A problem I've had about the Dinar investment

[Migkillertwo]

Hello. New member here, but I've been a member at Investors Iraq for a while now and was poking around for answers to this question regarding this problem I see with this investment opportunity. I heard about this board from a few people, so I will just post what I posted over there and maybe someone can solve my problem.

The iraqi Dinar has a fixed exchange rate. This means that the value of the iraqi dinar is pegged to the United States dollar. So the value of the iraqi dinar is backed by the US dollar.

The valuation of the dinar works like the valuation of the dollar worked before 1974. The US dollar was valuable because the Treasury, if asked, redeem US dollar bills for physical gold.

Right now, the value of the dollar is backed by nothing. Hence, the value of the dollar against other currencies is determined by a great many different factors, such as money supply.

From what I gather, the value is backed by the US dollar because, if asked, the central bank of iraq can and will redeem dinars for dollars at a fixed rate, much like the gold standard. The iraqi dinar, and all other fixed currencies, are "dollar standard" currencies. The reason why the Dinar is traded on the forex, then, is because banks and investment firms could, if they wished, redeem their own dinars for dollars by the central bank of iraq. This is why nations with fixed exchange rates must keep large reserves of foreign currency, and precisely why the iraqi central bank has bought tens of billions of dollars in foreign currency as reserves.

Now, if an "RV" as envisioned by many gents on this board were to happen, the dinar would suddenly, overnight, by fiat, be worth one thousand times more than the previous day. Since this is by fiat, the government would have to somehow redeem this. This means that the government would have to redeem dinars for dollars on a one-to-one basis.

Of course, this is impossible. The iraqi government does not have trillions of dollars in foreign reserve currency. Actually, it has considerably less than 60 billion dollars in foreign reserve currency.

Now if the iraqi government were to pursue this 1,000 fold deflation of their currency (which really isn't deflation because the money supply would not change in this hypothetical RV imagined by investors here), they would have to back it up. But they have absolutely no means to back it up.

The only people who could make money in this scheme were people who instantly redeemed their dinars for dollars, and then, using the proceeds from this as collateral, instantly shorted the iraqi dinar. A thousand-fold increase in the dinar's value would trigger a massive speculative attack wherein investors in iraq and around the world rushed to sell their dinars. This will cause the dinar's value to plummet on the forex, hence bloating the wallets of forex traders who are allowed to short dinars.

That said, the price of oil is poised to rise again as the world's economy recovers in 2011. This will mean larger reserves of currency for the CBI. This could mean 1 of 2 things

1: The iraqi government will revalue the dinar to be slightly (as in considerably less than one order of magnitude) more valuable, or

2: the iraqi government will pursue an inflationary policy which will, in the short run, reduce unemployment in iraq as capital-goods businesses use cheaper credit to expand.

Basically, how does this investment work out if the Government doesn't have enough foreign reserves to redeem dinars for dollars on a one-to-one basis?

[CaptainJack]

It's not going to revalue for thousands of what it's worth now, so while you make many good points, it's not going to happen that way when it comes out. Look for a re-value at around $0.30, and if they place it on a float then you will see it rise or fall based on the performance of Iraq, it's government, it's standing in the "free world" and it's economy.

[Migkillertwo]

It's not going to revalue for thousands of what it's worth now, so while you make many good points, it's not going to happen that way when it comes out. Look for a re-value at around $0.30, and if they place it on a float then you will see it rise or fall based on the performance of Iraq, it's government, it's standing in the "free world" and it's economy.

well a revalue at .30 cents for a dinar is 300 times what its worth now, so my point still stands.

[KramerDinar]

This was posted a ways back. Look for information on fractional banking. That breakdown will pretty much give you your answer as to how a large amount of transactions taking place and where the money will come from and what it truly costs the US and Iraq for exchanging.

[sneakey]

You don't need to cover it because only a very small percentage of people would want huge chunks of change on thier person or in the mattress. IMO

It's mostly virtual money and fractional banking at this point. There are some very good posts on fractional banking that you might want to search for.

[Migkillertwo]

This was posted a ways back. Look for information on fractional banking. That breakdown will pretty much give you your answer as to how a large amount of transactions taking place and where the money will come from and what it truly costs the US and Iraq for exchanging.

fractional banking, you mean fractional reserve banking? Fractional reserve banking is vulnerable to "runs", where everyone tries to cash out their accounts. Its (kinda) the same with the CBI and the dinar, every foreign investor will want to cash out their dinars when they suddenly become 10,000% more valuable. Hell, everyone would want to if they suddenly became 50% more valuable.

You don't need to cover it because only a very small percentage of people would want huge chunks of change on thier person or in the mattress. IMO

It's mostly virtual money and fractional banking at this point. There are some very good posts on fractional banking that you might want to search for.

That may be true, but even if it's just numbers on a computer screen, that means there will be less "numbers" on the computer screens in the CBI (metaphorically speaking). If I write a check to someone who uses a different bank than mine, it is still a zero-sum game.

[JohnKevin]

You must understand something...Iraq has enough OIL to RV at 14.00.

[racbluto]

Simply put, Proven oil reserves is as good as gold to back there currency.

[rt59]

Food for thought....How long would it take Iraq to pump one trillion dollars of oil out of the ground? Assuming they are maxed out at about 12 million bls a day (some where down a bumpy road) and at the current price of about $91/bl. How much of an RV or RI or what ever could that level of output support?

I am guessing about 3 years....put that in your pipe and smoke it and see what kind of value the Dinar will support.

[War Eagle]

Your dinars will NEVER make it back to Iraq.They will wind up in the Federal Reserve,where they will be used to buy oil in the future-it will then be an electronic transfer,with the money going back into the treaure of the Central Bank of Iraq,with the oil belonging to the US-where they will fill the Petroleum Oil Reserve,or sell it to an oil company--for a BIG p[rofit.It is my understanding that the US has contracts to buy Iraqi oil for $42 a barrel. It isalso my understanding that this will not occur until Iraq gets their oil pumping much higher than now,probably 2013,or later. Hope this helps!!

[Migkillertwo]

You must understand something...Iraq has enough OIL to RV at 14.00.

Forgive me if I'm skeptical, but I have to run the numbers.

Let's see. Every source I've read says that the CBI has sold roughly 50 trillion dinars. So, a revaluation from 1,170 dinars per dollar to 14 dollars per dinar means that iraq has 700 quadrillion dollars worth of oil, or 7 quadrillion barrels of oil.

Currently, estimates of iraqi oil reserves are 350 billion barrels of oil, which translates to about 31 trillion dollars worth of oil.

Which leads me to believe that iraq will only revalue the currency very slowly as their economy improves, and as the US dollar declines (Thank you Chairman Bernanke)

[AudiS4]

It simply wont RV at 14, we all know that.

If your numbers are correct it looks as if they can support a 1:1

I, however, remember seeing a article just the other day that it was 500 billion barrels of oil, not 350. I do believe this was only a certain percentage of the total area (room for more).

[Brisco]

Forgive me if I'm skeptical, but I have to run the numbers.

Let's see. Every source I've read says that the CBI has sold roughly 50 trillion dinars. So, a revaluation from 1,170 dinars per dollar to 14 dollars per dinar means that iraq has 700 quadrillion dollars worth of oil, or 7 quadrillion barrels of oil.

Currently, estimates of iraqi oil reserves are 350 billion barrels of oil, which translates to about 31 trillion dollars worth of oil.

Which leads me to believe that iraq will only revalue the currency very slowly as their economy improves, and as the US dollar declines (Thank you Chairman Bernanke)

An argumentative Newbie ? What are the odds

Ok open your mind this will not hurt!

1) Only 10% of their country has even been Sismographed so who knows how much oil they really have ( at the least more than ? any country in the history of the world.)

2) 90% of the 50 trillion was purchased by supporting countries of their new Dinar and future(not to be cashed in until some future growth and value accrues, and then in staged percentages)Obviously countries with more optomisum of their future value than ? YOU.

3) Iraq dinar has had an exstreamly high value in the past, with the antisipation of it exceeding all its neighboring countries in the future. http://www.edinarfinancial.net/

4) Wareagles point is valid and should be taken into consideration also.

5) China & India have large growing populations and are heavely invested in IRAQ

6) I am tired and do not want to waist anymore time turning your light bulb on.There is alot to read and learn out there if you really want to. And name droping Ben Bernanke is not really going to impress to many people.

You are obviously here just to argue and be condesending,so why not just go buy Wamart stock and go on your way.

This speculative endevor is obviously not for you.

So I recommend some cheese with that WHINE of yours.Have a nice life SEEEEEEE YAAAAAAAAAA

GO RV / RI

[gman51]

An argumentative Newbie ? What are the odds

Ok open your mind this will not hurt!

1) Only 10% of their country has even been Sismographed so who knows how much oil they really have ( at the least more than ? any country in the history of the world.)

2) 90% of the 50 trillion was purchased by supporting countries of their new Dinar and future(not to be cashed in until some future growth and value accrues, and then in staged percentages)Obviously countries with more optomisum of their future value than ? YOU.

3) Iraq dinar has had an exstreamly high value in the past, with the antisipation of it exceeding all its neighboring countries in the future. http://www.edinarfinancial.net/

4) Wareagles point is valid and should be taken into consideration also.

5) China & India have large growing populations and are heavely invested in IRAQ

6) I am tired and do not want to waist anymore time turning your light bulb on.There is alot to read and learn out there if you really want to. And name droping Ben Bernanke is not really going to impress to many people.

You are obviously here just to argue and be condesending,so why not just go buy Wamart stock and go on your way.

This speculative endevor is obviously not for you.

So I recommend some cheese with that WHINE of yours.Have a nice life SEEEEEEE YAAAAAAAAAA

GO RV / RI

Wow! You said HE was being condescending. It is interesting how quickly things can get off topic when people disagree.

[Bumper64]

Lets Play Nice!!!

Newbie Please read read read!!!!

Lots of info in the News Section!!

Also, Please take a look at this as it might help get you off to a great start!!

This was put together by a very good member on this site named Scooter http://i894.photobucket.com/albums/ac145/Becca_Scholarship/Iraq-Dinar%20PICS/SummaryV5-2.swf

Hope this helps!!

Good Luck and Go RV!!!

Bump

[Migkillertwo]

Food for thought....How long would it take Iraq to pump one trillion dollars of oil out of the ground? Assuming they are maxed out at about 12 million bls a day (some where down a bumpy road) and at the current price of about $91/bl. How much of an RV or RI or what ever could that level of output support?

I am guessing about 3 years....put that in your pipe and smoke it and see what kind of value the Dinar will support.

12 million barrels is a very generous estimate. Furthermore, not all of that oil is going to the iraqi government. Most of the oil is going to be extracted by foreign companies, and not very much of it will be pumped by state-owned wells. I myself have severe doubts that state-production of oil will go beyond 2 million barrels, but let's just assume that the price of oil remains stagnant, and all that money goes to the iraqi government.

Mind you, one trillion dollars will only be able to back a revaluation of .02 cents per dinar.

12 million barrels per day=~1 billion dollars.

365 billion dollars per year

a little less than 1 trillion dollars in 3 years. However, the CBI has sold about 50 trillion, give or take 5 trillion, dinars. So, to revalue it to 10 cents, the iraqi government would need about 5 trillion dollars. To revalue it to 1 dollar, it would need 50 trillion dollars, and 150 trillion dollars to revalue to pre-embargo highs.

Now understand that even these numbers are based off of VERY generous assumptions. Most of the oil money will NOT go to the iraqi people or government. Iraq does not have the infrastructure to export that volume of oil in one day. They only have one port city, Basra. The price of oil will not remain stagnant. An extra 10 million barrels per day on the world market will drive the price down.

[AudiS4]

I dont know about some of your numbers.

I've heard 27 Trillion Dinar, not 50 Trillion.

Currency can be valued on known assets.

I've seen the article claiming 500 billion barrels of oil. Keep in mind this was a SMALL portion of the entire country that was surveyed. THEY HAVE MORE THAN THIS.

@ $91/barrel, they have $45.5 Trillion in assets.

IF, and that's a big IF they really had 50 Trillion dinar, they could RV for $.91

Based on my 27 Trillion Dinar, that's an RV of $1.69.

If they RV for $.30 and 90% of investors cash in, then Iraq removes this currency from circulation, they'll possibly lower that 27T to 23 Trillion thus increasing the value.

They will NOT pump 12M bpd... at least not for a long time, if ever. Why would they pump out enough to lower the price per barrel? They'll continue to supply the demand, but no more.

Over time, I have a hard time believing the price of oil will drop. If it increases, then the total assets also increase.

I doubt we'll see a $3+ RV, but $1.50 isnt out of the question.

Based on their 2011 budget though, they're using $76.5/barrel which translates into $38.25T in assets lowering their projected RV to $1.42

Hmm, looks rather close to that $1.3665 we've seen magically appearing on a few sites.

I dont know about some of your numbers.

I've heard 27 Trillion Dinar, not 50 Trillion.

Currency can be valued on known assets.

I've seen the article claiming 500 billion barrels of oil. Keep in mind this was a SMALL portion of the entire country that was surveyed. THEY HAVE MORE THAN THIS.

@ $91/barrel, they have $45.5 Trillion in assets.

IF, and that's a big IF they really had 50 Trillion dinar, they could RV for $.91

Based on my 27 Trillion Dinar, that's an RV of $1.69.

If they RV for $.30 and 90% of investors cash in, then Iraq removes this currency from circulation, they'll possibly lower that 27T to 23 Trillion thus increasing the value.

They will NOT pump 12M bpd... at least not for a long time, if ever. Why would they pump out enough to lower the price per barrel? They'll continue to supply the demand, but no more.

Over time, I have a hard time believing the price of oil will drop. If it increases, then the total assets also increase.

I doubt we'll see a $3+ RV, but $1.50 isnt out of the question.

Based on their 2011 budget though, they're using $76.5/barrel which translates into $38.25T in assets lowering their projected RV to $1.42

Hmm, looks rather close to that $1.3665 we've seen magically appearing on a few sites.

[Workinchump]

I dont know about some of your numbers.

I've heard 27 Trillion Dinar, not 50 Trillion.

Currency can be valued on known assets.

I've seen the article claiming 500 billion barrels of oil. Keep in mind this was a SMALL portion of the entire country that was surveyed. THEY HAVE MORE THAN THIS.

@ $91/barrel, they have $45.5 Trillion in assets.

IF, and that's a big IF they really had 50 Trillion dinar, they could RV for $.91

Based on my 27 Trillion Dinar, that's an RV of $1.69.

If they RV for $.30 and 90% of investors cash in, then Iraq removes this currency from circulation, they'll possibly lower that 27T to 23 Trillion thus increasing the value.

They will NOT pump 12M bpd... at least not for a long time, if ever. Why would they pump out enough to lower the price per barrel? They'll continue to supply the demand, but no more.

Over time, I have a hard time believing the price of oil will drop. If it increases, then the total assets also increase.

I doubt we'll see a $3+ RV, but $1.50 isnt out of the question.

Based on their 2011 budget though, they're using $76.5/barrel which translates into $38.25T in assets lowering their projected RV to $1.42

Hmm, looks rather close to that $1.3665 we've seen magically appearing on a few sites.

I dont know about some of your numbers.

I've heard 27 Trillion Dinar, not 50 Trillion.

Currency can be valued on known assets.

I've seen the article claiming 500 billion barrels of oil. Keep in mind this was a SMALL portion of the entire country that was surveyed. THEY HAVE MORE THAN THIS.

@ $91/barrel, they have $45.5 Trillion in assets.

IF, and that's a big IF they really had 50 Trillion dinar, they could RV for $.91

Based on my 27 Trillion Dinar, that's an RV of $1.69.

If they RV for $.30 and 90% of investors cash in, then Iraq removes this currency from circulation, they'll possibly lower that 27T to 23 Trillion thus increasing the value.

They will NOT pump 12M bpd... at least not for a long time, if ever. Why would they pump out enough to lower the price per barrel? They'll continue to supply the demand, but no more.

Over time, I have a hard time believing the price of oil will drop. If it increases, then the total assets also increase.

I doubt we'll see a $3+ RV, but $1.50 isnt out of the question.

Based on their 2011 budget though, they're using $76.5/barrel which translates into $38.25T in assets lowering their projected RV to $1.42

Hmm, looks rather close to that $1.3665 we've seen magically appearing on a few sites.

yep...

[GreginTexas]

I have always had a lump in my throat when referring the Dinar as an investment. In truth it is hard-core speculation. If you are having too much trouble excepting risk, then maybe you should just buy mutual funds with the small rewards / risk ratio. Not picking a fight just saying.

[Jim1cor13]

fractional banking, you mean fractional reserve banking? Fractional reserve banking is vulnerable to "runs", where everyone tries to cash out their accounts. Its (kinda) the same with the CBI and the dinar, every foreign investor will want to cash out their dinars when they suddenly become 10,000% more valuable. Hell, everyone would want to if they suddenly became 50% more valuable.

That may be true, but even if it's just numbers on a computer screen, that means there will be less "numbers" on the computer screens in the CBI (metaphorically speaking). If I write a check to someone who uses a different bank than mine, it is still a zero-sum game.

Hi Mig

Didn't you just post a reply earlier today regarding that it

was 'illegal' to move dinar outside of Iraq?

I understand your concerns, but your questions are answered as to how

any revaluation is handled via the banking system. Take the time to review past

posts, this question has been explained.

Not trying to be difficult with you, but it has become common for some to pop in

and make comments that tend to stir up things, and nothing needs to be added to this

great forum to stir things up LOL

Do some searching, also in regards to fractional reserve banking, you will find some good

information.

All my best!

Jim

---

[Migkillertwo]

I dont know about some of your numbers.

I've heard 27 Trillion Dinar, not 50 Trillion.

Every source I've read said that the CBI has sold roughly 50 trillion dinars

"Currency can be valued on known assets."

not really. When you have a pegged currency, you can only value your currency based on resources you can actually redeem it with, and resources that the CBI actually has. So, the only thing that the CBI can value the iraqi dinar on is its own foreign reserve currencies (which currently stand at 50 billion dollars). The GOI may, or may not (and this will be important later)

"I've seen the article claiming 500 billion barrels of oil. Keep in mind this was a SMALL portion of the entire country that was surveyed. THEY HAVE MORE THAN THIS.

@ $91/barrel, they have $45.5 Trillion in assets."

The official GOI estimate is 150 billion barrels. The GOI has every incentive to report that they have as much oil as possible. They have no reason to deliberately under report their oil reserves, and every reason to exaggerate their oil reserves. Granted not much has been explored, but it's very very difficult to believe that, since only 10% of the land has been explored, they have ten times this figure. Estimates above 200 billion in reserves (like the one that said 500 billion) factor in undiscovered reserves.

"IF, and that's a big IF they really had 50 Trillion dinar, they could RV for $.91

Based on my 27 Trillion Dinar, that's an RV of $1.69.

If they RV for $.30 and 90% of investors cash in, then Iraq removes this currency from circulation, they'll possibly lower that 27T to 23 Trillion thus increasing the value."

That could, possibly, be true if all things were equal and if the dinar were a free-floating currency, but its a managed floating currency. Removing 4 trillion dinars from circulation would deplete their reserves of currency, which would tank their value.

Now keep in mind here that we are making another very generous and very unlikely assumption, and that is every cent earned from iraqi oil exports goes gack into the CBI. This is just not the case. The overwhelming vast majority of revenues from oil exports that the GOI gets will be used to pay expenses, and Lord knows that the iraqi government has a lot of expenses to pay (military, police, education, healthcare, their massive ****ing bureaucracy). There is no way that the people of iraq, nor elected representatives in iraq, would allow all these revenues to just go into the pockets of foreign investors.

While we are on the subject of fiscal and monetary policy for iraq, I think we also need to be clear on one thing: Iraq has a huge incentive to keep their currency at current values. If this RV scenario were to unfold, every persons dinar holdings in iraq (demand deposits, cash, etc.) would suddenly be hundreds of times more valuable. This sort of deflation would kill their export industries. the iraqi government does not want their economy to rely solely on oil exports. Oil prices are very fluid, and an economy based solely on oil exports will be extremely volatile. They want to also help their manufacturing sector, and promote their exports. This absolutely cannot happen if the dinar were to suddenly jump in value by ten times, let alone a thousand times.

"They will NOT pump 12M bpd... at least not for a long time, if ever. Why would they pump out enough to lower the price per barrel?"

That is an interesting point if we assume this "RV" scenario will unfold. If we assume that they're going to be using Keynesian economics and try to keep the price of oil up by not exporting 12 million barrels a day, then how on earth are they going to be able to honor a revaluation?

"They'll continue to supply the demand, but no more."

well demand for oil is unlimited. Everyone wants to drive their cars and heat their homes for more.

"Over time, I have a hard time believing the price of oil will drop."

Why not? Oil demand increased in the 80s as countries like India and China industrialized, but the actual price dropped. The price of oil will only drop more if Iraq really has as many reserves as you gents hope it has.

"If it increases, then the total assets also increase."

Only if

1: The oil is actually exported

2: The revenues from said oil production go to iraqis and not multinational corporations

3: The iraqis choose to use it to bulk up the CBI's foreign currency reserves.

None of those assumptions are true.

"I doubt we'll see a $3+ RV, but $1.50 isnt out of the question."

a 150,000% increase in value is always out of the question. 12 million bbl/day exports won't make forex traders suddenly willing to buy dinars for $1.50

"Based on their 2011 budget though, they're using $76.5/barrel which translates into $38.25T in assets lowering their projected RV to $1.42"

oil that is still in the ground, again, isn't an asset that can be used to do monetary policy until it is sold.

"Hmm, looks rather close to that $1.3665 we've seen magically appearing on a few sites.

"

really? All I've seen are typo's. You sound like a nostra-damian right now

[hurricanewayne]

Food for thought....How long would it take Iraq to pump one trillion dollars of oil out of the ground? Assuming they are maxed out at about 12 million bls a day (some where down a bumpy road) and at the current price of about $91/bl. How much of an RV or RI or what ever could that level of output support?

I am guessing about 3 years....put that in your pipe and smoke it and see what kind of value the Dinar will support.

first off the oil price is going up and we have heard that for awhile now, so I agree the oil is the support of the dinar value but lets take this in to consideration we heard oil will be over $100.00 dollars and we are sure were it wiill go to so they could raise the price to $150.00 a barrle if needed to suport the dinar value and no I don't think it would be $0.30 cents I have a feeling it will be much higher and anything ove $1.50 is good but I feel they will do their best to try to get as close to other counerties arround them so if Kwait who is right next door is at $3.57 to their dinar and jordan is about $1.50 it would make sence to me they would shoot from something in between like $2.50 and maybe up from there. you also need to remmember that the Arab summit is coming up and Iraq wants to be taken seriously at the summit plus they need to save face, so time wise I also think it would happen at least 2 months before the summit to show sablity for them and high enought to be taken seriously by the others in the summit. they have a lot they want from the summit and they don't want to be told you can't have it, they want their econnomy to rise for their people and the Iraqi's are putting pressure on their owen government to get it done. think of it this way they won't be in office for long if they don't and every one knows politions want to stay in office as long as possible.

[AudiS4]

It's all generalizations. I didnt sit down to write out a 90 page report on the economics of iraq. I posted a quick blurb on an online forum. Obviously assumptions were made.

However, YOU make it sound like Iraq has nothing going for it. You're probably right though... the oil in the ground isnt actually worth anything, even though we know it's there. Their currency... blah... it'll stay right where it is, to chill with the Yen. Profits? What profits? Iraq wont make a DIME on their oil... it's all owned by multinational corporations. We should all probably invest in big banks... you know, the places that actually create something of value (sarcasm).

The demand for the oil is NOT unlimited. Are you telling me that if we had a method to extract EVERY LAST DROP of oil from this earth in 2 seconds... that there would be enough demand to use every last drop within another 2 seconds? I'm not talking about anyone purchasing to sit on it until the value increases, because that's no different than keeping it in the ground and controlling flow... I'm talking about USING it.

[Migkillertwo]

It's all generalizations. I didnt sit down to write out a 90 page report on the economics of iraq. I posted a quick blurb on an online forum. Obviously assumptions were made.

However, YOU make it sound like Iraq has nothing going for it.

Not really. I think I said before that I think the dinar is a good investment if we think realistically. If the iraqi *government* is able to fund itself just through oil exports, then it will not have to tax its population very much at all, or go to the bond markets to fund itself. This is a great investing environment that the United States would envy. For now, they just have to liberalize their markets, ensure property rights, and crack down on institutional corruption. They have an educated populace, so I am very confident that they will hold the GOI accountable. All that said, I think we will see a considerable appreciation in iraqi currency. What I am discounting is the "RV" theory proposed by dinar dealers. There have been plenty of lops, revaluations, and re-denominations in the past, and none of them have made overnight billionaires out of currency speculators. Only a freak accounting error committed by banks everywhere can cause this, and markets are much smarter than that. Hell, the forex value is higher than the official CBI rate. The markets are liquid and responsive.

You're probably right though... the oil in the ground isnt actually worth anything, even though we know it's there.

I've explained this in detail; Its not worth anything until it is actually sold. And even when it is sold, the proceeds go to the Government of iraq, not the Central bank of iraq. The CBI is an independent body, just like most central banks; they do not own the oil reserves, so they cannot use the oil reserves to back whatever rate they set. They can only use currency reserves.

Their currency... blah... it'll stay right where it is, to chill with the Yen. Profits? What profits? Iraq wont make a DIME on their oil... it's all owned by multinational corporations. We should all probably invest in big banks... you know, the places that actually create something of value (sarcasm).

The demand for the oil is NOT unlimited. Are you telling me that if we had a method to extract EVERY LAST DROP of oil from this earth in 2 seconds... that there would be enough demand to use every last drop within another 2 seconds?

Obviously markets are not quite THIS responsive, but you can bet your ass that consumers around the world will use a lot more of that oil if it is out of the ground.

[AudiS4]

I dont know about your last statement. I myself dont tend to "run the pump dry" every time I visit the gas station. In fact, I dont know anyone that does. There's always more left when my demand has been met. This might not be the case in developing countries.