SWFloridaGuy Posts

[DocDinar.]

12-7-12 SWFloridaGuy: I'm receiving a lot of emails asking why I did not include Kuwait on my RV list. I omitted the country of Kuwait because they never revalued their currency. That is a myth spread by pumpers or the misinformed.

Iraq invaded and replaced the Kuwaiti dinar with the Iraqi dinar as the official currency. The Kuwaiti government was exiled. The UN condemned the invasion and no one of any preponderance recognized the right of Iraq to replace the government and currency of Kuwait.

The U.S.-led invasion and liberation of Kuwait created a turbid atmosphere for the money supply. People claim to have been able to buy KWD on the black market during this period but the official exchange rate was still the same. The old Kuwaiti government was restored following the withdrawal of Iraqi troops.

They were occupied by Iraq and business was halted. Seven months later when Kuwait was back on their feet, they redenominated with the previous exchange rate. This was more similar to a RD/RI than a RV.

Actually, this was neither a RI or RD, by the true their definitions. This was a unique circumstance due to the invasion. Their currency was not adjusted, in part, due to sanctions (UN resolution 661 which determined that Iraq failed to comply with paragraph 2 of resolution 660 and usurped the authority of the legitimate Government of Kuwait) like Iraq's was.

None of this means Iraq can't or won't revalue the IQD. It just shows that Kuwait is probably not a good comparison and that it was a very different set of circumstances, both economically and politically.

Keep in mind Iraq's future and economic outlook is far brighter than Kuwait's. The latest report to U.S. Congress forecasts Iraq's GDP growth 3x that of the next strongest MENA economy and efforts to diversify their economic base (IMF's 2012 World Economic Outlook Report 14.7% for 2013). The global economic crisis is stimulating investment and presents vast opportunities and a gateway to revive the world’s economies.

I have no doubt that Iraq's currency will once again boast a high value. However, I have my doubts about the IQD being recognized as a hard currency in the near future due to questions of long-term political instability that may affect their purchasing power, fiscal outlook and in turn - CBI policy that discredits them as a reliable store of value.

No need for concern though for us or our investment though. The IQD (similar to the KWD mentioned above) will remain bound to the economy of their country even though the value will be high. Some currencies have far less value but are considered a hard-currency because of stability (e.g., Japanese yen).

Whether we see a float (Kaperoni/Enorrste theory) or a historical large currency appreciation of 100,000% to get us to 1 to 1, I do think Iraq will accomplish returning their currency to its previous levels by increasing the value of the paper currency in a quantitative sense.

There are several ways I believe Iraq could accomplish this, some are better solutions than others. Under a fixed exchange rate, fluctuations in the value of a currency to which the IQD is pegged could produce volatility. We see these effects when the USD appreciates and other currencies linked to the USD in turn show appreciation also. Iraq does not want unnecessary monetary volatility.

There are a few solutions to this which I have mentioned before but will reiterate to demonstrate the different profitable scenarios. They could include oil in a basket of currencies to which the dinar is to be pegged in order to facilitate the recovery and expansion of the oil sector.

Define the value of the dinar as paired with a basket of currencies + 1/100 (just an example) of a barrel of oil. An oil producer like Iraq could thrive with this scenario, even if there were big swings in international exchange rates or global oil prices in the future. For this to work though, they would need to stabilize the price of oil in terms of purchasing power.

Another solution is Iraq could peg the currency to the export commodity (PEP) as I've mentioned in the past. The CBI could set the daily price of IQD in direct proportion to the daily price of a barrel of oil (or a more broad-based commodities peg) in terms of USD. That would stabilize the price of oil in domestic terms. That's the best of both worlds (fixed & floating) and would also help promote integration into world markets. I cannot prove that Iraq will revalue their currency but I do postulate that theory and believe there is a great basis for it.

The powerful countries, organizations, corporations and foreign Central Banks that have all invested so heavily into Iraq's reconstruction and helped to foster monetary cooperation will also reap the benefits. This is why I believe they have assisted in the development, extended project loans and offered technical assistance with communications and Iraq's banking sector.

The global monetary system is broken and although the IQD is not the world's savior by any means, I do believe Iraq presents a unique opportunity and may serve the role of a fulcrum in its recovery. These are just my opinions, which may or may not be correct.

Just to set the record straight, the IQD is a crawling peg. The currency is adjusted periodically in small amounts at a fixed rate or in response to changes in selective quantitative indicators.

The ERM (Exchange Rate Mechanism) which maintains that fluctuations have to be contained within a margin of 2.25% on either side of the bilateral rates has zero effect on our investment. The CBI is expected to determine the IQD rate in a rule-based manner, adjusting at a predetermined rate or as a function of (actual or expected) inflation differentials.

The IQD is currently pegged to the USD as a defensive measure while Iraq rebuilds. The auctions supply the market with dollars and stabilize the IQD rate against the USD. The rate of crawl can be set to adjust for measured inflation or other indicators, or set at a preannounced fixed rate and/or below the projected inflation differentials.

However, what applies to us (as IQD investors) is that the rate is generally adjustable (through discrete revaluations) in case of fundamental disequilibrium. As CBI reserves grow, so does their credibility. Reserves are not required to fully cover all domestic liabilities though, which leaves them some room for discretionary monetary policy.

Syria is the only country with an arrangement of pegged exchange rates within horizontal bands. Under this arrangement, the value of the currency is maintained within certain margins of fluctuation of at least ±1% around a fixed central rate or the margin between the maximum and minimum value of the exchange rate exceeding 2% of the fixed central rate. There is a limited degree of monetary policy discretion, depending on the band width. The interest in this regime is not high in the world and only 2 other countries follow the same arrangement.

In crawling peg regimes (Iraq's case), the currency is adjusted periodically in small amounts at a fixed rate or in response to changes in selective quantitative indicators. Along with 5 other countries in the world, Iraq, Iran and Uzbekistan are the three OIC countries using crawling peg regimes. Iraq and Uzbekistan adjust the exchange rates against the USD while Iran adjusts against a composite of foreign currency basket.

In my opinion eventually when we having a power-sharing GOI, the CBI will make their move and peg directly to the relevant commodity (which is oil) or do a hybrid solution. However, when it comes to the IQD, I've learned the hard way not to say anything with an in-exorable certainty.

It may be a long shot but it is possible that the CBI's numbers are fabricated and that there are really "2 sets of books," which would suggest a deliberate move where the CBI works in tandem with the IMF and World Bank to conceal the true numbers from speculators and protect their plan. I would imagine that if Iraq is truly preparing to pull off a historic revaluation, furtiveness would be by far the most crucial element due to the potential for abuse and corruption.

The fact that we are talking about these numbers in chat rooms does lead me to believe that if (and that's a HUGE "if") a historic large currency appreciation is indeed on the way for the IQD, "Fixing the books" would be a smart move. Europe, whose false public finance data helped usher in the latest round of global financial turmoil, the Enron scandal and China's recent "alleged" massaging of their growth numbers comes to mind. There is no independent replication of GDP numbers so we will never be sure.

I am not saying for sure that this is what the CBI is doing, I would have no earthly way of knowing that and have no evidence that this is the case. If Iraq continues to increase oil production and their GDP (which has been affirmed by the IMF), the IQD can increase the IQD in value giving them additional purchasing power in the international market. Now, progress is finally being made, and the country's massive reserves could bring untold wealth. But before that happens, Baghdad needs to improve security and get corruption under control.

I have been extremely encouraged by Iraq's progress toward Chapter VII removal. Although this does not directly signify a RV per say, when we see general progress that we can collectively process it's always a good sign that things are moving in the right direction. Iraq is showing a lot of progress lately that will eventually mark their reemergence to the international stage.

The persistent Forex rumors are back. The Netdania and Yahoo Finance type sites are not Forex brokers/marketmakers. They are just free web based charting tools and the numbers they use are a poor proxy for volume. The frequent anomalies often coincide with trading session openings (US, London, Asia), and the spikes are directly related to the volatility of the USD.

Netdania is a hybrid feed of data and the spikes also could represent an arbitrary spread depending on where their source data comes from. The IQD is not currently being traded and always reverts back to the actual value. Forex trading is done through a broker or market maker. Traders choose a currency pair that they expect to change in value and place a trade.

When you close your trade the broker closes the position on the Interbank Market and credits your account with the loss or gain. If someone wants to determine the IQD rate in correlation to another form of currency, they can go about this procedure in a variety of ways. Upon completing the entry procedure the results of the IQD exchange rate (with regard to the respective currency) will show the fluctuations, but the Iraqi Dinar is not currently traded on the Forex Market.

The IQD is a controlled currency. The CBI determines the exchange rate and must support that rate by maintaining adequate foreign currency reserves to handle capital flows across its borders and the IMF permits them to implement currency controls in order to stabilize their economy during its redevelopment phase. Presently, international banks will not accept the Dinar, and it is not traded on any Forex exchange.

Actual purchases are made through currency dealers that have been authorized to buy and sell banknotes that are already in circulation. When a country decides to implement a large currency appreciation, in accordance with IMF approval and instruction, their Central Bank will send the adjusted rate to the BIS and from there it will be released to all Central Banks around the world simultaneously.

This will not show up on Forex first because the IQD is not traded on Forex markets. Nothing against those who take the time to research and look for clues. More power to them and I appreciate their efforts. Just trying to provide some clarity.

Edited December 7, 2012 by DocDinar.

[WallyWeaver]

This thread should be pinned.

Thanks for bringing it over.

WW.

[pokerplayer]

Great post from SWFG. Thxs for posting it DocDinar

pp

[amhvl]

This thread should be pinned.

Definitely!

[Goeers]

What an essay. This man has a lot of sense. Seems to be very much in tune. Great post. SWFG has my sincere respect. Period.

[SWFloridaGuy]

What an essay. This man has a lot of sense. Seems to be very much in tune. Great post. SWFG has my sincere respect. Period.

Thanks man, that's really nice of you to say. Sure wish I knew more though. When it comes to date & rate, I'm pretty much clueless and just hoping for the best. Hopefully, we will cross the finish line together soon. Cheers brotha.

[okane]

Wow, what a read. Thank you for the time and effort to inform me and this rest of the masses. Seeing how involved this is from a global prospective is very comforting to know that it is more than just a handful of power hungry people in a pi$$ing match.

[SWFloridaGuy]

What an essay. This man has a lot of sense. Seems to be very much in tune. Great post. SWFG has my sincere respect. Period.

By the way, what kind of music do you sing? I play lead guitar in a band but can't sing worth a hoot.

[motox565]

By the way, what kind of music do you sing? I play lead guitar in a band but can't sing worth a hoot.

Cool! anyone that can play lead has some serious talent. I've been spuratically plucking away for years... and still suck.

Ps ...Sorry "fat fingered" +1.

Edited December 7, 2012 by motox565

[Snatcher]

To me it sounds like it would have been the same example as Kuwait..They were invaded and their currency changed by someone besides their government...Then it was changed back to where it was before. Iraq was invaded so to say by the US...Their currency was changed by UN....Now we are just waiting for it to be changed back to where it was before the santions or atleast higher than it is now.

Edited December 7, 2012 by Snatcher

[SWFloridaGuy]

Cool! anyone that can play lead has some serious talent. I've been spuratically plucking away for years... and still suck.

Ps ...Sorry "fat fingered" +1.

Hang in there, you'll get it. Cliff Williams (AC/DC Bass Player) is a good friend of mine and has taught me a lot even though he plays a different instrument. Keep plucking away sporadically. Post RV, we can jam together.

[motox565]

Hang in there, you'll get it. Cliff Williams (AC/DC Bass Player) is a good friend of mine and has taught me a lot even though he plays a different instrument. Keep plucking away sporadically. Post RV, we can jam together.

Awsome teacher!

If this thing would just RV already, I would love to jam....if I could. Lol

Edited December 7, 2012 by motox565

[rockfl9]

I found this in The Kellog Busines School Dictionary of Economics and Business.

REVALORIZATION : The process of RESTORING the former value of the monitary unit.

REVALUATION : Bringing the BOOK value of an asset in line with MARKET VALUES.

Given the later, with the market value at 1220 +/-, it seems the CBI has been propping UP the dinar , not holding down the rate as speculated.

[KiaKaha]

Why doesn't SWFG post his own stuff, I wonder? He used to...

KK

MADD for Heather

[SWFloridaGuy]

Why doesn't SWFG post his own stuff, I wonder? He used to...

KK

MADD for Heather

Hey KK, other than progress with Chapter VII and debunking bogus rumors, I haven't had much new to talk about and I don't want to waste people's time. I am encouraged by the news of late though. I'm just immune to the hype (like other Vets here), I'm numb to it. However, the hardest thing about the road not taken is that you never know where it might have led. I'm certainly grateful to be involved.

[WallyWeaver]

To me it sounds like it would have been the same example as Kuwait..They were invaded and their currency changed by someone besides their government...Then it was changed back to where it was before. Iraq was invaded so to say by the US...Their currency was changed by UN....Now we are just waiting for it to be changed back to where it was before the santions or atleast higher than it is now.

Actually, it was Iraq who is most responsible for changing their currency, the UN/ US sanctions probably had little to do with effecting the value of the IQD other than the sanctions caused Saddam to print an excessive amount. My understanding is the IQD lost its international value in 1995 when Saddam printed the heck out of it. This caused the internationally recognized exchange rate to drop to 3000:1 (even though in-country the exchange rate was recognized as much, much higher).

In 2003-2004, when the new bills (the ones we hold now) were introduced, the internationally recognized exchange rate was virtually the same as the old Saddam notes in 1995 (right around 3500:1 with the USD). So the exchange rate did not drop when we invaded, it had already been pretty low for several years.

And that's my understanding of it all....

WW.

[Goeers]

Thanks man, that's really nice of you to say. Sure wish I knew more though. When it comes to date & rate, I'm pretty much clueless and just hoping for the best. Hopefully, we will cross the finish line together soon. Cheers brotha.

No thank you for bringing good grounded info to the board. Don't need dates and rates. It'll be here soon enough.

[Noni]

Thanks SWFG! I have missed you. I am new and confused, but you always make me feel better. Thanks again:)

[Goeers]

By the way, what kind of music do you sing? I play lead guitar in a band but can't sing worth a hoot.

been playin in bars since 1971 when I was 15. I do a solo acoustic thing and also in a 5 piece classic rock 70's 80's band. We're not your ordinary ZZ Topp Skynard cover band tho. I do acoustic, electric guitar and keyboards. Plus we have another keyboard player in the band so we do some pretty sophisticated material. (late Doobies, Styx, Journey, Sanford Townsend, Pablo Cruise, Little Feat, Scaggs) It'd be the perfect band for the DV RV party.

[SWFloridaGuy]

been playin in bars since 1971 when I was 15. I do a solo acoustic thing and also in a 5 piece classic rock 70's 80's band. We're not your ordinary ZZ Topp Skynard cover band tho. I do acoustic, electric guitar and keyboards. Plus we have another keyboard player in the band so we do some pretty sophisticated material. (late Doobies, Styx, Journey, Sanford Townsend, Pablo Cruise, Little Feat, Scaggs) It'd be the perfect band for the DV RV party.

My link

been playin in bars since 1971 when I was 15. I do a solo acoustic thing and also in a 5 piece classic rock 70's 80's band. We're not your ordinary ZZ Topp Skynard cover band tho. I do acoustic, electric guitar and keyboards. Plus we have another keyboard player in the band so we do some pretty sophisticated material. (late Doobies, Styx, Journey, Sanford Townsend, Pablo Cruise, Little Feat, Scaggs) It'd be the perfect band for the DV RV party.

I love the Jimmy Page guitar you have.

Edited December 7, 2012 by SWFloridaGuy

[Goeers]

My link

I love the Jimmy Page guitar you have.

I've always like Doublemint gum for some reason.............

[Elixirbaby]

been playin in bars since 1971 when I was 15. I do a solo acoustic thing and also in a 5 piece classic rock 70's 80's band. We're not your ordinary ZZ Topp Skynard cover band tho. I do acoustic, electric guitar and keyboards. Plus we have another keyboard player in the band so we do some pretty sophisticated material. (late Doobies, Styx, Journey, Sanford Townsend, Pablo Cruise, Little Feat, Scaggs) It'd be the perfect band for the DV RV party.

Where do you play? I have a gig tonight doing tribute of Journey and Cars.

[SWFloridaGuy]

Where do you play? I have a gig tonight doing tribute of Journey and Cars.

Good choice, Don't Stop Believin is the Dinarian theme song.

[BKD]

Thanks, SWFG you always bring pertinent news which helps to clarify the news on the dinar.

[umbertino]

Talk about Led Zeppelin... I saw them the other day on TV at the D.Letterman show.......Even they (the Music semi-gods...) got old.....Shocking.