Why The IQD Can't Be Too High/Too Low

[ThePhantomRider]

Ok people, we are all, for better or worse, in this thing we call Dinar, together.

Now of course, the main two things that permeate the minds of most are rate, and date. Obviously, a rate would be nice, and we know that the date would not be released because that would cause chaos...well you get the point.

Discussing or hypothesizing a rate is silly, not because I think anyone is ignorant for doing so, but because even the best minds here, have not a clue as to what rate will or will not work.....because Iraq has no clue either. No one does.

Now there are some ways to guess...model themselves off Kuwait or other ME contemporaries. Kuwait seems to be the best measure, while other countries are falling apart at the seams.

What it really comes down to though, is a guesstimate. Now Iraq has an idea of what rate will work the best for them, I'm sure about that. An iron clad number? No way!! Here's why: When Iraq revalues, it's going to create a shock wave through the global markets. Not that it will catch any country off guard, but it's a big event. Considering now that the currency, while moving a bit now, will go into full earthquake chart mode when it's live, Iraq will not only have to be sure the rate is close, but the spread is tight. The CBI with assistance from the IMF and perhaps other major banks around the world will have to do their best bull riding impression and hang on to that 2000 pound bull for dear life.

Now problems can arise from being too low or too high.

Too Low: Currency is not strong enough to manage budgetary mandates, smaller investors will sell, but in come the big speculators that have stayed out till this was traded and will load up on tons of Dinar based on potential. Little sell back and a ton of buys, if this RV's at .50cents, and they believe it will grow close to the KWD, that's terrible news. Think it's bad now (it's really not) considering if the RV happens how it will all be paid for? Add in massive amounts of more dinar purchased by the whales and it will make your head spin. They then have to ride it out all the while having some very volatile swings.

Too High: Most just sell off, walk away and they are left with a crushed currency, that's simple math, anything in the $6 would be very dangerous, I've not spoken to a single investor that would not just sell it all and get out. Makes zero sense outside of pumping for dollars.

So what is the middle ground? I think no lower than $1.50 and no higher than $3.50. Remember that whatever the rate is, they anticipate it growing from there so the hope is that they will find the balance of buy/sell going forward, because balance brings less stress to the CBI and IMF who will manage the float. It's an imperfect science, and with oil shooting up in price, it's bound to cause budget issues and concern about the value they post. I think, whatever the original value of the RV was back during the 4th quarter of 2010, is about .50 cents lower than what it will ultimately be based on the sharp rise in oil prices.

I wish I could help with an EXACT rate or date...no one has that, and I'd be willing to bet, that neither does Allawi, Maliki or Shabibbi...they will have to guesstimate like the rest of us, though I do feel were at the end of this ride.

TPR

[rwharnden]

Awesome Thoughts TPR I could not agree more! To Low or High could be a potential Disaster for them! Nice work

[RonSkilbeck]

Ok people, we are all, for better or worse, in this thing we call Dinar, together.

Now of course, the main two things that permeate the minds of most are rate, and date. Obviously, a rate would be nice, and we know that the date would not be released because that would cause chaos...well you get the point.

Discussing or hypothesizing a rate is silly, not because I think anyone is ignorant for doing so, but because even the best minds here, have not a clue as to what rate will or will not work.....because Iraq has no clue either. No one does.

Now there are some ways to guess...model themselves off Kuwait or other ME contemporaries. Kuwait seems to be the best measure, while other countries are falling apart at the seams.

What it really comes down to though, is a guesstimate. Now Iraq has an idea of what rate will work the best for them, I'm sure about that. An iron clad number? No way!! Here's why: When Iraq revalues, it's going to create a shock wave through the global markets. Not that it will catch any country off guard, but it's a big event. Considering now that the currency, while moving a bit now, will go into full earthquake chart mode when it's live, Iraq will not only have to be sure the rate is close, but the spread is tight. The CBI with assistance from the IMF and perhaps other major banks around the world will have to do their best bull riding impression and hang on to that 2000 pound bull for dear life.

Now problems can arise from being too low or too high.

Too Low: Currency is not strong enough to manage budgetary mandates, smaller investors will sell, but in come the big speculators that have stayed out till this was traded and will load up on tons of Dinar based on potential. Little sell back and a ton of buys, if this RV's at .50cents, and they believe it will grow close to the KWD, that's terrible news. Think it's bad now (it's really not) considering if the RV happens how it will all be paid for? Add in massive amounts of more dinar purchased by the whales and it will make your head spin. They then have to ride it out all the while having some very volatile swings.

Too High: Most just sell off, walk away and they are left with a crushed currency, that's simple math, anything in the $6 would be very dangerous, I've not spoken to a single investor that would not just sell it all and get out. Makes zero sense outside of pumping for dollars.

So what is the middle ground? I think no lower than $1.50 and no higher than $3.50. Remember that whatever the rate is, they anticipate it growing from there so the hope is that they will find the balance of buy/sell going forward, because balance brings less stress to the CBI and IMF who will manage the float. It's an imperfect science, and with oil shooting up in price, it's bound to cause budget issues and concern about the value they post. I think, whatever the original value of the RV was back during the 4th quarter of 2010, is about .50 cents lower than what it will ultimately be based on the sharp rise in oil prices.

I wish I could help with an EXACT rate or date...no one has that, and I'd be willing to bet, that neither does Allawi, Maliki or Shabibbi...they will have to guesstimate like the rest of us, though I do feel were at the end of this ride.

TPR

Well thought out. Thanks for sharing.

[Darin]

You would think that an economy that is about to have an Economic boom year would look to move away from using USD.

With that said, you would also think they'd make the dinar more favorable to use..

For Iraq to do that, they would have to give the IQD more buying power.

Plus, with all the importing of goods likely to happen with an Economic boom, higher buying power will be greatly beneficial on a recognized currency, right? I would think so.

[fnbplanet]

Can you imagine a $.50 rate, and China coming in a literally buying the entire country of Iraq? Why wouldn't they? Strategic location AND the oil! Don't think that they can't afford it either. Even if they didn't have the liquid capital now, the could revalue their own currency (that is SUPER low now) AND call in the debts from other nations - like us.

We would be SO screwed!

[ThePhantomRider]

Those points validate my post, they need buying power BUT they have to make sure they are vulnerable to being bought out...

TPR

[MrRich]

Can you imagine a $.50 rate, and China coming in a literally buying the entire country of Iraq? Why wouldn't they? Strategic location AND the oil! Don't think that they can't afford it either. Even if they didn't have the liquid capital now, the could revalue their own currency (that is SUPER low now) AND call in the debts from other nations - like us.

1. The threat of civil war
   
2. The threat of terrorism
   
3. The threat of sectarian violence
   
4. The threat from Iran
   
5. The threat from their own people if conditions don't improve (think Egypt)
   

Owning dinar for the Chinese would be just as speculative and risky for them as it is for us now, if not more. After all, we're buying ours at $.00086.

[learning all i can]

I certainly like the way you think. Especially the part about being almost at the end of this ride. thank you for your thought and post

By-the-way, where have you been the last week or so

[Heavyduty053]

Ok people, we are all, for better or worse, in this thing we call Dinar, together.

Now of course, the main two things that permeate the minds of most are rate, and date. Obviously, a rate would be nice, and we know that the date would not be released because that would cause chaos...well you get the point.

Discussing or hypothesizing a rate is silly, not because I think anyone is ignorant for doing so, but because even the best minds here, have not a clue as to what rate will or will not work.....because Iraq has no clue either. No one does.

Now there are some ways to guess...model themselves off Kuwait or other ME contemporaries. Kuwait seems to be the best measure, while other countries are falling apart at the seams.

What it really comes down to though, is a guesstimate. Now Iraq has an idea of what rate will work the best for them, I'm sure about that. An iron clad number? No way!! Here's why: When Iraq revalues, it's going to create a shock wave through the global markets. Not that it will catch any country off guard, but it's a big event. Considering now that the currency, while moving a bit now, will go into full earthquake chart mode when it's live, Iraq will not only have to be sure the rate is close, but the spread is tight. The CBI with assistance from the IMF and perhaps other major banks around the world will have to do their best bull riding impression and hang on to that 2000 pound bull for dear life.

Now problems can arise from being too low or too high.

Too Low: Currency is not strong enough to manage budgetary mandates, smaller investors will sell, but in come the big speculators that have stayed out till this was traded and will load up on tons of Dinar based on potential. Little sell back and a ton of buys, if this RV's at .50cents, and they believe it will grow close to the KWD, that's terrible news. Think it's bad now (it's really not) considering if the RV happens how it will all be paid for? Add in massive amounts of more dinar purchased by the whales and it will make your head spin. They then have to ride it out all the while having some very volatile swings.

Too High: Most just sell off, walk away and they are left with a crushed currency, that's simple math, anything in the $6 would be very dangerous, I've not spoken to a single investor that would not just sell it all and get out. Makes zero sense outside of pumping for dollars.

So what is the middle ground? I think no lower than $1.50 and no higher than $3.50. Remember that whatever the rate is, they anticipate it growing from there so the hope is that they will find the balance of buy/sell going forward, because balance brings less stress to the CBI and IMF who will manage the float. It's an imperfect science, and with oil shooting up in price, it's bound to cause budget issues and concern about the value they post. I think, whatever the original value of the RV was back during the 4th quarter of 2010, is about .50 cents lower than what it will ultimately be based on the sharp rise in oil prices.

I wish I could help with an EXACT rate or date...no one has that, and I'd be willing to bet, that neither does Allawi, Maliki or Shabibbi...they will have to guesstimate like the rest of us, though I do feel were at the end of this ride.

TPR

Good post, makes a lot of sence.

[ThePhantomRider]

I certainly like the way you think. Especially the part about being almost at the end of this ride. thank you for your thought and post

By-the-way, where have you been the last week or so

Thanks, I step away when I have nothing constructive to add. Makes no sense as there is plenty to discuss.

Plus I was at a men's church retreat for the past several days, fellowship and soaking in hot springs...I feel renewed!

TPR

[keepmwlknfny]

Coming in too low is a non-issue.....anything higher then what they have now is going to be a complete blessing for all......it will give the dinar some purchasing power for the people and put confidence in the currency and country.....ANYTHING is better then what it is now......you speak of the "big whales" coming in and that China would swallow Iraq up and thats just not true....that would never happen.....its silly to think that another country would buy up all of ones currency just to sit on it hoping it triples and doubles in value......alot of the big players are already here....they have already bought dinar......but even when the currency becomes internationally accepted and does rise in value its still all speculation that it would ever reach previous heights......you can bet these giant investors/hedge funds are NOT going to be throwing hundreds of millions of dollars on a chance that Iraq will 100% succeed and that the currency MIGHT get back to previous heights, that would be really dumb....anything could happen with them.....but on the other hand there is a problem with them coming out too high.....inflation will rise significantly if the rate is too high and Shabs number one goal is to control inflation rates at all costs....which is why I see the dinar coming out low and gradually rising....

[hame55]

Coming in too low is a non-issue.....anything higher then what they have now is going to be a complete blessing for all......it will give the dinar some purchasing power for the people and put confidence in the currency and country.....ANYTHING is better then what it is now......you speak of the "big whales" coming in and that China would swallow Iraq up and thats just not true....that would never happen.....its silly to think that another country would buy up all of ones currency just to sit on it hoping it triples and doubles in value......alot of the big players are already here....they have already bought dinar......but even when the currency becomes internationally accepted and does rise in value its still all speculation that it would ever reach previous heights......you can bet these giant investors/hedge funds are NOT going to be throwing hundreds of millions of dollars on a chance that Iraq will 100% succeed and that the currency MIGHT get back to previous heights, that would be really dumb....anything could happen with them.....but on the other hand there is a problem with them coming out too high.....inflation will rise significantly if the rate is too high and Shabs number one goal is to control inflation rates at all costs....which is why I see the dinar coming out low and gradually rising....

Keepmwlknfny - Excellent ideas on the rate - completely agree. Saudi Arabia doesn't have insurgents, sectarian war, an occupying army, nor Iran next door..and their rate is .26 to the US $. Jeez, would it make sense to RV at 3$ + with SA being the world's largest producer of oil? Absolutely not. Will it ever get up to Kuwait's level? Probably, when the time comes - perhaps some years, tho speculation could accelerate the rise. I'd hold onto mine a bit after the RV and see what happens.

We dinarians are lucky to have guys like "walkin'funny" here to give us teh occasional rational perspective. PERSPECTIVE is everything. It means taking into account many factors, not wishing for instant millionaire-hood. Relax and enjoy the ride.

[ThePhantomRider]

I wasn't even referring to a country, but the big thing here is the fact that the currency can't be traded yet. So why bother, stay off the train and if it derails you miss the carnage, if it RV's high, well, no loss no gain. If you stay off and the train takes off, jump on and at least your shot at growth is backed because it can be traded.

TPR

[keepmwlknfny]

I wasn't even referring to a country, but the big thing here is the fact that the currency can't be traded yet. So why bother, stay off the train and if it derails you miss the carnage, if it RV's high, well, no loss no gain. If you stay off and the train takes off, jump on and at least your shot at growth is backed because it can be traded.

TPR

Yea but you know that even at the rate they have now the dinar COULD be traded.....if shabs allows it to......so value doesnt necessarily have everything to do with it.....the BIGGEST improvements for Iraq could happen if they could just be stable.....PERIOD.....yes a higher valued currency could help....but thats not the main issue with money flowing into Iraq....its because they are still fairly new for a country and their future is uncertain.....even if right now the value was higher it probly wouldnt make a huge impact for foriegn investment and capital flowing in because of how unstable they still are.....

[AudiS4]

I agree the stability is by far the biggest concern. If they can get that under control, the rest of it will fall into place (RV or not, it will become a traded currency - likely to rise in value).

But in the back of my head, I just cant imagine the US allowing Iraq to fall back into chaos... what a waste that would be. We all know they have what every nation in the world wants, and the demand is growing. I just have a hard time believing the world will allow them to fall back to where they were. I guess only time will tell.