CBI Currency Auction 3/15/2011

[drox]

drox, I find it interesting how you still maintain that a 100k note would not signify a LOP. I will have to re-read some of your old posts about that and maybe add it to my list of possible out comes. I try to keep an open mind to all possibilities. Thank you for sharing your opinion.

Hey Quad... You know I have always enjoyed your posts. Please comment back to this. And whomever else.

To address the your question above we have to understand what everyone's fears are regarding the 100k note. Please help me to understand this and correct me if I am wrong.

As I understand it... Dinar investors tend to shun the 100k note idea because they believe that the past/present 3 zero removal articles are pertaining to the removal of the 3 zeros from all Dinar notes. Whereby, the thought process is that they will remove the large notes (and destroy them) and replace them with the smaller notes (in hiding) called the fils. I equate the fils to mean coinage and smaller bills less than 50 Dinar. That theory also assumes that the CBI intends to destroy notes to decrease the M2 (basic money supply) in lieu of the option of having to lop/redenominate the currency. Investors have to do this to justify their idea of $1-$5 revaluation of the Dinar. Clearly, some parameters have to be installed. It is not a finite or ambiguous number people can throw out there. Justification must take root somewhere. Out of this... Somehow this "Ghost fils" theory as I call it, brings comfort to the investor as a possibility and makes sense of the 3 zero removal articles and keeps the riches dream alive.

I suggest that it is a ridiculous possibility made up by self appointed Guru's trying to substantiate their flawed theories. Some how it stuck and is now widely accepted as gospel. I suggest another possibility exists that is more realistic and still substantially profitable for us. Maybe not to the extreme as others but still an incredible investment. I do not want a lop at all but I do accept the 3 zero removal articles on the surface and as they are suggested. As a traditional redenomination (lop). So... I think that a lop has been on the table for a long time for the CBI... but that they have moved away from it. Why? Future Opportunity Costs and the obvious admittance that the GOI is a joke and would be a terribly unreliable partner in a lop scenario. If Iraq lops, they handcuff themselves to how high their currency can ever increase in time. If it lops to a $1 then at a 100% revaluation goes to $2. A 100% revaluation again would go to $4. Realistically the ceiling starts to get closer and closer and stuffs you into a specific box. Could it realistically ever increase to $10? Possibly but not likely.

If they manage what they have now even though the M2 numbers are extremely high... then through time they can make a series of steps to allow for their currency value to go up more. It gives them options and room because they keep the exchange rate factor number smaller with a much higher ceiling. As the economy grows, the CBI can take numerous "realistic and credible" steps to reduce the money supply with time on their side and not bumping up against an arbitrary ceiling rate. A 100k note would signify that the CBI has adopted a policy to not lop/re-denominate at this time. That they have elected to at least postpone it by going to the trouble and expense to have DelaRue create these new notes. (At 7cents a note mind you). They would do this for ease of cash transactions in the marketplace. As long as inflation is kept in place... who cares how high the nominal value on the note gets? The ghost fils existence is an aberration in my opinion. If they were created at the same time as the last currency then they are worthless because they probably don't have the Kurdish language on them. Which the constitution clearly suggests it must have. Why introduce a new currency to the market that technically violates the law?

Please tell me all your thoughts. I am not trying to sway anyone. Just trying to have an intelligent discussion. Thanks

drox

[aferriss]

Thanks, Doc. It has been pretty blah around here lately. And you're right...it's very sad when you can't even find a good rumor to debate.

[Adrenelized]

Doc, I'm relatively new to this world of dinar...how new I won't say but I gotta tell you in my very short time being involved I've read an enormous amount of drivel :-) I look forward to your postings as I enjoy your sense of humor and love your editorials.

[marknet73]

Fabulous analysis Drox. For me, trying to fully understand all the variables in this investment is more difficult than quantum mechanics! lol. I'm learning a lot from your posts and I agree that the release of the 100K note would be a very good sign. I'm thinking like you that there will be a series of small increases first - and not a big RV. Doesn't Iraq peg their currency? They don't back it with oil. They back it with dollars that they get from oil sales. They also have to use those dollars to rebuild and run their country. It is only extra dollars left over that can then be applied to FX reserves to back the currency. So I don't see how they can afford the $1+ RV that a lot of people are saying and still have a strong, fully backed currency. Hopefully we'll see some small upward ripples in the not too distant future which can gradually increase their purchasing power and test the waters. It seems like this would be much better than a lop which would put a serious limit on future growth. I'd love to see an RV of $1 upwards but I don't see how it's possible with all of the currency still in circulation. In my opinion they'll be doing great to approach Saudi Arabia's rate in the next few years. Thanx again for your input Drox and hopefully we can figure out this puzzle before too much longer.

[sweet B]

THANKS DOC!!!

I have been so down/discouraged lately regarding the dinar that I don't spend even 1/10 the time on this site like i use to. But I still check it daily and your post is the main 1 I look for. I love my DV family and am hoping pretty soon we're all back on a "dinar high" lol getting good news and some sort of progress till then I guess I'm just hear lurking waiting to get back on the roller coaster. lol...

I still have faith in this investment! It'll just keep on taking it's sweet time. lol.... Thanks again.

[Doc31]

Oil in a slump ... better at the pump ... but ...

[pops]

Hey,

Got to be one of my favorites. Between Doc an Drox and Quad I loved it. I don't have a clue where we will end up on all this. I have a lot of respect for each of you and a few others. Again I think we may be close to something. WHAT? Who knows?

[quadraph0nic]

Hey Quad... You know I have always enjoyed your posts. Please comment back to this. And whomever else.

To address the your question above we have to understand what everyone's fears are regarding the 100k note. Please help me to understand this and correct me if I am wrong.

As I understand it... Dinar investors tend to shun the 100k note idea because they believe that the past/present 3 zero removal articles are pertaining to the removal of the 3 zeros from all Dinar notes. Whereby, the thought process is that they will remove the large notes (and destroy them) and replace them with the smaller notes (in hiding) called the fils. I equate the fils to mean coinage and smaller bills less than 50 Dinar. That theory also assumes that the CBI intends to destroy notes to decrease the M2 (basic money supply) in lieu of the option of having to lop/redenominate the currency. Investors have to do this to justify their idea of $1-$5 revaluation of the Dinar. Clearly, some parameters have to be installed. It is not a finite or ambiguous number people can throw out there. Justification must take root somewhere. Out of this... Somehow this "Ghost fils" theory as I call it, brings comfort to the investor as a possibility and makes sense of the 3 zero removal articles and keeps the riches dream alive.

I suggest that it is a ridiculous possibility made up by self appointed Guru's trying to substantiate their flawed theories. Some how it stuck and is now widely accepted as gospel. I suggest another possibility exists that is more realistic and still substantially profitable for us. Maybe not to the extreme as others but still an incredible investment. I do not want a lop at all but I do accept the 3 zero removal articles on the surface and as they are suggested. As a traditional redenomination (lop). So... I think that a lop has been on the table for a long time for the CBI... but that they have moved away from it. Why? Future Opportunity Costs and the obvious admittance that the GOI is a joke and would be a terribly unreliable partner in a lop scenario. If Iraq lops, they handcuff themselves to how high their currency can ever increase in time. If it lops to a $1 then at a 100% revaluation goes to $2. A 100% revaluation again would go to $4. Realistically the ceiling starts to get closer and closer and stuffs you into a specific box. Could it realistically ever increase to $10? Possibly but not likely.

If they manage what they have now even though the M2 numbers are extremely high... then through time they can make a series of steps to allow for their currency value to go up more. It gives them options and room because they keep the exchange rate factor number smaller with a much higher ceiling. As the economy grows, the CBI can take numerous "realistic and credible" steps to reduce the money supply with time on their side and not bumping up against an arbitrary ceiling rate. A 100k note would signify that the CBI has adopted a policy to not lop/re-denominate at this time. That they have elected to at least postpone it by going to the trouble and expense to have DelaRue create these new notes. (At 7cents a note mind you). They would do this for ease of cash transactions in the marketplace. As long as inflation is kept in place... who cares how high the nominal value on the note gets? The ghost fils existence is an aberration in my opinion. If they were created at the same time as the last currency then they are worthless because they probably don't have the Kurdish language on them. Which the constitution clearly suggests it must have. Why introduce a new currency to the market that technically violates the law?

Please tell me all your thoughts. I am not trying to sway anyone. Just trying to have an intelligent discussion. Thanks

drox

Drox,

Thank you for the excellent reply.

In regards to why the LOP hasn’t happened, I like your Future Opportunity Costs explanation. Another thing you point out about the GOI being a terrible partner in this kind of scenario reminds me of the relationship between the two. Correct me if I am wrong but the GOI creates legislation that supports the policies of CBI which is why I think we might get a heads up on what they will do about their currency unless they somehow keep that entire process under wraps and out of the media. They could announce whatever monetary change after they have passed legislation but these Iraqi MOP who vote are politicians so the idea that they would keep their trap shut in front of the mic and cameras is…well is why I think we might have a heads up (leak) on this issue.

In regards to the 100k note. I did think about the cost of creating this new denomination and then to turn around LOP and then them having to print off new currency to properly represent all denoms? It would seem pointless to do it all at once but at the same time if they were to start this, they have to bring the money supply down for me to feel okay with the 100k note otherwise the M1/M2 would increase to the point that they may not be able sustain the current exchange rate. So if they introduced this currency and did nothing to the M1/M2 the 100,000 dinar note could be turned into a 100 after a lop. This is why I wasn't so giddy about the 100k note. That plus old rumors on the streets regarding the 100k.

What I would like to see is another period of appreciation at the least so I understand their intentions and I do agree with your idea that they could take steps to raise the value of the currency as their economy grows but I hope that CBI will change their monetary policy and do something radical (wishful thinking; highly unlikely ) because for me that’s the only way we would be able to substantially benefit like we all are or were hoping for.

I am definitely thinking long term these days. I hope I’m wrong of course!!

Thanks again!

[drox]

Great points Quad! I agree with everything you said.

Shabs does have to run things through Parliament but I think it is more of a 'Heads-Up' versus a permission based thing. I do think we will see some strong indicators or leaks ahead of time as you say.

Getting the 100k notes into circulation is an interesting conundrum without adding to the money supply I agree. I will try and post a thread or two on some things that are not being brought up. One is numerous large cache of Dinar that are not being reported in the M2 that I can see. They may be able to use those cache or side accounts to bring the notes through. Another is the fact that the private banks all had their reserve requirements upped 6 months or so ago. That takes money off the streets too. Let's talk more in another thread or PM okay?

My apologies to you Doc!

I wasn't trying to hi-jack your thread. I was hoping you and your readers and other's opinions that we enjoy would chime in for some great dialogue. I'm not sure if people are worn out or just so stubborn in their own philosophies that they don't want to participate. Maybe people just don't want to ruffle feathers. Anyway... love what you do and you know how high of regards I hold you in. I will post my own thread to get the conversation started. Thanks friend and say hello to the wifey for me.

[Doc31]

Great points Quad! I agree with everything you said.

Shabs does have to run things through Parliament but I think it is more of a 'Heads-Up' versus a permission based thing. I do think we will see some strong indicators or leaks ahead of time as you say.

Getting the 100k notes into circulation is an interesting conundrum without adding to the money supply I agree. I will try and post a thread or two on some things that are not being brought up. One is numerous large cache of Dinar that are not being reported in the M2 that I can see. They may be able to use those cache or side accounts to bring the notes through. Another is the fact that the private banks all had their reserve requirements upped 6 months or so ago. That takes money off the streets too. Let's talk more in another thread or PM okay?

My apologies to you Doc!

I wasn't trying to hi-jack your thread. I was hoping you and your readers and other's opinions that we enjoy would chime in for some great dialogue. I'm not sure if people are worn out or just so stubborn in their own philosophies that they don't want to participate. Maybe people just don't want to ruffle feathers. Anyway... love what you do and you know how high of regards I hold you in. I will post my own thread to get the conversation started. Thanks friend and say hello to the wifey for me.

Wordsmith

No hi-jack and no apology necessary ... I think what happened is that you found out that there are some folks who would like to figure it out starting from another angle with you ... I think that is great ... even glad that you did it here. I started out by posting the CBI currency auction because no one wanted to and even less understood it ... lol.

Let me encourage you to find something like it and post daily or as time allows ... you are a smart and well read/studied fellow ... people want to hear from you ... go get 'em cowboy. Rip some of what you've written here off the thread and get going. I know that in some instances you were striving for brevity ... I know that ... because even I couldn't connect all the dots. Expand your thoughts, ideas, suppositions ... all the best to you my friend.

Just no "Sanka in a Dixie Cup"! ... alright? ... I'm still laughing over that (inside joke folks)

Peace

Doc31