JayP

Sorry stryker, did not want you to feel that way, but I think folks are just telling it like it is for what this article is saying, that's all. This was however a very good article for us though, so I hope to see more of it. The truth is, I am sure that Shabibi wants to see the Dinar appreciate, regardless if he goes from 1166:1 to 1000(Dinar):1(USD) or RD and then 1.17(Dinar):1(USD) to 1:1 after that. In the end it both works out as the same return, the only difference is that without them RDing first and going from 1.17:1 to 1:1, and if they go from 1166:1 to 1000:1, then we do not need to deal with the extra step of needing to exchange our dinar for any new dinars, but I do agree, no question about it, Shabibi I am sure does want to see it appreciate within a reasonable and realistic change.

I do not believe that is the case. If you look at this link you can see on page 18 the amount of Dinar that was issued, which supports the CBI's intentions to want to do what they are saying: http://www.cbi.iq/documents/Annual_2010f.pdf You can see in there that they released 27.5 Trillion in Dinar. (The 27,507,328 dinar figure is in the millions). This is then also supported by the "Key Financial Indicators" link below Statistical Charts in this site: http://www.cbi.iq/index.php?pid=Statistics Row 79 will show you the total currency outside the banks. The figure as of Dec 2011 was about 27.6 Trillion. So in my opinion, I think that the CBI is quite serious about this plan, but the Govt is obviously opposed to the idea though, as they do not see enough benefits in them doing this to justify the efforts or risks involved. I say go Govt!!! We are on their side in this!!!

Hello Dinar Don... In all fairness, I think that there is potential here, but understanding the definition of what it means when a country discusses a process of deleting zeros is critical. Here are some past countries that have done this, and you can see what they have discussed. You will see that the terminology they used is just the same, so I do not want to tell anyone that they are negative just for understanding what the terminology means. If anything, the folks we should not be happy with the few names out there that try and re-define what this means that a country is talking about, or what it means for our investment: http://mg.co.za/article/2008-07-30-zim-to-lop-10-zeros-off-currency http://www.cenbank.org/redenomination/newpolicy.asp http://en.mercopress.com/2008/01/02/venezuela-launches-new-currency-to-stem-inflation http://www.spokesman.com/stories/2004/dec/31/turkey-will-lop-six-zeros-from-its-currency-at/ http://edition.cnn.com/2002/WORLD/asiapcf/central/10/06/afghan.currency/ http://www.rferl.org/content/article/1059616.html https://www.isdadocs.org/speeches/memopdf/Redenomination-Memo-061405.pdf http://www.atimes.com/atimes/Southeast_Asia/NA20Ae01.html These are all currencies that did do a Rd, and we can clearly see the verbiage used here. Clearly, Iraq has no settled on the idea of going this route, and that is a great thing for us, but I do think that it is ok for someone to point out the truth about what it is that they are discussing here, because there are a few people out there that wish to deceive people into thinking that deleting zeros means something else entirely different.

For those that want to redefine the definition of what it means when a nation discussing deleting zeros, I hope this offers some clarity. Almost every nation that I have reviewed the redenomination history of, spoke of this same thing. The good news here though, is that this is actually a great article for us, because it shows that they have not set anything in stone yet, and are still discussing the pros and cons to this plan, so there is still hope that this will not be the end result!

It's all good yota691, we all learn a little something new each day in this thing I am sure, and thanks for sharing all of the articles you post each day as well, it is greatly appreciated. As far as comparing Iraq to another Oil producing country, as you mentioned in an earlier post, then maybe we can look at Saudi Arabia, a country who actually produces about 12 million barrels a day. They do not have a rate anywhere near where some say they think that Iraq can get to, yet they only have a total money supply of a bit over a trillion. Here is some links where you can see some information on the Saudi money supply: http://www.sama.gov.sa/sites/samaen/OtherReportsLib/Weekly_Money_Supply_28th_Jul_2011.pdf http://www.sama.gov.sa/sites/SAMAEN/Pages/Home.aspx Point being, I do not think that we can look at the oil sales in Iraq alone as a basis to determine if Iraq is going to, or desires to redenominate. Also, I think that the important thing to know is that regardless, it is important that we understand the definition of what they are talking about when they discuss deleting zeros, and the amount of oil a country produces or sells does not change that definition. Once a reader has a better understanding what deleting zeros means to our investment, then we will have a much more clear picture about what they are talking about in the articles. I do agree though, there is certainly plenty of potential in Iraq, and maybe we can be hopeful that this is something that they will consider against deleting the zeros, but I just felt that it was worth noting that historically, this process that they are talking about is the method used to get themselves back into a position where they will have a much lower money supply once again, and that is why we are seeing the CBI talk about it as what they want to do. No doubt about it, that it is definitely not what we want though!

Hi zigmeister.... in all fairness, it is actually true that a deletion of zeros would not be a good thing for us in our investment, so we would want to just continue to hope they will decide against this plan. The good thing is that we have been hearing for years that they will do this, but each year it seems that they say the next year we will see the deletion of the zeros, so this still gives me hope. For example, please see the link below. This is a link from 12/21/2010 where they state the following: "2011 will see the deletion of three zeros from denominations of Iraqi currency, and it will equal the new Vdinar thousand dinars offline." http://www.aljazeera.net/NR/exeres/B7BE75CB-5479-439A-8D78-B05044F71024.htm Obviously, 2011 came and gone and that did not happen. Now this year we are already hearing articles say 2013. To me is a good thing. Now, why do I say that mazzz27 has a valid point on the deletion of the zeros? well, technically it is correct, as it is a redenomination when they talk about deleting zeros. There are a number of countries that we know have redenominated their currency in the past, such as Romania for example. Please see the below link, this will give you the actual law for the redenomination they did: http://www.polymernotes.org/other_country/ROU_law.htm "Art.1. (1) On 1 July 2005, the leu, Romania's legal tender, shall be redenominated so that 10,000 old lei, in circulation on that date, shall be exchanged for 1 new leu. " Here, they are stating they were doing a 10,000 to 1 exchange in this redenomination. Now, here is a news article about this redenomination from July 2005: http://www.rferl.org/content/article/1059616.html "1 July 2005 (RFE/RL) -- Romania today eliminates four zeros from its currency, the leu, as part of efforts to prepare the economy for European Union accession, expected in 2007." So as you can see they also used the terminology of deleting, or eliminating zeros, just in their case they deleted 4 zeros, where Iraq is talking about 3. Here is another example as well. This was the from the Nigerian redenomination. This was actually right from the Central Bank of Nigeria site: http://www.cenbank.org/redenomination/newpolicy.asp This is the definition they used to describe it: "What is currency redenomination? Currency redenomination is the process where a new unit of money replaces the old unit with a certain ratio. It is achieved by removing zeros from a currency or moving some decimal points to the left, with the aim of correcting perceived misalignment in the currency and pricing structure, and enhancing the credibility of the local currency. " Once again, they define it as the removal of the zeros. Here is an example from Zimbabwe where they to redenominated, and here is an article from July 2008: http://mg.co.za/article/2008-07-30-zim-to-lop-10-zeros-off-currency "Zimbabwe will re-denominate its dollar by removing 10 zeros from August 1, central bank Governor Gideon Gono said on Wednesday. " I hope that this clarifies some things for people about the definition of what removing, deleting, eliminating, etc, zeros from a currency means. Now, it is also important to note, there there are some factors with Iraq that has also stopped them from following through with this plan so far at this point, so of course I am as hopeful as everyone that they continue to not see this plan through they have been talking about though, and there have been some real good things that would make us still believe that maybe they will not. If they did redenominate though, they would obviously also remove the zeros from the rate as well, so it is not like we lose as a result of it. The other good news is that we have been seeing a lot of news lately about them wanting to raise the rate against the dollar, so, let's hope that they do follow through with that, then no matter what happens, we still come out ahead. So to say that a redenomination would not be a good thing for I think is a fair statement, but that does not mean that they will definitely do that either, especially in light of some recent articles I have seen about new concerns of counterfeiting or smugging, which was part of the reason that parliament was concerned with the CBI's plans to begin with. If they did continue to raise the rate against the dinar before they redenominated though as a partial measure to deal with some of the things they have been facing with issues with Iran spilling over into Iraq, than that may mean that we may just eventually see profits in the thousands rather than the millions if not break even. Even if they did redenominate, if our biggest problem in this investment should become just how MUCH we are to make, if it is in the thousands, or in the millions, well, that is a dilemma I am willing to be able to live with!

The other point to remember, is that if they did this, it would kill the market rates of the Dinar as soon as they RV'd, because there would be so much demand for the USD, and no demand at all for the IQD, driving down the prices of the dollar. Due to recent issues in Iran and Syria they have been plagued with this issue because of the demand for the USD over the borders, in addition to the already current demand they have had in Iraq, so this would only serve to make that situation much worse. If they were to do this, I do believe that they would need release new lower denominations if such a drastic exchange rate would cause a major depreciation of prices in Iraq. The other thing to keep in mind about that though, is what affects on the economy would such depreciation of goods have as well? This is something else that would need to be considered when thinking about the plausibility of a 1000x increase in the exchange rate of the IQD.

Hello sweetpea63! The answer to your question is actually both. In the event of a redenomination (what many affectionately call "LOP") they remove zeros from the notes, for example exchanging 25K dinars for 25 new dinars, then also remove zeros from the rate, making .00086 raised to .86. So currently 25K notes are worth 21.5 USD, but after a RD, 25 dinar notes would still be worth 21.5 USD. So just as lotsofdinar stated, it is revenue neutral, where we break even minus dealer fees, delivery fees, and any other expenses you incurred in your purchase of hard currency. That is not to say that they cannot decide to then also say that they want a new rate higher than .86, and in that situation we would actually come out ahead if they new rate is high enough. Let's say for example, hypothetically a new rate of 1.45 just to use a number. Then there would still be a small profit per dinar made even if they weer to RD. That is another great point that needs to be considered lotsofdinar! If they were to RD, then a new rate would happen at the same time. The old notes would be worth .00086, while the new notes would be worth .86 for example. Technically, the old notes we hold would not RV, but they could be exchanged at a 1000:1 ratio for new notes that would potentially have a rate of .86. That does not mean that they would not raise the rate of the current notes we hold a few times before they eventually do RD if that is what they end up doing in the end. I am hoping at the very least that is what they end up doing if they do decide on moving forward with an RD though, so we then help cover our full investment, but even better, I hope they do not RD at all, and we really make out on MUCH higher returns in this investment over time.. lol!

Another thing to remember, is that the actual same thing is said about what happened with Japan. They did not redenominate, but rather they were forced to allow their currency to appreciate about 200% over the course of a couple years in the 80's. At the time Japan was keeping their rates artificially low to gain that trade advantage over most western nations. The result of such a drastic appreciation in the 80's actually resulted in a major economic recession in the 90's because of that. For more information about how they were affected by allowing such a drastic change to their rate, here is an interesting read: http://english.peopledaily.com.cn/200309/25/eng20030925_124911.shtml "In early 1990s, the economic bubbles created by the yen revaluation suddenly blew up, plunging the nation into an unprecedented recession, from which the country has been trying to struggle out till today." So something to think about, is that while a redenomination is a revenue neutral event that has no real impact, a drastic increase in exchange rate can and has in the past proven to become something that can negatively impact an economy.

You are sort of correct. It is not uncommon that if the root causes for the inflation have not been fully addressed, that after the redenomination they can just go right back to the same thing. In fact, historically, that has happened on many occasions, and many countries had to redenominate a few times. That is just a process that happens. A redenomination will not resolve inflation, but it will help them reset themselves once the inflationary period is over. That is why you see this happen after the hyperinflationary period is thought to have ended. In fact there was a trend that was documented. Here is a clip from that: I. Trends in Redenomination Redenomination1 has a long history: in the 19th century, when governments faced shortages of gold or silver, they sometimes adjusted the value of their coins accordingly (recoinage; see Helleiner 2003). Among developing and transition nations, currency redenomination was employed on 60 occasions during the 1960-2003 period.2 These redenominations varied in size, from removing one zero from the currency (14 instances) to removing six zeros (9 instances); the median redenomination was three zeros, dividing the currency by 1000. Nineteen countries have used redenomination on one occasion, while ten countries have redenominated twice (sometimes, with many years in between, as in Bolivia, in 1963 and 1987; in other cases, redenominations follow rather quickly, as in Peru in 1985 and 1991). Argentina (4), the former Yugoslavia/Serbia (5), and Brazil (6) are the most frequent users of redenomination. http://www.unc.edu/~lmosley/APSA%202005.pdf Here is some more information on the Romanian redenomination as well, and what the process was. You will see in here the similarities that can be made for what they were saying in this document in June of 2005 document about what they were planning for Romania (and ultimately did do) and what we are hearing the CBI say: https://www.isdadocs.org/speeches/memopdf/Redenomination-Memo-061405.pdf Here is the law passed for the redenomination of Romania. Once again, you can see where the similarity can be made to what the CBI has been saying, and what XE is saying as well. http://www.polymernotes.org/other_country/ROU_law.htm I hope this was helpful

Well said I will take a slow increase in the rate as opposed to a RD! I am in no hurry! If that is what it takes to get them to that point, I would much prefer that way. Then again, I take the approach that anything over beak even is a win for all of us!

I would not advise you to pay no attention to this. Yes, it has been there for some time, since the CBI has been discussing their intentions to redenominate. If course, all of us that responded all are on the same side in terms of hoping that will not happen, but there is no mistaking the fact that this is a very real possibility that you must carefully consider as a potential outcome. The CBI has been stating for a number of years now that they intend to redenominate, and do the same thing that was done in other countries such as Turkey and Romania for example. Here is an article from July 2005 where it discussed the plans for Romania to delete 4 zeros from their currency: http://www.rferl.org/content/article/1059616.html "1 July 2005 (RFE/RL) -- Romania today eliminates four zeros from its currency, the leu, as part of efforts to prepare the economy for European Union accession, expected in 2007. July 01, 2005 The denomination transforms 10,000 units of the current currency into one new unit, dubbed "the heavy leu." The new bills and coins will circulate in parallel with the old ones until the end of 2006, but there is no time limit for exchanging the old ones at banks." Iraq is now looking to do the same thing but it would be deleting 3 zeros as opposed to 4. This would be a 1000:1 redenomination rather than a 10,000:1 that Romania did. I still hope for the best though, and the fact still remains, they have not done it yet, so all we can do is continue to hope that they will not, but I would advise that you proceed in this investment with caution as that is definitely a very important possibility that you need to consider. This is why XE has posted that warning about this investment though.

The only issues I would find with this would be that there is nothing to show that there is any deals being made, but we do know that Maliki is set to make another visit there, so at the very best, we can at least hope for better results than with prior visits to Kuwait. Any deal being made is nothing more than speculation though. That said, sure, I can agree with what Stryker said, because it would make sense to me, to you, Stryker, and anyone else on the outside looking in, but we are not the ones making the decisions either. The other thing you have to think about as well, is the missing persons. Most do not understand the details surrounding the missing persons, and the issues with that. There are wives that have been widowed, and in order for those widowed wives to be able to claim certain survivor benefits of their lost spouses, they need to produce the bodies of the missing loved ones to prove they have died. This is one of the big sticking points for the Kuwaitis as it is a very sensitive issue for a few hundred Kuwaitis still, especially for those that need those benefits to survive, and have been struggling for decades because of it. This is a little detail that the "remove Vii tomorrow" folks seem to forget about. You never know though, maybe there will be something worked out to pay out benefits for those families of deceased Kuwaitis as well in an effort to close the door on that issue as well, but now that is just me hoping and speculating as well.

In my opinion, I do not think that Kuwait will be forgiving the debts owed to them. Kuwait has even stated that they want the UN involvement to continue until all debts are paid, the border issues are resolved, and the missing persons and artifacts are returned. They do not want to work bilaterally with Iraq on these issues, and have stated that as well. They believe that the only way that they will be able to get Iraq to meet their obligations to them is through UN intervention.. ie.. Chapter Vii.. They are being paid out 1 Billion a quarter. There is about 17 Billion left to be paid out after this quarterly payment on the 26th. That would mean that at the current rate, it would be 17 quarterly payments (just over 4 years) for them to resolve their debts, unless they increase oil output so that the 5% equals to substantially higher than the current 1 Billion per quarter that they are paying out. All we can do hope that maybe Kuwait will be able to broker some other deal before the next UNSC meeting, but I do not foresee that being the case, but I will wait and see what happens come some time by June.

In the even of a redenomination, then all things would need to be changed to accommodate the new monetary system. If the current Iraqi Dinar is restructured by replacing it with a new Iraqi Dinar and then they would need to restructure the entire system. So if they were to drop 3 zeros in the restructuring of the currency, then that would mean that 3 zeros would be dropped from loans, bank accounts, wages, etc alike so that the citizens are not negatively impacted by the change. This is why you hear the term of it being a revenue neutral event. If a current IQD becomes 25 new IQD, the rate from .00086 would be .86, and a loan that was let's say 50,000,000 IQD would become 50,000 IQD. In the event of a straight up RV, it would affect the purchase power of how many dinar it would require to purchase goods from an importer based on the new exchange rate, but I do not see how that would affect current loans unless there was a restructuring of the monetary system as well, but then that would be more of a redenomination than it would be a straight up 1000x increase revaluation

I think that would be reasonable to understand why you may think that, and I agree, you are probably not the first to wonder about that as well. In my opinion though, I would just about certainly say that no, that is not what they mean by that. Right now they use both the USD and the Dinar (most business is done in USD, as is happening in surrounding countries like Syria and Iran as well), but that is something altogether different. In fact, when they talk about that, they actually talk about the desire to dedollarize, but the coexisting of the notes are discussed when talking about the process of the deletion of the zeros. This is where they draw similarities to the Romanian experience and what they did. The USD though is another issue, one they are definitely trying to deal with right now. In fact, as of late this has become a much bigger issue because of the issues in the region with Syria and Iran. In the last month we have seen and read them talking about how their market rates of the dinar against the USD have declined, and this is largely contributed to the problem they have been having with the demand for the USD because many businessmen have been pulling the dinars and selling them on the black markets so that they can be used to do business in Iran and Syria. They were increasing the CBI auctions as a measure to try to stabilize the rates of the Dinar by flooding the markets with the USD. In fact, please see below. Here are 2 recent articles that were in English that describes the recent issues they were having and why the auctions were like they were: http://money.msn.com/business-news/article.aspx?feed=AP&date=20120112&id=14689245 and http://www.bloomberg.com/news/2012-01-12/iraq-deplores-currency-attack-as-dollars-flow-to-syria-iran.html So, in my opinion, the use and demand for the dollar is something entirely different than what they are talking about with the coexistence of the old and new notes during any restructuring of the currency.

One more thing I thought I would add is this. in the explanation above it stated: "- July 1, 2005 – June 30, 2006: double posting of prices," I thought that I would provide an example of a price tag that showed the 2 different prices to reflect the rates for both the old and new notes: http://en.wikipedia.org/wiki/File:Romania_revalue_tag.jpg I just thought that this would be helpful to see to illustrate what it would look like..

It is also important to note, that the CBI when explaining their process of the deletion of the zeros, they have drawn a comparison to Romania. If we read the history of the process of the removal of the zeros in Romania we can see where they did the same thing, where there was not a time limit to exchange the old for the new leu. Please see the below link for an article from July 1, 2005 when they implemented the Romania process to remove 4 zeros from their currency. This was a 10,000:1 redenomination, as opposed to the 1000:1 that the CBI has been stating they want to do. http://www.rferl.org/content/article/1059616.html Please note in there the same verbiage we read today similar to the process of deleting 3 zeros from the Dinar. Now, here is the key thing to note though, please see the link below, and on page 1 they talk about how the prices would work for the 2 different notes that will be in circulation and could be used from July 2005 through June 2006. here is the verbiage and the link: "Implementation of the new currency shall be made according to the following schedule: - July 1, 2005: introduction of the new leu (RON). All account balances, credit and debit, shall be converted to RON and all banking transfers, accounting documents and supporting payment instruments, starting on this date, shall be performed and drawn up only in RON; - July 1, 2005 – June 30, 2006: double posting of prices, both in old and new leu, including forex exchange rates. The exchange rates shall be expressed with four decimals, without any rounding; December 31, 2006: Until this date both the old and new leu shall be accepted for cash payments. There is no time limit for exchanging ROL notes and coins for RON notes and coins at the National Bank of Romania branches performing cash operations and at the credit institutions authorised to perform such operations by order of the National Bank of Romania Governor (para 4, article 2 of Law no. 348/2004 as amended). https://www.isdadocs.org/speeches/memopdf/Redenomination-Memo-061405.pdf So I hope this helps explain the meaning behind what it means when they say the notes will co-exist.

Well, that is why I am eager to see the CBI Annual Bulletin for 2011. When that is released we will be able to see exactly how many of each denomination they have that was released. I will definitely be looking at that as soon as it is released, and then we will have a bit of a clearer picture as to what they actually did do last year, and what was printed by looking at that compared to the 2010 annual bulletin. One way or the other we will know.

Well, one point of speculation is that the CBI articles and quotes we read is that they use those articles to control speculation and prices, basically using the articles as another mechanism. I did consider that a strong possibility as well, but then I check the CBI Annual Bulletin each year to see if there is anything that would lead me to believe that it is possible that what they are saying does not match either the key financial indicators in the CBI site, or what they say in these articles. Unfortunately though, what I find is that all things do tend to match up. This is what leads me to believe that it is a very real possibility to consider that maybe what they are saying, is what they are intending, or the CBI's intentions at least. I am eager to see if the 2011 CBI Annual Bulletin when that is finally released though. One thing that I do find curious still though, is I have yet to hear of anyone that has seen a 2011 note, so I am also waiting to see if anyone can show one or not.

I can understand your thinking there, but the thing to keep in mind here, is that there is even less proof that what they are saying is not what their true intentions are outside of speculative hopes I am a firm believer that you cannot wish a return on investment into existence... but we can certainly hope for the best for all of us I agree!

This is true, you did make that call quite some time ago, regardless if it was what people wanted to hear or not. It certainly looks like you were on to something. I think that the timing issue has less importance than the back and forth discussions of the currency supply, and how this is going to affect how exactly they are going to be able to raise the exchange rate. What are your thoughts on this. Do you think that they can get anywhere near the USD with the current money supply in circulation? I have heard your views in terms of the potential timing, and respect your well grounded opinion, but I am not sure I have read anything as it relates to how or if they can do this without redenominating, so I am curious of your thoughts...

Excellent point Jupitergirl! Yes, they recently announced their reserves to be 60B. At last check the supply was 26.8T which would be about 23B, so yes they could double and still fall within the 60B. They have repeatedly stated they have the strongest currency in the region, and that they desire to be that way. This is because of this reason that they are backed 100% by their foreign exchange reserves. If they doubled in value, they would still be within that 60 with room still in there!

Hi jupitergirl! sorry.. I responded, but something happened that deleted my response.. Yes, you are correct about that. I do think that they are very careful, especially Shabibi, in what he says. He certainly chooses his words very carefully. One thing that he will say though, is the deletion of the zeros. They have been quite clear about what that process is, regardless of what some other names out there want to tell people. They have specifically stated a 25K dinar will be 25 dinars worth 21 USD, or in more recent articles, that 50K would be 50 dinars worth 43 USD. Of course, they have also discussed the concerns with the corruption in the banking system, and counterfeiting that may occur in the process, and I agree that it is a valid concern. This is one thing that I hope will help them re-think these plans, or they find the need to gradually increase the rate in the short term based on their needs, so that regardless of the outcome, we will still come out ahead.

Well said!!!