Frank26 KTF missions::: GOOD READ AND ANALYSIS

[tbush]

Frank26 Post: KTF Missions (Interesting Analysis Shared)

April 9, 2010

[tbush]

Economist Explains How The Plan To Have The IQD RV at 1 IQD = $1 USD Should Work!

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In our 40+ year career as a Retirement Consultant we have been blessed to meet some very talented professionals. One of them is a retired State Dept. economist who introduced us to the IQD investment in 2005. He had worked on the original plan to install a new monetary system for Iraq after the 2003 invasion.

He had originally indicated that the plan was for the IQD to achieve financial parity with the USD over a 7-10 year period from the introduction of the new system. At that time the USD’s use would be completely discontinued and it would be replaced by the IQD for in-country use and international exchange. The variable factor in the timetable would be the political environment.

I visited with him recently and got an update on several issues:

(1) He indicated the original time table was proceeding on a fast track due to the financial management skills exhibited by the CBI and the Finance Ministry in (1) controlling the rate of inflation, (2) controlling the value of the IQD in a declining economic environment and (3) implementing a digital banking system both internally and externally, but the variable was still the political environment.

Like most economist he doesn’t talk in absolutes (i.e. rate/date) but in probabilities. His knowledge base is pretty current since he is still part of a subsection of the original group that Iraq, State Department and IMF financial people bounce things off of.

(2) We raised the issue of the large number of IQD reported as being in circulation (current estimates are at 25 Trillion). He indicated this was mostly made up of (1) in country physical currency, (2) the foreign currency reserves of the central banks around the world which are electronic, (3) currency that had been printed but not released (i.e. small denomination bills) and (4) privately held physical currency sold to increase the foreign currency reserves.

The export oil revenues are still under the control of the UN supervised DFI, and Iraq only gets roughly 30% of the fair market value of the oil they are selling, which is to be used only for budgetary expenditures. Since Shabbi, the head of the CBI, knew he couldn’t get anymore cash flow out of the controlled revenue system the IMF/UN had him under, he opened a currency sales window at the daily auctions to tap into the wallets of the worlds speculators. Worked pretty good, since he’s built his foreign currency reserves to over $50 billion USD.

(3) We then moved to the removal of big bills (the ones with the 3 zeros on them) and he said that this activity was always built into the plan. The activity was to begin as soon as Iraq had implemented a modern digital financial system (i.e. bank branches, credit/debit cards, ATM’s, direct wire transfers etc.). The removal of the large bills in-country would be the reverse of the process that was used to remove the pre-2003 currency with Saddams picture on it. The example was a 25,000 IQD=$25USD/pre-rv note would be brought into the bank and exchanged for a 25 IQD note=$25 USD post/rv. The 25,000 IQD note would then be destroyed removing it from the currency in circulation account. I told him a lot of people would call that a LOP and he laughed, saying they are partially right, because 25,000 IQD was being lopped from the currency in circulation account, but the only reason for this process was to improve money handling ability at all organization levels, and reduce the actual physical currency in use in all areas of the Iraq economy.

Interestingly enough, he said this activity could happen in-country without an approved RV rate being released to the International financial system. I asked how much physical IQD did he estimated was in circulation in-country, and he said probably less than had been originally introduced in 2003 which was about $4.5 billion USD worth at an exchange rate of 2000 IQD = $1 USD, because there has been a continuous process of not replacing the larger bills as they wore out. In fact this has resulted in currency shortages in some areas.

(4) The next obvious question was how would the removal of the large bills with the three zeros work outside of Iraq, because of the number of world speculators holding IQD. He indicated, the amount of IQD held by speculators was relatively minor (less than 10%) compared to the IQD held as foreign currency reserve by the central banks of a number of major countries (US, China, England & France were the largest) with major financial interest in Iraq. He didn’t have an exact estimate of speculator holdings but ventured an educated guess of 750,000 individuals worldwide with the majority in the US. Estimated value of their holdings $1.5 Trillion – $1.7 trillion IQD.

The remainder of the discussion will be posted in Part 2.

__________________

IRS Circular 230 requires that those enrolled to practice before the IRS should state when general information is given, that it “SHOULD NOT BE CONSIDERED PROFESSIONAL ADVICE”. We strongly encourage all investors to consult with their own professional financial team.

Economist RV Explantion – Part II

Economist RV Explantion – Part II

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(5) Before discussing the planned process of how currency exchange would take plan after the IQD was released as an international tradeable currency, he asked if I remembered my economics 101 and what the real purpose of currency is? Yes teacher I replied, it’s a medium of exchange that facilitates the orderly distribution of goods and services among individuals, companies, country’s etc. The often used example, is the use of currency allows an automobile dealer to exchange a new mustang GT (composed of many diverse parts each with its own individual market value) for the cash down payment + bank financing check of a proud new owner, and each has received equal market value at the moment of exchange.

This is an important concept because the value of a particular currency may be defined by the value of what the currency can be exchanged for, instead of the usual underlying economic indicators.

[tbush]

This is an important concept because the value of a particular currency may be defined by the value of what the currency can be exchanged for, instead of the usual underlying economic indicators.

The complete discussion was rather lengthy so here’s the executive summary of how the exchange should work with IQD owned by a US speculator:

(1) IQD is released internationally with an exchange rate of $1 USD = 1 IQD

(2) IQD is exchanged by Mr. & Mrs. X at Bank Y. Their exchange value is credited to their designated financial account, Bank Y forwards the IQD currency to the Federal Reserve and Bank Y’s account is credited at the bank private exchange rate. Yes, the banks will have a private rate and then they will add their profit spread to come up with their public rate. By law this bank spread could be as high as 8%, but it will be a competitive marketplace and the banks know investors will shop around. There is a possibility that there might even be a three rate structure (i.e. Treasury Rate – Bank Private Rate – Bank Public Rate) imposed, but he had no input on that subject.

(3) The Federal Reserve adds the value of the exchanged IQD to their foreign currency reserve accounts and destroys the actual physical currency under agreement with the CBI, which serves to reduce the total IQD physical currency in circulation. This build up of the foreign currency reserve accounts serves to strengthen the USD in the marketplace, because heretofore the US has never held significant foreign currency reserves, because there wasn’t any country whose currency was perceived as being equal to or stronger than the USD. The IQD with it’s commodity (oil+others) base, potential for agriculture growth and aggressive private development growth, has the capability to become the most valuable currency in the world in the 10 years after it’s revaluation and approval as an internationally recognized currency. Other countries have lots of oil, but they can’t feed themselves, they operate under a monarchy or religious tribunal and they have no private development system in place.

(4) Mr. & Mrs. X tithe to their church, local charity etc. which stimulates activity in that sector. They pay off their debts, making currency available for re-lending by their creditors. They buy a new house and car which stimulates their local economy and set up a conservative investment portfolio which adds capital to the investment markets. They also pay their estimated taxes which increases the cash flow to the US Treasury.

(5) The Federal Reserve under a controlled redemption plan supervised by the IMF, will use it’s foreign currency reserve IQD account to buy oil for the national strategic reserve, DOD reserves, other country reserves as part of international support agreements or resell it to private oil companies etc.

This gives the Federal Reserve a powerful market force capability to control the supply/price of imported oil which has far-reaching economic and national security implications.

The economics of this scenario look like this, using the exchange of a 10,000 IQD Note with a two-tier 2% bank exchange spread as an example:

(1) Mr. & Mrs. X get $9,800 credited to their non-interest bearing checking account.

(2) Bank Y gets a $10,000 credit to its Federal Reserve account, and by adding the $200 profit to their capital account, allows them to increase their lending cap by $2,000 under the 10% fractional banking model.

(3) The Treasury gets $3,500 in estimated taxes in the quarter after the exchange, because Mr. & Mrs. X are now in the “rich” category and get to enjoy the 35% tax bracket. This lowers the net cost of the IQD exchange to the US financial system to $6,500 USD (i.e. $10,000 out – $3,500 in).

(4) The Fed’s designated agent, at some point, orders $10,000 worth of oil from Iraq. Payment will consist of a 10,000 transfer from the Fed’s foreign currency reserve IQD account to the IRAQ Oil payment account at the CBI. Even though the world spot price of oil is defined in terms of USD, the actual transaction may take place in any internationally recognized currency agreed to by the parties. For example, Iran only accepts Yen from Japan for their oil orders, because they don’t want USD in their foreign currency reserves.

(5) The $10,000 order is filled with 200 barrels of oil based on the spot price on the date of the sale (for this example we used a $50 USD spot price). What does it cost Iraq to produce the oil to fill this order? Well they have negotiated productions agreements for $1.50 USD/barrel. From that price $.50 USD goes to the national Iraqi oil company who is the partner in the field the oil came from. Out of the remaining $1.00 the other oil field partners have to pay the Iraq government a profit tax of $.35 USD (35%). The net cost to Iraq to produce a barrel of oil used in this scenario is $.65 USD. (i.e. $1.50 – .50 – .35)

(6) The transaction is completed with the Federal Reserve exchanging foreign reserve credits which are equal to 10,000 IQD (which had a net acquisition cost of $6,500 USD) for 200 barrels of oil (which has a net cost to produce of $130 USD.

Simply put, it cost Iraq $130 USD from their foreign currency reserve accounts to redeem the value of 10,000 IQD, which goes into their operating accounts. At the same time the US got $10,000 worth of oil for a net cost of $6,500. That’s how it was originally planned for Iraq to RV at 1 IQD = 1 USD, with the variable being the political element (i.e. UN Sanctions, GOI actions, IMF actions, World Bank actions etc.)

Now let’s really stir the pot by:

(a) Having the DFI ($280+ Billion USD) plus other frozen assets (estimated at $100 billion) turned back to Iraq and added to their foreign currency reserve, bringing it up to $430+ billion USD.

( Then change the current fractional IQD reserve requirements of 100% to 15%. That just raised the total potential money supply value to $2.8 Trillion (430 billion/ 15), while at the same time the total physical IQD in circulation is being reduced by removing the large bills with the 3 zeros.

© Also execute the plan Iraq announced to increase oil production from 2+ million barrels/day to 10 million barrels/day with the resulting revenues flowing directly to the Iraq treasury.

(d) To add a little more intrigue have the CBI continue to use it’s sales window to market oil futures and forex contracts. They have shown they can generate significant cash flow in the private market, think of their impact in public markets.

We leave it to your analytical ability to determine how high of an RV exchange rate IRAQ can really support. There is strong political pressure to set the initial rate at $3.22 USD = 1 IQD, so it can be proclaimed that IRAQ has moved back into the International community of nations and has re-established it’s currency at the internationally traded rate in effect before Saddam invaded Kuwait in 1990.

Frank26 zip code is $3.21+ as I remember, which is suggested is the same exchange rates cabinet ministers reportedly used to project the 2010 budget.

VERY INTERESTING! You have to love it when a plan comes together.

[bahtman]

Already Posted a week ago!!

http://dinarvets.com/forums/showthread.php?16551-Economist-RV-Explanation-Part-I-and-II

2nd Thread under Dinar Rumors

I agree. A very good read!!

[CaptainConrad]

This is all about creating expectations that will only lead to a future disappointment. What's the reason ?

[tbush]

This makes no sense whatsoever, or at best is lacking critical information. Could you expand on this a little?

-Are the 1000, 500. 250, and 50 IQD notes exchanged at the same rate (1000:1) as the 25,000 IQD note?

If so, that is a re-denomination (L0P).

If not, how does this NEW 25 IQD note you speak of relate in value to the current 50 IQD note?

-While this 25,000 to 25 IQD exchange takes place, what happens to a bank account balance of 17,347 IQD?

It is not a LOP. The removal of three zero's (5K, 10K, 25K notes) is ONLY and I stress ONLY removing the K notes out of circulation once the CBI recieves them back. When the dinar Rv's, your K notes whatever the denomination is, stays the same, example, 25K is still 25K regardless. Your 25K does not turn into a 25 dinar note. the removal of the K notes is due to after the RV, would you want to buy a loaf of bread for worth 3 dinar and hand the teller a 25K note? Do you think the teller is going to have 24,997 dinar to hand you back in change? It is not economically feasible for the K notes to be in circulation once the Iraqi Dinar revalues.

If your an Iraqi and you have an account or you yourself has a WARKA account, everything in your account is electronic so if yoy deposited a billion dinar in 25K notes you still have a billion dinar. It's just that all of your money if withdrawn by you will be in lower dinar denominations such as our 1's, 5,,10, 25, 50, and 100. NO DIFFERENT.

[cgbrown]

This is not a new post. Please check the threads under your topic before posting. We keep reading the same information. Nothing new here.

[tbush]

This makes no sense whatsoever, or at best is lacking critical information. Could you expand on this a little?

Dustin.... I have a question? I noticed your Sadam notes as your Avatar. This may be a dumb question but I am in no way trying to be a smart *ss. You do hold the new Iraqi Dinar, correct?

[tbush]

This is not a new post. Please check the threads under your topic before posting. We keep reading the same information. Nothing new here.

I already got that and know the procedures I am not a rookie, thank you. Frank 26 post, dated 4-09-2010...

get over yourself.

[tbush]

tbush, Thanks for the quick reply.

The original post stated: "The example was a 25,000 IQD=$25USD/pre-rv note would be brought into the bank and exchanged for a 25 IQD note=$25 USD post/rv."

Now you state: "Your 25K does not turn into a 25 dinar note."

Hence the confusion.

And for the record, the avatar is from the wiki website. The funny part is that at the little Iraqi store across the street, I can get 1200 (new) dinars for a buck, but the old saddam collectible dinars cost a lot more.

Dustin, that's cool.... In response to your question. As you know the article is not my analysis. There are alot of good points with this although in reference to your question with regards about the 25K and 25 dinar note, that portion of the article is in-correct. I hope my explanation as to the removal of zero's vs LOP got you on the same page and helped you understand that situation.

[quadraph0nic]

Yeah, I don't want to see a LOP, I hate the LOP thats not why I invested but I have to agree with Dustin because at this time the IQD is being backed by the dollar.

If you turn in these big dinar notes and open a bank account then the value of the currency still exists. If you turn in these big dinar notes for smaller notes, you still have the same amount of money floating around in circulation. CBI can burn these big dinars but doing that does not reduce the money supply. Why? Because there was an exchange done for those big bills and the value of those big bills still exist just in another form either electronic or smaller denomination or combination of both. Its that simple.

This does not reduce the money supply but it gets the big denoms off of the street.

So the question is how does the central bank of Iraq reduce the money supply without re-denomination? I'm hoping to see something that hasn't been done before? I read that our FED sells securities to reduce our money supply. Who's going to buy it with the value being nothing?

Of course they could do an internal RV and refuse to honor any dinars outside of Iraq due to the fact that it is against their law to take money outside of their country. That would suck but its possible. The law exist....

Another option is to get off the dollar completely. If other central banks are willing to accept their revalued rate, based on what they posses in oil reserves and other assets. Its possible...

Its only worth something if someone is willing to pay you for it...

[beau777]

Live rates at 2010.04.10 08:39:28 UTC

Notice: IQD will be redenominated by the end of 2010. More on the Iraqi Dinar

1.00 IQD

=

0.000849400 USD

Iraq Dinars United States Dollars

1 IQD = 0.000849400 USD 1 USD = 1,177.30 IQD

1 to 1 wishful thinking !

[mrref]

You guys just don't get it. Ask yourself this question does Iraq want to move forward or backwards?????????????????????Of course they want to move forward (RV) and they want their currency to be recognized throught out the world, well if they LOP that want happen thats a step in the wrong direction. GET IT

[inmemoryofrob]

You guys just don't get it. Ask yourself this question does Iraq want to move forward or backwards?????????????????????Of course they want to move forward (RV) and they want their currency to be recognized throught out the world, well if they LOP that want happen thats a step in the wrong direction. GET IT

Pick me, Pick me....I get it, Teacher! This is what happens when there is no news. HAha!

[gbrlgms]

You guys just don't get it. Ask yourself this question does Iraq want to move forward or backwards?????????????????????Of course they want to move forward (RV) and they want their currency to be recognized throught out the world, well if they LOP that want happen thats a step in the wrong direction. GET IT

that what i keep on saying all the time,that will send a wrong signal to the whole world and we keep on forgetting that they have alot of black gold this country is not poor my friend. let keep positive

[SuperFlyJr]

Live rates at 2010.04.10 08:39:28 UTC

Notice: IQD will be redenominated by the end of 2010. More on the Iraqi Dinar

1.00 IQD

=

0.000849400 USD

Iraq Dinars United States Dollars

1 IQD = 0.000849400 USD 1 USD = 1,177.30 IQD

1 to 1 wishful thinking !

Check out the value of the currencies from Iraq's neighbors. I posted all of them yesterday on these forums and they range from 0.18-3.46. Now compare that to Iraq's at 0.0008494 and consider Iraq is establishing a democratic, business-friendly government AND has huge natural resources. To me, 1:1 seems very reasonable. In fact, even if it originally RV's lower, as things stabilize in the years to come I fully expect it to reach 2-3+ to be in line with Kuwait, Oman, etc.

[eileen]

Thanks Tbush!! Keep all the information coming.

[Kuper]

Does anyone think that the iqd will go higher than 3?

[SuperFlyJr]

Does anyone think that the iqd will go higher than 3?

Only one currency in the Middle East is currently over 3, Kuwait's, but who knows what is possible? If, or when, an RV happens FOREX speculators would probably send the IQD on a crazy roller-coaster for a time, but where it stops - nobody knows! Our best bet is to pray it spikes, pick a point, jump out while we can, and never look back!

[beau777]

jump out while we can, and never look back!

Now those are words of wisdom IMO

And if it comes out @ .33 I am out and happy.

The big boys can keep playing all they want.