LET'S BREAK IT DOWN...........

[dvforumuser]

Hey Dinarck. I suspect that you've crunched the IQD numbers as much or more than I have. ....

Overall I agree but have a few quibbles and questions:

I don't think that an RV has to be simultanenous with an RD or is even necessarily likely to be done at that point, it could take place anytime during the period that IQD is still exchangeable. Having them announced at the same time might be more confusing since the two are not related.

An RV to something like $1.20 was what I was hoping for (once my huge RV delusion wore off) but a 40% currency move would be still be historically huge and why would they have tweaked it by only 0.34% a month or so ago if a move 100 times as large was planned shortly there after? As I think you pointed out before, normally moves of pegged currencies are very small and the 0.34% move tells me that Iraq is operating in this usual way.

Also I'm not sure what "internationally tradable" really means. Is this just referring to the fact that there is no demand for such trades or is there some World Bank, WTO, etc controls over such things? Alas even if the new-dinar issued as part of an RD becomes internationally tradable (i.e. there is demand and it is allowed whatever that means) that does not imply the the IQD will also, so exchanging iQD for dollars or new-dinars may still prove a difficult task offering yet a new opportunity for giant spreads at the dealers. Since an RD does not change the IQD value, if an institution doe snot want to trade in IQD now, I don't see how the RD would change that policy.

All of which is why I concluded that once the RD happens it will be very unlikely to get $1000/M and hence sold for that now, at a loss (2.5M to go).

Note also that going from $0.86 USD per new-dianr to $3.00 USD per new-dinar in ten years is about a 13% annual ROI. For something with such high risk, that is a terrible return. Using $1200/M as the buy rate, going up to $3 in ten years is only a 9% annual return. Also for the currency to rise their GDP has to grow faster than the money supply, which also implies very low (near 0) inflation and they have never approached that.

Note that several (even most perhaps) EU countries will still take their old currency today, but only at a central bank branch so accepting IQD for ten years seems quite reasonable, but doing so at any bank may not be the plan. A trip to Iraq, even if safe at that point, is going to seriously eat into that measly 9%.

Edited March 18, 2012 by dvforumuser

[MrFnHappy]

Here's where I have a problem with a simultaneous RD & RV.....why would Shabibi want to give up any more of his reserves than he has to? What I'm saying is, he'll have to make good on any dinar turned in from outside the country in USD, so why not leave the rate alone until most, if not all is either returned or deemed to no longer be exchangeable. If it was your money, wouldn't you want to hold on to as much as possible?

[Markinsa]

LOL. Figured I count count on Keep to be looking at it too. Yeah, IF it's 10 years, then we'd be OK. That seems like an awfully long period of time for them to allow us to exchange though. I thought 2 years sounded extremely generous. If it turned out to be longer, and ultimately went to $3, we'd be in great shape. I was thinking more in terms of the current budget and income, wondering just how high they could reasonably see fit to go. Guess we have to wait and see.

If the exchange in time is going to be 10 years, don't you think it would be a problem for them to maintain two different exchange rates for the old and new currencies?

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[dvforumuser]

If the exchange in time is going to be 10 years, don't you think it would be a problem for them to maintain two different exchange rates for the old and new currencies?

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It will be the new-dinar exchange rate that the tinker with. The IQD rate, for however long they accept them, will always be 1000/th of that. So pretty easy I think.

[Markinsa]

It will be the new-dinar exchange rate that the tinker with. The IQD rate, for however long they accept them, will always be 1000/th of that. So pretty easy I think.

You guys do know, that if they are going to exchange one 25000 Dinar Notes for one 25 Dinar Notes that they will have to pass a new law requiring that. Currently, the CBI Law states, the exchange rate has to be in equivalent amounts.

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[Frogee]

You guys do know, that if they are going to exchange one 25000 Dinar Notes for one 25 Dinar Notes that they will have to pass a new law requiring that. Currently, the CBI Law states, the exchange rate has to be in equivalent amounts.

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I am not sure they would have to, because they are deleting the 0's so it would make it only a 25 dollar note. No?

[Legolas]

You guys do know, that if they are going to exchange one 25000 Dinar Notes for one 25 Dinar Notes that they will have to pass a new law requiring that. Currently, the CBI Law states, the exchange rate has to be in equivalent amounts.

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Yeah, I have to agree, 10 years would be a long time to allow the notes to co-exist. It would seem too confusing, even though for us the math is pretty simple. Given the educational level of the average Iraqi citizen though, it might be a bit much, and having 2 price scales would be out of the question. I don't see the law issue as a problem, because they have to pass laws for the RD and the issuance of a new currency set. It would likely be a package deal, approving the change to the rate, the printing, length of exchange period, etc. They do nothing quickly, so whenever it finally happens, IF it finally happens, one would think that it will probably be simultaneous to avoid unnecessary confusion.

[dvforumuser]

You guys do know, that if they are going to exchange one 25000 Dinar Notes for one 25 Dinar Notes that they will have to pass a new law requiring that. Currently, the CBI Law states, the exchange rate has to be in equivalent amounts.

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It is an equivalent amount. Its 25000 IQD for 25 NEW dinars.

[Markinsa]

It is an equivalent amount. Its 25000 IQD for 25 NEW dinars.

25000 Dinars does not equal 25 Dinar. You need to go back and read the CBI Law.

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[dvforumuser]

I think the article that had the ten year time frame in it DID say it was only one year that both would exist in the marketplace. But banks (or maybe only CBI branches) would continue to accept IQD for ten years). So mostly the IQD will be gone at the end of the one year co-exist period. So I don't think confusion of the population is really an issue. Also this is a population that has been though hyperinflation and a currency exchange and deals routinely in dollars and dinars. I think they will manage.

25000 Dinars does not equal 25 Dinar. You need to go back and read the CBI Law.

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right, but 25000 IQD is an equivalent amount to 25 NEW dinars (you seem to not accept that it is a new currency since you purposeful dropped the "new").

[Legolas]

Here's where I have a problem with a simultaneous RD & RV.....why would Shabibi want to give up any more of his reserves than he has to? What I'm saying is, he'll have to make good on any dinar turned in from outside the country in USD, so why not leave the rate alone until most, if not all is either returned or deemed to no longer be exchangeable. If it was your money, wouldn't you want to hold on to as much as possible?

That's an excellent point, and we can only hope that for purposes of simplicity, they do it all at one time. The good news is that there have been several articles stating their intention to increase the value of the Dinar against the Dollar, and those statements have been contained "within" the RD articles for the most part. A simple RD is value-neutral, and wouldn't increase the value. You're right though, from a financial standpoint, it would make more sense to RD and then RV after most of the old notes have been exchanged for new. Let's hope that doesn't happen. At this point there is still no guarantee that they'll do anything at all. Theoretically, they could do nothing, and as Keepm has stated, simply allow the value to increase gradually over time. But given the amount of publicity they've given the RD, and all the talk about educating the people on the process, it would have been pretty senseless to have given this SO much publicity if they weren't actually planning to do it. Who knows?

[keepmwlknfny]

You guys do know, that if they are going to exchange one 25000 Dinar Notes for one 25 Dinar Notes that they will have to pass a new law requiring that. Currently, the CBI Law states, the exchange rate has to be in equivalent amounts.

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If one 25k note will be equal to one new 25 note, then it seems they would not be breaking any laws....or need to pass a new one....

[Markinsa]

I think the article that had the ten year time frame in it DID say it was only one year that both would exist in the marketplace. But banks (or maybe only CBI branches) would continue to accept IQD for ten years). So mostly the IQD will be gone at the end of the one year co-exist period. So I don't think confusion of the population is really an issue. Also this is a population that has been though hyperinflation and a currency exchange and deals routinely in dollars and dinars. I think they will manage.

right, but 25000 IQD is an equivalent amount to 25 NEW dinars (you seem to not accept that it is a new currency since you purposeful dropped the "new").

Ignorance of the Law is NO Excuse. The "Official Currency" of Iraq is "DINAR", adding the Term "NEW" to the Dinar will make it a New Currency, and at what point does "NEW" get dropped off?

Article 36 Redemption of currency

1. The CBI may decide to redeem banknotes or coins by issuing, free of charge, other

banknotes or coins in equivalent amounts. A decision to redeem banknotes or coins shall be

issued in the form of a regulation of the CBI specifying the period during which the exchange

shall take place and the locations and times at which withdrawn banknotes or coins shall be

presented for redemption.

2. At the end of the exchange period, or at any other time specified by the CBI, redeemed

banknotes and coins shall be demonetized and cease to be legal tender.

3. The CBI shall notify the public, by publication in the Official Publication, of the banknotes

and coins that are legal tender.

Read more: http://dinarvets.com.../#ixzz1pNLzMpMj

[MrFnHappy]

In the past, countries who have RDed and have used the word "NEW", dropped the "NEW" when the old currency was deemed to no longer be legal tender.

[dvforumuser]

Ignorance of the Law is NO Excuse. The "Official Currency" of Iraq is "DINAR", adding the Term "NEW" to the Dinar will make it a New Currency, and at what point does "NEW" get dropped off?

Ss MrFnHappy points out, usually after the old currency is no longer accepted. The currency symbol may never change. e.g. when Venezuela did this in 2008 the bolivar (VEB) changed to the bolvar fuerte (VEF) and VEF is still the symbol though now they just call them the bolivar I think (but not sure). And again the amounts ARE EQUIVALENT. A 100,000 IQD will be worth exactly 100 new dinar. The law specifically does NOT say "equal amounts" but "equivalent amounts". Edited March 18, 2012 by dvforumuser

[Markinsa]

Ss MrFnHappy points out, usually after the old currency is no longer accepted. The currency symbol may never change. e.g. when Venezuela did this in 2008 the bolivar (VEB) changed to the bolvar fuerte (VEF) and VEF is still the symbol though now they just call them the bolivar I think (but not sure). And again the amounts ARE EQUIVALENT. A 100,000 IQD will be worth exactly 100 new dinar. The law specifically does NOT say "equal amounts" but "equivalent amounts".

Oh please, let's not get into what the definition of what "IS" is... Your trying to make a whole apple, worth a half an apple, and I'm sure the Iraqi people that read that Law understand that 1 Dinar and 1 Dinar are equivalent, and 25,000 Dinar and 25 Dinar are not.

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[RVPleaseToday]

Markinsa, you talk like RDs have never happened before. Two currencies equvilent in value is the norm. Iraq doesn't have to hack a new trail through the jungle to RV. Countries have RDed dozens of times over the years. It's a well worn path.

[MrFnHappy]

Oh please, let's not get into what the definition of what "IS" is... Your trying to make a whole apple, worth a half an apple, and I'm sure the Iraqi people that read that Law understand that 1 Dinar and 1 Dinar are equivalent, and 25,000 Dinar and 25 Dinar are not.

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25,000 dinar and 25 dinar are not the same numerically, but would be of the same value in USD after a RD...you have to think in terms of what the dinar is valued against, USD, not just the numbers printed on the note.

[Markinsa]

Markinsa, you talk like RDs have never happened before. Two currencies equvilent in value is the norm. Iraq doesn't have to hack a new trail through the jungle to RV. Countries have RDed dozens of times over the years. It's a well worn path.

I'm not arguing against the possibility of an RD. I'm just stating if there is an RD and they are going to say 1000 Old Dinar equals 1 New Dinar, then in order for it to be legal they are going to have to pass a law/regulation stating as such, because the current law doesn't provide for that.

25,000 dinar and 25 dinar are not the same numerically, but would be of the same value in USD after a RD...you have to think in terms of what the dinar is valued against, USD, not just the numbers printed on the note.

Article 36 Redemption of Currency doesn't provide for a redemption amount based on another Nation's currency, and for anyone to say that the redemption amount is going to based on the exchange rate of the USD to the Dinar, that's just not logical. Again, if they are going to do that, they have to pass a new law or regulation that provides for that. Where are the Lawyers when you need them?

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[cheevo]

Turkey Oil Production - 52 Thousand Barrels a Day

Iraq Oil Production - 2.8 Million Barrels a Day.

15. Will the redenomination affect exchange rates or interest rates?

The zero-removal operation was not expected to have either a favorable or an unfavorable effect on exchange rates or interest rates, apart from its positive impact on expectations, since the main factors determining the general level of exchange rates and interest rates are the economic fundamentals and the current stabilization program. And the Cbi and parliament have been saying they are adjusting the exchange rate soon!!!! Turkeys redenomination did nothing with the exchange rate!!!

[dinarck]

Driving down the road Legoas. Looking forward to giving my thoughts on your questions when I get back in town.

[keepmwlknfny]

Turkey Oil Production - 52 Thousand Barrels a Day

Iraq Oil Production - 2.8 Million Barrels a Day.

15. Will the redenomination affect exchange rates or interest rates?

The zero-removal operation was not expected to have either a favorable or an unfavorable effect on exchange rates or interest rates, apart from its positive impact on expectations, since the main factors determining the general level of exchange rates and interest rates are the economic fundamentals and the current stabilization program. And the Cbi and parliament have been saying they are adjusting the exchange rate soon!!!! Turkeys redenomination did nothing with the exchange rate!!!

Turkeys redenomination did change the exchange rate.....it went from around 1.8 MILLION lira to 1 USD, to about 1.8 lira to 1 USD....how can you say it did nothing to the exchange rate?

[Legolas]

Driving down the road Legoas. Looking forward to giving my thoughts on your questions when I get back in town.

Awesome. No texting & driving! Tear it up!

[TimS]

I guess the point is that it doesn't MATTER if the numbers are wrong. They could be wrong by 90% (which is incomprehensible given the overwhelming evidence) and it STILL couldn't work. As long as the numbers in circulation are in the trillions, let alone 60 trillion, there can not be a revaluation. They have to FIRST reduce the money supply from trillions to billions, and the ONLY way to do that is by redenomination. It is likely that U.S. investors alone now hold more than a trillion - simple math makes that clear after many years of multiple dealers selling billions every month.

Think about it. Their confirmed reserves are now estimated to be $60 Billion - some believe $80 Billion. That is much less than ONE TENTH of $1 Trillion. Their reserves would be wiped out in seconds with even a minimal RV. More importantly, where are these TRILLIONS of Dollars going to come from? Again, look at the money supply of the ENTIRE WORLD? That amount of money simply doesn't exist, and it can't be created out of thin air. The world economy would crash like a boulder falling on Wiley Coyote.

It's inaccurate to say that the currency isn't worth anything to the average Iraqi. It very definitely IS. A 25k note is worth app. $22, and a re-denominated 25 Dinar note would STILL be worth $22......MORE if they RV at the same time. Their currency buys about the same amount of product as our own, give or take. It's not worthless by ANY stretch of the imagination. Iran's currency is worth TEN TIMES LESS than Iraq's as compared to a Dollar. Is THEIR currency worthless too? It's all relative. It's simply untrue that making US millionaires will benefit THEM more than us. It's not even remotely close. How many Iraqi's do you think have a million Dinars - or even 100,000 on any given day. The answer is damn few, and prices would have to be adjusted accordingly in any case, or inflation would skyrocket.

The average Iraqi is VERY poor. They are the 5th poorest in the world. The truth is that they have very little money, and probably virtually NONE saved. As I said before, if they spend a 25k note today to buy $22 worth of groceries, and it RV's tomorrow to be worth $25 Thousand DOLLARS, what is THAT going to do to the average Iraqi? It simply makes no sense for anything like that to happen. a revaluation would makes US millionaires, and do virtually nothing for the average Iraqi. You have to think about all of the eventualities involved.

I've never told ANYONE to buy OR sell Dinars. Using inverse logic to your "what if" scenario, what if it RD's tomorrow instead of RV's? What if a member has invested $10 thousand dollars (or whatever amount) and can't afford to lose that money. We already know that IF it RD's, at least 40-60% of the investment will be lost - probably more depending on how greedy the dealers are, and we could potentially lose ALL if we are ultimately unable to exchange old Dinars for new here in the U.S. So where is the difference in the what if scenarios? Many people here have invested WAY more than they care to admit, and many have already been hurt badly by the fact that the promised RV hasn't occurred over the past 8 years.

Don't kid yourself dinarck. You've done an amazing job in replacing the frequent rational posts of JMW, Dalite, Keepm, and many others who used to post on a regular basis and tired of the bashing. Keep up the great work!

Lagolas

I tried to ask the question "Can we believe the info posted on the CBI website?" in regards to dinar in circulation.....do you know what almost everyone said? "No" even Adam and Keep said the CBI numbers are probably not true. So, it just cracks me up that people will believe data that is out there if it supports an RV to their liking, and any data that does not is touted as "probable misinformation."

My sister got me involved in this "investment" and I bought some before doing any research myself....usually I would say shame on me for that, but I didn't spend any more than I would gamble at the casino while on vacation, so it's not an issue.....for me.

One thing she keeps throwing in my face are the articles where the CBI claims to have removed 70% of their currency (around 6 months ago?) from circulation.....do you recall that? But like you said....even if they removed 70% of the 28 trillion dinar, that would still leave 19.6 trillion dinar out there today...so as you say, a $1 RV would add $19.6 trilliion dollars of currency value into the market overnight which is what, at least twice as much value that is in circulation today? I can't see it happening either, it's an impossibility....period, even with all the "fractional banking" rhetoric being quoted. The numbers don't add up and the math never lies.

I'm starting to think that if we tripled our money, it would be the best to hope for. LOP off the 000's and then RV to around Kuwaits value, but even that is wishful thinking?

JMHO

[Legolas]

Turkeys redenomination did change the exchange rate.....it went from around 1.8 MILLION lira to 1 USD, to about 1.8 lira to 1 USD....how can you say it did nothing to the exchange rate?

Agreed. It's mostly semantics, but RD does change the exchange rate. Doesn't change the "value" unless they RV as well. Interest rates should be unaffected, although nothing says they couldn't change those as well, depending on inflation. .