"Deletion of Zeroes" and A Little Math...

[Hairball51]

Ok everyone...I apologize if this has been covered but I'm asking for a little help in my math skills here to see if I am way off on this. 

 

First, it would seem to me that the greatest number "lopsters" throw around in defending their views is the 30 trillion dinars the CBI has put out as a total amount of dinars. They argue that an RV, especially a 1:1 or anything close, would never make sense considering the staggeringly high amount of the 30 trillion dinars total. But as many have pointed out, the CBI has been using the auctions to pull in the higher denominations and keeping them to be destroyed when they issue the new lower denominations thus decreasing the money supply already. So, if that is true, that 30 trillion could be much less by now.

 

Here is where my math comes in...I put this out there as an example, if my math is correct, as to how much the CBI could take in of the higher denominations in one year, thus taking them out of circulation.

 

I will use a very conservative estimate of $150 million dollars at the daily auctions or $150,000,000. So, in order to find out how much dinar was pulled in at the auction to get that $150 million, you would multiply the $150,000,000 by an average exchange rate of 1,166 dinars (because for every dollar the bank gives, you would have to give them 1,166 dinars). That comes out to 174,900,000,000 or 174 billion 900 million dinar. Keep in mind, this is in ONE day. Now let's say they have 20 auctions a month. 174 billion 900 million dinars x 20 auctions a month = 3,498,000,000,000 or 3 trillion 498 billion dinars in one month. Now, multiply that out to a whole year and we see that it is possible for the CBI, if they wanted to, to remove from circulation almost 42 trillion dinar in one year. Suddenly, that 30 trillion the "lopsters" throw around doesn't seem so astronomical. 

 

I'm not sure when these auctions started but I would have to say that it's is fair to speculate that the CBI has had ample opportunity to put a huge dent in that 30 trillion without ever having to think of doing a LOP. I don't know...I could be wrong...and I probably am...lol. I'm hoping someone could help me with this....thanks!

[keepmwlknfny]

That would be nice, but the auctions dont pull in currency from circulation to be destroyed......those big numbers you see of USD being sold are electronic transactions....there is a very small amount of physical currency actually sold....I know I have seen many without even a physical cash portion....

 

The oil revenues coming into the country is in USD.....the Ministry of Finance takes the USD and exchanges it for dinar with the CBI. The MOF uses the dinar to fund its projects/budgets/salaries etc. The CBI then takes that USD and sells it in the auction and makes money off of it.....

 

Read this.....

 

Quote

The Foreign Exchange Auction In Iraq (CBI)
Middle East Economic Survey


VOL. XLVIII

No 18

2-May-2005

The Foreign Exchange Auction In Iraq


By Simon Gray

Simon Gray is Adviser, Markets and Financial Infrastructure, Centre for Central Banking Studies (CCBS), Bank of England. During his secondment to the Coalition Provisional Authority (CPA) in Baghdad, he was Senior Advisor to the Central Bank of Iraq. He wrote this article for MEES.

The Central Bank of Iraq (CBI) introduced a foreign exchange auction on 4 October 2003, just under a fortnight before the start of the currency exchange (which replaced the old banknotes, and ran from 15 October to 15 January 2004). The timing was to a large extent dictated by that of the currency exchange, but the underlying need reflects Iraq’s position as a major oil-exporting country.

Background

The government’s revenue is predominantly in US dollars, from oil sales. To this extent, Iraq’s position is similar to that of many countries in the region. And in common with many countries in the region, its expenditure is largely in domestic currency, in this case Iraqi dinar. The Ministry of Finance therefore needs to sell dollars for dinar.

Typically, a Ministry of Finance with foreign currency revenues will sell surplus foreign exchange (it will use some for the purchase of imports for government projects etc; and may keep some in a separate oil stabilization fund) to the central bank; and the central bank will on-sell dollars to the market, via the banking system. Under a fixed exchange rate regime – and many oil-exporting countries in the region operate such a policy – it is clear at what rate the Ministry should sell to the central bank. The central bank can then on-sell, at the same rate, whenever banks request dollars. Prior to the war, Iraq operated a fixed exchange rate regime (albeit with a hopelessly non-market exchange rate), supported by exchange controls. But post war, the central bank was not in a position to operate a fixed exchange rate regime, and in any case did not want to lock into the exchange rate prevailing at the time. 1

From the end of the war though summer 2003, the exchange rate was purely market-determined – the market in question being a street market for physical cash in three main locations in Baghdad. But the Ministry and central bank did not need to make use of this market, as official expenditure at that time was mostly in US dollar bills.2 From October, things had to change. Once the currency exchange was under way (from 15 October), it was clearly important – if only from a political point of view – for the government to make disbursements in the new Iraqi dinar, rather than predominantly in dollars as had been the case since May. This meant that the Ministry needed a reference rate at which it could sell dollars to the central bank; and the central bank needed a mechanism for on-selling dollars to the market.

Without a mechanism to rechannel dollars to the economy, there would have been two consequences:
A shortage of dollars could hit the dinar exchange rate, leading potentially to a very sharp depreciation;
A dollar shortage would also cut off import supply, pushing up prices sharply. (Large amounts of dollar expenditure by the CPA and MoF had, predictably, fed through to a huge increase in imports, as previously suppressed demand could now be satisfied.)

Associating the introduction of the ‘new’ currency with sharp depreciation, cutting of the supply of consumer goods, and a hike in prices for those goods still available would have been disastrous.

An Auction As The Solution

The solution was to introduce a foreign exchange auction. This was kick-started by the CBI selling a small amount of its foreign exchange reserves to the market. Thereafter, the auction rate could be used for MoF dollar sales to the CBI (so that it would be a genuine market rate, rather than something based on a straw poll of street exchanges); and the market could bid for dollars in the auction to meet the level of demand. If demand was excessive, the rate would adjust.

We were aware that, once the new currency was available, the MoF would be selling several hundred million dollars a month to the CBI, and that auctions could easily exceed $10mn a time as the domestic demand generated by government expenditure (payment of salaries, pensions etc) fed though to import demand (since many consumer goods had to be imported), and thus demand for foreign currency. It was important to prepare the market for the auction system, and ideally to have a mechanism up and running, before the amounts became large. This meant starting in early October at the latest.

The full details of the auction need not be covered here. Importantly, several meetings were held with the commercial banks and the non-bank licensed foreign exchange dealers to discuss the mechanics and the purpose of the auction. Three dry runs of the auction were held, to give participants a better feel and ensure the mechanics worked. The first dry run was very messy; but by the end everyone understood not only how to complete bidding forms correctly, but how to participate in the price formation process and learn from the previous auctions.

All the banks and foreign exchange dealers also understood how the CBI would participate. It would look at the volume and price of bids from the market before deciding on its own participation, so that it could choose the cut-off rate. Clearly, no central bank can have full freedom in this: trying to keep the dinar too strong could lead to an unsustainable drain on limited reserves, while trying to hold back appreciation could have an inflationary impact. But at the margin, and for a time, the CBI could influence the rate. Since the market is allowed to participate in the auction in either direction (buying or selling dollars), it is possible that the central bank will not need to participate at all. But in practice there will nearly always be a large net demand for foreign currency by the market.

Banks and licensed foreign exchange dealers were allowed to submit bids directly to the central bank; but the dealers had to accompany their bids by a confirmation from their bank that funds were available to honor the bid, if successful. Settlement is book-entry only, across accounts at the central bank. Most bids are made in the 15-30 minutes before the cut-off time for the auction; and results are published 30 minutes after the close of bidding. Details can be found on the CBI website (www.cbiraq.org). Settlement is same-day. The short time-scale – only possible with book-entry settlement – helps to keep the auction and the rest of the market in line with each other.

The Auction, Exchange Rate Policy And Inflation

The first auction was held on 4 October 2003, and received a single bid, for $20,000. There was some debate about whether to accept it, since it was arguably below the market rate. But the CBI decided it was important to give a positive signal to the banks, to encourage participation in the future, and the bid was accepted. Within a couple of weeks, the bid rate at the auction and the street price – CBI staff went out three times a day to check prices at a range of locations (preferring those where prices were displayed, rather than given in response to a request) – had merged; and volumes were soon close to $10mn3. The majority of Iraqi banks participate regularly.

The CBI has said regularly in the auction result announcements that its aim is to achieve broad exchange rate stability, in order to support domestic price stability. There is no exchange rate target or band. The CBI has been able to meet demand, and there is not enough economic information for the market to take a strong view on what an ‘appropriate’ level of the exchange rate might be, certainly not to push for change in the rate.

But while the ‘right level’ was not clear, the CBI could be confident that excessive volatility was harmful. After the massive shocks to the economy and to society more widely in the previous months, it was important as far as possible to engender an atmosphere of stability – particularly in the early days of the currency exchange, when many Iraqis would see their income switching from dollar cash to new dinars. In any case, in view of the upward stickiness of some prices, it was likely that exchange rate volatility would tend to increase the level of inflation.



Especially in the early days, it was not clear what a ‘normal’ level of day to day volatility might be, since there was no ‘normal’ period to compare with. The chart above shows the daily returns on holdings of new Iraqi dinar, and clearly indicates much more volatility in the early days of the auction, and of the currency exchange, than more recently. Two particular spikes in the chart – in early December and mid January – can be linked to the announcement of Saddam’s capture (when it was not clear what the long term impact would/should be), and the end of the currency exchange, when the trend appreciation of the dinar (arguably starting with Saddam’s capture) led to ‘irrational exuberance’.

In the former case, the CBI made no attempt to stand against the trend, but did help to smooth it by the level and rate of its participation in the auctions. By contrast, the very sharp appreciation of the dinar in early January seemed unwarranted and almost certainly unsustainable; and it was clearly upsetting the market4. On this occasion – on 15 January 2004 – the CBI bought a small amount of dollars at the auction, and indicated that the recent appreciation of the dinar ‘was not supported by any recent political or economic announcements’. In other words, the CBI again avoided taking a stance on the appropriate level of the exchange rate, but merely noted that nothing had changed recently which would justify the very sharp movements in preceding days. This worked, as the chart below indicates.



Similar action in January 2005, just ahead of the national elections, was also undertaken in response to an increase in volatility, but otherwise the market has been remarkably quiet.

Reducing exchange rate volatility, and then supporting a remarkably stable nominal exchange rate since the beginning of 2004, has proved to be a very powerful tool in meeting the CBI’s objective of low domestic inflation (formalized in the new CBI law, dated 6 March 2004). In Iraq, as in many commodity-exporting open economies, there is a rapid pass-through from the exchange rate to domestic inflation. The correlation is bound to be unstable, as it will be affected by expectations, changes in the level of demand (eg reflecting changes in the security situation), changes in the direct costs of importing goods in an unsafe environment, and periodic supply disruptions. But prima facie, there is strong evidence that a stable exchange rate has helped to support price stability.
 

Read more: http://dinarvets.com/forums/index.php?/topic/112743-cbi-foreign-currency-auctions/#ixzz2ZFYrWW41

[srdedeaux]

• Keep Me think's your math is wrong! And you're Quoting from old Data! 2003: 2005 etc.. etc..!  Oh and today's  date is 7/16/2013.

Edited July 16, 2013 by Stephen Dedeaux

[stealthwarrior]

_{We might be looking at this same stuff in 2017.}

[keepmwlknfny]

• Keep Me think's your math is wrong! And you're Quoting from old Data! 2003: 2005 etc.. etc..!  Oh and today's  date is 7/16/2013.

The date doesnt matter.....this is explaining the auctions and their purpose....check out the other countries that hold currency auctions.....its no different.....

[johnnyboyirish]

Buzz buzz killington to the rescue

[keepmwlknfny]

Buzz buzz killington to the rescue

Maybe you should blame the OP for asking a question and wanting feedback?

[sandstorm]

Buzz buzz killington to the rescue

if you dont have an answer...why dont you quit being an amateur crybaby. dont read it. dont look at a questions topic. and sure in the heck...dont interject with nothing but insults. you dont have to respond....yet you waste your day for snide comments. great contributor

[johnnyboyirish]

Kinda like what you just posted right ?

[Hairball51]

Guys, I don't want to say that your article holds no value but it is from 2005 and perhaps the goal of the auctions has changed. I submit the following article from April of 2013. (The red highlights are mine and something to pay attention to along with comments of mine in parentheses and in bold)

 

 

 

Central bank action begins deletion of zeros from the currency

 

Post 13 April / May 2013 15:09

 

 

BAGHDAD / Center Brief for the Iraqi Media Network (IMN ) - The parliamentary Finance Committee, the central bank and according to official communications of the current year starts procedures for deleting three zeros from the local currency, stressing that it would lead to the development of cash transactions and international economic. (According to the very first paragraph of this article, the central bank, through its official communications, has said the procedure for deleting three zeros from the local currency was to begin the 1st of this year for the above stated purposes)

 

And a member of the Finance Committee said Abdul-Hussein al-Yasiri, Saturday,'s (IMN ) That "According to official Almkhtabat, with the central bank, it is supposed to start during this-General Balastaadadt for deleting three zeros from the local currency."

 

He pointed out that "the local currency will reduce from four billion units to one billion units which will make there Anciabh

in the process of transfer of the currency." (Interesting that the local currency units would reduce but not by the "deletion of zeroes" definition you're are putting forth.)

 

Yasiri between that "the Finance Committee to make changes to support the local currency because of the economic importance to the country."

 

The central bank says that the deletion of zeros comes under a plan to develop its monetary policy and currency management reform. (I think the term reform here is very important...)

 

He was a member of the Finance Committee parliamentary Haitham al-Jubouri, had said in an earlier statement to him that "the replacement of the currency and delete Ocefarha will features the best and biggest reduce the size of inflation and revive the dinar due to lack of demand for the dollar, which comes advantages of a large economy of the country, and to replace it will revive the country's economy but needs to the atmosphere of political and economic environment for the implementation of the project without facing any obstacles lead to the deterioration of the Iraqi currency." (A LOP does not revive the dinar...)

 

The CBI had said in August that it plans to delete the zeros from the Iraqi dinar to facilitate financial transactions carried out through cash in most cases. Among the difficulties faced by Iraq if they are to foot on the deletion of zeros from the dinar is pulling about 30 trillion dinars in circulation from the Iraqi market now, then get rid of them and replace them with a new currency. (The CBI admits that pulling in the 30 trillion dinars in circulation, getting rid of them and replacing them with a new currency...i.e. lower denominations. That is confirmation they are "removing the notes!" Which also supports the process has already started. The important thing here is they speak as if the larger 3 zero notes must be removed. This is no different than when the U.S. began removing $1,000 bills from circulation)

 

 

The Finance Ministry has ruled out earlier in the deletion of zeros from the local currency in 2013 because the budget is calculated in current currency. (This is a huge statement in that 2013 is out because the budget was already calculated with the current currency or rate! To see the term "currency" here as meaning actual currency makes no sense at all since it is the VALUE of the currency that is important. It is a bad translation and "currency" means rate. When understood as that, the statement makes sense. Also, you'll pay attention to the fact that the 2014 budget has come out with a NEW rate of .86 or 1.16)

 

From: Ahmad al-Maliki, n: m Q

 

 

http://translate.google.com/translate?hl=en&sl=ar&u=http://center-imn.com/index.php%3Foption%3Dcom_content%26view%3Darticle%26id%3D3599:2013-04-13-12-09-50%26catid%3D94%26Itemid%3D602&prev=/search%3Fq%3D%25D8%25AD%25D8%25B0%25D9%2581%2B%25D8%25A7%25D9%2584%25D8%25A3%25D8%25B5%25D9%2581%25D8%25A7%25D8%25B1%26lr%3D%26tbs%3Dqdr:d&sa=X&ei=spNpUcP8BcbAqAG7loHQDQ&ved=0CDkQ7gEwAA

--

 

 

Now, I can see where you guys are about to go with this and say "your above assumptions are dependent upon your understanding of 'delete the zeros' to mean remove the 000 bills from circulation and not from the bills themselves". Well...not exactly guys. The above article makes no sense when read as a LOP article. Plus, as I've said before, a LOP has never been part of any CBI plan. Take the following articles: 

 

 

 

Reveal the intentions of raising the value of each Iraqi dinars to equal one dollar (The headline really says it all doesn't it)

 

Added by two rivers News

 

A source at the Central Bank of Iraq for four companies currently competing to win a draft print the new Iraqi dinar, which will generate graceful after deleting three zeros from him, while Samay central bank to raise the value of the dinar against the dollar gradually down to the day to start replacement where the value will be in the absence of a fluctuating one Iraqi dinars equivalent to U.S. dollars one. (This is HUGE guys! Not only does it reveal new denominations which would accompany an RV but it states the intended purpose of the deleting three zeroes is to raise the VALUE of the dinar but starting it out a 1:1....If a LOP is a "neutral value" event as you both have said, why do they speak of increasing the value of the dinar? A LOP doesn't do that...But wait guys...it gets better)

 

The source said the bank and after remarking that blockbuster buy hard currency from the auction, which is supervised by the Central deliberately to sell the dollar worth less than the previous by 3.4 points, with the imposition of conditions buy to prevent the exploitation market meet the demands of neighboring countries, which suffer from sanctions economic and devaluation of their national currencies, all of this to re-balance the local market, which saw the result of what male fluctuate rapidly in prices dinar, adding that everyone knows that the central bank succeeded actually raise the value of the dinar is thoughtful and intelligent since 2003 until now that the price of the dollar equivalent to 240 dinars, but now price tag rose to 1120 per dollar, and this is one of the most important tasks of the central bank, which is responsible for monetary policy in the country, and one of the most important endeavors is to raise the value of the national currency to achieve a higher purchasing power of the Iraqi citizen.

 

The Central Bank of Iraq announced, yesterday, doing the buying and selling dollar at 1166 dinars during the auction, which is evaluated daily with the participation of 23 banks, after it was sell it and buy it at the price of 1170 dinars to the dollar.

 

The deputy governor of the Central Bank of the appearance of Mohammed Saleh in statements to the media », that« the bank to work on raising the prices of the Iraqi dinar against the dollar during its sessions for the sale and purchase of foreign currency by four dinars and by 3.4% to reach to 1166 dinars to the dollar », indicating that« dinar nominal is not commensurate with the purchasing power to him or the real price of the exchange rate of the dinar against the dollar. (This is the first mention of the nominal rate and how it is currently not reflective of Iraq's "surplus relative to GDP and the new large reserves) Saleh added that «the current account of payments Iraq where a large surplus relative to GDP and by 5-8%», stressing that «the surplus is the signal strength and not vice versa as well as the presence of large reserves of the Bank». Saleh pointed out that «the dollar exchange rates in the Iraqi market which recently experienced a slight increase will be affected by the decision of the Central Bank of Iraq, saying that «the Iraqi dinar will be attractive in the Iraqi market. ( Does a LOP make the dinar attractive?)

 

The Deputy Governor of the Central Bank of the appearance of Mohammed Saleh earlier this year for efforts to obtain the approvals executive and legislative authority to ask three major categories after deleting three zeros from the Iraqi dinar, pointing out that the process of replacing the currency will take two years. As Saleh announced in (January 6 2012) from higher reserves the Iraqi Central Bank foreign currency to $ 60 billion, for the first time in the history of Iraq, while stressing its ability to curb inflation if arrived at two places decimal places, considered that current levels do not raise anxiety. (Just a monumentally important paragraph...They are saying that they are trying to get approval, executive and legislatively, for three new denominations while replacing the three zero bills. They expect it will take a couple years for this to happen fully. Also, here we have the second mention of the nominal value in reference to the decimal places.)

 

Noteworthy that the CBI is being daily sessions for the sale and purchase of foreign currencies with the exception of public holidays during which depends on those auctions. And Zkrmzar Mohammed Saleh, said that the size of the money supply, which will be printed soon consist of 28 30 billion dinars, with calculation of the currency in circulation now reaches more than 32 trillion dinars, and you measure the size of Limbering which dominated the national currency, and the size of the benefits that will befall this project where withdraw monetary inflation and reduce the amount of cash and other.

 

He revealed that the shape of the new currency would be like a mirror reflecting the history of Iraq and specifications will be even better than printing the dollar, and are impossible with falsified, and will be charged properties technical and aesthetic features of an Iraqi national tells the story of civilization and achievements since the dawn of history, as well as she would Arabic and Kurdish as the constitutional text on This addition to the English language as a global system in place in all countries of the world.

 

He said the groups would be equal between the metal and paper issued class (25, 50, 75 and 100) dinars metal and there are groups of 5, 10 and 25, 50 and 100 dinars paper.

 

 

But the evidence that a LOP was never part of the plan keeps getting better....Check these out! 

 

I wanted to point out this quote from the April SIGIR (Special Inspector General for Iraqi Reconstruction) confirming something close to 1.17 to $1 or .86. This report was written at the time Maliki was trying to stop this from happening. This is taken from page 84 of the report...page 94 on the file.

 

"official exchange rate for Iraqi dinar strengthened

 

marginally against the U.S. dollar, selling at 1,166

 

per dollar through much of the quarter. Th at rate

 

is down slightly from 1,170—a level that had held

 

constant for the past three years. However, a spike

 

in demand for dollars generated by merchants

 

from neighboring Iran and Syria—suddenly

 

unable to procure suffi cient amounts of the U.S.

 

currency at home because of international sanctions—

 

helped drive the unofficial street exchange

 

rate above 1,320 dinar in mid-April.375

 

In April 2012, the CoM postponed indefi nitely

 

plans for a currency reform that would have removed

 

three zeros from the Iraqi dinar in 2013 and

 

required the issuance of new currency notes. The

 

reform would have made the dinar’s value slightly

 

less than $1.  It is currently worth less than one tenth

 

of a cent.376"

 

 

 

http://www.sigir.mil/files/quarterlyreports/April2012/Report_-_April_2012.pdf#view=fit

 

--

 

 

 

I have saved the best evidence yet for what the true definition of "delete the zeroes" means....Kaperoni, who may be labeled a guru but absolutely despises the term and those who would be considered "pumpers", breaks down a paper on removing zeroes. If you read anything, read the following please!!! The report Kaperoni references here in this breakdown can be found here: http://www.uobabylon.edu.iq/uobcoleges/fileshare/articles/%D8%B1%D9%81%D8%B9%20%D8%A7%D9%84%D8%A7%D8%B5%D9%81%D8%A7%D8%B1.pdf

 

 

 

Kaperoni: I thought the PDF Paper (document) from Dr. Bakri was so good, so informative, I wanted to do a chat on this.  To break down the events and clarify what we know.

 

Kaperoni: First, who is Dr Bakri?

 

Kaperoni: He is on the Administration and Economics staff at the University of Babylon

 

Dr. Kazem Jawad Al Bakri teaches in the Department of Finance at the University of Babylon

 

Well respected Economist.  Has been hired by the CBI to participate in the various Symposiums around Iraq educating in regard to the “delete 3 zeros,”  also known as “lift 3 zeros” process.

 

Kaperoni: I think we can say this man is very well educated, knowledgeable and experienced.  So much so, in fact, that the CBI relies on him to speak at these various Symposiums to explain what is about to happen to the currency.

 

Kaperoni: Here are a few of the news articles supporting Dr. Bakri’s participation in various Lectures and Symposiums.

 

Kaperoni: http://www.ikhnews.com/news.php?action=view&id=34445

 

Kaperoni: http://www.crdiq.org/ArticleShow.aspx?ID=674

 

Kaperoni: I think we can draw from this information that Dr. Bakri is an authority, an expert, and is well informed in this event.   Much more so than any “part time” guru or educated person who thinks they know what is happening within Iraq.  Even someone who claims to be a “currency/investment analyst” has to take a back seat to this man's knowledge, experience, and expertise in the circumstances within Iraq.  After all, he is one of the “trusted” ones to disseminate this process to the Iraqi people.

 

Kaperoni: Now that we have qualified him, lets take a look at one of his papers…from June, 2011

 

Kaperoni: Proposal to raise zeros from the dinar Ala a paper - A. M. D. Jawad Kazem al-Bakri

 

Kaperoni: http://www.uobabylon.edu.iq/uobcoleges/fileshare/articles/%D8%B1%D9%81%D8%B9%20%D8%A7%D9%84%D8%A7%D8%B5%D9%81%D8%A7%D8%B1.pdf

 

Kaperoni: Here is the first quote…

 

Kaperoni:  “The history of modern economics tells us that many nations in the world such as the countries involved in WW1 and WW2 or most recently the collapse of the Eastern Bloc countries, have taken one of these two measures, either by changing the whole national currency or eliminating zeros from the currencies so that it can go back to its previous stable condition.”

 

Kaperoni: This is pretty straight forward.  That there are two ways or methods to go back to the previous  stable condition after such events like a war.  You either eliminate zeros from the currency (LOP) or do a currency change (transition from one set of notes to another without the zeros).

 

Kaperoni: Now here is where we learn what Iraq is really doing.  Despite all the articles, misdirection, and confusion with terminology this quote tells us exactly what is happening….

 

Kaperoni:  “In the Iraqi experience after the fall of the dictatorial regime, the present authorities have decided to change the Iraqi currency to a new currency.”

 

Kaperoni: This is absolutely the most direct and powerful statement we have heard.  This is not an opinion, but a factual statement…"the present authorities have decided to change the Iraqi currency to a new currency”

 

Kaperoni: Now this also tells us that they are NOT deleting the zeros off the notes.  And it tells us that “collecting the notes” is what is happening to reduce the money supply.  It also tells us that we have been accurate all along on the research we have done on this investment.   Here is the telling part -- we did not know this information until just a few days ago.   Which then ends up being a “validation” of the research.

 

Kaperoni: Next quote…

 

Kaperoni:  “This does not affect the value of the dinar so far but it opens the dinar to the free currency market such as against the dollar, etc.”

 

Kaperoni: Now this quote is simply amazing.  It is telling us that the value of the old dinar (3 zero notes) is not effected.    Clearly, this is what we want.   Some may want to interpret this saying “yes the value does not change and the exchange rate also stays the same,”  ie (LOP)   Well this next quote…puts an end to that theory as well...more proof yet to come…

 

Kaperoni:  “If three zeros were lifted from the IQD, this means the IQD becomes stronger 1000 times in terms of value.”

 

Kaperoni: This in itself is all we need to be assured of our investment.  But the good Dr. gives us the dagger in the LOPster heart with this gem of an example…

 

Kaperoni:  “For example, a pack of cigarettes that was selling for 1000 dinar would be only 1 dinar.  If it was a conversion like that, if the three zeros were lifted from the previous currency, this means the old 1000 dinars will buy 1000 packs of cigarettes instead of 1.”

 

Kaperoni: He states clearly the previous currency (3 zero notes) will buy more after this event.  That the dinar will appreciate in value 1000 times.  No more discussion is needed...But wait, he is trying to explain this event so we will get even more confirmation...lol

 

Kaperoni: Quote…

 

Kaperoni:  “From a theoretical point of view, when three zeros are lifted from the IQD its buying power will increase drastically so that the dollar will be equivalent to 1.5 dinars only.”

 

Kaperoni: And this one…

 

Kaperoni:  “Therefore, let’s say the merchandise imported from abroad is valued before lifting the zeros at 1.2 million dinars, or $1000; if you lift the three zeros 1200 dinars will equal $1000;  therefore, that will not bring any negative impact on the Iraqi citizens.”

 

Kaperoni: And the benefits of the event…

 

Kaperoni:  “On the positive of lifting the zeros from the IQD, the operation of lifting three zeros from the IQD, according to a study and sound physical policy, will lead to these positive factors:

 

1. It increases the monetary power of the IQD to buy things.

 

2. It increases the value of exchange from the dinar to other currencies.

 

3. It provides more confidence for more foreign investment in the economy.

 

4. It increases the confidence of the Iraqi citizen in his own currency, as is the case with the dollar and other currencies in their own countries.”

 

Kaperoni: This is simply the most powerful explanation and description of what is going to happen that we have ever had in print from an expert in Iraq.   An explanation that is right on with our own research studying this event for over 4 years.

 

Kaperoni: Pray that the GOI is formed, that stability continues, and that Dr. Shabibi can accomplish this event.

 

Kaperoni: Done.

 

 

 

 

The overnight RV so many are expecting may not happen just the way that we had hoped but I think we can say unequivocally that a LOP is not, nor ever has been, any part of the CBI's plans.

[Hairball51]

Keep, never mind replying brother...I just saw that all the stuff I posted was already discussed on earlier posts and you had commented in some of them. So, you are aware of all this and nothing has changed since....ha! Should've searched it before I posted...Oh well...live and learn...

[keepmwlknfny]

lol....its all good....

 

As much as I wish deleting the zeros was just removing the larger bills from circulation, I just havent seen anything to prove otherwise. In this plan they want to replace the entire set of bills, not just adding some lower to the current set. By lopping you can go from 30 trillion to 30 billion.....Its referred to as a neutral event because you dont actually lose any money (value) to what you have, but the new currency would have the higher exchange rate....the old bills we hold would never see a higher value. So it does lead to a stronger dinar because after lopping the NEW dinar would be on par with the dollar....3 zeros come off the notes and it also comes off the .00086 as well.....it happens together...only problem is that the zeros off the .00086 is only with the new currency.

 

Just keep an eye on the months towards the end of the year.....if the CBI applies for and recieves a new ISO code for the new currency, then we will be lucky to break even.....

[hame55]

Ok everyone...I apologize if this has been covered but I'm asking for a little help in my math skills here to see if I am way off on this. 

 

First, it would seem to me that the greatest number "lopsters" throw around in defending their views is the 30 trillion dinars the CBI has put out as a total amount of dinars. They argue that an RV, especially a 1:1 or anything close, would never make sense considering the staggeringly high amount of the 30 trillion dinars total. But as many have pointed out, the CBI has been using the auctions to pull in the higher denominations and keeping them to be destroyed when they issue the new lower denominations thus decreasing the money supply already. So, if that is true, that 30 trillion could be much less by now.

 

Here is where my math comes in...I put this out there as an example, if my math is correct, as to how much the CBI could take in of the higher denominations in one year, thus taking them out of circulation.

 

I will use a very conservative estimate of $150 million dollars at the daily auctions or $150,000,000. So, in order to find out how much dinar was pulled in at the auction to get that $150 million, you would multiply the $150,000,000 by an average exchange rate of 1,166 dinars (because for every dollar the bank gives, you would have to give them 1,166 dinars). That comes out to 174,900,000,000 or 174 billion 900 million dinar. Keep in mind, this is in ONE day. Now let's say they have 20 auctions a month. 174 billion 900 million dinars x 20 auctions a month = 3,498,000,000,000 or 3 trillion 498 billion dinars in one month. Now, multiply that out to a whole year and we see that it is possible for the CBI, if they wanted to, to remove from circulation almost 42 trillion dinar in one year. Suddenly, that 30 trillion the "lopsters" throw around doesn't seem so astronomical. 

 

I'm not sure when these auctions started but I would have to say that it's is fair to speculate that the CBI has had ample opportunity to put a huge dent in that 30 trillion without ever having to think of doing a LOP. I don't know...I could be wrong...and I probably am...lol. I'm hoping someone could help me with this....thanks!

I like it of course because i want an RV - what they seem to be doing is balancing the dinar and dollar - so the entire auction may not be about pulling in dinar only. If they pulled in that much dinar daily, there would be none on the streets for transactions.

 

What I DO KNOW is ....

There are no hard numbers on circulation in or out of country.

There is no way to know exactly what the auctions are doing.

They seem to be adopting a fiat system.

They could have RD'd years ago to solve 000 problem of accounting

There has been no need to exit Chap 7 for an RD

No need for an HCL for and RD

No need for a seated GOI for an RD

No need for a better int'l banking system of QI cards for an RD

No need for high foreign investment or build up of oil industry for an RD

 

EVERYTHING points to an appreciation of the Iraqi Dinar.

And there is no need for a new currency with new ISO code - the one they have is hi-tech.

[dontlop]

if someone told you iraq was going to be invaded and  the invading force backed by the united nations would replace iraqs currency would you of needed proof of that being possible?

 

i dont know of any other cases , but it happened in iraq and it was backed by the united nations ,the imf and world bank

 

if you can show me another case like iraq id like to see it ..

 

ill bet there would be people arguing for years saying you cant do that .. and say show me  where its happened in history ..

 

show me where another country reinstated their currency like kuwait did .. kuwaits dinar plumeted  to 70 cents before it was shut down on the international exchange  no one could back it any more ..no one would buy it after a couple days ..if you had it you were told it was toilet paper ..but a few months later . bloop right back over 3 bucks..

[dontlop]

In the first days of the invasion, the Kuwaiti dinar fell from $3.45 to about one-fifth its value before international currency exchanges suspended trading of the Kuwaiti currency.

 

''No banks will accept to quote or trade either Iraqi or Kuwaiti dinars,'' a Banque Francaise du Commerce Exterieur official said Monday. That would be forbidden under the freeze on Kuwaiti and Iraqi assets adopted by France and the other European Community countries, the Paris-based official said in an interview.  http://www.apnewsarchive.com/1990/Kuwait-s-Currency-Declared-Invalid-by-Iraq-With-AM-Gulf-Rdp-Bjt/id-978b923d961916791ee3c34fce20be34

now iraqs govt was replaced .. lets hope for the best outcome

Edited July 17, 2013 by dontlop

[dontlop]

The fall of Kuwait made instant paupers out of tens of thousands of people with assets in Kuwait or Kuwaiti currency.

 

H. Zahreddin, a wealthy Lebanese businessman doing business in Kuwait, flew home to Lebanon the day before Iraq overran Kuwait to throw a lavish wedding party for his daughter at a plush Beirut hotel.

 

''I went to bed a millionaire and woke up in debt,'' Zahreddin said later. ''The hotel refused to accept my Kuwaiti dinar check to settle the bill.''

http://www.apnewsarchive.com/1990/Kuwait-s-Currency-Declared-Invalid-by-Iraq-With-AM-Gulf-Rdp-Bjt/id-978b923d961916791ee3c34fce20be34

 ..

 

then we had the fall of iraq .. so we wait

..

Edited July 17, 2013 by dontlop

[TotalNewb]

lol....its all good....

 

As much as I wish deleting the zeros was just removing the larger bills from circulation, I just havent seen anything to prove otherwise. In this plan they want to replace the entire set of bills, not just adding some lower to the current set. By lopping you can go from 30 trillion to 30 billion.....Its referred to as a neutral event because you dont actually lose any money (value) to what you have, but the new currency would have the higher exchange rate....the old bills we hold would never see a higher value. So it does lead to a stronger dinar because after lopping the NEW dinar would be on par with the dollar....3 zeros come off the notes and it also comes off the .00086 as well.....it happens together...only problem is that the zeros off the .00086 is only with the new currency.

 

Just keep an eye on the months towards the end of the year.....if the CBI applies for and recieves a new ISO code for the new currency, then we will be lucky to break even.....

Are you suggesting they will have two different currencies with two different rates ?

[keepmwlknfny]

Are you suggesting they will have two different currencies with two different rates ?

If they delete the zeros, yes thats exactly what will happen.....

[dontlop]

If they delete the zeros, yes thats exactly what will happen.....

if they have two different currencys with two different rates what will the exchange rate be between the two currencys in iraq ? if they delete 3 zeros ?

[keepmwlknfny]

I like it of course because i want an RV - what they seem to be doing is balancing the dinar and dollar - so the entire auction may not be about pulling in dinar only. If they pulled in that much dinar daily, there would be none on the streets for transactions.

 

What I DO KNOW is ....

There are no hard numbers on circulation in or out of country.

There is no way to know exactly what the auctions are doing.

They seem to be adopting a fiat system.

They could have RD'd years ago to solve 000 problem of accounting  -They could have RVd years ago to solve the zeros problem

There has been no need to exit Chap 7 for an RD -Same for RV

No need for an HCL for and RD -Same for RV

No need for a seated GOI for an RD- Same for RV

No need for a better int'l banking system of QI cards for an RD- They need to be up to international standards regardless....Iraqs banking system is from the stone ages

No need for high foreign investment or build up of oil industry for an RD- Sure they do....they would still be getting rid of the program rate and trying to keep a rate on par with the dollar stable

 

EVERYTHING points to an appreciation of the Iraqi Dinar.-It does, but they have two ways of accomplishing that

And there is no need for a new currency with new ISO code - the one they have is hi-tech.- It was high tech in 2003-04....gotta keep up with changing technology...thats why the US changes its bills every so often...gotta stay ahead of the counterfeiters....

if they have two different currencys with two different rates what will the exchange rate be between the two currencys in iraq ? if they delete 3 zeros ?

1000 old for 1 new just like they have stated....

[TotalNewb]

If they delete the zeros, yes thats exactly what will happen.....

I think It's illegal... Against international banking law from what I understand.

IMO, if they lop, it would change the face value of the large bills but at a new rate. For example... My 25000 dinar note would be worth 25 dinar at the new exchange rate of say, 3.42.

[dontlop]

they did that with the swiss dinar and the saddam dinar .. gave them two separate  rates of exchange to the dollar ..1 to 1 for saddam dinars  and 150 to 1 for swiss dinars

[keepmwlknfny]

I think It's illegal... Against international banking law from what I understand.

IMO, if they lop, it would change the face value of the large bills but at a new rate. For example... My 25000 dinar note would be worth 25 dinar at the new exchange rate of say, 3.42.

Its not illegal....because when doing this you have a new ISO code for the new currency.

 

This is what always happens when a country redenominates.....they come out with a new ISO code for the new currency, and they are able to set different rates for each one....

[dontlop]

the saddam dinar had some reserves 2 billion . to back the saddam dinars ..but the swiss dinar had nothing backing it . but they gave the one with nothing backing it a higher value .. strange

 

you know since the swiss dinar was demonetized in 1991.. it wasnt backed by the cbi

[TotalNewb]

Actually, they can have two different currencies. They cannot have the same currency with different rates.