Making Sense of the Numbers

[syzygy]

November 23, 2010 11:13 am

I continually receive emails for different people who struggle to understand what the “dropping of the 3-zeroes” means, and how all this could play out. I’m re-posting this post of mine that I put up here on the site a few months back to help quel the tide if questions, concerns, and emails. I hope this helps. Tie THIS post in with my “All the Possible Outcomes” post (you can access that post by clicking HERE), and you should have the full picture of how I feel about this investment. G0 Dinar! – DD

All,

From the moment I’ve been in this investment even until now, the debate of LOP versus RV has been raging. That very argument is what drove me and thousands of others AWAY from Investors Iraq (IIF), as it appeared it was absolutely overrun by those who felt it was their mission to squash the hopes and dreams of other investors. I am sharing this with the permission of those who have helped bring me this concept to light, from several legitimate economists and very sharp minds, their perspective to help each of you understand this dilemma.

I don’t know about you, but I’ve been told time and again by those who are absolutely in a position to know that this will NOT be a LOP, but will be a straight-up RV, yet I found myself not being able to refute the arguments of those who brought only “part of the truth” forward, using the “numbers” to their advantage through logical focus on that which was clearly understood. This post of mine is dedicated to explaining how an RV will happen.

CONCEPT EXPLAINED:

First off, I’ll use the exchange of a 10,000 IQD note as my example. To help explain the economics of this cash-in example, I will use a 1:1 cash-in ratio between the USD and IQD, that is given a two-tier payout, and a 2% bank spread.

What You Will Receive:

If you were to cash in your 10,000 IQD note with a bank that charges you a 2% spread, you would personally receive a net take-home of $9,800 credited to your bank account.

What Your Bank Will Receive:

Your Bank will receive a $10,000 credit to its Federal Reserve Account. They will also be able to add the $200 profit to their “capital account”.

If you don’t understand the “Fractional Banking“ concept that runs our country, you may want to, as that is what this is based on, and is what is behind this entire concept and plan. To learn more about this concept, I suggest you click HERE, and go to a video post I brought to the forum previously, and posted in my “Tidbits“ section.

Ultimately, the bank wins because they are able to gain $2,000 in lending power under the 10% “Fractional Banking“ model.

What the US Treasury Will Receive:

First off, the US Treasury will receive $3,500 in estimated taxes in the quarter after the exchange, because you 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). Furthermore, the US Treasury’s rate is higher than the banking rate (we will use in this example 1.25), thereby further reducing their “net cost” from $6,500 to $4,000.

Oil Now Enters the Picture:

At some point, a Fed-appointed agent orders $12,500 worth of oil from Iraq. Payment will consist of a $12,500 transfer from the Fed’s foreign currency reserve IQD account to the IRAQ Oil payment account at the CBI in a form otherwise known as PetroDollars/PetroDinar. 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.

How the CBI “RECAPTURES” the Money:

The $12,500 order is filled with 250 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 approximately $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)

What does all that mean? It cost Iraq $162.50 to bring back a 10,000 IQD note! Can they afford that? I think so! So, instead of paying out $12,500 for a 10,000 IQD note, they only pay $162.50! That doesn’t add to the money supply much at all does it! They receive their IQD back and place it in the CBI, or destroy it.

The transaction is completed with the Federal Reserve exchanging foreign reserve credits which are equal to $12,500 USD (which had a net acquisition cost of $4,000 USD for the US) for 250 barrels of oil (which has a TOTAL COST to produce of $162.50 USD for Iraq.

More completely explained, and simply put, it cost Iraq $162.50 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 $12,500 worth of oil for a net cost of $4,000. 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.)

Other Factors that Strengthen Iraq’s Position and Ability to RV:

DFI Funds Returned & Other Assets: $280+ Billion USD, plus other frozen assets (estimated at $100 billion) will be returned back to Iraq and added to their foreign currency reserve, bringing it up to $430+ billion USD.

CBI IQD Reserve Requirement Adjustment: The CBI will change the current fractional IQD reserve requirements from 100% to 15% at the appropriate time. As a result, the the total potential money supply will be raised in value to $2.8 Trillion (430 billion/15), while at the same time, the total physical IQD in circulation will be reduced by removing the large bills with the 3 zeros over a period of 2 years, as they have indicated.

Oil Production Increased: Iraq will also execute the plan they 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.

Oil Futures & Forex Contracts Added: To further stir the pot, the CBI will 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.

There, my friends, is how this plan will be enacted and made possible. Taking NOTHING, and turning it into SOMETHING, then bringing it back to a “manageable and reasonable something” that is accepted and supported by seeming endless supplies of oil. This is how the world’s ENTIRE NEW MONETARY SYSTEM will be regenerated and supported and backed, given, in essence, a re-birth and renewed for most governments and economic regions… even by “Black Gold”.

So, here’s the summary for all the “players” involved, giving ballpark numbers, and not taking into account superfluous costs, fees, and other small details that don’t really affect the larger picture:

Investor’s Net Gain: $10,000 – $200 = $9,800 x .65 = 6,370 for an investment that cost $10

Bank’s Net Gain: $200 added to “capital account”, plus $2,000 they can use to loan out.

US Treasury Net Gain: $2,500 from the .25 spread on top + $3,500 in quarterly taxes = $6,000

CBI/GOI/Iraqi People Net Gain: $12,500 – $162.50 = $12,337.50 + Profits from “Other Factors”

Overall Net Gain for All Involved: $6,370+$200+$6,000+12,337.20 = $24,907.20

This is the wealth that was generated from a single 10,000 IQD note that was given an original value of approximately $10! Is that amazing or what?! You tell me… can Iraq afford NOT to RV?!!! Will the IMF allow them to NOT RV their currency, but simply replace their large denoms for smaller ones?!!! LOL!!!

In this scenario, EVERYONE WINS… and the IQD is slowly (over 2 years) taken back in to the CBI… eventually destroyed, leaving a manageable M2 behind, having created HUGE WEALTH throughout the world to re-supply what was allowed to be destroyed in the “great bleed” over a period of just a few weeks a couple of years ago, even the greatest redistribution of wealth the world has ever seen. Believe it or not, it has happened for this very purpose, and it IS coming!

Dont shoot the messenger...jusy passing info along...Syzygy

[brighterdays]

It All makes sense. Great post!

[Mikki-RN]

Maybe we could fax this to Shabibi and the GOI so they will know how to handle this situation!

[junitman]

THANK YOU syzygy, for passing this on~ Excellent Excellent explanation by DD.

[royboyterry]

Excellent?

You're thanking him?

This makes sense to you? Really?

You gave Iraq $8.55 and they gave you a 10,000 IQD note. You give them back the note, and they spend $162 to produce 250 barrels of oil, sell it, and give you the $10,000.

Does it still make sense to you now?

Let's try those numbers this way.

In your scenario, let's say The VIP Club, which Adam says holds 25 BILLION IQD, are the ONLY people who cash in after the $1.00 RV. They have 2.5 MILLION 10,000 IQD notes. Using your figures, Iraq is going to spend $325,000,000 to produce 625,000,000 barrels of oil to fulfill the order from your fed appointed agent.

The VIPs get $25,000,000,000.

The Feds get 625,000,000,000 barrels of oil. (which Iraq had to pay $325,000,000 to produce)

Iraq gets back the dinar that they had sold to the VIP Club for $21,375,000.

Instead of using the VIP's money for an example, start multiplying the above numbers by the Trillions of IQD which Iraq will have give its oil away for.

How long will it take Iraq to produce the 625 BILLION barrels of oil to pay back the VIP Club alone? Does it still make sense?

ok gu

ok both seem good explanations ..who right? we need an expert here!!

MY HEADS SPINNING!!! HEEEEEELP!!!

[mike032588]

Amazing point dustin... GOOO RVVV GOO RVVV hahahahahaha ppl on this forum i feel bad for... we shall see... its not over to the fat lady sings...

[Richguy]

That DD explaination has been floating around for a long, long time. I personally think it's a bunch of horse manure. There has never been anything officially put out by the Iraqis or anyone else to suggest this could actually happen. I have yet to see any professional economist agree that this type of scenario could happen. Does DD have an economics degree? It's also based on a $1 rv. When you change those figues to reflect a $3.50 rv to get in line with Kuwait, the numbers become exponentially more ridiculous. The official stance of the CBI is best summed up in the article below from February. They have never waivered from this position. Recent articles continue to use the phrase 'delete the zeros'. Notice he says specifically that they are planning to remove the zeros from the currency, NOT the exchange rate. This will make it easy for current and new bills to coexist. 25,000 note = new 25 note, simple. There is no ambiguity here, in my opinion at least. They have also stated elsewhere that they want an exchange rate similar to late 70s, which would be between $3.20 and $3.50. So you are looking at a 25k note being worth about $80 US, post rv. Still a 300% return on my investment, so I'm not complaining. There is a lot of other statements that support this, but frankly if people want to continue with unrealistic expectations of having trillions of dollars worth of dinar floating around after the rv, that's up to them. Now, are they puting out all these lop articles just to throw everyone off so people everywhere aren't hoarding dinar? Doubt it, but again, you can believe whatever pipedream you want. Also note the use of the term redenomination. This is what wikipedia has to say about redenomination:

The authorities may alleviate this problem (inflation) by redenomination: a new unit replaces the old unit with a fixed number of old units being converted to 1 new unit. If inflation is the reason for redenomination, this ratio is much larger than 1, usually a positive integral power of 10 like 100, 1000 or 1 million, and the procedure can be referred to as "cutting zeroes". (sound fimiliar? deleting zeros, cutting zeros, same thing)

Here is the earlier article:

February 06, 2010

BAGHDAD -- The Iraqi Central Bank is planning to redenominate the national currency in an effort to ease transactions and allow people to carry less paper money, RFE/RL's Radio Free Iraq (RFI) reports.

Mudhhir Muhammad Salih, a member of a Central Bank advisory panel, told RFI that a plan has been made to remove three zeros from the currency and phase out the current banknotes late this year.

Salih said by the end of 2010 the new banknotes will be fully introduced while the old banknotes will be gradually removed from circulation. He did not specify when the new notes would be issued.

Both will be legal tender in Iraq until the old notes are completely withdrawn.

Iraqi officials have had a long-running plan to redenominate the Iraqi dinar. In 2006, the Finance Ministry recommended to the Central Bank that it carry out such a plan.

Salih pointed out that banks are having a hard time accepting cash savings and deposits, but by dropping the zeros it will make it easier for both the banks to deal with their customers and for the general public to carry money. He said some 80 percent of Iraq's money supply is cash in circulation.

Salih added that in 1990 the value of banknotes in circulation was about 25 billion Iraqi dinars but is currently some 25 trillion dinars.

Economic analyst Hilal al-Tahhan told RFI that the bank's move is overdue. He said he expects the currency change to go smoothly because of the decision to allow both the old and new banknotes to coexist, leading to less turbulence in the economy.

Read more:

[Guest lopsters_win]

Fractional banking concept is such a far reach, but the only attempt possible for an rv. At some point someone will be either paying or waiting for payments for futures in iqd or oil. It doesnt just go in the "magical" system, and

disappear, someone pays. There are too many dinars in circulation for an RV. I can think of 20 trillion reasons for no RV , first that is. I do believe there will be an RV, but only after the lop. Its just too easy to turn 20 trillion to

20 billion with a lop. No one will hide from the lop. All notes and accounts. Then i see an RV of 3.20usd/dinar, This is still great news. EVeryone we will make 200%-300% off this venture. Unfortunately its not

300,000% profit. LOPSTERS ALWAYS RULE THE DAY. Do your history my friends.

[royboyterry]

Fractional banking concept is such a far reach, but the only attempt possible for an rv. At some point someone will be either paying or waiting for payments for futures in iqd or oil. It doesnt just go in the "magical" system, and

disappear, someone pays. There are too many dinars in circulation for an RV. I can think of 20 trillion reasons for no RV , first that is. I do believe there will be an RV, but only after the lop. Its just too easy to turn 20 trillion to

20 billion with a lop. No one will hide from the lop. All notes and accounts. Then i see an RV of 3.20usd/dinar, This is still great news. EVeryone we will make 200%-300% off this venture. Unfortunately its not

300,000% profit. LOPSTERS ALWAYS RULE THE DAY. Do your history my friends.

as much as i hate to admit it..this does seem the only realistic way...there goes the mansion

Excellent?

You're thanking him?

This makes sense to you? Really?

You gave Iraq $8.55 and they gave you a 10,000 IQD note. You give them back the note, and they spend $162 to produce 250 barrels of oil, sell it, and give you the $10,000.

Does it still make sense to you now?

Let's try those numbers this way.

In your scenario, let's say The VIP Club, which Adam says holds 25 BILLION IQD, are the ONLY people who cash in after the $1.00 RV. They have 2.5 MILLION 10,000 IQD notes. Using your figures, Iraq is going to spend $325,000,000 to produce 625,000,000 barrels of oil to fulfill the order from your fed appointed agent.

The VIPs get $25,000,000,000.

The Feds get 625,000,000,000 barrels of oil. (which Iraq had to pay $325,000,000 to produce)

Iraq gets back the dinar that they had sold to the VIP Club for $21,375,000.

Instead of using the VIP's money for an example, start multiplying the above numbers by the Trillions of IQD which Iraq will have give its oil away for.

How long will it take Iraq to produce the 625 BILLION barrels of oil to pay back the VIP Club alone? Does it still make sense?

can anyone refute this argument?..its does seem the only realistic course of action?

[Guest Samurai]

No Hyperinflation......No Lop

[Guest ninja]

No Hyperinflation......No Lop

first you need to, learn what you are talking about and then where you are showing your ignorance,,,this thread is about how iraq is going to give away there oil to cash you out

[tampa1000]

NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP

NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP

NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP

NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP

NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP

NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP

NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP

[Guest ninja]

NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP

NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP

NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOPOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP NO LOP

ummm ok

next question...do you believe iraq is going to sell a bunch of oil so you can be rich, or keep the money for themselves ?

[jopy]

I appreciate the point of views here but it still bothers me about Former Pres. Bush talks on how this Iraq war will pay for itself. Does he mean 100 years down the road from future oil revenues? Are all these countries that are forgiving Iraq debt settling for a simple lop or RD without any thing to gain? I know some will be for oil credits but what about others? Seems puzzling to me.

[Guest Guest]

I appreciate the point of views here but it still bothers me about Former Pres. Bush talks on how this Iraq war will pay for itself. Does he mean 100 years down the road from future oil revenues? Are all these countries that are forgiving Iraq debt settling for a simple lop or RD without any thing to gain? I know some will be for oil credits but what about others? Seems puzzling to me.

He might have ment down the road, and im sure he also had the ISX in mind when he gave the go ahead to invest(not speculate) in iraq.

[tampa1000]

ummm ok

next question...do you believe iraq is going to sell a bunch of oil so you can be rich, or keep the money for themselves ?

Get for real, Iraq does not know our care about you or me or any other investor on any of these Dinars sites, everyone on theses sites put together is a drop in the bucket and does not even show up on radar, when Iraq does an RV its for the benefit of iraq and its people, as far as Iraq knows we do not exist. GO RV!!!!!!!!!!!!!!!

[Guest Guest]

Get for real, Iraq does not know our care about you or me or any other investor on any of these Dinars sites, everyone on theses sites put together is a drop in the bucket and does not even show up on radar, when Iraq does an RV its for the benefit of iraq and its people, as far as Iraq knows we do not exist. GO RV!!!!!!!!!!!!!!!

Youre right, so why would they pay us/you millions by selling off their resources for pennies on the dollar?

[jopy]

He might have ment down the road, and im sure he also had the ISX in mind when he gave the go ahead to invest(not speculate) in iraq.

Thanks for reply

Ok, I can see your point, but why allow US registered Dinar traders via the presidential order to sell the Iraqi dinars to citizens if knowing full well this "speculation" is a farce or nothing really to gain?. I understand the investor side for rebuilding the country. Also, what about the Paris debt settlement. Forgive me if I am wrong, but wasn't most of that debt pretty much forgiven or Iraq payed little of it back . What does Paris get out of this? Oil contracts?

Kind Regards

[Guest Samurai]

Get for real, Iraq does not know our care about you or me or any other investor on any of these Dinars sites, everyone on theses sites put together is a drop in the bucket and does not even show up on radar, when Iraq does an RV its for the benefit of iraq and its people, as far as Iraq knows we do not exist. GO RV!!!!!!!!!!!!!!!

Read more:

They're never going to understand..........GO RV

[6year wait]

The people of So. Korea have had experience with a LOP, the govn tried to pull it on them earlier this year. It caused great civil unrest and hyper-inflation. There will be no LOP with Iraq.

[Guest Samurai]

No hyperinflation...........No Lop

Dr. Shabbibi

received PHD in 1975

One of the most respected economists in the world

Governor of the CBI since 2003

Has authority to revalue the currency of Iraq on HIS time frame

At the Jackson Hole Wyo meeting he said "We're Rich" "We could support a $9.00 RV"

S will pull the trigger when it's necessary to sort things out for the GOI

Be Patient

Happy Thanksgiving!

Go RV!!!

[Yogi-Donnie]

All I can suggest for you and everybody else is to do is keep looking at this very critically before you put up your hard earned money.

Very good advice. People should be wary of any predictions with this investment, and I believe any outcome, bad or good, is possible. This is a unique situation and I do believe the normal rules do not apply. People have to understand risk is involved and not bash others when they point them out.

That being said, I do believe there is potential for great gains, minimal gains, or no gains at all. People need to be prepared for any outcome.

-Iraq is going to keep the money from the sale of THEIR oil for themselves.

You are really not suggesting that countries do not spend money from THEIR natural resources to pay off domestic DEBT owed to other countries? Which if we sold all our Dinars to the US govt, isn't that debt owned from Iraq? Wouldn't the US govt want to hold onto those Dinar to buy oil over a long term to beef up our oil reserve or just keep the price of oil in check for decades? The idea that any country just gets to keep the money from sale of their natural rescoures is akin to; you keeping your paycheck and not pay your credit card bill, taxes, or utilites, it doesn't happen without serious finacial consequenes. IMHO.

[Guest ninja]

No hyperinflation...........No Lop

At the Jackson Hole Wyo meeting he said "We're Rich" "We could support a $9.00 RV"

now you are just posting down-right lies...shabbibi has NEVER said anything like that... now you are showing your ignorance and flushing your credibility down the toilet at the same time

[Guest Guest Supreme]

Richguy, All I can suggest for you and everybody else is to do is keep looking at this very critically before you put up your hard earned money. Any research of the IQD as an investment that involves reading the convoluted BS on this site (such as how Iraq is going sell its oil and give you the money) will doom you to a loss of money.

I refused to believe that this was going to make me rich until I first tried to find the flaws in this "investment". Those flaws were too easy to find.

-Iraq is going to keep the money from the sale of THEIR oil for themselves.

-If the U.S. Fed has ANY plans to keep the IQD in its reserves, they are going to buy it NOW at 1170 IQD for a buck. Why would they wait until next week and buy it from me for thousands of times more.

-Actually, I have no argument for those who say that it is all an exchange of paper, and nobody has to pay the billions we are going to receive. I guess it's just magic.

There is also a large flaw in your 200-300% theory. The best hope I can give is that IMO, the exchange rate will not go lower. And Iraqi banks are paying 5-7% interest on deposits.

I was like many on this site: I thought I was going to be rich from this. Now I see the light. It just was indeed too good to be true. I hope we will make a little from this, but I doubt it.

[Guest boo boo]

No, I am suggesting the exact same thing as you. All dinar held IS debt owed from Iraq.

What I am suggesting is that for every 1 Million IQD I hold, Iraq today owes me $855, and they are not going to RV to $1.00, call me up and say "hey, we now owe you $1 Million".

I am stating that Iraq is not going to RV and increase their obligation a thousand fold.

Using your analogy, that would be akin to you calling up your credit card company and telling them that you owe them 1 million instead of 1 thousand.