Economics 101 for Iraq Dinar Value

[Kent]

OK guys, this isn't critical. I am trying to understand. Will someone with some knowledge in economics answer this question about the ultimate value on RV? I am sure there are some bright minds in this group that know a lot more about economics that I do and already have this figured out. If this is an old question that keeps getting tossed on the table I apologize in advance for bringing it up again.

The International Monitary Fund estimates a 2010 GDP for Iraq of a little south of $95 Billion US. (see chart on page 19 of http://www.imf.org/external/pubs/ft/scr/2008/cr08383.pdf ) How can an economy that size support the instant trillions in value that would exist in a $3 RV - and that with (same chart) 46% of GDP in government debt?

The amount of funds or supply of money in an economy is also influenced by the velocity or the turnover of money (like inventory turnover in a retail business) so I don't believe you usually have anywhere near as much as 1xGDP as money supply. Somewhere in college days I thought I remembered a formula that said the money supply = GDP + Debt / Velocity or something like that. Does anyone have information or comment that supports the very attractive $3+ RV? I am looking for economic theory to support rumor and thought the discussion would help others also.

[fladinarinvestor]

excellent question. I wish I could answer that one but look at the history of the Kawaitt dinar. It might be able shed some light maybe.

[Show Me th' $$$]

good question i wish i had the ansewers to most of the posts that we read on diner web sites

[Torey0112]

research how kuwait r/v'd...should shed light on how iraq will do it..after you research it..post a thread for all to see..then we all know!! thanks

[Short6]

There are certain governments that hold most of the Iraq Dinars (trillion or Billions of them) They will not cash them in, they will get SDRs from the IMF in exchange for oil purchases. Only the little guys like us will cash in. I'm not sure if that amount can be handled by Iraq. It may be handle based on future oil profits. It will help the average Iraqi because his money will be more valuable, he can buy more, as long as inflation does not raise its ugly head. It will attract international business. OK that is what I have read on the subject. Best I could do! SDRs are the KEY!!!

[jocko129]

I agree with you short, and how about a short rv @$3.00 for 1 or 2 weeks and then LOP??

[aurdemus]

I agree with you short, and how about a short rv @$3.00 for 1 or 2 weeks and then LOP??

i dont know doesnt sound like a good way to get elected. make your citizens happy then **** them off with a lop? or better yet **** off those very same goverments that basicaly put you in office in the first place.

[Kent]

Thanks for your post Short6, the SDR and foreign govmts holding them issue is interesting and would certainly explain some (particularly explain a delay), but when they convert to SDR's, still their value would become huge overnight and by purchasing oil- that value is infused over time into the Iraq money supply. Torey0112's point that it happened in Kuait is a good one, but I still wish someone could explain the economic concepts about the size of the money supply and how the economy could handle it. I understand if there were no foreign transactions, it wouldn't matter if 1 Dinar bought a loaf of bread or if it took 3,000. Everything would scale (wages, cost, domestic debt), but when it comes to a foreign currency exchange, an increase in value seems to create a HUGE debt for Iraq to foreign Dinar investors on exchange by increasing their money supply. Example: I have heard rumors of a single investor that bought over $5Million US in Dinar. Rough math - that means he has north of 5Bil dinar. Overnight he would drag 15Bil out of the Iraq economy that was only worth 95Bil(US) in GDP! That is one private investor. Even if that rumor was totally false, look at the kind of figures that Ali at Dinar Trade has thrown around regarding his sales alone ( http://www.cnbc.com//id/15840232?video=1311362126&play=1 ) 100Mil US a year ( if my $1k US bought 1Mil Dinar that's 100 Trillion Dinar on the market in one year?)- his sales alone in one year to private investors would be several times Iraq's total annual GDP on conversion. Someone please check my math. I'd like to live in Wonderland, really. Someone save me from my logic. I know I am wrong here somewhere... and someone on this site is smart enough to set me straight.

I don't know specifics, but know it happened in Kuait somehow (and without the much feared inflation) and I am completely convinced that Iraq must be able to trade internationally and the value will go up drastically. For me a ten cent reval would pay off the house and be a life changing event, but I just want to understand how the big rate rumors can possibly work. These numbers are so huge compared to their economy and I haven't seen data yet to show how large the economy was when Sadam was President and Mass Murderer in Chief. I understand they had a 3:1 ratio back then, but was Iraq GDP 3,000 times the present size?