are from money owned by the bank – not Iraq. So this part of the transaction won’t cost Iraq anything. The bank makes a profit based on the “spread” – the difference between what they pay us for our Dinar and the amount they can sell it for on the worldwide market. In other words, after exchanging with us, our bank offers the Dinar they got from us for sale on the worldwide currency market at a profit, and somebody else (probably not Iraq) buys them with Dollars. Iraq doesn’t need to buy their own currency – they can just print more, so our bank’s buyer is likely to be someone other than Iraq itself. It’s only when the bank takes the Dinar that we exchanged and goes directly to Iraq to exchange them for Dollars that Iraq must fork over any US cash. I would expect this to actually occur on a trivial basis, with the vast majority of Dinar just continuing to be traded on the exchanges outside of Iraq, and investor profits being taken as the price fluctuates – just like other currencies work today.

I posted this on the Chat forum last night, but nobody seemed to know the answer. I have been seeing news blurbs on the Aswat al-Iraq website (http://en.aswataliraq.info/?p=130271) like this for several weeks

According to the International Monetary Fund (

I am not making any predictions regarding whether a redenomination will actually occur or not, nor am I attempting to persuade anyone in any direction regarding their dinar investment. I simply want to share my thoughts on an apparently confusing topic. By itself, a redenomination is nothing to fear. We redenominated our currency when we introduced the $2 bill. Nothing changed, except we put another unit of currency in the market. A dollar was still worth a dollar. However, in every sense of the word, a redenomination that is based on a

I hope we are not judged by the quality of our comments.

I would love to wake up to some great news!

Looking forward to getting back in chat.

If I had some intel to post, I would.

I hope we hear so great news soon.

Thank you for this website.

I have posted a lot in chat, but less in here.

Good morning everyone!

Thanks, I appreciate this opportunity

I have seen a few comments about the term

Just a neophyte trying to learn.

Maybe it works this way ... As a hypothetical example, if the Dinar was worth 1