The IQD is actually waiting on International Tradability status to RV

[phlip]

I have to agree with DV Moderator djgabrielie in that we seem to be waiting on IQD international tradability rather than the myriad of other things that have been presented by every guru on the planet as reasons not to RV ~ just yet.

Of course, international tradability speaks to the need for a valid, enforceable HCL; but still, the key to selling the oil is having an internationally tradable currency with which to receive the payments for it in.

 

Since right after WWII (almost 70 years), the Royal House of Saud in Saudi Arabia is still using USD’s (petrodollars) as their international currency while at the same time keeping the value of their own in-country currency ~ the Riyal ~ lower in value against the USD and mostly reserved for the use of the peasants stuck inside Saudi Arabia.   

For the last 20 years the USD has been working better than the IQD as the go to internationally traded currency inside Iraq, too. The average Iraqi citizen has also been stuck inside the borders of Iraq using currencies (both Saddam’s and Bremmer’s) that didn’t exchange across the borders.

 

All the Iraqi Citizens I ever met (without exception) throughout and ever since 2004 all preferred to be paid in USD, rather than these large denomination (CPA) IQD notes.

As far as these Iraqis were concerned they had simply traded strongman leaders (Saddam for Paul) and one relatively useless currency (outside of Iraq) for another (Saddam’s for Bremmer’s).

Since the Iraqis I met seem to prefer the internationally tradable USD notes rather than the Bremmer notes and since the CBI controls the (cash) flow of both currencies inside Iraq, we can be sure that the CBI is well aware of this preference and from that, we can only assume that the CBI has allowed it to be that way for the last 10 years for a reason.

 

In 2004 the CBI was chartered for and is therefore obligated (then and now) to promote the IQD’s value against the USD while at the same time continuing to make progress in de-dollarizing Iraq.

It’s publicly stated intentions have always been just that; including the eventual issuance of new lower denomination, internationally tradable IQD notes which are supposed to have a higher exchange value (than the Bremmer’s) against the USD.

 

If a Major RV of 10 cents to the IQD happens before the issuance of the new lower denomination, internationally tradable notes, an existing Bremmer IQD10,000 note would immediately be worth US$100, while (later when they are finally issued) a new IQD100 note would be worth only One USD ~ and the IQD100 note is one of the highest new denominations announced by the CBI so far.

 

Why would the CBI raise the value of these Bremmer notes (from $0.10 to $1.00) against the USD unless they were already internationally tradable?

 

A Major RV prior to the issuance of the new lower denomination IQD notes would immediately make the Bremmers even far less useful or preferable than they are now inside Iraq; and at the same time would promote a (mad and dangerous) rush for all the available USD cash inside Iraq. Would the CBI intentionally do that?

 

At a Major RV of 10 cents to the IQD prior to the issuance of the new lower denomination IQD notes, if an Iraqi citizen goes to his local bank and trades his IQD1,000,000 in cash for US$10,000 in cash, would he later go back to that same local bank to trade that same US$10,000 back for only US$100 worth of new lower denomination IQD notes ~ since according to some theories they are supposed to be issued with the same exchange rate as the Bremmers?

Would any of us willingly do that?

 

If at a Major RV of 10 cents the largest new IQD note of IQD100 is worth only One USD would that make the new IQD currency more or less internationally tradable?

 

Even with best intentions, it would be a logistical nightmare to move that much internationally tradable cash USD around the country and not be subject to the endless whims of road agents, insurgents, wannabe (ex army) outlaws and other such heavily armed and dangerous reprobates ~ each only looking for a little taste of the good life for once in their lives.

Without publicly declared Martial Law (which was the case in 2003 when both currencies first hit the streets via deliveries by British and American MP Convoys) it wouldn’t even be physically possible to transport the stuff around the country.

 

Raising the value of these Bremmer notes (from $0.10 to $1.00) would also make them even less desirable than they are now as an internationally traded currency; except perhaps (very briefly) as a means to acquire more internationally tradable USD cash ~ which would have to come directly from the CBI (only), since they now own the Bremmer notes.

 

You’d have to get in line to trade them in, though, since the CBI has only a limited supply of USD cash on hand with which to meet its immediate cash auctions to local banks obligations inside Iraq.

With less than US$100 Billion in cash reserves, how long do you think it would take for the CBI to run out of (available) USD cash just trying to meet its Iraqi obligations ~ especially since Warka, with the biggest footprint of branches and ATM machines, is not yet back on line?

 

Instead of cash, any Iraqi bank with ATM machines could start issuing electronic cards to ease the pressure on the demand for physical cash; but it would still come down to an Iraqi citizen trading in IQD1,000,000 cash (worth US$10,000) for a card that would only give him back $100 worth of new IQD ~ take it or leave it, Habibi.  

Popular revolutions have been launched for far less than that.

 

If, as some theories suggest; the new lower denomination, internationally tradable IQD notes (which are meant to replace the existing Bremmer notes) are issued after a Major RV; but are given the same new ($0.10 to $1.00) exchange rate as the existing Bremmer’s, then it seems that the their relative values would be terribly skewed and unbalanced compared to the CBI’s publicly stated intentions of promoting stability in the Iraqi financial districts and in the Iraqi economy, while also de-dollarizing Iraq.

[Elixirbaby]

I would be very happy with .10

[djgabrielie]

I would just be happy with a tradable currency.  We could wait or not to sell and we would not have to incur the dramatic spreads from dinar venders.

 

Thanks for the post.

[Badrabbit]

$10,000 note revalue of $.10 would be $1,000 not $100 (ten percent), I would be happy with that, would be happier at $.35 and even happier at $3.50

[billio0]

Isn't it amazing how many ways this thing can be speculated on?

 

Why not just wait for it to happen rather than tossing around what-if's as if they really matter?

 

In fact, if I'm not mistaken, that's really all anyone can do is wait until something happens, one way or the other. Guessing about it, or trying to interpret articles, or worse yet, relying on rumors and mysterious intel from unnamed sources has proven but one thing; that in the final analysis nobody really knows JACK!

 

That said, I DO appreciate the post phlip, and have given you the only thing I have to show my gratitude; a plus!

 

Billio0

[mrref]

Isn't it amazing how many ways this thing can be speculated on?

 

Why not just wait for it to happen rather than tossing around what-if's as if they really matter?

 

In fact, if I'm not mistaken, that's really all anyone can do is wait until something happens, one way or the other. Guessing about it, or trying to interpret articles, or worse yet, relying on rumors and mysterious intel from unnamed sources has proven but one thing; that in the final analysis nobody really knows JACK!

 

That said, I DO appreciate the post phlip, and have given you the only thing I have to show my gratitude; a plus!

 

Billio0

Totally agree

[Maggie123]

Isn't it amazing how many ways this thing can be speculated on?

 

Why not just wait for it to happen rather than tossing around what-if's as if they really matter?

 

In fact, if I'm not mistaken, that's really all anyone can do is wait until something happens, one way or the other. Guessing about it, or trying to interpret articles, or worse yet, relying on rumors and mysterious intel from unnamed sources has proven but one thing; that in the final analysis nobody really knows JACK!

 

That said, I DO appreciate the post phlip, and have given you the only thing I have to show my gratitude; a plus!

 

Billio0

 

You sure do have a way of "making lemonaide out of lemons" Billio0... Appreciate You And Your Great Big Kind Heart My Dear.

 

Haha I'll bet you thought I was going to say "great big" something else... although I love and appreciate that too.

[umbertino]

$10,000 note revalue of $.10 would be $1,000 not $100 (ten percent), I would be happy with that, would be happier at $.35 and even happier at $3.50

That's what I think myself.

[billio0]

You sure do have a way of "making lemonaide out of lemons" Billio0... Appreciate You And Your Great Big Kind Heart My Dear.

 

Haha I'll bet you thought I was going to say "great big" something else... although I love and appreciate that too.

 

Thank you for your kind words Maggie123.

 

You also made me blush, but of course you already knew that!

 

Just be careful 'cause I'm easily corrupted.

 

Billio0

[SolidSnake]

I wouldn't be happy with just .10 stop having a nickel and dime mentality

[Alex38]

1,000,000 IQD @ .10 = 100,000 .... not 10,000 .... #Math 

[mokie775]

.10

[dweave69]

I'd take 10¢.

[sandfly]

ME TOO

[ReinMan]

So WHAT WILL IT TAKE for the IQD to be internationally tradeable - an internationally recognized currency - at ANY RATE?

What are the exact STEPS?

[phlip]

I apologize for the bad math. Thanks very much for pointing it out.

Normally, I don’t let those pesky zeros and decimal points intimidate me like that.

So, it becomes an even worse scenario for an Iraqi citizen ~ which should actually have read like this:

 

At a Major RV of 10 cents to the IQD (prior to the issuance of the new lower denomination IQD notes), if an Iraqi citizen goes to his local bank and trades his IQD1,000,000 in cash for US$100,000 in cash, would he later (willingly?) go back to that same local bank (or any other bank for that matter) to trade that same US$100,000 back in for only US$100 worth of new lower denomination IQD notes ~ since, according to some theories, the new lower denomination, internationally tradable notes are supposed to be issued with the same exchange rate as the existing Bremmers?

 

Trading $100,000 worth of existing IQD notes in and then being told that you can only have $100 worth of new IQD notes is even a worse scenario for an Iraqi citizen and (more than ever) doesn’t seem fair, does it?

Would anybody you know willingly do that?

Why do some folks think an Iraqi citizen would willingly put up with it?

 

Arabic numerals or Hindu-Arabic numerals (depending on who you listen to) are the numbers 1 thru 10 that we in the “West” use today.

Why would anybody think that the folks who grew up in the very region where “Western” math comes from are ignorant of it and therefore can’t see the disparity that a Major RV of the IQD could (potentially) cause if initiated prior to the equalizing factor of the nationwide issuance of the new lower denomination IQD notes?

 

Sorry to pop anybody’s bubble on this, but all the Iraqi citizens that I ever met (literate or not) could easily hold their own when it came to every day math ~ in their head, without a calculator.

[phlip]

Even more corrections to this post (in red) ~ sorry for the bad math:

 

If a Major RV of 10 cents to the IQD happens before the issuance of the new lower denomination, internationally tradable notes, an existing Bremmer IQD10,000 note would immediately be worth US$1000, while (later when they are finally issued) a new IQD100 note would be worth only US$10 ~ and the IQD100 note is one of the highest new denominations announced by the CBI so far.

 

If at a Major RV of 10 cents the largest new IQD note of IQD100 is worth only US$10 would that make the new IQD currency more or less internationally tradable?

 

Instead of cash, any Iraqi bank with ATM machines could start issuing electronic cards to ease the pressure on the demand for physical cash; but it would still come down to an Iraqi citizen trading in IQD1,000,000 cash (worth US$100,000) for a card that would only give him back $100 worth of new IQD ~ take it or leave it, Habibi.  

Popular revolutions have been launched for far less than that.

[phlip]

ReinMan

 

That’s an excellent question that I’d also like to know the answer to, so that I can watch for the signs of it actually happening.

 

Rather than the exact steps to IQD international tradability, we might have to instead look at some another country’s situation to have a benchmark with which to compare to Iraq.

 

For example, from Japan I once took an R&R to Taiwan.

Leaving Japan, I converted my Japanese Yen (JPY) to USD and entering Taiwan, I converted USD to Taiwan Dollars (TWD).

Leaving Taiwan, I didn’t take the time to convert my TWD to either USD or to JPY.

Later, in Japan, when I tried to convert my TWD back to JPY, I found that no Japanese bank or Japanese currency exchange shop would touch the TWD.

I even tried Citibank in Japan, but they wouldn’t exchange it either.

Arriving stateside, I found that no US bank or airport currency exchange booth that I tried then (in 1997) would convert the TWD, either.

 

Both the Japanese and the US bans on the TWD speak to both countries having the same foreign policy with regards to China. Don’t piss of the Chinese mainland folks who (still) consider Taiwan to be part of China. Don’t openly trade with the Taiwanese either or there will be consequences.

 

So, the TWD is just one example of a potentially internationally tradable currency that sometimes isn’t ~ despite there being “Made in Taiwan” labels everywhere and despite the fact that Taiwan has a unique culture, a robust tourist industry and a relatively well equipped military force which they aren’t afraid to show off every once in a while.  

 

In Iraq’s case, and especially because of the oil, it might be that the countries that serve as home bases for the 30 plus international oil companies which have now bid for and won contracts to drill for oil inside Iraq (including in Kurdistan) would certainly have to agree on any CBI proposed international exchange rate against the reigning currency of the area ~ the FED’s own USD banknotes, aka Petrodollars.

 

I think that cross trading without an international currency standard to adhere to (against the USD/Petrodollar, for example) would be extremely difficult.

 

The IMF actually has its own Special Drawing Rights (SDR) electronic currency (representing the average of several select countries’ basket of currencies) which could also serve as a bridge currency if the need arose and/or the USD was no longer needed/wanted in a given area of new development.

 

Then again there’s always the Bitcoin.

 

Iraq as the current default leader (since Egypt and Libya got themselves ousted) and also one of the (1945) founding members of the 22 country Arab League of Nations may be asked to also front a coalition of countries which all use the dinar; with the idea of the IQD setting the rate against the USD ~ based on its accessibility to oil.

Perhaps the idea of that particular basket of (dinar only) currencies becoming a global reserve currency backed by oil and as an alternative to the USD (backed by a printing press) is also in the plan.  

So far, I’ve only heard of that plan in the form of a possible proposal ~ which doesn’t mean it still couldn’t actually happen sometime in the future.

The IQD would certainly have to be internationally tradable then, wouldn’t it?  

 

Without actually doing the research on it, I would still venture to say that most of the countries which now have home based international oil companies drilling for oil in Iraq are also among the G-20, the G-8, the G-7, etc. countries which make up the top echelon of the 170 or so countries belonging to the IMF and/or the World Bank.

 

The IMF offices and the World Bank as well as the most powerful of the 12 regional banks of the FED are all located in New York City; which certainly demonstrates the FED’s home court advantage over the other central banks of the world.

 

Those countries in the top echelon of the IMF all have central banks controlling their currencies and at the top of that list of those central banks is the FED controlling the Petrodollar ~ which represents approximately 2/3 of the total available currency worldwide.

 

I would further venture to say that in the end it will be first up to the Board of Directors of the FED to agree to whatever international exchange rate the CBI proposes for the IQD against the USD; before that proposed rate will ever actually become internationally effective.

The usual secret shenanigans benefiting all the greedy buggers at the top will have to take place behind the scenes and then the decision will reach the Board of Directors at the CBI so that they can announce and implement the acceptable new rate to Iraq and to the rest of the international community with some authority and dignity.

 

At the same time, the FED can’t just run over everybody else with some whimsical decision on the CBI proposed rate, since at any given time individual sovereign countries could still vote to treat the IQD (which will remain pegged to the USD) just like the US, Japanese and Chinese central banks and governments currently treat the TWD.

If the top three economies in the world refuse to exchange currencies with the TWD, the only way that I can see that Taiwan remains independent and with a viable global economy is through a certain reliance on the USD as its intermediating currency.

 

The CBI is already on record for declaring that they hope to end any dependence on the USD and in fact plan to de-dollarize Iraq permanently.   

 

In order for the most powerful economies in the world to get along about international exchange rates between their currencies, it probably takes lots of reports and vast amounts of number crunching to support each individual country’s most desirable rate against the Petrodollar ~ all of which has to be presented with some amount of transparency at some international summit or another.

 

As far as I know, the G-20 Summit usually takes place sometime in the fall of each year and exchange rate adjustments between the major currencies is usually on the agenda.

 

It may be that whatever the CBI decides for the IQD inside Iraq, whether it’s called re-denomination, or re-value, or whatever; the international tradability status of the IQD will still ultimately depend on the central banks of the top echelon of countries in the IMF and the World Bank; and specifically those central banks among the G-20 countries accepting the new CBI proposed rate ~ or not.

 

Even as an internationally traded currency, the IQD might not be sought after enough to be exchanged in every single country (including in the USA) ~ but that could turn out to be an individual bank by bank decision, too.

As long as petrodollars remain available and accepted in a wider range of countries, why would a person hold any electronic IQD at all?

 

In the case of Warka, IMO, it’s because of the interest rates offered and also the possibility of getting an automatic electronic bump in value whenever an RD/RV takes place.

Also, it seems that you can only hold IQD electronically in banks based in Iraq; mostly because no other bank in any other country is authorized by its own central bank to open an IQD account for you.

A possible exception might be that certain Swiss banks oblige qualified customers by holding a physical deposit of IQD banknotes with the agreement that the customer can exchange them at any time at whatever the true rate is.

 

An even bigger step for Iraq would be for the IQD to become a sought after international reserve currency, but if oil is still sold mainly in petrodollars, even after an official Iraqi IQD RD/RV; then the IQD as a reserve currency might not happen anytime too soon.

 

Once the necessary machinery is back on line ~ with Warka open for business again ~ anything can happen in Iraq.

120 branches and 350 ATM’s is a good start for the Iraqis to start using electronic banking with debit cards (in addition to cash), so that any RD/RV will run more smoothly. It will also mean that some kind of a workable exchange rate has been reached for the IQD vs. the USD (at least) inside Iraq ~ and that would in turn serve to curb the fluctuations and some black marketeering happening in the open (cash) marketplaces.

 

A steady exchange rate between the IQD and the USD inside Iraq which is dictated by well operated and functioning ATM machines could certainly pave the way for a possible upward movement on the exchange rate between the USD and the IQD. 

 

Tourists and business interests alike will ultimately only be attracted to Iraq and the Iraqi currency if they can easily change whatever currency they are holding to either USD or IQD and then back again while still in-country; and also if they can access a local Iraqi ATM or bank using a card, whenever necessary, for more funds (in either currency) ~ just like you can do in other electronic banking savvy, tourist seeking countries.

 

By now the Directors of the CBI, in conjunction with the GOI/MOF were supposed to have already brought the financial affairs of Iraq (including having a viable, tradable, international currency) into compliance with the IMF and the World Bank financial (transparency) rules that the other (approximately) 170 IMF member countries follow.

The CBI started its second (supposedly final) two year probationary period, called a Stand-By Arrangement (SBA) in February 2010; and that SBA was supposed to have ended in February 2012.
The CBI asked for and received 2 extensions to that particular SBA ~ the first for 5 months and the second for 7 months.

The second extension ended a year ago in February 2013 ~ a year later than the (second) SBA probationary period was supposed to have ended in the first place.

 

Now, it’s another year later, and I have no idea whether the CBI got yet another extension from the IMF and/or is still under a SBA; or if they finally passed all the compliance tests to become fully fledged members of the central banking community.
An IMF declared end to any Iraqi SBA probationary period is probably only going to happen if Iraq has a respectable international currency and the CBI has some working electronic banking procedures in place to back it up.

 

At this point, at the beginning of 2014, with Warka still down for the count and with no CBI publicly stated intention of processing even an internal RD, let alone an international RV, I’d say there has been another extension request from the CBI, and/or a brand new (3rd) chance, two year SBA offered by the IMF to Iraq with a stipulated amount loaned to Iraq through the World Bank in order to see the CBI through the probationary period ~ again.

But that’s just a guess, and hopefully the new loan from the World Bank will include enough to make Warka whole again.

If there is a 3^rd two year SBA in place, then we may be looking at February of 2015 before the CBI is really free to RV and/or exchange currencies internationally. 

The UN and the IMF and the World Bank are certainly not going to allow the CBI to mix currencies with the rest of the international community until Iraq has completed a satisfactory financial probationary period and can demonstrate an ability to trade for goods and services globally and with its own currency managed through the CBI.

 

Perhaps the first sign/step in the process of the IQD becoming internationally tradable is for Warka to become viable again so that the infrastructure needed by the CBI to actually RD/RV or Go International (at the very least inside Iraq) is first in place and is working properly.

 

Perhaps the next sign/step in the process would be for some movement on the in-country rate against the petrodollar, along with the publicly stated CBI purpose of either de-dollarizing inside Iraq and/or presenting the international community with a new series of very secure banknotes that more closely resemble current international reserve currency denominations and at the same time satisfy and inspire the Kurds enough for them to also use the new IQD instead of their own currency or the USD.

 

Perhaps the next sign/step in the process would be for the IMF to announce that Iraq is no longer under a Stand-By Arrangement, and that the CBI is free to conduct international banking business like all the other central banks ~ which are not on probation. Keep an eye on CBI news updates on the CBI homepage.

 

Perhaps the next sign/step in the process would be for the international community to announce the acceptability of the CBI proposed international rate against the USD at the next G-20 Summit.

 

Even with all those steps in place, there still might exist some extra proprietary agreements between certain countries that seemingly protect their own currencies on the face of them; but ~ for whatever reason ~ still exclude the IQD (new or old) from being traded against certain other currencies.

The real reason could actually be politically or socially instead of strictly economically motivated.