Kent

But let me get this straight. That was only a +2.1% RV ? I don't exactly see the similarity to what people hope for here.

You know the drill. Pro RV people say all the press is "smoke and mirrors" (means outright lies) to dissuade dinar investors just before an RV. It's just a misinformation campaign. Interestingly, it doesn't seem to occur to them that pro-RV rumors could be a disinformation campaign to prop up the sale of that nearly worthless pretty red paper at the CBI auctions (which has been a brilliant tool to increase CBI reserves in dollars). I have a tendency to believe most of the pro-RV people and even most of the guru's aren't "pumpers" working for the dealers. They just believe what they hear and sometimes the things they hear come from people in-country. We'll have to wait and see. Some are wrong and some are right. Much about what is said by RVers about re-denomination is blatantly inaccurate. Personally, I am with you and lean toward the "black and white" view as the most likely. In the long run, the currency will strengthen if the country continues to develop. That is unfortunately different from an RV. Personally, I may not stay invested much longer. Kent

Reknow, just to clarify, I am not implying anything about Bush's character or ethics by mentioning him. The rumor was a few months ago and only related to a conference call in which he told some other businessmen to get ready because there was going to be a big change really soon. Actually, I live in DFW. His house is far more modest than you would expect and I've heard of more than a few stories about people running across Bush riding his bike on some off road bike trailsin a state park south of Dallas, friendly, gracious and unassuming.

THAT is a good description. I've heard rumors from people I totally trust who totally trusted the source. One was even a telephone conference where there were a handfull of people in the room on a telephone conference with George W Bush. Others, and that story in particular were cases where it was impossible for me to believe they were lying. The bottom line is that the forecasts from those stories never panned out. I honestly can't reconcile why, but I still totally respect the source of the information.

Sonny1, a little help please. I know you get loaded with requests for info. I find a reference to an RV when Estonia changed from the Kroon to the Euro for less than .0001% increase in 2004 (not exactly what dreams are made of). Likewise, I've not seen information on Kuwait where it was drastically changed by government fiat overnight. It seems all the examples people quote are really gradual market change or change by pegging to another country. Do you have any link for any example in any country where a drastic currency value change happened due to a declaration of value by that country or central bank? Honest question... I've asked others before, I've looked - just haven't found an example. The "woods are full" of redenomination examples and there certainly have been market driven success stories over time. I'd love to see an example of a pretty big overnight RV (anything over 25% increase). The closest I have come was Germany after WW II when they merged a few currencies and it wasn't that high (as I recall only about 15%) . I am sure all of us would be encouraged by seeing an example, particularly with the news like this string. Kent

The following 2 point conclusion of the report seems to exactly describe Iraq to me: "Based on the analysis above, the re-denomination of national currency must be done only when the following circumstances are being met: The decrease trend of inflation is consolidated. A low inflation rate, joined by zero-dropping operation will improve credibility of the national currency; Other significant positive results are obtained, proving the success of economic reforms and restructuring (e.g. the real terms increase of the GDP). It has been proved in the majority of the countries that put in place a re-denomination process that this operation is an indicator of the success in lowering inflation and determination to keep inflation under controlled margins. Iraq has ended and stabilized a period of high inflation and effected other positive reforms to keep it from happening again.

Drox, That was a good thread and good to see you and Chas32 looking at a market driven approach to revalue.

Drox, thanks for the personal note and "welcome back" PM message. This is the response you requested. First, Thanks for putting in the time and thought. I always appreciate people who offer thoughtful opinion and analysis, even when we disagree. The people who offer respectful insight and even insightful questions make the site worthwhile. You are a great example of that. Candidly, I have a tendency to take things closer to face value than your analysis. When an articles say "delete 3 zeros" and make comparison to countries who did a redenomination I think that is what they mean. We used to have the discussions about "they didn't really mean delete the zeros from the notes, they mean delete the zeros from the rate"? ...bunk. Apart from translation difficulties (which I admit are confusing) the articles seem pretty clear. As to whether they are "smoke screen" efforts to scare away investors that they would have to pay on RV day? I don't think so. It makes more practical sense that they have told the truth about an RD, but not so aggressively that it kills the CBI auction activity. I think they WANTED to keep selling those little red slips of paper in exchange for dollars and that they have been doing that for years now to increase their REAL currency reserves to shore up the value and stability of a currency that was ravaged by war - and it has worked beautifully. I rather suspect some of the "intel" our well intended gurus are getting from CBI folks is intentional for that purpose - to sell more junk paper in return for greenbacks. (side note, I seldom agree with someone being called a "pumper" or a "dumper" because either are probably well intended based on what they think is valid information from sources they think credible). Remember, articles often spoke of inflation as a great fear and avoiding it as job #1 at the CBI. You rightfully comment that interest rates are not a tool to control inflation in a country where there is very little consumer borrowing. Often in the past I made a totally ignored, but no less valid point. Increasing the money supply is inflationary. Highly increasing the money supply is highly inflationary. Even if you assume all the rumors that all the guru say is true, even if you buy the premise that oil in the ground is the same thing as monetary reserves (and it isn't by the way) and even if you think those reserves are large enough to support a money supply larger than the US (and all you have to do on the surface is compare Saudi Arabia to know that isn't true) - still the question remains if increasing the money supply x3000 overnight is a good thing. My opinion is that would hyper inflate the economy of Iraq. The day after an RV you would have 3000 times more money offering to buy the same amount of "stuff". That is exactly what causes inflation - more money chasing the same amount of stuff (e.g. if you had 50 buyers for a piece of real estate rather than 2 and the 50 got rich overnight) Personally, I am more inclined to believe CBI will use the past occasional "3 zero" announcement as fall-back to claim they were telling everyone the truth all along and we just weren't listening. They are certainly on no mission to clear up our misunderstanding because we are buying those pretty red bills, but they have been releasing enough to say later "we told you all along". Think about it... All the reasons there MUST be an RV. They MUST have it to pay their bills (now Paris on the 11th). Really, no war ravaged country has ever had trouble paying their bills? They MUST do it for their poverty stricken people! Aren't there more efficient methods to distribute oil wealth to citizens? Look at other oil rich nations where they just give them a healthy income and benefits. They MUST recover prewar currency rates. Why? Pride? -Not a healthy economic policy basis and they could get there the way all other countries have done it - with a combination of market change and redenomination. Drox, I still haven't been able to get anyone to document a single incident where a country has done anything like what would be represented in even a ten cent RV. My research indicated that there are just a few examples like Germany where there was a very nominal government (as opposed to market change) revalue. After WW II Germany needed to consolidate different currencies and in the process there was (can't remember the exact figure) like a 15% revalue. The rest of the growth came in economic horsepower and market change. Likewise, even Kuwait. The huge increase in value given seems to be the contrast between what shopkeepers would pay in the market for worthless mid-war money to post war values. That wasn't by government fiat. If the government RV'd the currency for 10, 100, 3,000 times the worst value I'd like someone to show the link. I have challenged others to show a single example in history. I can find more than a hundred RDs and even read studies on the motivation (grossly misrepresented on this site by the way), but I've never seen anyone give an example close to what is forecast as an RV for Iraq. Ask yourself, really. If a government could get away with an overnight announcement that their currency was worth 1000 times more overnight, why hasn't anyone else done it to get out of THEIR debts. Answer? A). the world wouldn't "buy" it and . even if they would, it would wreck their economy with inflation. Do I think Iraq has tons of growth potential? yes. Do I think Iraq's value will substantially increase? yes (if they don't "****** victory from the jaws of defeat"). Would I like to believe your "plan B" theory and see an RV and become an overnight multi-millionaire? H_ _l yes. Honestly though, I don't see it square with economic reality. That leaves me in the uncomfortable position of disagreeing with some who see their view as spiritually motivated and all who see the dinar as a quick ticket to a much better life. It's no fun. Neither is giving you such a candid answer, but I could do no less for someone whose efforts and manner I respect. I have, however become very quiet in the last year. Over that time it seems the site has become even more harsh than it was before. I miss reading some of the old guys who no longer post. Blessings to you and yours. As always, hope I'm wrong. Kent

tmc, + from me buddy. I find it hard to believe how thinking people can read all the news quotes, even from the CBI, over and over referencing to "deleting three zeros" and even making comparisons to other countries that have done a redenomination... yet still not even question whether they will see a 3,000x revaluation of their investment by government fiat. I used to try and respectfully post a lot about money supply, currency reserves, comparisons to other countries, etc. thinking that balance on the site would be a benefit to others. Many people believe what they want to believe. We all like to dream and I'd love to be wrong and shout it from the mountaintops. I am still holding my dinar, but with a pretty nominal expectation of return. The news seems pretty clear. I don't have a crystal ball, but RD and then float seems likely to me. JMHO - not trying to offend anyone.

also, some of us USED to be dinarified before the system converted - and never went to the trouble to re-dinarify

I find it interesting that the article is exactly the scenario (not large notes but the process to a redenomination) that A/C describes.

Hey Ron, while I've got your attention, ever had your Phd Economist wife post something on the feasibility/impact of a large RV? I'd sure like to read anything like that you've done. Kent

Ron, It's been a long time since I posted. Thanks for the story. I hope your banker's intel is gold. Blessings on ya. Kent

Darin, The best study on redenom. I have seen is http://www.unc.edu/~lmosley/APSA%202005.pdf and it discusses the why and the outcome and it is based on looking at (I can't recall the exact number) like 70 redenominaitons. Regarding your question about a revaluation, there are certainly examples of market change and Kuwait is an example. My understanding is that the government didn't revalue the currency, the market did - down during the war when locally in Kuwait, stores were reluctant to accept it, and then up again afterward. People made money in that change. Germany apparently consolidated more than a single currency in the shadow of WW II and that resulted in a modest (true) revalue. I am not aware of another example where a government (or government entities) redefined the value of their currency the way everyone hopes for an RV in this curcumstance. I've literally asked for years and no one gas given an example (please, someone chime in if you can cite one). In truth, "this time may be different". We all hope so. Some are not as convinced as others. In a frustrated response to many who, in my opinion give false reasons that this time MUST be different, I offered this post based largely on the Mosley study: http://dinarvets.com/forums/showthread.php?7545-Debunking-the-myths-of-the-infamous-bunny-ear-(lop)&highlight= Conviction regarding an RV must be based on economic optomism about Iraq and their economy (Oil growth, the fact that they can support a diverse economy including agriculture, etc.) In my opinion, that must be factored against the amout of currency they can afford to support without causing massive inflation in any change. (think about the current discussion in the US about QE2 or quantitative easing by the Fed and the fear that it would cause inflation of costs and devaluation of the dollar). In forming your opinion, you have to largely assume that a true RV is the same thing as printing the same percentage of new, additional money and putting it in curculation (some exceptions). What would happen to the US economy if we told everyone tomorrow that they can come to the bank and get $1,000 of blue dollars in exchange for $1 of current "green"? Process that question and then ask yourself why Iraq is different and by how much? Seriously, if anyone reads this and they have a good example of a true, substantial RV I'd love to hear it. Sorry to sound pessamistic. ...don't want to rain on anyone's party. I have dinar and want it to change like everyone else.

No criticism intended, but none of the Venezuela discussion is new. For a quicker read, look at the Venezuela brochure link in Bellypod's post a year ago. It was used to promote that redenomination. Often such opinions have not been popular in the past and people who hold them tire and leave or quit posting.

Thanks for the help Menholt. Now that I see that I do remember it. Back in the day, I always wondered why people didn't make a bigger deal of it than they did. I even saw MOP change the rate once.

I went to the link, but didn't find the article although several articles were mentioned on the page. It seemed to just go to the Ministry home page. Do you have a more specific link or the name of the article? I got into the dinar about two years ago and don't recall this one and would like to read it. Thanks

I am just posting the summary and then the conclusion section. Hit the link if you want to read the whole thing (20 + pages). Obviously inflation is an important issue relative to monitary policy. http://www.imf.org/external/pubs/cat/longres.cfm?sk=24035.0 Summary: Containing inflation has turned out to be one of the most challenging aspects of economic management in Iraq. This paper posits that conventional as well as unconventional factors explain inflation dynamics in the recent past. We build a theoretical model based on the insights into the workings of socialist economies under supply shortages provided by Shleifer and Vishny (1992) to help explain price dynamics. In the model, strategic behavior of the fuel distribution monopolist results in fuel shortages, with implications for fuel and non-fuel inflation. A number of step-wise adjustments of administered prices for fuel products since December 2005 offer an interesting experiment to help study this behavior. Our findings show that inflation may have been influenced by shortages in fuel and non-fuel commodity supplies, which themselves are driven by violence and rent-seeking. V. CONCLUSIONS AND POLICY IMPLICATIONS Since the invasion in 2003, inflation in Iraq has been high, and in 2006 it increased sharply. Our findings show that inflation may have been influenced by shortages in fuel and non-fuel commodity supplies themselves driven by violence and rent-seeking behavior in the fuel distribution sector. We also conjecture that trend inflation may have been influenced by adjustment of the real exchange rate to a new (appreciated) equilibrium in the context of improved terms of trade and a fixed exchange rate. The results also suggest that, while raising administered fuel prices may contribute to inflation in the short run, raising such prices to international levels would eliminate rent-seeking via induced shortages, and thereby help reduce inflation. The fuel monopolist has an incentive to engage in behavior that is socially sub-optimal by suppressing the supply of oil products and keeping it below market equilibrium levels. Given the focus on supply shortages as a factor in driving inflation in Iraq, the findings also provide strong support for the authorities’ policy of liberalizing the importation and distribution of fuel products and allow the private sector to freely operate in this sector. Adjusting fuel prices closer to international levels helps in reducing shortages but does not change the underlying incentives of the fuel monopolist to maximize and collect rent by supplying less than what the market could consume at any given price. It is clear that full convergence of both prices and quantities towards the equilibrium levels will be achieved through liberalization of the supply network to allow the private imports of gasoline. These policies have helped reduce inflation from 65 percent at end-2006 to single digits in the last quarter of 2008. The econometric results presented in the paper also highlight the important role that the continuing violence has played in hindering efforts to reduce inflation. The effect of violence is stronger for non-fuel commodity supplies than for fuel commodity supplies. Finally, the result shows a strong pass-through from the exchange rate to inflation which supports the government’s policy of a gradual appreciation of the exchange rate to control inflation.

If you really want to understand the fix Germany and the Euro is in (due to Greece and the southern european economies) and what their options are read this article. http://www.stratfor.com/weekly/20100517_germany_greece_and_exiting_eurozone?utm_source=GWeekly&utm_medium=email&utm_campaign=100518&utm_content=readmore&elq=466892e2ef414e7781b6190642f24b52 Enjoy, Kent

Ditto that Fort Worth. Hey neighbor.

doc, I appreciate your candor and respect your opinion. Hopefully, you will grant the same in return. Just to offer a bit of a counter point: Lops have no effect on inflation. They are not done to correct inflation. That is an oversimplification and on the surface is just not true. It is not a justification for thinking that a lop is impossible. This string addresses that and several other common misstatements about lops from a statistical analysis of causal factors in 70 of them since 1960. The link for the study is also in the post. http://dinarvets.com/forums/showthread.php?7545-Debunking-the-myths-of-the-infamous-bunny-ear-(lop)&highlight= I would maintain that the oil resources of Iraq are a far more likely strategic target of creditor nations of Iraq than a hopeful change in the value of their currency. In many cases oil has far more strategic value than money, certainly true with currency from an unstable fledgling new government. Likewise, debt owed to IMF is also not a likely motive to be convinced of a large RV. In the study above you will note that IMF involvement actually increased the likelihood of a lop. Finally, there are 2 kinds of lops (redenomination), but I challenge you to identify a single study or example of lopping zero's from the rate. The study mentioned above indicates the alternative kind of redenomination is a confiscatory redenomination like the one that occurred in North Korea where there were caps on the amount of currency that could be converted (effectively resulting in the government taking the excess from their citizens out of circulation). I am not trying to scare anyone. I am fully aware that my position is in the minority in the forum and I respect the opinions of those (including you) with whom I disagree. I also feel somewhat of an obligation to occasionally correct misstatements. To me many statements feel like the story that is told often enough that it becomes fact. Frankly, it just ain't so.

REPORT CONTINUED In Search of a Plan B Therefore, logic tells us that the United States must have a Plan B. This could be a plan to halt withdrawals. The problem with that plan is that there is no assurance that in three months or a year the core divisions of Iraq could be solved. The United States could be left without forces for a strategic reserve without any guarantee that time would solve the problem. A strategy of delay calls for some clear idea of what delay would bring. Or the United States could complete the withdrawal on the assumption that the Iranians would not dare attack Iraq directly while the residual U.S. force remained. The problem with this strategy is that it is built on an assumption. This assumption is not unreasonable, but it is still an assumption, not a certainty. Moreover, Iran could covertly destabilize Iraq, putting U.S. forces without sufficient combat capability in harm’s way from Iranian-supplied forces. Finally, Iran’s major audience consists of the oil powers of the Arabian Peninsula. Tehran wants to show the Gulf Arabs that the United States will withdraw from Iraq regardless of potential consequences to them, reducing their confidence in the United States and forcing them to contemplate an accommodation with Iran. Halting the withdrawal therefore poses substantial challenges, and completing the withdrawal poses even more. This is particularly the case if the United States completes the withdrawal without reaching some accommodation with Iran. But negotiating with the Iranians from a position of weakness is not an attractive option. The Iranians’ price would be higher than the United States wants to pay. Therefore, the United States would have to make some show of power to the Iranians that will convince the Iranians that they are at risk. Bombing Iran’s nuclear facilities could fit the bill, but it has two drawbacks. First, the attacks might fail. Second, even if they succeeded, they would not have addressed the conventional problem. Washington’s way forward depends upon what the American government believes the probabilities are at this point for a viable Iraqi government and security force able to suppress insurgencies, including those fomented by Iran. If the Americans believe a viable Iraqi government is a possibility, they should roll the dice and withdraw. But it is not clear from our point of view what Washington is seeing. If it believes the probability is low, the United States not only will have to halt the withdrawal, it will have to reverse it to convince the Iranians that the Americans are hypercommitted to Iraq. This might cause Tehran to recalculate, opening the door for discussion. It is now April, meaning we are four months from the deadline for the completion of the withdrawal of U.S. combat forces from Iraq. In the balance is not only Iraq, but also the Iranian situation. What happens next all comes down to whether the mass of parties in Baghdad share a common foundation on which to build a nation — and whether the police and military would be loyal enough to this government to die for it. If not, then the entire edifice of U.S. policy in the region — going back to the surge — is not merely at risk, but untenable. If it is untenable, then the United States must craft a new strategy in the region, redefining relationships radically — beginning with Iran. As with many things in life, it is not a matter of what the United States might want, or what it might think to be fair. Power is like money — you either have it or you don’t. And if you don’t, you can’t afford to indulge your appetites. If things in Baghdad work themselves out, all of this is moot. If things don’t work out, the Obama administration will be forced to make its first truly difficult foreign policy decisions.

"This report is republished with permission of STRATFOR" http://www.stratfor.com/weekly/20100419_baghdad_politics_and_usiranian_balance?utm_source=GWeekly&utm_medium=email&utm_campaign=100420&utm_content=readmore&elq=e3f3eec757a6414a8b5ca15cf7b68cde Baghdad Politics and the U.S.-Iranian Balance April 20, 2010 | 0854 GMT By George Friedman The status of Iraq has always framed the strategic challenge of Iran. Until 2003, regional stability

Honestly, the articles that I recall that are supposed to be saying, "they're not going to knock 3 zeroes off the Dinar" actually say no decision has been made or things similar to that. I don't recall one that said they won't lop. "at this time" http://www.aknews.com/en/aknews/2/130886 "so far no formal decision to" http://dinarvets.com/forums/showthread.php?14051-deputy-central-bank-governor-denies-lifting-of-the-zeroes-of-the-Iraqi-currency the clearest NO LOP- http://translate.google.com/translate?hl=en&ie=UTF-8&sl=ar&tl=en&u=http://www.iraq-ina.com/showthis.php%3Ftype%3D1%26tnid%3D41288&prev=_t Conversely, I could document 9 LOP articles. Clearly there are contraditions in the news, but most lean toward a Lop and you have to believe it is "smoke and mirrors"/"fake left and go right" to be confident in the RV (and that is the position of most on this site). I personally belive a Lop is more likely with a smaller RV, but none of us really knows (and I hope they are right). Kent

I absolutely agree, muydinar. Shipping news is significant because on the surface it sometimes appears to violate trade sanctions (which is good news). Whether they pay in Dinar or Dollars is immaterial. They have 50 Billion in foreign currency reserves ( http://www.cbi.iq/xl&wr/key%20financial.xls ) and can certainly "make change". On the long haul though, that won't work. They need to be able to freely convert (trade) their currency into foreign currency in order to maintain trade, but that is one reason Shibibi set up the "auction" to sell us dinar - it was to buy foreign currency. Understand, though that when they sell us currency at a "managed" auction rate it dilutes their money supply even further over time.