ICB - willingness to deleve the zeros of the Iraqi currency, iraqi dinar after the formation of the Iraqi Govt

[quattro1]

Good Saturday Morning Dinar Guru's ...

What's your take on this news article?

http://www.edinarfinancial.net/news/?quer=&nm=&ny=&nn=620

The Iraqi Central Bank, willingness to deleve the zeros of the Iraqi currency, iraqi dinar after the formation of the Iraqi Govt

October 23, 2010

The adviser said the Iraqi Central Bank Governor appearance of Mohammed Salih in an interview with “Alsumaria News”, “The zeros that are added to the Iraqi currency, during the last period, formed a cluster of large cash amounting to more than four trillion paper money, financial value amounted to 27 trillion Iraqi dinars, after that was 25 billion dinars in 1980, “noting that” Iraq is unable to manage this block because it is a small country where the large number of funds that traded on the Iraqi market has led to confusion in transactions for large commercial banks and in the work. ”

The Iraq and gradually the issuance of new banknotes after 1991 when it began currencies scarce on the market Iraq for several reasons, most notably the high demand for the fill buying and selling and smuggling of currency abroad, and to the north of Iraq, which split its time for the Central Administration, making the Iraqi government allows Central Bank of printing new banknotes to meet the local need, and continued the process of lifting of the zeroes of the dinar to beyond 2003 through the issuance of a class of cash amounting to 25 thousand dinars.

Saleh added that “the Bank has fully prepared to delete the zeros of the Iraqi dinar, once forming the Iraqi government,” noting that “the deletion of zeros is a national issue and may need to special legislation, despite the fact that the Central Bank of Iraq is a reform of the currency management from the core work and to delete the zeros is one of the strategic functions of the Central Bank of Iraq. ”

Saleh pointed out that “the Bank was able, during the last period, to reduce the level of inflation to the level of one decimal place, after more than twenty years,” noting that “Iraq could for the first time to reduce inflation to 3%, which reflects the success of Iraq policy,” monetary .

For his part, said economic expert on behalf of Jamil Antoine in an interview for “Alsumaria News”, “Iraq is not formatted for the time being to delete the zeros of the Iraqi dinar,” noting that “the deletion of zeros needed to stabilize the security and political, as well as economic stability.”

Antoine said that “the central bank by seeking the deletion of zeros from the Iraqi dinar is designed to give moral force, not physical strength of the dinar,” noting that “the deletion of zeros needed to create and cultural awareness for the Iraqi people and the Iraqi market.”

The CBI, with headquarters in Baghdad, has four branches in Basra and Sulaymaniyah, Irbil and Mosul, and founded the bank independent Iraqi under the law of the Central Bank of Iraq issued on the sixth of March 2004, and is responsible for the maintenance of price stability and the implementation of monetary policy, including policies, prices exchange and management of foreign reserves and the issuance of currency management, as well as to regulate the banking sector. (Source) CBI

[BobbyToGo]

Seen this one posted before a while back and then a couple of times yesterday...you can read threads from the previous posts on the subject. Look back through the news section of posts and you will find it without much trouble.

[Rhinestone Cowboy]

I agree with BKhopefull. Sounds like the best scenario from what I'm reading, but what do I know. I hope nothing b/c this isn't good for any of us. But I'm telling you, this isn't sounding promising! Experts???

[SteveI]

This article is nothing but a repeat of previous articles but worded a bit differently by yet another author. As others have said, I am not really sure how all of this will play out by deleting the zeros and not changing its value. Others say that if you do one, you have to do the other. I go agree that it is confusing and until some of the more experienced people can narrow the exact meaning, I will just let this whole thing unfold. God Bless!!

Edited October 23, 2010 by SteveI

[hspotman]

This article is nothing but a repeat of previous articles but worded a bit differently by yet another author. As others have said, I am not really sure how all of this will play out by deleting the zeros and not changing its value. Others say that if you do one, you have to do the other. I go agree that it is confusing and until some of the more experienced people can narrow the exact meaning, I will just let this whole thing unfold. God Bless!!

Steve, did you read Sooters chat that was posted last? I got lost in the middle because of everyone jumping in and celebrating the Texas Ranger NLCS win. also very hard to read everything in those chats. I'm just wondering if you think that info and this info are related?

[Traconesu02]

Thanks for the post quattro1

[elliott]

As far as I know if the currency RV's and is traded openly then you don't have to trade for US dollar. It will be a usable source of monies, just like owning any other countries money, so there isn't a real need to run like chickens with head cut off to the bank and exchange. Just go trade for the new paper if they switch it out and let it be. If it is worth more then the dollar and is stable, you would be better having IQD wouldn't you? so I really don't think you need to trade in millions of IQD for USD unless you think the market will fall immediately.

[John54]

I have asked the same question several times and have looked for posts addressing this and cant find one. I am sure there is people that has bought millions of dinar, and i think it has been posted that estimates of 750,000 people have bought. A post the other dat stated that a family has been in this for several years and they have 50 milion dinar, not if it RV for a buck well you can do the math. This is not counting countries and what they have......its confusing to me to say the least, but gonna ride it out. They need a econimist to make a post just on this subject alone IMO. GO RV

[elliott]

Lets not forget that were not trading in worthless money for USD were trading in money that is worth something....... people seem to act like were "getting away with something". that is not the case! we will be trading a valuable product for like value of product. and most of our money is electronically traded. so unless everybody makes millions and we all want it in cash to stuff in under our mattresses, it shouldn't really be a problem.... IMHO but I'm a health care worker not economist, but I'd like to think I got something out of 8yrs of college but maybe i didn't.....

[SteveI]

Steve, did you read Sooters chat that was posted last? I got lost in the middle because of everyone jumping in and celebrating the Texas Ranger NLCS win. also very hard to read everything in those chats. I'm just wondering if you think that info and this info are related?

Good morning hspotman. I did read the post several times and each time I read it gained nothing more than according to Scooter that our (all of us in the speculation) investment compared to the rest of the circulation is like one gran of sand on a big beach. This is very true. I think the bottom line is that he is preparing a "Monster" post with hundreds of links that will try and tie all of this together. After reading his previous posts, it will be very factual with lots of links.

So in summation of his input is as follows: (basically his exact words)

All of the MOP docs and quite a few other articles that imminently point to the reality of an rv and the major delay is the formation of the Government and getting them seated so they can start confirming or for better words, approving new law and procedures like the budget. Many articles point that all of this can be done without the GOI in place, but according to articles and Scooter, it is imminent that all of this will unfold and fall into place once the GOI is seated and they are allowed to function as a unit to start the new process of rebuilding of their country.

What did you get out if that post?

I am just letting things unfold. I am in this for the long term investment and I have spent over 2000-3000 hours in this past year reading each and every article from the past 5 years of archives and I am certain that the value will be forthwith. I personally hate to put any a date or rate on anything due to the bashing one receives on this site, but I have a fairly good idea on both.

God Bless you and your family and have a safe weekend!!

[lancer22]

This is an economist take on how the RV/RI works in Iraq and outside Iraq (like USA, france, UK & china). A long read but a good economics lesson if you will on how the CBI can afford the RV/RI of the NID.

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

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

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

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

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

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

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

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

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

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

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

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

__________________

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

Economist RV Explantion – Part II

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Now let’s really stir the pot by:

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

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

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

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

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

[Don Paul]

One of the better, most consice posts I have read in awhile. Thank you for a real perspective.

[SteveI]

You can never read this report and information enough. Thanks and God Bless.

[hammer911]

Thanks for the post.

Seems like a real, vialble option for them.

I've read the threads from Dustin Hayes and Marcus (and many, many others). Both bring up very good points. Dustin does bring up a valid question that I dont think I've seen anyone address as of yet.....the money trail. I'm new to this so call me ignorant if you want but I just dont get how they are going to come up with all that cash to pay out when the RV comes thru? if I missed someone answering that question, I apoligize in advance.

Seems to this rookie (with no real understanding of how an event like this would work) that deleting the 0's would be the best option.....unless a major pay out of tons of USD would somehow benefit them. I hope I dont get beat up for my inquiring mind as I have skin in the game too, just feeling like I may need to treat my investment as long term I guess.

Simple way of looking at it is. If they dont remove the zeros: Example: A 25,000 note after RV. would give the Iraqi's @ $3.00 RV this would turn theres into $75,000. That would make all Iraqi's milionairs over night. This is not going to happen. So they have to remove the zeros. Iraqi's will only have more buying power from imports not in country. Smae thing when some one from say eroup come here with erou. They spend $1.00 and get $1.40 worth of murchandice. There money is @ $1.40 to ours. But in there country, It is just a dollar.Hope this helps.

[Bull Dog]

As has happened with the old Saddam currency, I am sure there will be a time limit to cash in your Dinar, ie 3 weeks, 3 months etc. I was in Iraq when the time frame was set up. I beleive it was 3 months to exchange your old currency.

[Mongo]

Simple way of looking at it is. If they dont remove the zeros: Example: A 25,000 note after RV. would give the Iraqi's @ $3.00 RV this would turn theres into $75,000. That would make all Iraqi's milionairs over night. This is not going to happen. So they have to remove the zeros. Iraqi's will only have more buying power from imports not in country. Smae thing when some one from say eroup come here with erou. They spend $1.00 and get $1.40 worth of murchandice. There money is @ $1.40 to ours. But in there country, It is just a dollar.Hope this helps.

Why would they exchange for US dollars to give them 75k for? they keep their 25k note, exchange for lower denoms( the ones the bank are still holding) so now they have 25k in lower note and can buy 3X more with their money!!......... now that's buying power. i hear in country, out of country It's all going to be the same across the board.................The sky is falling.... the sky is falling, but only in Iraq?? Come on

[xxxgator]

I think a point of reason is being missed here.If the country revalues there money a small few are going be wealthy over night including the country or government itself, Because after rv .it will cost all the other countries 3000 times more to purchase oil or you could say they would be getting 3000 times less for their money.Also Iraqi would have 3000 times more buying power for foreign goods.Not to mention all their debt that was owed will be paid off in 1 swoop.

[hspotman]

What did you get out if that post?

I am just letting things unfold. I am in this for the long term investment and I have spent over 2000-3000 hours in this past year reading each and every article from the past 5 years of archives and I am certain that the value will be forthwith. I personally hate to put any a date or rate on anything due to the bashing one receives on this site, but I have a fairly good idea on both.

God Bless you and your family and have a safe weekend!!

To tell you the truth Steve, I already forgot what I was thinking when I read Scooters chat, lol. But when I read it, or tried to sift through all the chit chat in-between, and then I read this one just after, I thought they had to do with each other. Not directly, but because one was happening, then the other was a result. I don't know if that makes any sense to you, Steve, but I just remember feeling that way when I was reading them. Lol, again I forget what I was thinking exactly and what the posts were about. I just got back from a couple hours of surfing, and I think the ocean salt water clogs my thinking straight anymore for awhile And I'm about to go head out for another couple hours hopefully.

I am like you, I'm in this till the end regardless, and I'm just letting things pan out and unfold. We have many smart people on this site that seem to know what they are talking about. And like I said before in a previous thread, worse-case-scenario is that I sell my dinar and get back what I put in, minus comissions

[quadraph0nic]

Two ways to look at this...

If they have to back their currency with other currencies then yes by that set of rules, it doesn't look good however when you look at a currency like the US dollar that is FIAT or how the Federal Reserve a corporation that doesn't fall under our government's control can do what they do....yeah, explain that to me. What's backing our money?

Okay we all know we are here because of OIL (Operation Iraqi Liberations) Anyway, with the US Dollar making 2/3 of the world's curency, things can not continue like this. How long do FIAT economies last? When were we taken off the gold standard?

If our position in the world can back our promise to pay our debt which backs the US dollar then control of a countries currency that potentially can be the #1 oil producer in the world should have a better justification for a strong currency.

I know for some this is a huge stretch but think about this, if you look back in history all wars make money. ALL OF THEM. Someone made out BIG. Why did we really come here? Don't feed me that WMD crap either that's junk for the masses....Why are we here?

Again its a stretch and for those that have to understand everything that have to have FACTS AND PROOF then what I've said will be hard to accept....I say if you have pondered on this stuff already and you think there's no way its going to happen then why gamble with your money?

[Bull Dog]

What do you mean crap about the WMD??? Then why did we transfer 500 tons of uranium from Iraq to Canada two years ago?

[haha]

Thanks for the post.

Seems like a real, vialble option for them.

I've read the threads from Dustin Hayes and Marcus (and many, many others). Both bring up very good points. Dustin does bring up a valid question that I dont think I've seen anyone address as of yet.....the money trail. I'm new to this so call me ignorant if you want but I just dont get how they are going to come up with all that cash to pay out when the RV comes thru? if I missed someone answering that question, I apoligize in advance.

Seems to this rookie (with no real understanding of how an event like this would work) that deleting the 0's would be the best option.....unless a major pay out of tons of USD would somehow benefit them. I hope I dont get beat up for my inquiring mind as I have skin in the game too, just feeling like I may need to treat my investment as long term I guess.

Im not trying to bash you but do you really think that ppl are just going to hand out over 100,000 US dollars to everyone that invested in dinar. No.It is called a bank account.