Designed to sift through all the rumors

[VIZIOIRAQI]

This is the second in a series of posts designed to sift through all the rumors, myths, and legends about the dinar. While the truth is hard to find, it is out there. It just has to be the number 1 goal. The agenda should be what is the truth about this investment. We should destroy all rumors, Intel, and lies. I include Intel because this is what a lot of people are calling rumors. In an effort to spread rumors people say just about anything and call it Intel. In many cases there is no intelligence in Intel.

How about the “Intel” in the report that was circulating a few days ago that said Maliki was in the hospital, and that he was in a diabetic coma. Or the Intel that said the banks all know the new rate but they are not allowed to say? Or the Intel that says they released lower denominations. All of this really serves no purpose other than to frustrate the investment. I believe in the investment, and I will try to tell you the truth through out this series of post designed to debunk rumors. DON’T LISTEN TO RUMORS AND VERIFY EVERYTHING!!!! I know this is hard to do, but the aggravation of taking all the outright lies, (Oh I’m sorry Intel) at face value is discouraging in the long run!

There is a good object lesson in the American news media. Fox News is basically conservative and republican in base. Sometimes they gravitate to the middle. MSNBC is ultra liberal and Democratic in base. CNN tries to be middle of the road but sometimes leans towards left depending on the story. The bulk of any story the news media reports shows a leaning towards their core beliefs and values. The last election in this country is proof enough for this alone!

The same problem exists in Iraq today. If a part of Iraqi news media favors Maliki then the stories they release will be supportive of him. Other networks support Allawi, and their stories lean in favor of him. If you look through older post on this blog you will find news stories that came out of Iraq declaring Maliki stepping down, or buying property in England. These stories came from a section of Iraqi media who support Allawi. My mistake was to assume that the press in Iraq had the same agenda I had. My agenda is the truth. Nothing could be further from the truth than some of the stories coming out of Iraq. So now I am left to sifting through countless documents by the IMF, UNSC, and UN to find out what is really going on. If you look at older post in this blog and find news concerning Maliki or Allawi take it with a grain of salt and consider the Source. I will not change any older post. I will just count it as a good object lesson.

What is the rate?

This one question alone has been the source of many rumors. Speculation is all over the map on this. So I will break down why there are many different guesses on what the rate will be. Please keep in mind no one knows for sure and all this is guess-work. People guess by looking at what Iraq does, not what it talks about. Sometimes the guess-work comes from GOI or CBI press releases.

1. 1 to 10 cents. People who believe in this rate flip-flop back and forth from Lop to that rate. They argue that there is way to much currency in circulation. A high value in rate cannot support the amount of currency in circulation and even if this revalue thing happened in Kuwait and Germany they had a lot less currency in circulation.

First there will be no Lop. More on this latter. Second the people who support this rate know there is around 25 trillion dinars. What they don’t know is not all the dinars are in circulation. If you go to the CBI’s web site you will discover that the coins that were minted are not in circulation and they have been removing the 25,000, and 10,000 from the public for over a month now. No one knows how much dinar is in circulation and how much has been removed. Second they compare the dinar to fiat currencies that are backed by nothing. The dinar is backed by Iraqi oil and the IMF will allow them to monetize the oil in the ground. This alone adds tremendous value to the currency and makes a revalue at a high price more likely.

2. 86 cents. people support this rate get this rate from today’s value. One Iraqi dinar equals 0.000855473. us Dollar. Knock off three zeros and you round to the nearest number and you get 86 cents

In June of 2010 CBI said they are going to redenominated and remove three zeros from the currency. They did not mean they will take three zeros from the value. They meant that once the currency revalues they will remove the currencies with 3 zeros (25,000 and 10,000 notes) from circulation. And introduce lower denominations.

3 $1.20 to $1.70 People who believe this rate are looking at Iraq’s budget. Iraq needs a minimum of $1.20 to meet budget demands. This is from the 2009 year budget. $1.70 could be what is needed for the 2010 budget.

The problem here is that no one has seen the 2010 budget and 2010 is almost over. So who knows what is going on behind closed doors? One thing is for sure though. If Iraq needs a currency that reflects their budget they cannot go any lower than $1.20 per dinar

4. $2.50. People who believe this will be the rate look at the value of the dinar before Saddam changed it to $3.22 Even though Saddam changed the rate it still traded globally for $2.50. The IMF and the global community said he could not change the rate. He changed it anyway

However, the dinar was based on oil back then as well, and oil at that time traded between $15.00 to $25.00 a barrel. Oil is much higher now.

5. $3.22. People who support this rate point out that this was the official rate before sanctions were placed on Iraq for invading Kuwait. If they were to reinstitute the rate (RI) this would be it. They point to future contracts Iraq has for rebuilding infrastructure. All the combine contracts support a rate over $3.00.

I will admit I don’t know enough about their research to comment on this. It may be a rumor. It is important to look at the time frame of these contracts and not just the dollar amount. If the contract is spread over 3 years then that dollar amount is divided by three consecutive budgets. This throws the numbers way off. The truth is no one knows enough to confirm or deny this theory. I have not seen any data yet.

6. $3.86 People who believe this rate believe that there will be an RI and a RV. Frank pointed out, The CBI at one point said the rate will be 3.22 plus 20 percent. I don’t know what document or research he has to confirm this. But he is adamant about it. This is what he believes.

To tell you the truth I hope he is right. I don’t know where he gets his information. I am not going to say if he is right or wrong because I just don’t know.

7. $4.00 and over. This rate has just recently surfaced. The main supporters of this rate are the same people who predict an RV every weekend. I would not put much stock in this rate. I believe it is nothing more than wishful thinking and fantasy. There are no documents to my knowledge that even support a rate like this.

As you can see speculation is all over the map on what the rate will be. The debate is intense. The funny thing is no one really knows what the rate will be. I remember reading an article over the summer that said Kuwait demanded a rate that was at least 3.40. The reason for this is to match Kuwait’s dinar rate. All of the OPEC currencies are over $3.00. If Iraq undercuts this rate it will have an impact on the entire region.

A floating rate has also been suggested. Basically the rate is introduce at lets say $1.75. and then it floats up to over $3.00. There has to be balance no matter what the rate is. If they release a rate that is to low then they will not achieve their goal of removing all the currency with three zeros by the end of the year. To high a rate could make it hard to trade the currency on an international basis. I personally believe that the rate could be anywhere from $1.20 up to $4.00 Like everyone else I just don’t know for sure. It could be any ones guess.

What about the lop?

Basically this rumor has been floating around for two years. In 2008 it was mentioned in an article, and it has been circulating ever since. A lop is defined as taking currencies of high denominations and removing the zeros at the end thus reducing the value of that currency. For example, by removing three zeros from the 25,000 dinar note it is now valued at 25 dinars. There are several reasons why I believe a lop will not take place at the revalue.

First a lop only happens when a country’s currency and economy are in ruins. Typically it is used on fiat currencies after hyper inflation kicks in.

Second Iraq is not removing all the old currencies from circulation. Only the 25,000 and the 10,000 will be removed. If they were going to lop and introduce new currencies they would need to replace all the old currencies. Not just the high denominations. This is part of the pre post RV scenario that lop preachers preach.

Third Iraq itself has said It will not lop off the zeros from the currency, and the old currency will retain it’s value along with the new lower denominations. The CBI has stated that the reason for the lower denominations was so Iraqi citizens would carry less money. Here is the latest article from AKnews

Zeros Will Not be Removed from Iraqi Currency

Posted on 24 August 2010. Tags: forex, iraqi dinar, re-basing

There has been much speculation in recent months that the Iraqi dinar would be re-based, knocking off the last three zeros.

The latest news is that Iraq will not in fact remove the zeros from its currency, because it will not resolve inflation and will create opportunities for corruption, reports AKnews, citing a senior source in Iraq’s ministry of finance and economics.

The Iraqi dinar was largely devalued after Iraq’s invasion of Kuwait in 1991 and the imposition of international sanctions on the country.

While before 1991, one Iraqi Dinar was equal to around $3, now $1 is worth roughly 1170 Dinars, according to Iraqi Central Bank’s exchange rates.

Some experts have suggested that removing the zeros will enhance the country’s currency and allow it to better tackle inflation.

“The Central Bank wanted to remove the zeros three years ago, we alleged that it was impossible. They wanted to do it again last year and we rejected the proposal again. The issue is currently brought up once again, but the Ministry of Finance and Economics insists that Zeros will remain,” said Fazil Nabi, the deputy minister of finance and economics.

Nabi said removing the zeros will not reduce the inflation rates as Iraq’s inflation has been stable and remained low for quite some time.

“Besides, it will create problems for many citizens because it takes time for them to learn to use the new currency,” he said.

Nabi also stated that certain people will be harmed by removing the zeros because their salaries will decrease while it is unlikely that the price of goods in the markets would decrease. It is not clear to IBN how the minister came to this conclusion.

(Source: AKnews)

http://www.iraq-businessnews.com/2010/08/24/zeros-will-not-be-removed-from-iraqi-currency/

Forth, Iraq was forgiven massive debt from all over the world. These countries hold Iraqi dinar. For example, china holds dinar( mainly the 25,000 and 10,000 notes) china forgave Iraq 80 billion dollars. They did not do this to watch Iraq delete the value of the zeros from the notes they hold. There are several nations that are in the same position china is in.

There are more reasons why I believe Iraq will not lop, but at this point I think you can see the evidence that the lop will not take place.

Iraq is doing what it can to remove UN chapter 7 sanctions another step was taken on September 2^nd

Iraq to pay $400 million for Saddam’s mistreatment of Americans

Baghdad – Iraq has quietly agreed to pay $400 million in claims to American citizens who say they were tortured or traumatized by Saddam Hussein’s regime after his 1990 invasion of Kuwait.

The controversial settlement ends years of legal battles and could help Iraq emerge from United Nations sanctions put in place two decades ago – a step Iraqi leaders see as a prerequisite to becoming fully sovereign.

The Iraqi foreign ministry said the $400 million settlement, signed last week with James Jeffrey, the new US ambassador to Iraq, resolves legal claims inherited from the former regime and was in line with negotiations to end the sanctions.

Settling the claims, which were brought by American citizens, has been seen as a key requirement for Washington to be willing to push for an end to the UN sanctions.

“There was a lot of pressure on the Iraqi government to do something that gets Congress off their back,â€

Known as “Chapter 7″ sanctions after the part of the UN charter that deals with international threats to peace, they were imposed against Iraq after Saddam Hussein’s 1990 invasion of Kuwait and never fully lifted.

As part of the Status of Forces Agreement between Iraq and the United States, which provides the legal basis for the presence of American troops here, the US committed itself to helping Iraq emerge from Chapter 7.

Claims for kidnapped children, CBS reporter, and others Law firms representing the American families pressed Congress for years to approve a measure that would allow foreign governments accused of sponsoring terrorism to be sued in the United States. They finally won an amendment lifting immunity for states accused of sponsoring terrorism.

Senior Iraqi officials who asked to remain anonymous because of the sensitivity of the issue said Iraq and legal firms representing the American families had agreed to a $400 million payout to settle up to eight groups of claims.

The claims include compensation for emotional distress from the children of two contractors seized near the Iraq-Kuwait border in 1990, Americans held as human shields in an effort to prevent a US attack, and the case of CBS News reporter Bob Simon and his cameraman who were held after being arrested along the border with Kuwait.

US courts had previously awarded at least two multimillion-dollar settlements, later appealed. The Bush administration at the time had argued that the money, held in US trust, was needed to help rebuild Iraq. Lawyers have previously said they expected individual claims to average between $400,000 and $500,000 under the final settlement.

“There were originally billions of dollars of claims from thousands and thousands of cases,” said one Iraqi official.

The claimants included an American boy who was seen frozen-looking on Iraqi television while Saddam Hussein asked him if he’d enjoyed his breakfast after he and his family were prevented from leaving the country.

Settlement money to come from frozen assets After Saddam’s invasion of Kuwait, the regime rounded up several hundred American citizens in an effort to deter the attack launched by the United States several months later to drive Iraq out of Kuwait.

The money comes out of a roughly $900 million fund in frozen assets held by the US government to settle unresolved contracts under the Oil for Food program.

The program was an exemption to the sweeping trade sanctions in the 1990s, under which Iraq was allowed to sell oil to foreign buyers under supervision to buy food and medicine. It ended with the 2003 war, leaving dozens of countries and companies with unfulfilled contracts.

Senior Iraqi officials said the settlement was aimed at protecting Iraqi funds being held abroad. The Development Fund for Iraq, created by the UN, holds Iraq’s current oil revenue as well as money from the former Oil for Food program and other frozen assets. The mandate of the advisory body which oversees it expires at the end of this year and Iraq needs US and international support to replace it with direct control of its revenue.

Iraq is still paying compensation to Kuwait under Chapter 7 sanctions – so far $27.6 billion – and continues to devote 5 percent of its oil revenues to a UN fund for Kuwaiti compensation. Baghdad, which argues that it needs the funds for reconstruction, is trying to cut that percentage in half.

Kuwait has taken additional measures such as seizing an Iraqi Airways plane on its first flight to London this year.

Iraq argues that it can’t be fully independent while it is still under Chapter 7.

Why the settlement is controversial Despite Iraq’s potential oil wealth, the country has major economic problems, including widespread poverty, 30 percent unemployment, and an infant mortality rate among the highest in the region. Oil revenue, which the US believed would fund reconstruction when it invaded Iraq, has been limited by ongoing attacks and an infrastructure that will take billions of dollars in investment and years to repair.

The settlement is controversial not only because of Iraq’s pressing developmental needs, but because it holds the current government accountable for Saddam Hussein’s actions.

“A lot of blood has flowed since then and a lot of it is Iraqi blood. It’s arguable that the suffering was not caused by the current Iraqi government or the Iraqi people,” says one senior Iraqi official. “This is politics, this is not justice.”

Iraq to Develop Southern Gharraf Oil Fields

Nasiriyah, Iraq (dpa) – Iraq’s oil ministry announced Friday that it would begin drilling for oil in the southern Gharraf oil fields by the end of the year.

Officials said initial production levels of 50,000 barrels per day from eight oil wells are expected.

Gharraf is located near Nasiriyah, some 375 kilometers south of the capital Baghdad.

Malaysia’s state-owned oil company Petronas and the Japan Petroleum Exploration Company (Japex) late last year signed a deal with the Iraqi government to develop the Gharraf oil fields.

The deal envisages 20 oil wells with an estimated daily output of 230,000 barrels over 20 years.

Iraq’s state oil company holds a minority share in the partnership.

Oil contracts are still going forward. Iraq is trying to emerge from chapter 7. and now it appears there is no lop and Iraq still plans on a revalue sometime this year. When is another set of issues, another set of rumors.

[mrref]

Thanks for the History Lesson on RUMORS

Edited September 13, 2010 by mrref

[gerald15]

Excelent Thanks/

[Eddinar]

Excellent post Vizio...

[WantsToRetire]

Thanks. That concise explanation helps me a lot.

[tampagirl]

Great article to clarify some rumors!!!! The history lesson of the day!!!!

[Legolas]

Very well done VizioIraqi, EXCEPT for the fact that in fact, only ONE of the 11 members of OPEC has a currency valued at over $3.00. That would be Kuwait, at $3.47. More than half are well below $1.00. The amounts are as follows:

Algeria ......... .0013

Angola.......... .90

Equador...... 1.26

Iran............... .00009

Kuwait.......... 3.47

Libya............. .78

Nigeria......... .0066

Qata.............. .27

Saudia Arabia..... .26

U.A.E..................... .27

Venezuela........... .00023

Edited September 13, 2010 by Legolas

[cjmac]

Very well done VizioIraqi, EXCEPT for the fact that in fact, only ONE of the 11 members of OPEC has a currency valued at over $3.00. That would be Kuwait, at $3.47. More than half are well below $1.00. The amounts are as follows:

Algeria ......... .0013

Angola.......... .90

Equador...... 1.26

Iran............... .00009

Kuwait.......... 3.47

Libya............. .78

Nigeria......... .0066

Qata.............. .27

Saudia Arabia..... .26

U.A.E..................... .27

Venezuela........... .00023

If you go to Oanda.com, Saudi Arabias Rial is $3.74 and the UAE(United Arab Emmirates) is $3.67. Qatars Rial is $3.63. These are all based against $1.00 U.S.

[hopeful1]

Thanks for the info, very interesting

[Legolas]

If you go to Oanda.com, Saudi Arabias Rial is $3.74 and the UAE(United Arab Emmirates) is $3.67. Qatars Rial is $3.63. These are all based against $1.00 U.S.

You have the conversion backwards, CJ. 1 U.S. Dollar = 3.74 rials, etc Correct the conversion and you'll see that they are all under a dollar.

Edited September 13, 2010 by Legolas

[greebs]

First of all, Saudi Riyal is at .26 cents per US dollar and as well as the Qatari currency. Please learn how to read a currency converter correctly. Viz-you start off your post stating how you want to get through the rumors, speculation, and intel. Then the rest of your post is filled with rumors, speculation, and intel, so much for getting at the facts.

[VIZIOIRAQI]

First of all, Saudi Riyal is at .26 cents per US dollar and as well as the Qatari currency. Please learn how to read a currency converter correctly. Viz-you start off your post stating how you want to get through the rumors, speculation, and intel. Then the rest of your post is filled with rumors, speculation, and intel, so much for getting at the facts.

I forgot to clarify this was not written by me , but I thought it was an all around good read. I do see those mistakes , and it is under rumors

[Legolas]

I forgot to clarify this was not written by me , but I thought it was an all around good read. I do see those mistakes , and it is under rumors

It's OK Viz.....many people make that same error when using the converters, and often use those erroneous figures in supporting their argument that the dinar has to be over $3.00. The truth is that only Kuwait's currency (in that region) has a value over $3.00, and they are a VERY wealthy country.

[RicknSaudi]

If you go to Oanda.com, Saudi Arabias Rial is $3.74 and the UAE(United Arab Emmirates) is $3.67. Qatars Rial is $3.63. These are all based against $1.00 U.S.

Don't know where you get your information from. Perhaps you read the charts wrong. I live and work in Saudi Arabia and have gotten 3.75 Riyal for my dollar since as long as I can remember. UAE pretty close to that. Please clear this up for your own peace of mind.

[WHATTHE]

Very well done VizioIraqi, EXCEPT for the fact that in fact, only ONE of the 11 members of OPEC has a currency valued at over $3.00. That would be Kuwait, at $3.47. More than half are well below $1.00. The amounts are as follows:

Algeria ......... .0013

Angola.......... .90

Equador...... 1.26

Iran............... .00009

Kuwait.......... 3.47

Libya............. .78

Nigeria......... .0066

Qata.............. .27

Saudia Arabia..... .26

U.A.E..................... .27

Venezuela........... .00023

that's what i was thinking...thanks for doing the research...