Why Iraqs currency reserves matter.......

[keepmwlknfny]

There seems to be some questions or even some confusion on the importance of Iraqs currency reserves. Some think they dont matter and dont play a role in the dinar and its value. Being that Iraq is using a fixed exchange rate system or simply, being a pegged currency it does actually play a huge part. Yes, we know that all currencies are fiat, but even under that category and system, there still is a value placed on currency and what backs its value. Floating currencies operate differently then pegged currencies, and while there is a POSSIBILITY that sometime in the future that Iraq could change their monetary policy, it might not even be for the currency we hold currently....could be for the new currency they plan on putting out, which would make more sense seeing as how at that point, the money supply would also be reduced drastically to manageable numbers.

Anyways.....according to this information below (and many others found) countries that use fixed-exchange rate systems rely heavily on their currency reserves on hand to back the value of their currency. Central banks must be willing to spend those reserves on offers of buying back their currency at those rates. Now Im not gonna sit here and say that Iraq without a doubt has to back their currency no less then 100% by its reserves, but at the same time, I dont think we can sit here and say they dont matter cause they do.....they do play a big role.....

The CBI wants to keep a stable and strong dinar. (Strong does not mean high in value as some gurus will tell you) The high reserve amount compared to the currency in circulation is what puts the dinar in that category. They are backing the currency by a little more then 100%.....how much do you think the CBI is WILLING to spend on buying back their dinar?? Especially if they were to suddenly come out at a buck.....Do you think they would be willing to deplete their reserves plus more to buy back offers on their currency????

• Under a fixed exchange rate system, devaluation and revaluation are official changes in the value of a country's currency relative to other currencies. Under a floating exchange rate system, market forces generate changes in the value of the currency, known as currency depreciation or appreciation.

• In a fixed exchange rate system, both devaluation and revaluation can be conducted by policymakers, usually motivated by market pressures.

• The charter of the International Monetary Fund (IMF) directs policymakers to avoid "manipulating exchange rates...to gain an unfair competitive advantage over other members."

At the Bretton Woods Conference in July 1944, international leaders sought to insure a stable post-war international economic environment by creating a fixed exchange rate system. The United States played a leading role in the new arrangement, with the value of other currencies fixed in relation to the dollar and the value of the dollar fixed in terms of gold—$35 an ounce. Following the Bretton Woods agreement, the United States authorities took actions to hold down the growth of foreign central bank dollar reserves to reduce the pressure for conversion of official dollar holdings into gold.

During the mid- to late-1960s, the United States experienced a period of rising inflation. Because currencies could not fluctuate to reflect the shift in relative macroeconomic conditions between the United States and other nations, the system of fixed exchange rates came under pressure.

In 1973, the United States officially ended its adherence to the gold standard. Many other industrialized nations also switched from a system of fixed exchange rates to a system of floating rates. Since 1973, exchange rates for most industrialized countries have floated, or fluctuated, according to the supply of and demand for different currencies in international markets. An increase in the value of a currency is known as appreciation, and a decrease as depreciation. Some countries and some groups of countries, however, continue to use fixed exchange rates to help to achieve economic goals, such as price stability.

Under a fixed exchange rate system, only a decision by a country's government or monetary authority can alter the official value of the currency. Governments do, occasionally, take such measures, often in response to unusual market pressures. Devaluation, the deliberate downward adjustment in the official exchange rate, reduces the currency's value; in contrast, a revaluation is an upward change in the currency's value.

For example, suppose a government has set 10 units of its currency equal to one dollar. To devalue, it might announce that from now on 20 of its currency units will be equal to one dollar. This would make its currency half as expensive to Americans, and the U.S. dollar twice as expensive in the devaluing country. To revalue, the government might change the rate from 10 units to one dollar to five units to one dollar; this would make the currency twice as expensive to Americans, and the dollar half as costly at home.

Under What Circumstances Might a Country Devalue?

When a government devalues its currency, it is often because the interaction of market forces and policy decisions has made the currency's fixed exchange rate untenable. In order to sustain a fixed exchange rate, a country must have sufficient foreign exchange reserves, often dollars, and be willing to spend them, to purchase all offers of its currency at the established exchange rate. When a country is unable or unwilling to do so, then it must devalue its currency to a level that it is able and willing to support with its foreign exchange reserves.

A key effect of devaluation is that it makes the domestic currency cheaper relative to other currencies. There are two implications of a devaluation. First, devaluation makes the country's exports relatively less expensive for foreigners. Second, the devaluation makes foreign products relatively more expensive for domestic consumers, thus discouraging imports. This may help to increase the country's exports and decrease imports, and may therefore help to reduce the current account deficit.

There are other policy issues that might lead a country to change its fixed exchange rate. For example, rather than implementing unpopular fiscal spending policies, a government might try to use devaluation to boost aggregate demand in the economy in an effort to fight unemployment. Revaluation, which makes a currency more expensive, might be undertaken in an effort to reduce a current account surplus, where exports exceed imports, or to attempt to contain inflationary pressures.

Effects of Devaluation

A significant danger is that by increasing the price of imports and stimulating greater demand for domestic products, devaluation can aggravate inflation. If this happens, the government may have to raise interest rates to control inflation, but at the cost of slower economic growth.

Another risk of devaluation is psychological. To the extent that devaluation is viewed as a sign of economic weakness, the creditworthiness of the nation may be jeopardized. Thus, devaluation may dampen investor confidence in the country's economy and hurt the country's ability to secure foreign investment.

Another possible consequence is a round of successive devaluations. For instance, trading partners may become concerned that a devaluation might negatively affect their own export industries. Neighboring countries might devalue their own currencies to offset the effects of their trading partner's devaluation. Such "beggar thy neighbor" policies tend to exacerbate economic difficulties by creating instability in broader financial markets.

Since the 1930s, various international organizations such as the International Monetary Fund (IMF) have been established to help nations coordinate their trade and foreign exchange policies and thereby avoid successive rounds of devaluation and retaliation. The 1976 revision of Article IV of the IMF charter encourages policymakers to avoid "manipulating exchange rates...to gain an unfair competitive advantage over other members." With this revision, the IMF also set forth each member nation's right to freely choose an exchange rate system.

September 2011

http://www.newyorkfed.org/aboutthefed/fedpoint/fed38.html

EXTERNAL LINKSInternational Monetary Fund (IMF)

FED EDUCATIONU.S. Foreign Exchange InterventionAll About...The Foreign Exchange Market in the United States

So in all reality.....we need the CBI to drastically increase its foreign reserves, AND we need them to drastically reduce the amount in circulation WITHOUT deleting the zeros......it wont be a quick process, but its not impossible....

[Zman6]

Thanks Keep, I always like to hear both sides of the Dinar debate, even if it's not a warm and fuzzy bank rumor. But I still like to fantasize that your wrong and the "gurus" are right and I'm gonna be an instant millionaire.

[dontlop]

I HAVENT HEARD OF ANY ONE BESIDES ME WHO THINK THIS.. WHO ELSE . I NOTICED YOU ARE SAYING SOME DONT THINK RESERVES MATTER .. MAYBE YOU CAN HELP ME OUT SO I CAN HAVE OTHERS TO TALK TO ABOUT THIS .

oh i do wonder how they came up with the exchange rate difference between the saddam dinar and the swiss iraqi dinar .. being that the swiss iraqi dinar had been demonetized long before the exchannge .. leaving it with no value or reserves at all to back it .. yet the swiss dinar was exchanged at 150 bremmers for one swiss dinar ,, and saddams dinars that were not demonetized only were exchanged for 1 to 1 .. thanks

I DID NOTICE THE IRAQI RESERVES WERE DEPLETED IN THE MID 1980S .. YET THE DINAR HELD A HIGHER EXCHANGE RATE FOR SOME TIME ... THAT TOO BAFFLES ME

COULD IT OF BEEN THAT THEY SIMPLY DECREED THE SWISS DINAR TO HAVE A HIGHER VALUE ?

Edited February 2, 2013 by dontlop

[staunch]

you all are miles above me on this, but i do have an honest question: Are you saying that if a currency is a fiat currency on a float, it still has to fully backed by its reserves?

[dontlop]

ONE MORE QUESTION .. DO YOU THINK FIAT CURRENCYS ARE ALL BACKED UP BY RESERVES ? THAT TO BAFFLES ME .. LOL IM BAFFLED

[keepmwlknfny]

I HAVENT HEARD OF ANY ONE BESIDES ME WHO THINK THIS.. WHO ELSE . I NOTICED YOU ARE SAYING SOME DONT THINK RESERVES MATTER .. MAYBE YOU CAN HELP ME OUT SO I CAN HAVE OTHERS TO TALK TO ABOUT THIS .

oh i do wonder how they came up with the exchange rate difference between the saddam dinar and the swiss iraqi dinar .. being that the swiss iraqi dinar had been demonetized long before the exchannge .. leaving it with no value or reserves at all to back it .. yet the swiss dinar was exchanged at 150 bremmers for one swiss dinar ,, and saddams dinars that were not demonetized only were exchanged for 1 to 1 .. thanks

Maybe you can jump in the phone booth with bill and ted and zap back to 2003 and sit down General Taft......there is a reason for everything.....

Still doesnt negate the information presented because it does apply.....Iraq was a country that went rogue......so a lot happened that we might not ever have answers to.....

We are talking about here and now.....and Iraq having one unified currency, and them using a fixed exchange rate system......

[dontlop]

THIS IS AL I KNOW ABOUT FIAT CURRENCYS

Fiat money is money that derives its value from government regulation or law. The term fiat currency is used when the fiat money is used as the main currency of the country. The term derives from the Latin fiat ("let it be done", "it shall be").[1]

Fiat money originated in 11th century China,[2] and its use became widespread during the Yuan and Ming dynasties.[3] During the 13th century, Marco Polo described the fiat money of the Yuan Dynasty in his book The Travels of Marco Polo.[4][5] The Nixon Shock of 1971 ended the direct convertibility of the United States dollar to gold. Since then all reserve currencies have been fiat currencies, including the U.S. dollar and the Euro.[6]

[keepmwlknfny]

you all are miles above me on this, but i do have an honest question: Are you saying that if a currency is a fiat currency on a float, it still has to fully backed by its reserves?

Nope.....floating currencies work differently......their value is determined by different things....

ONE MORE QUESTION .. DO YOU THINK FIAT CURRENCYS ARE ALL BACKED UP BY RESERVES ? THAT TO BAFFLES ME .. LOL IM BAFFLED

Nope....not what I said just FYI.....nor what the information provided suggested....

[dontlop]

Maybe you can jump in the phone booth with bill and ted and zap back to 2003 and sit down General Taft......there is a reason for everything.....

Still doesnt negate the information presented because it does apply.....Iraq was a country that went rogue....so a lot happened that we might not ever have answers to...

We are talking about here and now.....and Iraq having one unified currency, and them using a fixed exchange rate system......

I DO AGREE TO YOUR STATEMENT

Nope.....floating currencies work differently......their value is determined by different things....

Nope....not what I said just FYI.....nor what the information provided suggested....

OK THANKS

[SnowGlobe7]

thanks keep.....plus one

for the record my greatest fear is a new currency. I fear that we will not have a trade in period. Not sure if that is likely, but that seems to be such a worry that I can not shake.

Edited February 2, 2013 by SnowGlobe7

[keepmwlknfny]

thanks keep.....plus one

for the record my greatest fear is a new currency. I fear that we will not have a trade in period. Not sure if that is likely, but that seems to be such a worry that I can not shake.

You, me, and many others share the same worries.......

[boomer113189]

thanks keep.....plus one

for the record my greatest fear is a new currency. I fear that we will not have a trade in period. Not sure if that is likely, but that seems to be such a worry that I can not shake.

when countries get all new currency they give everyone time to trade in there old currency for new for a certin amount of time.

[keepmwlknfny]

when countries get all new currency they give everyone time to trade in there old currency for new for a certin amount of time.

You.sure.about that? I have read of countries before that closed its.borders to any outside exchanges of their currency during redenominations. And i know saddam is no longer in power but Iraq also closed its borders before when they removed the 25 dinar note from circulation.....

I could be mistaken.....

[dontlop]

ONE MORE QUESTION .. DO YOU THINK FIAT CURRENCYS ARE ALL BACKED UP BY RESERVES ? THAT TO BAFFLES ME .. LOL IM BAFFLED

WELL AT LEAST WERE ON THE SAME PAGE HERE BEING NEITHER OF US BELIEVE FIAT CURRENCYS NEED TO BE BACKED UP BY RESERVES ..ALTHOUGH THERE IS ONE STIPULATION .. ALL THE FIAT CURRENCYS OUT SIDE OF THE COUNTRY OF ORIGIN I DO THINK HAVE TO BE BACKED UP BY RESERVES .. THATS ACCORDING TO THE FEDERAL RESERVE BANK OF NEW YORK ANY WAY . .. OR AT LEAST THIS IS WHAT I THINK THEY MEANT HERE >>> In order to sustain a fixed exchange rate, a country must have sufficient foreign exchange reserves, often dollars, and be willing to spend them, to purchase all offers of its currency at the established exchange rate. When a country is unable or unwilling to do so, then it must devalue its currency to a level that it is able and willing to support with its foreign exchange reserves.

AS LONG AS IRAQ SETS UP LEGAL TENDER LAWS WITHIN ITS BORDERS ,, DE-DOLLARIZATION WOULD BE IN EFFECT . AND THERE WOULD BE NO REASON TO BACK UP ANY CURRENCY UNLESS IT IS USED OUT OF COUNTRY SOMEWHERE ..

WHO KNOWS ,, MAYBE ITS GOING TO FLOAT ITS CURRENCY .. BECAUSE A FIXED RATE THEY WOULD HAVE TO FOLLOW RULES , RULES LIKE THIS .. ALSO FROM THE FEDERAL RESERVE IN NEW YORK >>>>> When a country is unable or unwilling to do so, then it must devalue its currency to a level that it is able and willing to support with its foreign exchange reserves.

FLOATING THEIR CURRENCY DEMAND WOULD DICTATE ITS VALUE..

[makecents]

you all are miles above me on this, but i do have an honest question: Are you saying that if a currency is a fiat currency on a float, it still has to fully backed by its reserves?

No, fiat is just currencies that do not have an intrinsic value (like a gold coin). Fiat currencies can get their value from the market by floating (e.g. the dollar and euro, but others as well) or it can be pegged to a value set by (and must thus be redeemable by) the central bank of that country. In the pegged case the value can not go (much) higher than the reservers allow, though it can always be set lower (e.g. Saudi Arabia has theirs pegged at about of 1/3 of reserves).

WELL AT LEAST WERE ON THE SAME PAGE HERE BEING NEITHER OF US BELIEVE FIAT CURRENCYS NEED TO BE BACKED UP BY RESERVES ..ALTHOUGH THERE IS ONE STIPULATION .. ALL THE FIAT CURRENCYS OUT SIDE OF THE COUNTRY OF ORIGIN I DO THINK HAVE TO BE BACKED UP BY RESERVES .. THATS ACCORDING TO THE FEDERAL RESERVE BANK OF NEW YORK ANY WAY . .. OR AT LEAST THIS IS WHAT I THINK THEY MEANT HERE >>> In order to sustain a fixed exchange rate, a country must have sufficient foreign exchange reserves, often dollars, and be willing to spend them, to purchase all offers of its currency at the established exchange rate. When a country is unable or unwilling to do so, then it must devalue its currency to a level that it is able and willing to support with its foreign exchange reserves.

Far more "offers of exchange" come from within Iraq due to imports than (will) come from the outside. They import about as much dollar value as the dollar value of oil they export (sometimes more and hence go into debt, sometimes less and hence have a surplus). In 2009 they imported $41B of stuff so about 48T IQD could have been exchanged (some might have stayed in dollars).

[keepmwlknfny]

WELL AT LEAST WERE ON THE SAME PAGE HERE BEING NEITHER OF US BELIEVE FIAT CURRENCYS NEED TO BE BACKED UP BY RESERVES ..ALTHOUGH THERE IS ONE STIPULATION .. ALL THE FIAT CURRENCYS OUT SIDE OF THE COUNTRY OF ORIGIN I DO THINK HAVE TO BE BACKED UP BY RESERVES .. THATS ACCORDING TO THE FEDERAL RESERVE BANK OF NEW YORK ANY WAY . .. OR AT LEAST THIS IS WHAT I THINK THEY MEANT HERE >>> In order to sustain a fixed exchange rate, a country must have sufficient foreign exchange reserves, often dollars, and be willing to spend them, to purchase all offers of its currency at the established exchange rate. When a country is unable or unwilling to do so, then it must devalue its currency to a level that it is able and willing to support with its foreign exchange reserves.

AS LONG AS IRAQ SETS UP LEGAL TENDER LAWS WITHIN ITS BORDERS ,, DE-DOLLARIZATION WOULD BE IN EFFECT . AND THERE WOULD BE NO REASON TO BACK UP ANY CURRENCY UNLESS IT IS USED OUT OF COUNTRY SOMEWHERE ..

WHO KNOWS ,, MAYBE ITS GOING TO FLOAT ITS CURRENCY .. BECAUSE A FIXED RATE THEY WOULD HAVE TO FOLLOW RULES , RULES LIKE THIS .. ALSO FROM THE FEDERAL RESERVE IN NEW YORK >>>>> When a country is unable or unwilling to do so, then it must devalue its currency to a level that it is able and willing to support with its foreign exchange reserves.

FLOATING THEIR CURRENCY DEMAND WOULD DICTATE ITS VALUE..

You asked me if I thought ALL fiat currencies were backed by reserves......

I said no....cause according to a lot of literature I have read, there is a difference between pegged and free floating....everything I have read has in fact suggested that pegged currencies/fixed exchange rate systems (such as Iraq) do in fact rely heavily on its reserves to promote the value of their currency.

Free floating currencies are a completely different story and as you can see by the USD, are not required to back their currency with reserves.

But I am really unsure why it is you think that the CBI would only have to back what is outside their country. Im pretty sure that is not what is meant. ALL offers of its currency.....that would also include anyone inside its own borders that wanted to redeem them for another currency. Not to mention it would be almost impossible for any country to physically know how much of their currency is outside its borders....

[dontlop]

You asked me if I thought ALL fiat currencies were backed by reserves......

I said no....cause according to a lot of literature I have read, there is a difference between pegged and free floating....everything I have read has in fact suggested that pegged currencies/fixed exchange rate systems (such as Iraq) do in fact rely heavily on its reserves to promote the value of their currency.

Free floating currencies are a completely different story and as you can see by the USD, are not required to back their currency with reserves.

But I am really unsure why it is you think that the CBI would only have to back what is outside their country. Im pretty sure that is not what is meant. ALL offers of its currency.....that would also include anyone inside its own borders that wanted to redeem them for another currency. Not to mention it would be almost impossible for any country to physically know how much of their currency is outside its borders....

YES IM SURE THEIR WOULD BE A SMALL PART OF THE POPULATION THATS TRAVELING ABROAD THAT NEED ANOTHER CURRENCY FOR TRAVEL .. JUST LIKE ANY OTHER COUNTRY SOE HAVE TRAVELERS .

for the most part . only imports would need to be paid for with foriegn currency .. as long as iraq has a budget for outside expenditures .. for import . they can just use the petro dollars they are generating for that .. but as far as paying govt workers , military . teachers , firemen . police .. any govt worker ,, they woulnd be being paid with anything but their own local fiat currency . when they go home after pay day ,, they just go buy groceries what ever pay their bills with their new fiat local currency ..this isnt bad iraq wil get rich applying this into their national accounting

Edited February 2, 2013 by dontlop

[makecents]

YES IM SURE THEIR WOULD BE A SMALL PART OF THE POPULATION THATS TRAVELING ABROAD THAT NEED ANOTHER CURRENCY FOR TRAVEL .. JUST LIKE ANY OTHER COUNTRY SOE HAVE TRAVELERS .

for the most part . only imports would need to be paid for with foriegn currency .. as long as iraq has a budget for outside expenditures .. for import . they can just use the petro dollars they are generating for that .. but as far as paying govt workers , military . teachers , firemen . police .. any govt worker ,, they woulnd be being paid with anything but their own local fiat currency .

The petrodollars are owned by the government. So indeed if the GOI wants to buy something (F-16s or grain or ...) they could pay directly with dollars. But if an importer (say for cars) wants to buy things, they will need to convert. If the dinar were to go up in value there might be a substantial demand from Iraqi's just to lock in that value.

[dontlop]

try this sometime

WHERE ISTHE Wealthof NATIONS?

THE WORLD BANK

Washington, D.C.

Measuring Capital for the 21st Century

http://siteresources.worldbank.org/INTEEI/214578-1110886258964/20748034/All.pdf

it does mention that the reserves are part of national accounting but only a smal part

[keepmwlknfny]

If a central bank is responsible for backing its liabilities when being pegged, then regardless of where that bill is, its still a liability no?

At least they count it themselves as a liability as well.....

So we should be focusing more of our attention on monetary policy changes, and ways of contracting the money supply.....thats what is most important in us making a profit.....

[dontlop]

If a central bank is responsible for backing its liabilities when being pegged, then regardless of where that bill is, its still a liability no?

At least they count it themselves as a liability as well.....

So we should be focusing more of our attention on monetary policy changes, and ways of contracting the money supply.....thats what is most important in us making a profit.....

well kinda ..if i earn 5 bucks cutting my neioghbors grass . i turn around and buy a pack of ciggerettes for 5 bucks with it .. the central bank isnt involved at all ... money circulating around in a local economy does not have to be backed up until it needs to be exchanged into foriegn currency .

if iraq has a 50 billion dollar trade balance with the us .. theres not another pile of money somewhere else being used up in trade . once the wto comes into the picture .. declarations of value, taxes . payments are resolved thru the wto .. balances and trade deficits would have to be squared away .. if iraq bought 20 billion dollars worth of goods from the us .. and the us bought 25 billion of oil .. . the us would have a trade deficit of 5 billion dollars they would need to pay iraq or they could let it ride into the next phisical quarter or year.. ... in the end iraqis will be using their own legal tender after de-dollarization not dollars ..i hope no one thinks if you buy something from some other countryy you first have to go to the foriegn exchange and exchange your currency

. in the end one dollar is redeemable for one dollar in the united states ..no gold .. just another dollar

Edited February 2, 2013 by dontlop

[keepmwlknfny]

Its the whole point of this post.....that even local currency circulating is a liability to the central bank that printed it. And under a fixed rate exchange system, the currency is in fact backed by the reserves behind it.....

Does not matter if that dinar is here in my pocket or in Iraq.....they are both backed by the reserves the CBI holds because they are a pegged currency.....

[makecents]

if iraq bought 20 billion dollars worth of goods from the us .. and the us bought 25 billion of oil .. . the us would have a trade deficit of 5 billion dollars they would need to pay iraq ..

Completely ridiculous. In 2011 the US exported $104B to China and imported $399B from China, so you're saying China actually "needs to pay" the US about $295B dollars? (link)

[dontlop]

Its the whole point of this post.....that even local currency circulating is a liability to the central bank that printed it. And under a fixed rate exchange system, the currency is in fact backed by the reserves behind it.....

Does not matter if that dinar is here in my pocket or in Iraq.....they are both backed by the reserves the CBI holds because they are a pegged currency.....

i have to agree to some extent ,, but i think iraq will indepently establish its own legal tender, fiat of course .. de-dollarize its streets .. with legal tender laws . the whole system wil be replaced and not be where every dinar is backed by the foriegn reserves ... like all other fiat curencys .. i dont think this system they have being pegged to their reserves will last much longer. i think they are going to add a huge amount of value to their countrys currency . and the dinars in the cbi system will be deleted .. and as the rest are exchanged they will be deleted .. the cbi will only be managing this . and since the govt of iraq owns the cbi .. the govt of iraq will become alot richer by paying govt employees in new fiat currency and those petro dollars will go alot further not being attached to their new local curency

Its the whole point of this post.....that even local currency circulating is a liability to the central bank that printed it. And under a fixed rate exchange system, the currency is in fact backed by the reserves behind it.....

Does not matter if that dinar is here in my pocket or in Iraq.....they are both backed by the reserves the CBI holds because they are a pegged currency.....

i know theres a point to the entirity of your post .. but isnt this fun just picking out parts of it , forget the point of the whole article ..right ? geez i get it every day from lopsters . you should know how this works .

Completely ridiculous. In 2011 the US exported $104B to China and imported $399B from China, so you're saying China actually "needs to pay" the US about $295B dollars? (link)

so in this case the us also has a deficit .. and its the us that needs to square that away .. i dont see how you come up with the question . it depends on a deficit or surplus in the trade balance to determin who owes who .

talk about complete rediculousness.. only you would say china has to pay in your secenario

im out of here i see a huge deficit on spending my time

[keepmwlknfny]

i have to agree to some extent ,, but i think iraq will indepently establish its own legal tender, fiat of course .. de-dollarize its streets .. with legal tender laws . the whole system wil be replaced and not be where every dinar is backed by the foriegn reserves ... like all other fiat curencys .. i dont think this system they have being pegged to their reserves will last much longer. i think they are going to add a huge amount of value to their countrys currency . and the dinars in the cbi system will be deleted .. and as the rest are exchanged they will be deleted .. the cbi will only be managing this . and since the govt of iraq owns the cbi .. the govt of iraq will become alot richer by paying govt employees in new fiat currency and those petro dollars will go alot further not being attached to their new local curency

Well that is what it will take....either way, the money supply has to be taken care of. Change the monetary policy and/or take care of the excessive amount in circulation.

Not a simple task, and not a quick one. but the possibility is there...