IRAQI DINAR ON RV/RI

[steve999]

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.

http://***********.wordpress.com/

[Mikki-RN]

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.

http://***********.wordpress.com/

You have obviously done your homework! Thank you for a very informative post.

[awayfromthesun]

Good stuff Steve, thanks for your hard work

[Unitedrich]

Steve999,

What a fantastic post! You layed out all the different framework for the many scenarios for "food for thought". Like you, I am just as perplexed at what will really happen when the time comes, but perhaps we will come out with a rate somewhat in the middle. This has been my thinking for a very long time. $1.80 has been my number since about June of this year, and I have not wavered from it, even with all of the new oil reserve information, etc., etc.,. High enough to prevent overspeculation, yet low enough to take the investors out without too much impact on their monetary system. UR

[misty]

steve what a great post, read it twice so as not to miss anything, thank you for all the work you did in putting this together.

[Traconesu02]

Nice post steve999 - Thanks for sharing this with us.

[Mongo]

Let's COOK the BOOK and see what's left...........................................................NOBODY KNOWS.........

[14Mil]

Appreciate you taking the time to summarize the different perspectives. I've always wondered what some of the rates were based on. Now I know.

Based on my own education (Ungrad Finance, MBA) and knowledge of the region (stationed in Bahrain for 3 years) choice number 1, is what my mind is thinking....but my hopes for the Iraq people (not to mention investors) is that one of the other rates will prevail. Time will tell.

Go RV!

[SoldierOfIndependence]

This was great, Steve, clear and concise. I look forward to your next post, hopefully that will deal with the date subject.

Thank you sir!

Fidelis Ad Mortem

PS: 14Mil, yer avatar makes me go like this ->

Edited October 31, 2010 by SoldierOfIndependence

[simon23]

Great Post. Thank you for taking the time to share.

[Dirk Diggler]

Very good post, Steve! Thanks for taking time to share your views.......

[Mr rue]

I also thank you for taking the time to break the lop down. Well said Steve.

[thunderrb]

Steve, thank you... As a Newbie, this was very informative. I try to pay attention to those of you that appear to be knowledgeable and dedicated to the common good. This article is a perfect example of a person that is aware and reliable without propaganda...Thanks, Ron

[Dell]

Way to go Steve999!!! Clear , Concise and to the Point. Look forward to your next post.. Blessings to All!!

[Legolas]

Steve's statement that all of the OPEC currencies are above $3.00 is incorrect. In fact, only Kuwait is over $3.00. The value of OPEC currencies is as follows:

Algeria: .0013

Angola: .90

Equador: 1.26

Iran: .000096

Kuwait: 3.55

Libya: .80

Nigeria: .0066

Qatar: .26

Saudi Arabia: .26

U.A.E.: .27

Venezuela: .23

As you can see, the average is actually way under a dollar.

Edited October 31, 2010 by Legolas

[Doc31]

My only question is ... why do you believe that they will ONLY "call" the 10K and 25K IQD notes?

The "000"s (if you will) also include both the 1K and 5K notes ... as far as counterfeiting ... both the 10K and 25K notes at RI/RV of $3+ makes both of them obvious targets. However, the 1K and 5K would be $3000+ and $15,000+ respectively ... also viable counterfeiting targets.

I'm not saying that you are incorrect ... I don't know either ... just wondering why you stated it that way.

Thanks for the post!

[Blue-Duck]

Steve, thank you... As a Newbie, this was very informative. I try to pay attention to those of you that appear to be knowledgeable and dedicated to the common good. This article is a perfect example of a person that is aware and reliable without propaganda...Thanks, Ron

thunderrb, Steve may have a new name but he is not a Newbie. Steve do you by any chance know Enorrst, because your logics and writing style is almost Identical. If you are not Enorrst than I apologize and to say your writing is similar is not a put down but a compliment! This is a very, very good post, thanks Steve!

Cheers!

[ccr]

Great Post.... thanks for all the hard work....

[CheckMate]

Thanks Steve for the post,

I appreciate all your hard work and the effort it took to put this post together.

Have a great weekend,.......

Check,

[bikertrash]

Great post Steve, I sure hope you are right

The more I read someone should be right as long as it is between .86(which I could live with) or anywhere above

Look forward to your next post

[3grlz]

From what i've heard it will RV at .86 so the CBI can recover the large bill and than have a cut off date for those who are willing to hang on for a higher rate. Than they will distribute there lower denomination currency and make the larger bills(with the 3 0's) void like Kuwait did years ago.

[caz1104]

Thanks for the post. Mostly a rehash of events and opinions..........................................GO RV BABY!!!!!!

[Soldier]

The more negative post from actual news sources equals the more "Gurus" that start to come out. I hope your right stevie but it won't be this year.

[BtrFuture4All]

Thanks Steve for the post,

I appreciate all your hard work and the effort it took to put this post together.

Have a great weekend,.......

Check,

As do I, Steve... really makes it more clear for me. Thanks

[Good people]

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.

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Good job thank you