Predicting the future - 4/21/2011

[RonSkilbeck]

PREDICTING THE FUTURE

When asked what is wrong with the world today, a recent Nobel Laureate, after considering the question for a moment responded, “Man simply doesn’t think.” With this in mind I’ve, by and large, left the Dinar blogs and internet sites alone for the last ten days. Checking them occasionally for no more than an hour or so, saying “hi” to my online friends, and looking in on my favorite community here at Dinar Vets. I wanted to research and think, over and above the hundreds of hours I’ve already put into this speculative investment, about what is likely to transpire as it pertains to the IQD. Along the way, in the course of my reading I’ve posted only a few factual pieces – Transcript of Shabibi’s answer to the revaluation and redenomination of the IQD; and a reply post on the second IMF Iraq Country Report (along with few news articles).

Though I hold several license for the sell and service of many types of investments, and I have done studies and completed designation enhanced test for U.S. and international trade. I didn’t feel like I was qualified to accurately predict what was next for war torn Iraq. Let’s face it, just because you might understand the inverse relationship of corporate and municipal bonds or the Beta test on like investments, it doesn’t make you proficient in understanding the revaluation of an emerging middle eastern democracy. It may give you some background vocabulary – you can understand the big words and do the math – but because you don’t have the closed door IMF notes and Federal Reserve minutes you feel like there are about a million missing pieces.

I wanted to find a few of those missing pieces. My one criteria in doing this was, “Read nothing from the online Gurus.” I believe these are well meaning intelligent people. Because of their effort and countless hours of hard work we know more about the IQD and what’s going on in pre and post democratic Iraqi. By and large, it’s a good group and I appreciate them very much. They should be thanked, not criticized. So please don’t take my journey down this road as a criticism of their good work. It’s not. But almost all, without exception say, “Do your own research.” That’s my ongoing attempt. It’s easier said than done. Unlike other types of securities there is no prospectus to review. Unlike other types of Real Property there are no disclosures to initial. Currency issues seem to have the fewest regulations for those who issue and sell them (Central Banks/Trading houses) with the most severe penalties for those who use them (Us – We the people).

Of course, when I say Gurus, I don’t include the Rumor Mill Boys (there are a few noteworthy ladies in there too) in anywhere near the same category as those mentioned above. The Rumor Mill Boys are definitely for “entertainment purposes only.” They generate sales of IQD and other products, along with website hits for advertising; which of course, generates income. Even the bad news “newbies” (you know these guys, they’ve been on the site for about a day, and always tell you why IQD is a scam or why it’s not going to revalue and what a fool you are for having bought it) generates additional website hits and increase the trade of IQD – normally a sale back to the IQD dealer will generate $200 to $400 of revenue. (The IQD is pegged to the dollar at $1,170 IQD – it’s been that way since it was taken off a dirty float and put on a Central Bank auction. It’s as good and steady as the USD. A licensed trader can either resell or, if their reserves are too high, exchange IQD to the original bank – either way, the transaction equals profit –for those of you who wondered about it; now you know). In the interest of full disclosure; I once posted a bank/Monday rumor that I had heard from a trusted friend – when it didn’t come to fruition I posted an apology the very next morning . If you click on my post you can find both. Anyway, some of these guys are “outright liars” (sorry, I’m polite but I couldn’t think of a more accurate word), and some are well meaning, but those in this category take their own speculation, pass it among themselves a time or two and before you know it, it becomes true (to them). Then they get on a conference call and share their “truth” with anyone who will listen. This is called “Myth Creation”. And it’s amazing how long some of these myths will linger and last.

Try and recall some of these – “Shabibi is in Switzerland”, “They are cashing in at a bank in Jordan”, “The ATM machines have been activated and loaded” (at the time this one was really funny – no electricity, but all over the country they are using ATM machines), “America, Ships at Sea, NUFF SAID” (I love Oakie), “Kuwaiti citizens can exchange their IQD,” and almost any and everything “said by the G.E.T. team” is questionable - and the list goes on and on… Some even spend a great deal of time praying before they pass on “the new myth.” I guess if you pray before hand, then any and everything that comes after is the truth. Not… But, I don’t want you to misunderstand me. I believe the Myth creators serve a valuable purpose above and beyond the profit they generate for traders, or the constant, week after week, false hope they pass along; they also create a sense of community, a following of like minded people who feel accepted within an extended family structure. For many (myself included) this is important. Heck, in the writing of this post I have received two phone calls from excited friends telling me Rumors about Shabibi back in Switzerland and the Parliament voting on security ministers, etc. all passed on from something they heard or read online “Boots on the ground”: CONFIRMED! Yea, right (a little laugh-I hope, could it be true?) – but I answer the calls and enjoy the visit on the phone with my friends and their (temporary) excitement in the supposed new developments. So, to be clear, I believe there is a place in our Dinar community for these online Myth creators. Just don’t invest any money because of what they pass on.

Some of what I’ve learned: Predicting the Future!

When it comes to the revaluation of an emerging nation’s currency (especially a middle eastern experiment in democracy) there are few if any experts. None to be exact; and especially not me. So let me begin by saying that like many of you I still hold out a reasonable hope that the amount of IQD I hold is, in essence, a winning lottery ticket. Who wouldn’t want a life changing event? So go RV!!! But after everything I’ve learned, I no longer think so. And believe me when I say, in this, I hope that I’m wrong. However, that is not to say that the IQD isn’t a good, if not great investment.

If you do the math, CBI reserves ($50 Billion USD – with a projected 18% increase by end of 2011 to $59 Billion – you can find this on the CBI website: In Country Report) with the amount of currency in circulation ($30 Trillion IQD) minus their liabilities, plus approx $22 Billion in protected funds (Sorry, I just couldn’t find the $1 trillion that some have bantered about), you will come up with an IQD rate of about $.01 = $1 IQD. This does not count any GDP or future production. That’s a penny per IQD, which is ten times the present exchange rate. In other words your approx. $1,000 investment should be worth about $10,000. I said, “Should be.” At this time, because of the daily auctions, our IQD is still equal to about a tenth of a penny.

I have discovered in the course of my investigation that a extremely low exchange rate, whether it’s in an established or emerging nation, is used to encourage growth and new business. Some examples of this are China and South Korea (#2 and #6 world economies). The future good news for us - Seldom is this used when you are a net exporter of Raw materials in an established nation. You see the lowered currency is actually a additional tax (like inflation) on the citizens – they are in effect financing the building of their economy on the backs of the citizens.

The IQD was taken off a dirty float and put on a daily auction by the CBI to control inflation and build foreign reserves. For the time being, it’s their only tool for doing this – but that’s about to change – with the emergence of an actual productive banking system. (The CBI hasn’t had to cover bank “overdrafts” for about a year and they don’t project any into the future – a few audits only go up to 2008, but most are current).

As you probably already know, all fiat money is debt. (this is different from “Hard” currency – gold, silver, copper, commodities/oil). All the money created by a Central Bank is debt (whether that is the U.S., London, Iraq, or you name the central bank and the country). If there were no debt there would be no money. Thus at the present exchange rate and the CBIs reserve ratio they could have $300 Trillion in IQD (not $30 Trillion at present) – but Iraq also has hard currency – oil… and a lot of it – with recent finds they are number two in the world behind Saudi Arabia (which in the last year has had to reduce their estimates by about 40%). That means, that once established (it cracks me up – they pump 2.35 mbd and export 1.85 mbd and they are not established - I guess they actually mean “more established”) not all their money will necessarily be debt. Take Kuwait or Bahrain as examples – both have tremendously high currencies, and neither produce anything but oil. Why are their currencies so high? Because oil is like a “hard currency” – also because they don’t import raw materials, subject them to a manufacturing process, and then export them (ie, South Korea – China – who have low valued currencies). (For the purposes of this post I won’t go into the agriculture, water, manufacturing, etc. that Iraq has that other countries don’t possess – this helps, but is not as significant for currency valuation as oil)

Why do I believe that Iraq will have a tradable currency? That’s simply, every country that surrounds Iraq (including Iran) has a tradable currency. The only question is when. I’ve heard many say that by being accepted into the WTO they have to have a tradable currency. (Vietnam does not have a tradable currency but is a member through the Asian Union thus a member of the WTO) I couldn’t find that anywhere (that you have to have a tradable currency), not even on the WTO website. But they do have to have at least one trading partner, so other countries will have in place established trading parameters to work with and adapt. They also have to have laws on their books that protect international trades – this appears to have been completed. Because of this, I think the two may go hand in hand – trading partner/tradable currency. But it does not appear to be a hard/fast rule.

Is the government of Iraq formed? Yes. The President of the U.S. and a dozen major publications say so. They have passed a budget. They are paying their bills. Though never with 100% attendance Iraq’s parliament meets, committees are formed, measures are voted on and passed (many don’t attend because their personal weapons are not allowed in parliament). This sounds like a government to me.

Must Iraq have a Security Minister? It’s in their constitution. It’s like a cabinet position – Secretary of Defense – control of the Army and security of the nation. So far Maliki has kept this for himself. Without judging him, especially with a new democracy, and after Iraq’s history of dictatorship, war, violence, huge sectarian issues, he probably has his reasons. But after listening to Shabibi on April 19th, as far as our investment goes, this seems to be very important. He said, “Security” – not a Security Minister – but maybe, to Shabibi they are one in the same.

But isn’t Iraq like Kuwait when they R/I their currency? Nope. They have a few things in common, but not as it pertains to the IQD. Kuwait exchanged their currency first – much of their pre-war currency was in the wrong hands (Saddam and other bad guys) and counterfeiting was also an issue. It (Kuwaiti Dinar) took a big market hit during the war. They already had an established government which simply resumed their duties. They did not have a period of high inflation prior to the exchange or reinstatement. They simply picked up where they left off; and true, many speculators made a tremendous amount of money when they did. (the fun news is if Iraq does like Kuwait they will RV/increase in value many times after they become a tradable currency)

– In contrast, Iraq is a new nation with a new government – they are laying the foundation, the cornerstone to their future as they go. They had rampant inflation in the eighties and again from 2003 – 2006. What’s worse, they had Paul Brenner, Haliburton, KBR, and a dozen other corporations over there raping them, dismantling manufacturing and security for years after Saddam was gone. Maybe they (the US and corporations) had to do this in order to give Iraq a new start, maybe not. Based on history and empirical evidence – The U.S. was attacked by a terrorist living in Pakistan – so logically we attack Iraq and secured the oil. It’s that easy. No WMDs, no mission accomplished, no democracy building… it was the oil (and the petro-dollars that go with that). There was never a governmental decree to add three zeros to their (Iraq’s) currency. They just did because of the terrible inflation.

Now we’ve got everyone weighing in on what it means to “drop three zeros” off the Iraqi currency. Some excellent research has been done on this – some very interesting arguments. (see -http://www.reconversionbcv.org.ve/englishversion/pdf/fundamentalscurrencyredenomination.pdf - the redenomination of the Venezuela currency) In the online community there has been LOP vs. changing the .00086 to .86 (fraction change) going back and forth; the “LOP vs. raise” groups. If you want to get a multitude of “red button negative votes” all you have to do is advocate the LOP argument. I will tell you what I’ve found in researching the redenomination of a currency. Because I still hold out hope, and mostly because of the oil, I’m praying for the fractional people to be right. (Who wouldn’t?) But, I have never found an instance of this. EVER! Both seem to go hand in hand, but the way it works historically is – the currency is reissued minus the allocated extra zeros (I’ve found anywhere from one to ten zeros removed) and the exchange rate decimal point automatically moves to the left because of the deletion of the zeros. Not the other way around. Please understand, I’m open to the “raise group” because I want the raise group to win – so if you can show me a country that did it this way, please post the link below!!! But I just don’t see it happening. All other argument is speculation. The only way to predict the future is by what happened in the past and what is happening now. But on a final note, I will give the “raise” people (my brothers and sisters) this – “No country like Iraq has ever happened before. A MIDDLE EASTERN SECTERIAN DEMOCRACY THAT IS OIL RICH! If they don’t go the way of Iran who knows what they can eventually accomplish.

Now for the Predictions – (Why not? I can guess as good as anybody)

1. All the turmoil in the other middle eastern countries will work to Iraq’s advantage – in a few short years they will be the wealthiest and most powerful among all the emerging democracies.

2. Prior to June 1st 2011 Iraq will redenominated their currency, with a value on par with the USD – based on how they do it (like Turkey? Maybe…) We can exchange our IQD then or hold for a period of days before exchanging – some may trade in or sell their currencies – the real money on this will be made over the next three to five years with subsequent RVs and increases in value against the USD.

3. The IQD will be added to the Forex and traded along the same lines as the Kuwaiti Dinar within a short period of time after redenomination.

4. By December 31st Iraq will revalue their currency to $3.22 or higher (this may also happen at or close to the same time as they redenominated – keep in mind that Iraq does get complete control of their oil without restrictions on July 1st, 2011)

5. U.S. troops will remain in Iraq for a very long time (we are not going to give up those bases in Iraq – hey folks, we still have bases in Germany, France, and England – WWII has been over with for 66 years – and the cold war has been over since the Soviet Collapse in 1989 – by the way, what expert saw the Soviet Collapse coming?)

6. The new IQD will be added to a basket of currencies for the SDRs of the IMF

7. And here is the crazy conspiracy prediction for those that like that sort of thing – by 2013 the USD will quit being the world’s reserve currency, being replaced by the IMFs SDRs. True, the US has veto power at the IMF and World Bank – but don’t forget, they are (IMF –WORLD BANK) US inventions – and it seems a New Bretton Woods agreement was just passed, with little or no fanfare from our major medias.

8. Most, if not all, IQD that is cashed in will be with Banks or the Forex. I don’t envision

People trying to make the effort to go to a IQD trader when a local bank will be cheaper and more convenient. (assuming the zeros are removed).

Or if you prefer –

1. The IQD will revalue thus causing us all to become extremely wealthy – this will happen on April 27th (you pick the year) – with a rate of (you fill in the number). – Come on, Go RV!!! - All my very best to all of you!!! Let the bashing begin!!!

Disclaimer: I bought IQD, I DO NOT sell IQD, do not by IQD because of this post.

[coleman619]

Get over yourself

[bluejay]

At least there still some light, thanks been waiting for some positive news..

[summershah]

Thanks for the post.

[ckh]

PREDICTING THE FUTURE

Now for the Predictions – (Why not? I can guess as good as anybody)

1. All the turmoil in the other middle eastern countries will work to Iraq’s advantage – in a few short years they will be the wealthiest and most powerful among all the emerging democracies.

2. Prior to June 1st 2011 Iraq will redenominated their currency, with a value on par with the USD – based on how they do it (like Turkey? Maybe…) We can exchange our IQD then or hold for a period of days before exchanging – some may trade in or sell their currencies – the real money on this will be made over the next three to five years with subsequent RVs and increases in value against the USD.

3. The IQD will be added to the Forex and traded along the same lines as the Kuwaiti Dinar within a short period of time after redenomination.

4. By December 31st Iraq will revalue their currency to $3.22 or higher (this may also happen at or close to the same time as they redenominated – keep in mind that Iraq does get complete control of their oil without restrictions on July 1st, 2011)

5. U.S. troops will remain in Iraq for a very long time (we are not going to give up those bases in Iraq – hey folks, we still have bases in Germany, France, and England – WWII has been over with for 66 years – and the cold war has been over since the Soviet Collapse in 1989 – by the way, what expert saw the Soviet Collapse coming?)

6. The new IQD will be added to a basket of currencies for the SDRs of the IMF

7. And here is the crazy conspiracy prediction for those that like that sort of thing – by 2013 the USD will quit being the world’s reserve currency, being replaced by the IMFs SDRs. True, the US has veto power at the IMF and World Bank – but don’t forget, they are (IMF –WORLD BANK) US inventions – and it seems a New Bretton Woods agreement was just passed, with little or no fanfare from our major medias.

8. Most, if not all, IQD that is cashed in will be with Banks or the Forex. I don’t envision

People trying to make the effort to go to a IQD trader when a local bank will be cheaper and more convenient. (assuming the zeros are removed).

Or if you prefer –

1. The IQD will revalue thus causing us all to become extremely wealthy – this will happen on April 27th (you pick the year) – with a rate of (you fill in the number). – Come on, Go RV!!! - All my very best to all of you!!! Let the bashing begin!!!

Disclaimer: I bought IQD, I DO NOT sell IQD, do not by IQD because of this post.

Got a link for that...??

[Bill the Cat]

Ron –

Thank you for taking the time to craft a particularly well-thought and articulate post. People may not agree, but you are certainly welcome to your opinions. Personally, your thoughts make quite a bit of sense. I do have a few questions and/or points I would like clarified. I will follow up later this evening. Thanks again.

[Shinnidan]

hmm...let me get out me crystal ball...

hmmm...lets see...

oh i see something!!! a fire....and lots of holes everywhere!!! .....i see messages????

BUWAHAHAHA!!!!

[radar12354]

You did your homework.........great post, alot of patients.........but the US have a plan along with other countries.......Iraq doesn't have the kind of money we expect for this RV yet, but it coming..........hold on, have some faith..... :lol:

You did your homework.........great post, alot of patients.........but the US have a plan along with other countries.......Iraq doesn't have the kind of money we expect for this RV yet, but it coming..........hold on, have some faith..... :lol:

[JayLee202]

Get over yourself

Rude

[LAWRENCEOFDINARIA]

thanks Ron, that was a very well written post with a lot of good points on the IQD and comparisons. I enjoyed the read.

[labdog]

The best post I have ever read on this (Adam Montana's )site! I wish Adam could be so informative?

Anyway, without spending money on the VIP I would like to thank you for your common sense approach and opinions. I agree with your out look and hope it comes through as such!

Thank you and have a day.....Cheers!

[Bambino3]

Your indignation and pomposity have been duly noted. As a matter of fact, you will be receiving a membership card (actually several) soon. The club is called "The rational thinking club (and we still don't know crap) You need "a high colonic and a ten mile hike".

[Carrello]

Ron,

Thank you for your thoughts and information, which includes so much research and time, and was very tightly presented. I enjoyed the read, but I must admit this subject is new to me, so your perspective is appreciated.

Two questions:

Indignation and pomposity? Where?

Can someone tell me why Shinnidan wants to shoot Ron for his post? I can't figure that out.

[cocklebur]

Thanks Ron, for trying to make some sense out of an insane situation.

[skepticaldinar]

The best post I have ever read on this (Adam Montana's )site! I wish Adam could be so informative?

Anyway, without spending money on the VIP I would like to thank you for your common sense approach and opinions. I agree with your out look and hope it comes through as such!

Thank you and have a day.....Cheers!

Adam is incredibly informative. Have you purchased Adam's book... aka RV bible?

[Legolas]

Excellent post Ron. Obviously entailed a lot of research and effort. Hope the newbies take the time to read and digest it..