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And that's why we are all here ! There shouldn't be that great of difference in the two currencies. Because of sanctions placed on Iraq during the Saddam era everything was devalued to the point and Iraq was isolated from trade. Iraq is a war torn country still rising from the ashes that has great potential, we can only hope that they can once get back to where they were with their currency and have it recognized by the USA. The more I think about all of this, is it doesn't matter if the rest of the world wants to recognize their currency as long as the USA is prepared to accept it. I think that is going to be our key to an exchange should Iraq should decide to RV their currency. I may be way off base but common sense tells me that if we want to be paid in good ole USD, it really doesn't matter if the Chinese are trading currency with them, I sure don't need an YEN or Yans or what ever the heck that their currency is, I want American money with lots of Zero's ! :twothumbs:  Thanks one2one ! your thread has now allowed me to reason out this debenture in a whole new light .  :twothumbs:

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In September 2014, Kuwait's oil production was 2.65 MM barrels per day while Iraq's oil production was 3.5 MM barrels per day.  My understanding is that Iraq's current oil production is 3.9 MM barrels per day.  Perhaps Iraq's dinar value should be at least as valuable as the KWD.

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Yes it is the highest valued currency in the world in use today. Why??

 

Well Kuwait is a relatively small country (17,820 km2 ) yet has a population around 3 million, holds 9% of the worlds proven oil reserves, has a well developed banking system and runs its economy at 30% Govt budget surplus!

Kuwait GDP is around USD 176B or USD 52,197 per capita. 50% of their GDP comes from petroleum products. Their economy is not that diversified yet.

 

Now let's compare this to Iraq is a relatively large country (437,072 km2 ) , has a population around 33 million (roughly 10 times Kuwait) holds 11% of the worlds proven oil reserves, has a poorly developed banking system and telecommunications and runs a budget deficit.

Iraq GDP is around USD 229B (similar) or USD 6862 per capita (roughly a tenth). It derives % of its GDP from oil and has a poorly diversified economy. On top of that there are regional/tribal rivalries that Kuwait doesn't have, together with the problems of Daash. Thus they are regarded as much more unstable than Kuwait. Their currency is artificially pegged.

 

Potential...yes Iraq wins hands down. They are in the process of reforming their banking sector and kick starting a market economy. Oil exports are ramping up and shortly we will see the development of the metals and minerals in the ground along with the re-development of the Agricultural sector...so they will diversify their economy once Daash is dealt with.

 

All the above facts should spell out the current reasons why there is a difference in Iraq and Kuwait currency values. The upside is best for Iraq IMO

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Yes it is the highest valued currency in the world in use today. Why??

 

Well Kuwait is a relatively small country (17,820 km2 ) yet has a population around 3 million, holds 9% of the worlds proven oil reserves, has a well developed banking system and runs its economy at 30% Govt budget surplus!

Kuwait GDP is around USD 176B or USD 52,197 per capita. 50% of their GDP comes from petroleum products. Their economy is not that diversified yet.

 

Now let's compare this to Iraq is a relatively large country (437,072 km2 ) , has a population around 33 million (roughly 10 times Kuwait) holds 11% of the worlds proven oil reserves, has a poorly developed banking system and telecommunications and runs a budget deficit.

Iraq GDP is around USD 229B (similar) or USD 6862 per capita (roughly a tenth). It derives % of its GDP from oil and has a poorly diversified economy. On top of that there are regional/tribal rivalries that Kuwait doesn't have, together with the problems of Daash. Thus they are regarded as much more unstable than Kuwait. Their currency is artificially pegged.

 

Potential...yes Iraq wins hands down. They are in the process of reforming their banking sector and kick starting a market economy. Oil exports are ramping up and shortly we will see the development of the metals and minerals in the ground along with the re-development of the Agricultural sector...so they will diversify their economy once Daash is dealt with.

 

All the above facts should spell out the current reasons why there is a difference in Iraq and Kuwait currency values. The upside is best for Iraq IMO

 

 

Great explanation, FlyHi, much appreciated!

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Yes it is the highest valued currency in the world in use today. Why??

 

Well Kuwait is a relatively small country (17,820 km2 ) yet has a population around 3 million, holds 9% of the worlds proven oil reserves, has a well developed banking system and runs its economy at 30% Govt budget surplus!

Kuwait GDP is around USD 176B or USD 52,197 per capita. 50% of their GDP comes from petroleum products. Their economy is not that diversified yet.

 

Now let's compare this to Iraq is a relatively large country (437,072 km2 ) , has a population around 33 million (roughly 10 times Kuwait) holds 11% of the worlds proven oil reserves, has a poorly developed banking system and telecommunications and runs a budget deficit.

Iraq GDP is around USD 229B (similar) or USD 6862 per capita (roughly a tenth). It derives % of its GDP from oil and has a poorly diversified economy. On top of that there are regional/tribal rivalries that Kuwait doesn't have, together with the problems of Daash. Thus they are regarded as much more unstable than Kuwait. Their currency is artificially pegged.

 

Potential...yes Iraq wins hands down. They are in the process of reforming their banking sector and kick starting a market economy. Oil exports are ramping up and shortly we will see the development of the metals and minerals in the ground along with the re-development of the Agricultural sector...so they will diversify their economy once Daash is dealt with.

 

All the above facts should spell out the current reasons why there is a difference in Iraq and Kuwait currency values. The upside is best for Iraq IMO

Grazie FlyHi

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There is 62 billions Kuwaiti dinars in circulation.

There is 90 trillions Iraqi dinars in circulation. To much for a high individual value.

I know some here may and will argue with you on this mdenali.

But not me.   I'm thinking you got it right here on your first post!

Edited by SocalDinar
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Kuwait is also the reason I got into this investment.  You see... I figure These people are a proud race and to have a country right next door that has a Dinar values so high in the world, logic dictates that Iraq will have to match them or at least get close just to save face.  It was and has always been my gut feeling this will happen.

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Kuwait is also the reason I got into this investment.  You see... I figure These people are a proud race and to have a country right next door that has a Dinar values so high in the world, logic dictates that Iraq will have to match them or at least get close just to save face.  It was and has always been my gut feeling this will happen.

Completely agree

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Thanks one2one....The rate can be set at any value the CBI wants it to be. If the Iraqi CBI wants to commit economic suicide and set the rate at 10 bucks a USD that's their burden to bare...although they my be confronted by the WTO and IMF...basically the Iraqi dinar rate is whatever the Iraqi CBI thinks they can back and support...Any and all rates are just someone's opinion until the actual rate is released. The economic potential of Iraq as a whole with all their resources compared to Kuwait is staggering. Iraq has never been allowed to develop their true complete resource potential. Just the simple land area mass has the potential to refine natural recourses that's impossible for Kuwait to match. The bottom line is still...we are witnessing something that has never happened and will never happen again in our life time. In our time frame here on this rock we are involved in watching one of the major oil producing countries and major big league player helping re-establish Iraq's place in the world market...The kicker this time around is that everybody that's somebody has a hand in either forgiving debit in Iraq or are literally pushing Iraq into the free market. The entire problem right now is they really don't know the entire true worth of Iraq and all their potential in the FREE MARKET...Iraq has NEVER, EVER been allowed to expand on their potential income from the PRIVATE sector. It just strikes me funny that everyone wants to compare apple to oranges...everybody wants to grab the golden ring and have the unanswerable answer for Iraq's outcome...   

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I THOUGHT YOU GOT BANNED TO THE LOPSTER TANK...

I have a heck of alot of IQD in my shoebox Botzwana. To be honest I do not even know how many. But that box is pretty full and I have big feet LOL. The last thing I want is a Lop. I still totally believe the Dinar is undervalued, I just dont buy into the incredibly high 100,000 % increase in value so many want to believe. Don't get me wrong I would be incredibly wealthy if that was to happen, I just don't see that kind of rate being possible.  Im actually hoping on 1 cent rate. That would be a 1000% gain on our money.  Who could complain at that kind of return? Is that a LOP?  I don't see how that could ever be considered a LOP.

 

It is a bummer that I did have to dump my 50s recently. Nobody saw that coming including all of the Gurus or Newshounds.

Edited by SocalDinar
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this is all my very humble opinion, but the concept at looking at another country's exchange rate to gauge where an exchange rate should land is very very very misguided.  i use to believe this when i first got into this investment but digging through real economic data has turned me completely away from this theory.  you cannot look at kuwait's exchange rate and determine iraq's real exchange rate because monetary and fiscal policies are different.  let me explain my point in generalities (not any specific country).

 

there are some countries who do not desire a strong currency because it will cause them to lose competitive edge in the export market.

 

consider: if my country and your country are major exporters of mango and coconut and my currency's rate is 85% of your currency's rate, that is a 15% discount for importers to do business with me instead of you.   so then why not just allow my currency to drop to the basement and corner the market on mango and coconut export?  there are a few of many reasons:

 

1) because my country would experience overheating as our production of mango and coconut could no longer keep pace with aggregate demand for the two commodities.  a temporary boom in the economy would occur but with the boom a natural appreciation of the currency's value would happen.  appreciation in the value of the currency brings my exchange rate back up to the level of my competion so i have to manually inflate the currency in order to keep it suppressed/devalued and continue cornering the market on mango and coconut.  once production is exhausted, the economy retracts to its natural production level but my currency has been hyperinflated and now i have a mess on my hands.  

 

2) because devaluing my currency to gain competitive edge in the export market has the exact opposite effect on the import market.  i am now attempting to buy imported assets with a devalued currency which translates into paying more than i payed on yesterday.  how low can i cut the value of the currency to gain export advantage before my citizens rise up in protest from eggs, bread, apples and oranges now costing 2.5x as much as it did a year ago?  now i fear that, should the people dump the domestic currency and go to the black market to get a stable foreign currency (like the usd) to support their livelihood, the domestic currency will lose relevance.  as a currency loses relevance, foreign investors begin selling all of their assets (investment properties, stocks, etc) to get out of anything denominated in my country's currency.  there is a fast mass exodus of value leaving my country.  my country's central bank begins using its foreign reserves to buy back its domestic currency in an attempt to stabilize the exchange rate, but this is short lived because foreign reserves are finite!  (a great example of an oil rich country where 90% of its economy is oil based had to abandon its currency auction and using its reserves to buy back its domestic currency is nigeria...read more)

 

this is jus ONE aspect of monetary policy howbeit we haven't even touched on fiscal policy.  my point is to dissuade people from using another country's exchange rate as a direct basis of determining the exchange rate of another.  instead you have to look at factual statistics and trending information.  

 

just my  :twocents:

Edited by TrinityeXchange
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Good post sir reminding us of the limitations and dangers of monetary policy...hence it is always  a juggling/balancing act. 

 

This lines up with discussions we have had on another VIP thread....

 

An increase in the exchange rate (RV) can indeed be an arbitrary decision by the CBI. whether it holds that Value in the International Market place is a function or Supply and Demand and perceived value (what backs the currency- partly the potential wealth yet to be tapped etc)

 

By increasing the value of the IQD will increase purchasing power (if one is an importer or consumer) but this increase in purchase power in turn runs the danger of causing inflation. Also Iraq's exports (Oil, minerals, Agricultural products etc) will be less attractive to other International buyers and they may shift at certain price points to shop elsewhere. So it is a catch 22 for those within Iraq. Conceivably, they may elect to keep the imposed fixed rate for longer until certain goals have been met by the GOI. Once they are in a sound position they may consider raising the value and de-dollarising.

 

The issue of covering or backing the currency is largely a perceived value....bragging rights in other words as currently they have a Fiat currency along with most the rest of the world. The question is whether they are positioning themselves to break the bonds and come out with currency backed by Gold (which they have been buying up lately) and cash reserves.

 

They made great economic strides under Shabibi getting inflation under control and stashing away reserves from currency transactions/ sales. The Paris debt forgiveness deals have played into their hands as well.

So the question for me is do they have to back their currency? No concrete rules there so the answer is no. However, we hear of the Pride of this nation so my thoughts are they want to show the world they can back their currency. Then the question is when is enough to support the announced value and let it rise up...well that is the question along with when might/if this can happen.


Read more: http://dinarvets.com/forums/index.php?/topic/198829-my-confusion-concerning-an-rv/#ixzz3UflxOJde

 

Iraq as an oil rich country with a current focus on domestic economy. They desire to be a world player in a free market scenario...but any lift in currency value will diminish their competitiveness as an exporter (unless those stories about other countries central banks hold dinar in exchange for a fixed price of oil supposedly already negotiated).

 

Looking at my first post in this thread one could simplistically extrapolate/derive a rate from the differences in the two economies (Kuwait and Iraq) and say that should currently be around 1/10th of Kuwait's currency...$0.33 but hey I am not Iraq and the CBI is firmly in control of the currency value at this time before it pushes the red button and releases the brakes on the economy and send them into free  market mode. At which time the reverse of Trinity said above will be true... the foreign investors will then flock back to invest in assets/infrastructure/property/stocks/companies ... you get the point..... voila a country with a road map that is finally going places all because confidence is restored.

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