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Legolas
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Look at it this way

They're basically saying, buy up shares at $0.86 and be ready to sell at $1.00

Hmm - this is where a big whale could profit...

Lets say you are a wealthy person and invest $10,000,000 with an expectation to make a ROI in a short-term

10,000,000 * 0.14 (The difference between .86 & 1.00) = 1.4 million dollars

That excludes spread, so lets be conservative & claim they profit 1 million dollars.

Any intelligent person purchasing large volumes is going to get the best price when purchasing (unlike us speculators who went through dealers & paid high mark-ups)

So, even for the appreciation to be on PAR with the dollar will produce significant profits to those who purchased in large sums.

Heck, it'll prove to be profitable who acquired IQD at near CBI rates or better

The above would be why it would be "wise" for the CBI to never claim appreciation of the value. High rolling investors will exploit the opportunity to receive profits in short-term.

Exactly. ;)

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It's easy to see where the confusion comes in, and I suspect that as always, translation issues are responsible. The most important sentence is:

"Detected by a source in the Iraqi Central Bank are four companies currently competing to win a print project which will generate new Iraqi dinar after deleting three zeros graceful, with the Central Bank will raise the value of the dinar against the dollar gradually towards the day to begin replacement where the value will be in the absence of a wiggle one equivalent of IQD one US dollar."

It doesn't say that it will reach the value of the Dollar BEFORE the day they begin replacement - only that it will reach the value of the Dollar "by the day" that they begin replacement. They HAVE in fact already increased the value by a few pips, and could conceivably continue to do that gradually until the new Dinar is ready for release. Those few pips make no substantial difference to us as investors, unless they do the entire increase at one time, and there is a way to exchange back to U.S. Dollars prior to the issuance of the new IQD. That's the only scenario I can see which would make sense. They certainly can't increase the value by 1,000 times, and THEN redenominate. That would completely eliminate the advantage of the RD, and cost them $60 Trillion Dollars. Unless, like you said, "we're missing something." As Darin said, there's no way they're going to announce an RV prior to its happening. That would be economically devastating, to put it mildly. Doesn't hurt to hope tho, does it? :unsure:

If you look above and read through my previous post that this could serve to be a problem for speculation upon their market. Gradual or not, the ROI could be made for deep pocket investors. They may seek a double-dip solution by simply using a brokering company to invest in the ISX to benefit from both the R/D & its gradual appreciation to the dollar & the overall success of the economy & what their stock does for them.

Imagine this: If an investment company placed $100 million dollars into a bank stock that not only double in value but the IQD increased from .86 to 1.00, they would simply produce a return over over $20 million dollars in a short-term.

Exclude the doubling in value on the ISX and they still receive a high return in short-term by 10 million dollars. It would be their own choice whether to bail or continue waiting, but it creates a liability for the ISX stock of the company and the CBI as those IQDs would have to be converted to USD from the speculative investor.

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IMO, if the M2 figures are nearly accurate, it may likely be due to large amounts of foreign speculation (i.e., investment companies who chose the correct path that reduces risk)

They may make up a lot of the large sum of digital currency or anything that is not hard currency that the CBI claims as a liability.

Re-denomination + any appreciation in value may cause a run on the bank.

The ROI % potential is reduced

And since they refer to Turkey as a common similarity on how they have studied to their own R/D, the history of the Lira shows that it showed appreciation slightly after the re-denomination than has since been losing value ever since. I would also argue that money can be made for any currency change whether it be R/D or R/V or a mixture of both if you put your money in the right place prior to the event or your in the right channel so to speak of transactions.

Heck, the speculation alone has given some individuals the ability to exploit it to make profits. Where there is a demand, supply is available to fill it & the price is set from there.

(i.e., Neighboring regions selling IQD on E-bay at a mark-up)

It would seem the best move would to be to slowly appreciate the value over time, but the media seems to hint otherwise is what the intent of the CBI would be. The next interesting thing is the media coverage of the R/D when that region should be familiar w/ what a R/D entails since Turkey recently had one of their own.

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  • 4 weeks later...

Prior to the inevitable redenomination of the existing Iraqi Dinar banknotes and coins, the only way to truly invest in the IQD and actually see a return on your investment is to open a Warka Bank account and then wait for an international revaluation of the IQD against the USD.

Altering the face value of a currency without reducing its (fixed) foreign exchange rate is a redenomination, not a lop and not a revaluation.

Revaluation (RV) means a calculated rise in a country’s official (fixed) foreign exchange rate of its own currency, relative to another country’s currency.

Mazhar Mohammad Saleh, a senior member of the CBI Advisory Panel has repeatedly stated publicly that the GOI has adopted a CBI drafted two-pronged plan to restructure the national currency ~ to include physical banknotes and coins and electronic bank accounts.

One prong is the long overdue (domestic) redenomination of the existing large denomination banknotes by introducing new banknotes and coins into circulation.

The other prong is a simultaneous (international) revaluation of the new banknotes and coins to increase the value of the IQD against the USD.

Iraqi Dinar Currency

Buying IQD on the internet and/or holding IQD in cash form, in my opinion is useless for a foreign investor especially since the CBI is about to recall all the existing banknotes and exchange them for the new banknotes (and the new banknotes probably won’t be available for trade-in or purchase via the internet once they are introduced into circulation).

Existing banknotes with the (current) CBI fixed exchange rate of 1: 1166, can only be used inside Iraq, will never be used internationally and will never be able to be universally exchanged outside of Iraq.

Existing IQD Banknotes:

• IQD 25,000 = $US 21.44

• IQD 10,000 = $US 8.58

• IQD 5,000 = $US 4.29

• IQD 1,000 = $US 0.86

• IQD 500 = $US 0.43

• IQD 250 = $US 0.21

• IQD 50 = $US 0.04

There are also IQD 100 and IQD 25 coins but they are not currently in circulation, and are not for sale to foreign investors on the Internet.

New banknotes with the anticipated CBI fixed exchange rate of 1: 1.17 are still yet to be issued, will replace the existing notes and the USD over time; and will be able to be exchanged and used for purchases outside of Iraq ~ only after an official international revaluation has been established and recognized by the IMF, World Bank and the rest of the international community.

New IQD banknotes and coins not yet issued:

• IQD 100 = $US 85.76

• IQD 50 = $US 42.88

• IQD 25 = $US 21.44

• IQD 10 = $US 8.57

• IQD 5 = $US 4.28

• IQD 1 = $US 0.85

• IQD 0.50 = $US 0.42

• IQD 0.25 = $US 0.21

• IQD 0.10 = $US 0.09

• IQD 0.05 = $US 0.04

When the redenomination process starts (reportedly in late 2012 or early 2013) these new banknotes and coins with their new CBI (fixed) exchange rate will be introduced into circulation and will co-exist with the already existing banknotes and their old CBI (fixed) exchange rate along with the USD, until the existing notes and the USD are sufficiently removed from circulation ~ to the satisfaction of the CBI and the GOI.

In the recent past (2003) when the existing notes replaced those with Sadaam’s picture on them the process took approximately 90 days. That was because of the war and the Coalition Provisional Authority (the US and the British) introducing both the USD and the currently used IQD banknotes (made in England) into the Iraqi economy. Everybody was in a hurry so that the economy didn’t collapse completely.

This time around the CBI is going to allow both kinds of banknotes (the newer lower denomination bills and the existing larger denomination bills) to co-exist for a (reportedly) 1 - 2 year period until the CBI is satisfied that the redenomination has been successful.

Redenomination success would mean that the majority of the existing large denomination IQD banknotes are exchanged out of circulation and the Iraqi citizens become confident enough in the value of their own new low denomination currency that the use of USD banknotes is phased out as well.

The Saddam banknotes could not be spent outside of the borders of Iraq.

Instead, there was an international version of the IQD that was made in Switzerland and recognized and exchanged for other currencies by the international community.

Similarly, the existing IQD banknotes cannot be spent outside of the borders of Iraq.

Instead of an international version of the IQD made in Switzerland, the Iraqis currently use the USD, made in the US, and recognized and exchanged for other currencies by most of the international community.

In order for the new low denomination IQD banknotes to replace the USD as the Iraqi international currency, the new low denomination IQD banknotes will have to recognized and be exchangeable by the international community in order for them to be used for the purchase and importation of goods and services into Iraq.

UN Sanctions under Chapter 7 will probably have to be resolved and the Iraqi HCL will have to be in place (and effective) before the international community will unilaterally recognize the new lower denomination Iraqi banknotes (yet to be issued) as the legitimate international (and exchangeable) currency of Iraq.

That being the case, when the redenomination process starts, all three types of currency (the existing high denomination IQD, the new low denomination IQD and the USD) will at first all be recognized, exchanged and used inside the borders of Iraq and only the USD will (still) be spendable outside of Iraq.

The existing large denomination banknotes will be exchanged at the current CBI rate of $1:1166 (or whatever the exchange rate is by the time redenomination starts) and the new lower denomination banknotes will be exchanged at the new rate of $1:1.166.

That way an existing IQD10000 banknote and a new IQD10 banknote will both be able to be exchanged for US$8.57 and the economy will absorb the two different rates and the 3 different currencies (including the USD) smoothly and without a lot of strife.

Iraqi merchants will just have to decide whether to advertise their goods and services at the existing currency rate or the new currency rate. Either way, IQD10000 or IQD10 or US$8.57 will all spend equally.

Since the existing notes will never have the new exchange rate attached to them, they will not even be useful for future interbank transfers inside Iraq and will likely just be destroyed once they have been collected.

The Iraqi people will certainly be able to cope with using three different currencies, because they are already dealing with the existing IQD and the USD.

What the Iraqi people really want is to become international citizens again with their own IQD international currency, instead of having to depend on the USD to purchase goods and services outside of Iraq.

In fact, the Iraqis are so ready for equality that they are already using the existing domestic IQD notes against the USD in a de-facto ‘unofficial’ street level exchange rate of 1: 1000.

For example, right now in Iraq and mainly because there’s no practical way to make small change:

• IQD 25,000 = $US 25

• IQD 10,000 = $US 10

• IQD 5,000 = $US 5

• IQD 1,000 = $US 1

• IQD 500 = $US 0.50

• IQD 250 = $US 0.25

• IQD 50 = $US 0.05

Something that needs to be re-emphasized ~ the existing IQD banknotes and coins can only be used and/or exchanged for USD inside Iraq ~ nowhere else.

So, if anyone is holding the existing large denomination banknotes outside of Iraq, how are they supposed to cash them in for USD outside of Iraq?

The answer is that they are not going to be able to ~ not now, not after the redenomination process starts inside Iraq and not even after the international revaluation of the new Iraq Dinar notes has been declared and recognized.

The reason is that no bank outside of Iraq will ever recognize the existing large denomination banknotes as legitimate international currency and so will refuse to cash them in, even at the existing exchange rate of 1: 1166.

There will of course be exceptions, whereby an enterprising financial institution or even a forward thinking US bank may choose to trade through a third party that is willing to transport the physical notes back to Iraq for the final exchange with the CBI; however, the existing large denomination IQD notes will never be on that same bank’s ‘accepted currencies’ list for foreign exchange with the USD. The larger than normal fee for this (potential ) exceptional service will most certainly wipe out any profit that might be anticipated.

Anyone holding existing IQD notes outside of Iraq won’t even be able to get their costs back outside of Iraq (minus exchange fees).

When an international revaluation takes place and the IQD is again recognized by the global community, it will be only the new notes with the new rate that will be recognized and exchanged and/or accepted as payment outside of Iraq ~ not the existing notes with the larger denominations.

There is at least one “Dinar Guru” out there with three internet sites tied to an IQD news network that claims that he will be able to get the best group rate available when it comes time to “cash in” your IQD banknotes.

All you have to do to get this great exchange rate for your existing IQD banknotes is join his VIP group and pool your banknotes together with a larger group for the leverage of a bulk exchange to take advantage of the best rates available.

His stance is confusing because he seems to combine the redenomination process and the international RV into one event and at the same time ignores or seems to dismiss what the CBI senior board members have already put out to the public regarding the redenomination of the existing banknotes.

Here is a November 2011 quote from him:

“If the RV is at a dime and there is a mandatory turn-in of old notes, I am going to cash out half or more ~ I will be happy with that return. Then, I’ll reinvest the other half back into Dinar, so that I can take advantage of the future rate increases. Many people who have never heard of the Dinar will hear about it, and they will buy Dinar at US$0.10 because honestly, once the rate goes that high I don’t think it will go down. It will only go up and others will think so too. So, the notion that nobody will invest at a low rate of US$0.10 is just wrong in my opinion. Regarding the lower notes (the existing IQD500, IQD 250 and IQD50 notes), if there is a recall or a mandatory cash in of the notes, it will be across the board. Don’t listen to the pumpers that say low notes will be safe. That’s just a sales pitch”

This guy has about 30,000 to 35,000 followers (his estimate) holding IQD cash who are heeding his advice and expecting to be able to cash in their existing IQD banknotes through him when the time comes. I’m sure that his popularity has increased in this regard, since most who have inquired about cashing in IQD with their local bank have probably already been told that it’s a ‘scam’ and can’t be done. Now, he is their only hope.

A foreign investor holding the existing large denomination notes outside of Iraq may be able to at least retain what value the CBI gives the notes now by immediately converting the physical notes into USD cash (via EBay or an online IQD trader) and then wire the USD cash into an electronic line item in a bank account ~ provided the bank will support an IQD account. There are not too many (if any) of those banks around outside of Iraq.

Even though the value the CBI has assigned to the notes at the current rate of 1: 1166 might be far less than what the foreign investor paid for them over the Internet; it would still be a way of rescuing the investment from being a total loss, and might even be a way of gaining more value (at least up to par) through financial products that such a bank has to offer ~ such as Certificates of Deposit or Savings Accounts with higher rates of interest than are currently offered by US banks.

Out of necessity, such a bank would have to be a private bank and probably would also have to be located in Iraq in order to accept physical notes for a deposit.

One such bank is the Warka Bank for Investment and Finance with 120 plus branches and 350 plus ATM machines scattered throughout Iraq. www.warka-bank.com

Right now Warka Bank is under the Guardianship of the CBI due to liquidity problems which have made it temporarily insolvent, but that state of affairs will soon be adjusted by an independent Auditor appointed by the CBI.

Warka Bank IQD Account

Once you have opened an account at Warka ~ with both USD and IQD savings accounts ~ you can wire transfer USD to your Warka account and then choose to deposit the funds in either your USD or your IQD account.

Besides remarkably higher interest rates offered for both USD and IQD savings accounts and certificates of deposit, Warka also has an Iraqi Stock Exchange (ISX) department which acts as a broker for anyone wanting to invest in the ISX.

Current interest rates are:

4% interest on a USD Savings account

5% interest on a USD Certificate of Deposit

7% interest on an IQD Savings account

8.5% on a 3 month IQD Certificate of Deposit

9.5% on a 6 month IQD Certificate of Deposit

10.5% on a 12 month IQD Certificate of Deposit

There is strong historical evidence from other (recent) currency redenominations that when the redenomination process is started in Iraq, electronic IQD bank accounts will also have their balances adjusted by the same method as the physical banknotes and coins. That is, the total bank account balance will be reduced a thousand fold with the movement of the decimal point 3 places (to the left), but at the same time the exchange rate will be increased upward a thousand fold so that the value in USD remains the same after the redenomination as it was before the redenomination. In such a case, all electronic accounts in IQD would be affected worldwide; including the foreign currency reserves held by the various central banks and governments around the world.

Emotionally, it might be wise to accept that even thousands of USD invested in an electronic IQD bank account won’t make anyone an instant overnight millionaire ~ and that would hold true for Iraqi Citizens as well as foreign investors outside of Iraq.

The advantage of a Warka Bank account (and other private bank accounts inside Iraq) is that because they are electronic they will be uniquely positioned to take advantage of future international revaluations of the IQD ~ possibly even up to past exchange rates of US$2+ to US$3+ per IQD. That could double or even triple the initial investment.

The Iraqi Stock Exchange (ISX)

Trading on the ISX through a Warka ISX Department broker could mean explosive potential as the country and core infrastructure companies grow with the economy.

The process to be eligible to trade on the ISX with Warka Bank appears to be at least a 4 month process to receive a Warka ISX trading account number but may well be worth the effort for future wealth.

In 2011 the aggregate growth of the Iraqi Stock Market was 36% for the year.

It is expected to do as well or better in 2012.

Until the Warka Bank Audit process is over you won’t be able to wire transfer USD back to the States or purchase stock on the ISX through the Warka Bank ISX Department.

It would be wise to visit www.iraq-businessnews.com/category/banking-finance often in order to keep up on the latest news of Warka Bank, the Iraqi Stock Market and the Iraqi Dinar Re-denomination process.

I don’t see the USD ever recovering from its decades long decline, so I’m sticking with gold, silver and copper bullion and the IQD at Warka to put my savings into.

The IQD Revaluation (RV)

When all of this redenomination has successfully taken place, the Iraqi currency as a whole (including the new lower denomination IQD banknotes, electronic Warka accounts and stock prices on the ISX) will (finally) be in a position to incorporate a significant revaluation to match the growing Iraqi economy.

A revaluation could take the exchange rate from $1:1.166 to $1:1 or even more; but while the rest of the world (and especially IQD foreign investors) wouldn’t mind a revaluation to $2:1 or even $3:1, the CBI and the GOI are going to want to keep that exchange rate as low as possible in order to be competitive exporting Iraqi oil, natural gas, gold, silver, dates, copra, etc……

The GOI will also want to encourage tourism and foreign investment into its infrastructure, so it will serve the Iraqi economy best to be the new international “bargain” by keeping the exchange rate of its currency as low as possible.

For us IQD investors it will mean a chance to possibly double or triple our Warka investments in the future; but in the meantime while we are waiting, we can still enjoy 7% on savings, 8.5%, 9.5% and 10.5% on CD’s and possibly even more by investing in the ISX.

You never know when an Iraqi company might suddenly take off and become the next “Microsoft” of the investing world, especially with the encouragement of foreign investment and technology.

No foreign investor or any Iraqi citizen for that matter is suddenly going to be a millionaire based just on a new revaluation of the IQD, but that doesn’t mean the investment is a bad idea. In fact, in my opinion it’s still the best choice available to the average investor.

For additional information on the owner’s of Warka Bank go to:

http://www.al-bunnia.com/HMBS.pdf

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I was really surprised no one replied to Phlip. I love reading the banters back and forth, but no one stepped up to his opinion. Could it be your all afraid he is right? I hate to admit it did make sense.

Pro-RVers don't typically spend much time in this part of the forum...

It is interesting that none of them stepped up to even attempt to debate the redenomination post Phlips made... It is kind of telling isn't it... :lol:

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It's tough to argue with the logic in Phlip's post. I just don't feel that they would totally screw over investors by not honoring the old notes outside of Iraq. I think there's still a chance for some more slight upward jumps which is why I'm hanging in. The longer they go without an RD shows the openess to let it grow on its own but nothing in this investment is for sure.

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