JoeFriday

I'm not sure what you mean by "purchasing power" or where the 75B and 25B numbers come from. But Venezuela did an RD in 2008 when their GDP was $300B USD, so bigger than Iraq. Iraq doesn't do anything quickly. Its a highly factionalized country and government. Why would the process of an RD be immune to that? You need security due to people carrying around more cash then usual to exchange it. To make sure that no money laundering (counterfeit to clean) is taking place. But I agree that is not a big deal. Its mostly just politics I'd guess. But more importantly its false logic to say since they have not done it already they are not likely to do so. Speaking of pissing people off. Suppose two workers that are paid weekly and living payday to payday get paid just before and just after an RV to $1. The one that gets paid just before and has not had time to spend it and gets 20 years of pay at the old rate. The one that gets paid after the RV has their pay adjust down by 1000x (as everything has to be) so just gets the exactly same value they had before. The second guy seems likely to me to not be a particularly happy camper. How would an RD change the amount of money available to run the country? 72T IQD is exactly equal to 72B IQN or whatever they call them. Not usually in the context in which its used here. But sure if they let the dinar float it might go up, or down, or up and then down or... but not by 1000% but by amounts more like 0.2%. Again the biggest RV is always stated as the Chinese Yuan that has moved up 30% over the last 7 years. Right now, I'd guess the IQD would go down if allowed to float, but just a guess.

If you only want to hear tales of riches to come just put me on ignore and/or stay out of the LOPsterTank. Many say the same, but so far none have explained it. Is this not a forum for discussing the dinar? I see nothing that says its only for discussing how amazingly rich everyone is about to be. Especially in the LOPsterTank. Nor do you even see such a question asked no matter what the opinion of the investment in question, in other forums about investments.

Is it just dueling opinions? I don't think so. One side has clear support that an RV can not happen. The other side does not offer solutions to these many fundamental problems, but just ignores them saying things like "you can't know" or "its just your opinion". The US stock market has done quite well over the last couple of years actually. Sure there is risk, but there is proportional return too. That is what is missing with the iQD as there is no possibility of a good return. Its not unlikely, its impossible. So closing your eyes on the freeway comes with great reward? Sometimes great reward comes with great risk, but risk alone does not imply reward.

Except I don't see anyone here telling anyone what the dinar WILL do. They might do an RD in 2013, or 2014 or 2022 or never. Inflation might become a problem again, or it might not. Oil production might exceed expectations or it might not. They might move away from civil war, or toward it. Who knows. Maybe "the articles" can help you sort that out, maybe not.What is clear is an overnight RV to a penny or more is not possible and articles are irrelevant in that determination. Its not among the possible futures to chose from. Saying no one knows the future so no one can tell if an RV will happen, is like saying no one knows just how or when we will get back to the moon, so you can't say for sure we won't get there by swimming (which I assume is seen as nonsense).

Is there no data we can use to support an assertion about this (one way or the other)? I'd say there is quite a lot actually.As Dinarck says, if you want to make that case that a huge RV is possible, please do so, otherwise what is the point of just saying so? Nor does this explain your previous post which I'm still interested in hearing.

Meaning what? Lets say the GOI is corrupt as can be (and perhaps they are), how does that impact what is possible with their currency relative to the rest of the world?

Oops I have the Yuan (CNY) and USD flipped. It used to be 0.12 dollars per Yuan (8.3 Yuan per dollar) and is now 0.158 dollars per yuan (6.27 Yuan per dollar). Oanda seems to have the graph and data legend backwards. But, the point of slow change still remains. Sorry for the confusion. The edit time expired before I could get back and correct the post.

I don't even understand this long term possibility.First the Chinese Yuan did not RV overnight from what I can tell, nor do I think the quotes offered on this subject say so. So in fact RVs of the sort mentioned on this site are limited to just a few percentage points and don't even get to the 10s of percent. The Yuan has risen in fits and starts from 0.12 Yuan/USD in May 2005 (having been at that level for many years) to 0.158 Yuan/USD today. 30% in 7 years is 4% per year compounded yearly. So that's about inflation plus 1 or 2 percent per year, pretty poor ROI. So 12x (to get to one penny) would be a gigantic currency movement even over a 10-20 year span. And why would one think such even might occur? A rising GDP does not imply a rising exchange rate. What business wants is a stable exchange rate. Here is the Yuan/USD data (sorry oanda doesn't offer a link to the graphs) End Date CNY/USD 9/30/12 0.1579 6/30/12 0.158 3/31/12 0.1582 12/31/11 0.1568 9/30/11 0.1557 6/30/11 0.1537 3/31/11 0.1518 12/31/10 0.15 9/30/10 0.1475 6/30/10 0.1463 3/31/10 0.1463 12/31/09 0.1463 9/30/09 0.1462 6/30/09 0.1462 3/31/09 0.1461 12/31/08 0.1459 9/30/08 0.1459 6/30/08 0.1435 3/31/08 0.1394 12/31/07 0.1344 9/30/07 0.1321 6/30/07 0.1301 3/31/07 0.1287 12/31/06 0.127 9/30/06 0.1254 6/30/06 0.1246 3/31/06 0.1241 12/31/05 0.1236 9/30/05 0.1227 6/30/05 0.1207 3/31/05 0.1207 12/31/04 0.1207 9/30/04 0.1207 6/30/04 0.1207 3/31/04 0.1207 12/31/03 0.1207 9/30/03 0.1207 6/30/03 0.1207 3/31/03 0.1207 12/31/02 0.1207 9/30/02 0.1207 6/30/02 0.1207 3/31/02 0.1207 12/31/01 0.1207 9/30/01 0.1208 6/30/01 0.1208 3/31/01 0.1208 I also don't see the relationship to an RD. The RD is neutral so whether they RD or not, the possibility (or lack of same) of a slowly rising exchange rate seems the same. Why are you here Deborah? Dinar holders like to ask this question, but I have yet to see one answer it. I suspect the reason is pretty much the same for everyone, its an enjoyable discussion. Whether you are a current-holder, previous-holder, future-holder, or never-holder of dinars seems irrelevant to me. What is needed is just an interest in the subject.

OK, I'm not sure what to make of that. If they do 4 auctions a week for 45 weeks of the year that would total up to $36B USD. If that actually represents a years worth of dollar use in the economy than that's maybe 25% of GDP, 50% of M2? But Im not sure it does represent that.But, now I'm also going to reverse myself and say, why does this matter? It does make M2 bigger than just the dinar value of M2, but it also has the dollars to exchange. i.e. if all those transactions were done in dinars, by those dollars being exchanged for dinars, then nothing changes but M2 and reserves both get bigger. So why does it matter?

In what way? You mean using dollars internally? Do we know how much are used? If its a lot then that presents an even bigger problem as their effective M2 gets even bigger. If you mean externally, they are going to continue to sell oil for dollars pretty much forever as its their only means of building up reserves and they don't have any other significant exports and likely will not for quite some time to come.

Relative to currency issues, yes its just dinars and dollars. The exchange rate is not based on the economy or oil in the ground or private assets owned by Iraqis. The maximum exchange rate is just M2/reserves. They can always peg it lower of course, like the Saudis do, but they can't go higher.

You keep ignoring the fact that the "program" rate is not imposed on Iraq. But in any case I'm not arguing that there are MORE than 72 T dinar out, that is plenty. You admit there are 72T dinars out so with reserves of 68B, that gives an exchange rate of exactly what we see 1166 (they have a few percent more reserves then needed to allow some flexibility or safety margin).What other assets does the CBI have other than foreign reserves?

Why do we not know the value of Iraq's currency? We know M2 and we know their reserves, simple. Could M2 be even 10x lower than they say? No as then the economy would not function. Could reserves be even 10x greater than they say? No, where would they ever have gotten $700B dollars? We know how much oil is coming out of the country, we know from that the rough size of the economy. How can those numbers be off by even 10x, let alone 100x or 1000x? No way. But its not looking at news reports, its looking at the basic facts of the Iraqi economy and its interaction with the rest of the world. News stories of Iraqi politics and pronouncements by this minister or that analyst etc are all irrelevant. Again, the IMFs program rate is not a rate imposed on Iraq, but the rate the IMF uses do analyze the CBI. And when you say "the only reason iraq as 72 trillion dinars is thats how much foriegn currency they have exchanged at the program rate of 1166", yes that is correct (well not fully as the program rate is actually 1170 and Iraq not being bound to that has adjusted the rate the CBI offers). But close enough, so with 72T out exchanged at 1166, why isn't that the "real" rate? You are admitting here there is 72T dinars out, and 68B in reserves, so unless they have vast undisclosed reserves (and not a few billion which might well be true, but 10s of trillions which is impossible) then that IS the exchange rate, just M2/reserves. What do past exchange rates have anything to do with anything? Now as you say, there are 72T dinars backed by 68B dollars, end of story.

If you mean that one morning it will be many many times the value of the previous morning, sorry, alas it can not happen.If you mean slowly rising over the next 10 years? Sure it might go up, but not by 1000x or even 10x and it might go down or up and down or... A growing GDP (which seems very likely barring all out civil war etc) does not imply a growing exchange rate. South Korea again is a good example. A wildly booming economy for 40 years, but their currency has been up and down by 50% or so a couple of times over that same period and now the Won is back to about where it was 40 years ago at 0.00092 USD per Won or 1082 Won per USD.

How is it not a scam? Like all good scams it has to have an element of truth to it and the truth here is that you can buy real Iraqi Dinars. The scam is not that the dinars are fake, but that a huge overnight RV is possible, which it is not.

I think its worse than this. The CBI's reserves only grow when the GOI exchanges dollars for dinars, not just when the GOI deposits their petri-dollars and when the do exchange M2 and reserves grow in perfect proportion so there is no gain in exchange rate.

I would say the auctions have nothing to do with their balance sheet. The auctions are about exchange rate stability. Their liabilities (dinars in M2) and their assets (dollars, euros, gold, etc) go up and down in proportion (though that does change a little based on the auction price) when they either buy or sell dinars. They do so both to supply other downstream banks with dinars, but also to stabilize the rate by offering more or less dollars or dinars into the auctions via supply and demand (not sure how well that is working for them). Don't mean to sound contrarian, but the GOI growing oil production has no impact on the exchange rate as I see it. No matter how much the GOI exchanges (due to growing sales), dollars coming in to the CBI (from the GOI's oil sales) increases reserves and dinars going out (in exchange back to the GOI to pay for stuff in their budget) increases M2 by the same amount (proportional to the exchange rate). Its only when the GOI wants dinars for its dollars that this happens. If the GOI just deposits dollars into its account at the CBI that does not its foreign reserves. But governments don't produce balance sheets, for them its just the budget and thier total debt. They have no assets beyond tax or oil royalty revenue holding accounts. When they buy a tank, it doesn't go on a balance sheet as a depreciating asset. So for private entities like banks even central banks, businesses, individuals, charities, indeed the balance sheet is key, but not for governments.

I showed in my "The IMFs program rate" thread that this view is false. This is the rate the IMF uses in its analysis of the CBI but is not a constraint on the CBI to follow this rate, and that has been proven by the rate change from 1170 to 1166. Yet instead of responding on topic to that if you disagree, you resurrect a 5 month old thread to repost your assertions and to a poster who has not been on this site in 2 months. I see you have done the same thing with 4 or 5 other dormant threads. What is the point of all this?

I tired to report dontlop for abuse (sexual slurs) in this thread and my "what does this mean" thread, but get [#10136] You do not have permission to report the item you are attempting to report. So if you are confined to the lopster tank I guess you can not report other posters for violating forum rules either. Perhaps someone else could click the "report" button and do so. Dontlop is clearly trying to incite a fight with these recent posts. I see no reason to tolerate it. I see the "WAHT DOES THAT MEAN" thread he started, for this same purpose, has been locked so perhaps someone has done so already, thanks for that.

Sure, all that makes sense. I was thinking of the CBIs member/partner/downstream banks as in the same group as the CBI itself as far as rates go, but you're right that the rate will get a little lower at each step. That other thread must be in this forum since Dinarck can not post anywhere else, so why not go respond in context.

That is certainly true since the only way the CBI builds its reserves is from exchanging the dollars the GOI gets for oil. But I'm not sure what you mean by the balance sheet for the Iraqi Republic. The value of stuff in private hands or owned by the government (tanks, buildings, roads) doesn't have a bearing on the exchange rate as I see it. The CBI issues currency and backs them with dollars. So the rate is just the total they have issued, physically or electronically (i.e. M2) divided by the reserves. How would assets, or debt play into that?There are certainly indirect impacts of GOI policy around debt and taxes and foreign trade and such that would cause the CBI to adjust the money supply or tend to push inflation one way or the other as the economy heats up or cools down etc. But, in a sort of snapshot sense, of what the exchange rate should be "now", I think its just M2/reserves.

I think it is making the case that for planning purposes they have to use an realistic rate (e.g. calculated form export/import costs etc) and not the "official" rate (of 3.208 USD per dinar). No date, but I would suspect its old. This perhaps corresponds to the time when the CBI history page says the official rate was 3.21 but the black market rate was more like 1 and change (in the 80s).

No, its only for calculation not actual exchanges. Note the part you highlight below. Its to convert (not exchange) currency VALUES, not actual currency. For the IMF to try and tell how the country is doing, they have decided to factor out small fluctuations in the exchange rate and use a fixed rate that is set when the standby agreement is made (and maybe modified at times as well, I don't know). Otherwise comparisons are more complicated. It is not a constraint on Iraq to use this rate in actual exchanges, but it is set from the actual rate that Iraq was using when the stand by agreement was enacted, and then frozen to make comparisons easier. Note also it says "dollar value of all CBI foreign assets and liabilities...". This isn't talking about currency exchanges in Iraq, but analysis of the CBI and how the IMF will carry that out.

From dontlop's post on this topic quoting a CIA analysis report. So the CBI was NOT "maintaining" or "holding" the exchange rate to $3, they just maintained the fiction of this rate in some official documents but no one on the planet was doing exchanges at that rate so its meaningless. When their reserves dropped to nearly nothing, the actual exchange rate followed right along. As I keep saying for small economies the exchange rate really by definition is approximately M2/reserves.

There has been some discussion on the term "program rate" in IMF documents. Some think this is the IMF setting Iraq's exchange rate. I think that is backwards. The IMF has "programs" to monitor the stand by agreements it makes with various countries. This is from their glossary page Now as part of that program they have to have an exchange rate to use to convert assets into a common currency for analysis purposes. That is the "program rate", its the rate the country has set for its exchange. Its not (as I interpret all this) that the IMF is setting the rate, but just the rate they decide to use. Note it does not exactly track the exchange rate as when Iraq went from 1170 to 1166, the program rate did not change as far as I can tell. If the rate was set by the IMF, then the CBI would not have been allowed to alter it, even by 4 dinars. Iraq's exchange reate IS determined by M2/reserves, i.e. exactly what the CBI can actually support. Note that when discussing the IMF's interactions with Afghanistan they also use the term "program rate" (you can find mention of it here http://www.imf.org/external/pubs/ft/scr/2006/cr06251.pdf). However Afghanistan lets their currency float (a managed float, but all floats are managed to some degree), so to be consistent in their analysis the IMF uses their "program rate", not the slightly varying actual rate. Despite the float it hovers around (surprise surprise) M2/reserves.