Iraq May Legislate on Currency Exchange"

[VIZIOIRAQI]

Re: $$ Central Bank of Iraq: Iraq has succeeded in providing cover for foreign currency $$ Enoch8 Today at 4:27 pm

Enoch8 wrote:

Had a couple requests to take a look at this article.....

This title is certainly interesting..... however, in digesting the content, "Why do I get the feeling, whoever was reporting on this seems to be afraid to really say anything?"

"The Central Bank of Iraq adviser said on Thursday that the bank has succeeded in providing financial cover for foreign currency in addition to that he managed the success of price stability of the Iraqi dinar."

This sounds like an answer to the article from yesterday,

"Iraq-Business News: Iraq May Legislate on Currency Exchange"

My response to that article was that the banks seemed to be more concerned about liquidity and solvency, in the event of an RV, because by far the greatest cash flow in Iraq is foreign currency, I.E. USD and Euro, because they do not have but about $7 Trillion IQD in the whole country, unless they convert that liquidity, to digital.

Let's say, the Central Bank of Iraq system, has half of that, which is only about $3 Billion Dollars, based in IQD, and the remaining Stock and Quasi Stock is in USD, mostly. {I know, this is a very rough estimate, but my bet is this is pretty close....close enough for giving this example, anyway.}

The M2 is around $52 Billion, including all cash and digital, if I understand that right..... (could be off..... but again, good enough for this example.) Even if, Iraq is allowed 20% Fractional Reserve of the IQD, that means they can only support about $15 Billion USD worth of IQD, but have only $3 Billion USD worth of it to support that, (assuming they were able to digitize roughly 17 to 18 Trillion IQD), there are still 2 basic problems, they have.

1. IQD is not recognized internationally, so it would still have to be supported by USD, which is already being supported by the actual holdings of USD, which is also costing them a premium, for international transfers, because the IQD is not recognized. That alone represents a huge loss to the banks, in handling such transactions, as one would imagine, due to the premiums paid out to the larger international banks, for covering such activity.

2. The IQD held, does not hold any value of it's own, so the liquidity backed by IQD, is not valid outside of Iraq. If it were to become recognized, it would solve the first problem, but create a new problem, because there would be an immediate run on the banks, at the current rate of exchange, due to demands for international holdings.

Why is this so?

At the current rate of exchange, what little IQD is held by Iraq, would be consumed immediately, to demand for hard cash holdings, not to mention forex. Forex alone, runs about $4 Trillion per day.

How long do you think, $3 Billion in IQD would last? I think maybe about the first hour of trade would cause a run and a bank holiday, at the current rate of exchange.

So, what this article is suggesting, is that the CBI and Banks of Iraq, are certainly strong enough, to handle the transactions of foreign currency, but would not last even one hour, if the IQD became internationally recognized, at the current rate of exchange.

Let's further this example, and suggest, that the entire amount of IQD in print, (based on news releases from CBI,) is 27 Trillion. Let us say, that Iraq could, (as if that were possible,) to buy back the entire cash supply at the current rate, (which is ridiculous, but let's just say for now, they could). The entire stock would cost them about $25 Billion of their existing reserves, which they could easily do and they would still have half of their foreign reserve left to easily support the entire 27 Trillion IQD.

Here would be the problem:

That is still only about $25 Billion worth of IQD, with only the Fractional Reserve ability, to place $125 Billion worth of IQD, into circulation, digitally.

Again..... even with the entire supply, even if that were possible to recapture at the current rate, again, within the first hour of trading in the world market, there would be a run on the banks and Iraq would be left with no IQD left in their vaults, even because the people would grab it up, much less international trading.

My guess is, nothing under a $1 to 1 IQD rate, could keep that from occurring, once the IQD is put on the open market.

So..... this article is saying, they are strong enough to support the Dollar, but they could never support the IQD at the current rate of exchange. It has to be strong enough and with enough value, to stop a run on the banks, due to the demand. That is simple economics 101.

Here is another way to look at this:

If the CBI is strong enough to support the USD at $1 to $1 less a percentage, offset by the auctions, then it is also able to support a $1 to 1 IQD rate, unless the eternal demand is too great at $1.00, that there is still a run on the banks.

My own calculations based on the MOP projections, would indicate, that for EOY 2010, the value would have to be set at a minimum of $1.36 in 2010, but closer to $1.75 for the years 2011 through 2012, which even then, many believe would still be to low, to fend off a run, because future speculation over the coming 5 years, shows that value to be about double that.

Now, if that is so, and my own calculations are showing the 5 year plan value to be supportable at as high as $3.93, also based on MOP projections and calculations, along with the IMF Dejure Rate of $.00342 for EOY 2009, adding an additional $7 Billion to the Reserves from 2009 reports, should reflect a Real Rate of +/- $.00393 for EOY 2010.

Drop the 3 zeros, means to shift the decimal 3 spots to the left = $3.93 REER.

Now, here is why I am showing you this:

If you have been listening to what people like Scooter or Rudy have been talking about, it would be a fair assumption, to say, world forex giants and multi international corporations, would jump on forex prices with the expectation of doubling or tripling their returns, but you would also have players driving down prices on those markets, if the rate is set too high, by playing the shorts on the market.

That activity, known as 'Orbits' in circulation, is much of what sets the tempo and value, which is regulated by the amounts in circulation, proportionate to demand, but supported by the actual Reserves, of the Host Nation, supporting and backing that currency.

If the price is too high, CBI and GOI have to sell of all their wealth to pay for their own paper, and they loose the value to inflation and have to destroy what they bought with their wealth.

If it is too low, it is paid for buy the markets and does not cost them a dime, but they would have a run on the banks.

So, what is a Bilderberger to do?

The answer, is they have to come out at a value, that is just right, low enough to attract just the right amount of investors, that the market pays for the revaluation, yet high enough, to keep out, over-speculation, as to keep from having a bank run.

My guess is, that would be about 1/3 to 1/2 of the projected 2010 amount of the REER, of $3.93.

That is roughly $1.31 to $1.92, which is also consistent with the Qualitative vs Quantitative ratios of the percentage increases reflected in the Feasibility Study and the 5 Year Plan, of the Ministry of Planning.

So...... this was a long explanation, in an effort to fill in the blanks, as to what the above article, is saying. They are saying they have the funds to continue using the Dollar and Foreign Currencies, as a banking policy for Iraq, but as we see, they are also saying, they need a Banking Law and Central Bank Law, of which both have been in Parliament already, and are among the 200 plus laws in Parliament, yet to be addressed and ratified.

If you are confused about this, don't feel bad. I have been studying this for a full 7 years and am still struggling to grasp and comprehend the big picture. Much of what is going on with this, is still contained in 'Classified Documents' and is also a moving target, that changes daily. It is 'Live' and 'Fluid'.

Be glad you are in this investment. I know of no better place to be positioned so far ahead of the curve. You are in the right place at the right time.

[muchodinaro]

I like your way of thinking! I sure hope you are right.

[PacoTaco]

Sounds like it could be!

Go RV!

[BanG]

EXCELLENT Post, lot of work went into this one I would say. Thanks for the great read. Peace.

[double_duce_duce]

Re: $ Central Bank of Iraq: Iraq has succeeded in providing cover for foreign currency $ Enoch8 Today at 4:27 pm

Enoch8 wrote:

Had a couple requests to take a look at this article.....

This title is certainly interesting..... however, in digesting the content, "Why do I get the feeling, whoever was reporting on this seems to be afraid to really say anything?"

"The Central Bank of Iraq adviser said on Thursday that the bank has succeeded in providing financial cover for foreign currency in addition to that he managed the success of price stability of the Iraqi dinar."

This sounds like an answer to the article from yesterday,

"Iraq-Business News: Iraq May Legislate on Currency Exchange"

My response to that article was that the banks seemed to be more concerned about liquidity and solvency, in the event of an RV, because by far the greatest cash flow in Iraq is foreign currency, I.E. USD and Euro, because they do not have but about $7 Trillion IQD in the whole country, unless they convert that liquidity, to digital.

Let's say, the Central Bank of Iraq system, has half of that, which is only about $3 Billion Dollars, based in IQD, and the remaining Stock and Quasi Stock is in USD, mostly. {I know, this is a very rough estimate, but my bet is this is pretty close....close enough for giving this example, anyway.}

The M2 is around $52 Billion, including all cash and digital, if I understand that right..... (could be off..... but again, good enough for this example.) Even if, Iraq is allowed 20% Fractional Reserve of the IQD, that means they can only support about $15 Billion USD worth of IQD, but have only $3 Billion USD worth of it to support that, (assuming they were able to digitize roughly 17 to 18 Trillion IQD), there are still 2 basic problems, they have.

1. IQD is not recognized internationally, so it would still have to be supported by USD, which is already being supported by the actual holdings of USD, which is also costing them a premium, for international transfers, because the IQD is not recognized. That alone represents a huge loss to the banks, in handling such transactions, as one would imagine, due to the premiums paid out to the larger international banks, for covering such activity.

2. The IQD held, does not hold any value of it's own, so the liquidity backed by IQD, is not valid outside of Iraq. If it were to become recognized, it would solve the first problem, but create a new problem, because there would be an immediate run on the banks, at the current rate of exchange, due to demands for international holdings.

Why is this so?

At the current rate of exchange, what little IQD is held by Iraq, would be consumed immediately, to demand for hard cash holdings, not to mention forex. Forex alone, runs about $4 Trillion per day.

How long do you think, $3 Billion in IQD would last? I think maybe about the first hour of trade would cause a run and a bank holiday, at the current rate of exchange.

So, what this article is suggesting, is that the CBI and Banks of Iraq, are certainly strong enough, to handle the transactions of foreign currency, but would not last even one hour, if the IQD became internationally recognized, at the current rate of exchange.

Let's further this example, and suggest, that the entire amount of IQD in print, (based on news releases from CBI,) is 27 Trillion. Let us say, that Iraq could, (as if that were possible,) to buy back the entire cash supply at the current rate, (which is ridiculous, but let's just say for now, they could). The entire stock would cost them about $25 Billion of their existing reserves, which they could easily do and they would still have half of their foreign reserve left to easily support the entire 27 Trillion IQD.

Here would be the problem:

That is still only about $25 Billion worth of IQD, with only the Fractional Reserve ability, to place $125 Billion worth of IQD, into circulation, digitally.

Again..... even with the entire supply, even if that were possible to recapture at the current rate, again, within the first hour of trading in the world market, there would be a run on the banks and Iraq would be left with no IQD left in their vaults, even because the people would grab it up, much less international trading.

My guess is, nothing under a $1 to 1 IQD rate, could keep that from occurring, once the IQD is put on the open market.

So..... this article is saying, they are strong enough to support the Dollar, but they could never support the IQD at the current rate of exchange. It has to be strong enough and with enough value, to stop a run on the banks, due to the demand. That is simple economics 101.

Here is another way to look at this:

If the CBI is strong enough to support the USD at $1 to $1 less a percentage, offset by the auctions, then it is also able to support a $1 to 1 IQD rate, unless the eternal demand is too great at $1.00, that there is still a run on the banks.

My own calculations based on the MOP projections, would indicate, that for EOY 2010, the value would have to be set at a minimum of $1.36 in 2010, but closer to $1.75 for the years 2011 through 2012, which even then, many believe would still be to low, to fend off a run, because future speculation over the coming 5 years, shows that value to be about double that.

Now, if that is so, and my own calculations are showing the 5 year plan value to be supportable at as high as $3.93, also based on MOP projections and calculations, along with the IMF Dejure Rate of $.00342 for EOY 2009, adding an additional $7 Billion to the Reserves from 2009 reports, should reflect a Real Rate of +/- $.00393 for EOY 2010.

Drop the 3 zeros, means to shift the decimal 3 spots to the left = $3.93 REER.

Now, here is why I am showing you this:

If you have been listening to what people like Scooter or Rudy have been talking about, it would be a fair assumption, to say, world forex giants and multi international corporations, would jump on forex prices with the expectation of doubling or tripling their returns, but you would also have players driving down prices on those markets, if the rate is set too high, by playing the shorts on the market.

That activity, known as 'Orbits' in circulation, is much of what sets the tempo and value, which is regulated by the amounts in circulation, proportionate to demand, but supported by the actual Reserves, of the Host Nation, supporting and backing that currency.

If the price is too high, CBI and GOI have to sell of all their wealth to pay for their own paper, and they loose the value to inflation and have to destroy what they bought with their wealth.

If it is too low, it is paid for buy the markets and does not cost them a dime, but they would have a run on the banks.

So, what is a Bilderberger to do?

The answer, is they have to come out at a value, that is just right, low enough to attract just the right amount of investors, that the market pays for the revaluation, yet high enough, to keep out, over-speculation, as to keep from having a bank run.

My guess is, that would be about 1/3 to 1/2 of the projected 2010 amount of the REER, of $3.93.

That is roughly $1.31 to $1.92, which is also consistent with the Qualitative vs Quantitative ratios of the percentage increases reflected in the Feasibility Study and the 5 Year Plan, of the Ministry of Planning.

So...... this was a long explanation, in an effort to fill in the blanks, as to what the above article, is saying. They are saying they have the funds to continue using the Dollar and Foreign Currencies, as a banking policy for Iraq, but as we see, they are also saying, they need a Banking Law and Central Bank Law, of which both have been in Parliament already, and are among the 200 plus laws in Parliament, yet to be addressed and ratified.

If you are confused about this, don't feel bad. I have been studying this for a full 7 years and am still struggling to grasp and comprehend the big picture. Much of what is going on with this, is still contained in 'Classified Documents' and is also a moving target, that changes daily. It is 'Live' and 'Fluid'.

Be glad you are in this investment. I know of no better place to be positioned so far ahead of the curve. You are in the right place at the right time.

VERY NICELY PUT TY FOR THE INFO

[bluejay]

VIZIOIRAQI, Thanks I really liked the logic of this post, I'm sure there are going to be a million objections as to why it's not correct, and I personally do not have the interest to know all the workings of a country & it's currency...But bottom line I like the logic, they have to come out with the right number that allows them to sustain balance...Great Read can't wait to see the comments from the smart one's I'm not being sarcastic, I want to see were the wholes are with this logic......

[deenar]

Excellent post. Very informative. Thanks VIZIO!

[DrPitts]

Vizio, thanks for the post. Good stuff. Since you seem very knowledgeable on the subject, specifically numbers, I was wondering what you thought about the idea presented in the latest DD radio show: that the RV isn't going to happen until China says so. And China will only say so when the Euro is up to around 1.50 instead of around 1.38 which is where it is right now. If this is true, what is it that China has to do with all this? investments? loans? debts? Just thought I'd ask since I want to understand China's role better, if in fact their role is pertinent. Thanks.

[tim5400]

i like your take and though explanation even I understood it...thanks for the post GO RV

[venetia]

How refreshing to read a well informed opinion such as this. Good job there are people willing to put the work in so that those of us who are less well infomed can get through another day with a better grasp on the situation.

Thanks for posting.

[butkus51]

This post ticks me off. I am trying to be the humorist and, even when I am not trying to do so, find that I still am. But this post has given me no ammunition..nothing I can grab onto, not that I ever had much to begin with.

[TimS]

so let it be written...so let it be done....asap please

[gp49]

Thanks again VIZIO for another great find. Yours is one of the few postings that I look for to read. Keep up the good work.

P.S. You're a great mod too!

gp49

[leola]

May I commend you on your effort,,,It all sounds rational to me ,,,however,,in that lies the problem,,nothing rational about the iraqi`s....thank you very much for your information,,,i`m impressed,,,,,,,,,,,,,,,,here`s a plus to get you started !!!!

[patb1]

TO the person who "explained the article"

You are either one of the most briliant Forex and CBI Experts, and international finance ,or you have the longest line of BS on the planet.

I BOW to you either way.

In all serniousness , I am truly amazed at your depth of knowledge.

The way you explained the details is amazing and I am reading it over again and will do so several times.

Thank you for the in depth percetpion

I My self have a MBS on the subject of BS and even have 4 cows to back up the bs when I run out of it, however I bow to you MOST great one.

Have A great day and thank you again

Please take everything I just said in the highest compliment

[4given2]

Uhmmmm, Im not the smartest person here, but it looks to me like Vizio just brought that over from someone else. Enoch8, to be precise. So whoever that is, thanks be to him/her. They definitely have great insight and its nice to read something that makes sense. But thanks Vizio for bringing that over to us!!

Edited March 10, 2011 by 4given2

[patb1]

Yes

Vizio thank you

and please send our regards to Enoch 8

[Biker]

I understood about 1/3 of what you said , but sounded good lol. i liked the 1.92 part the best. Thanks for the post great job, and after the RV get a job teaching school lol .

[elm]

Thanks For the info, really helps me understand some of what is going on

[matt77]

Thank you for posting this. This is one of the most imformative posts I have read. It really helps me understand a few things.

[preston]

Now that was a great post! Go RV!!!!!!!!!!!!!!

[balkanbob]

Great job. A well written story. I agree with you.

[observer2]

Kuwait $1 = 0.267 KWD or 3.74

Saudi Arabia $1 = 3.69 Riyal or .27

4.01 total divided by 2 is $2.00 There you go, there is your rate!! Though I feel that it is to low when you consider that oil is purchased in USD. How can Kawait's Oil be so

more valuable than Saudi Arabia and Iraq. I know you have to take into consideration that Kawait is only

3,000,000 people compaired to 33,000,000 in Iraq, and the infrastruction is not in place now in Iraq and all,

but when you consider all the Oil and gas in Iraq, I think the rate will be closer to Kuwait's rate sooner than

we think. JMHO. Any response welcomed!

[VIZIOIRAQI]

VIZIOIRAQI, Thanks I really liked the logic of this post, I'm sure there are going to be a million objections as to why it's not correct, and I personally do not have the interest to know all the workings of a country & it's currency...But bottom line I like the logic, they have to come out with the right number that allows them to sustain balance...Great Read can't wait to see the comments from the smart one's I'm not being sarcastic, I want to see were the wholes are with this logic......

So far so good , looks like everyone agree's with Enoch 8. I really enjoyed reading this glad you did to

[jaw2]

Thanks for the Info. a lot more to it than just pushing the easy button.