Plan B

[drox]

Thought this was an interesting article from Dflake... one particular paragraph or sentence really stood out to me for this Plan B scenario.

A Deputy Governor of Central Bank of Iraq, Ahmed Ibrihi that "the deletion of zeros from the Iraqi currency has nothing to do at the exchange rate and prices."

Ibrihi said in a statement to the Agency all of Iraq [where] on Sunday, said: "Some people imagine that the state wants to influence prices or exchange rates (a reduction or waiver) by the deletion of zeros and this is not true."

He added that "the deletion of zeros nothing to do with price and exchange rate and that the addition of larger groups of the currency does not require the deletion of zeros."

He continued that "it is not expected to convene official in the state to promote a false consciousness about life and the promotion of economic illusions create disorder."

It should be noted that the "plan of deleting three zeros from the Iraqi currency is one of the proposed projects. Emphasizes economists that this project will facilitate cash transactions; because the handling of cash in Iraq is complex; due to the variation in currency exchange between the Iraqi dinar and the U.S. dollar, which could reach the cash transactions to the trillions the require complex calculations to see the results of those transactions in the profit and loss, and others. "

The Central Bank of Iraq has decided to restructure the local currency in order to develop the payment system in the country, and start execution of the strategic long-term, specializes in the restructuring of the local currency for the development of the payments system in Iraq.

The "International Monetary Fund calls Iraq a number of economic measures including the privatization of banks and raise three zeroes from the local currency and to meet debt and compensation is the responsibility of Iraq, if Iraq's desire to receive the support of the International Fund." Ended 23

http://translate.goo...lrF7pOrGtYvpilw

Read more: http://dinarvets.com/forums/index.php?/topic/72050-central-bank-the-deletion-of-zeros-from-the-iraqi-currency-has-nothing-to-do-public-prices-or-exchange-rate/#ixzz1QPNdYXlU

"One of the proposed projects" fits nicely with my thoughts of proposing 2 options to the Council of Ministers and Parliament. A RD and my Plan B idea. Maybe more who knows...

The words "strategic long term" is also encouraging to me to because that seems to go beyond the reach of a LOP. It relates to my thinking of getting closer to par with the Saudi's rate through time. Thoughts anyone???

[quadraph0nic]

Thanks Drox

[jmw]

Hey Drox...I was going through your post again....one questions....in summary, is the 100,000 note just to buy them time to be better prepared...to grow their GDP... infrastructure,,,etc?

[drox]

Hey Drox...I was going through your post again....one questions....in summary, is the 100,000 note just to buy them time to be better prepared...to grow their GDP... infrastructure,,,etc?

Hey JMW... Great question! All of this is simply opinion from me.

For the most part yes. The main point is that a LOP with even a raise to the $3 level helps but I think really traps or boxes them into a corner for future growth. It provides a credible currency and clearly re-establishes an old familiar value, but... what will the future value escalate to as they become the power house of the Middle East? The projections of Oil exports by 2020 are off the charts. They want to be the media capital of the middle east, a tourist destination, an education mecca, agriculture, technology hub, etc. Iraq will be something else if they can get past the Sectarian divide that handcuffs them. That is where my local government and citizen dividend comes in. It bridges the divide between the political parties and their differences. The Iraqi would have a dividend of about a 10% increase to their current average income and the exchange rate would increase in time way more than 3times.

I believe that international companies will force the issue in Iraq. They are coming hell or high water from all directions. Iraq must change their cultural paradigm. Their destiny is predetermined thanks to the UN, Stand-by arrangements with IMF, and the World Bank and release of the odious debt through the Paris Club. Not to mention the US military foothold. So if it goes to $3 after a LOP and 3times RV (at some point) does it stay there forever? How high can it really go? My thought is that if they keep the exchange rate low and work with the existing money supply to organically grow to say the Saudi Rate (.27 cents), that would give them room to grow in the future as well. At 28 trillion Dinar at a $.27 rate isn't that really the equivalent of a $7.5 Trillion (M2)? Crazy high still but much more manageable then $28Trillion or whatever it would be with a $1+ RV.

Destroying notes isn't necessary a common practice to reduce money supply because it really destroys wealth. The debt that was created for those notes still remains after the destruction. However... I have read a couple things that say it is a possibility outside of the Dinar forums but I am not factoring that in here at all. There are a few ways to reduce that money supply that are common as you know. T-bills is one, increasing bank reserves but they are already at 15%, amongst others. How much of the Dinar is currently in international investors hands? Much of that will never touch Iraqi soil ever again. That was a built in money supply reduction on some levels. I honestly have no idea if foreign holdings are measured in the M2. Shabs was brilliant when he did this. It was like a brand new country and he built wealth for the CBI by doing that. So lets say the international investor and other country Dinar holdings is say 4 Trillion (total guesstimate on my part). At .27 rate that would be $1 Trillion more to shave off the M2 making it now $6.5 Trillion. Kind of like how much of the Dollars in foreign countries will never come back to the US.

Please correct my thinking if I am off my rocker. There are a lot smarter folks on here that are hiding in the bushes. (Right Froto and Chas32??)

[ThePeoplesChamp]

bump. Plan B FTW!!!

[DgreenFSU66]

I'm not sure how you can say that nowhere has it been mentioned that they are considering releasing a 100K note. Several articles this week alone have mentioned it, and it has come out in others in the past. This week's article said specifically:

"Mudhhir Muhammad Salih, a member of the bank's advisory panel, told RFI on June 23 that in the short term, larger banknote denominations of the dinar will be issued to simplify major transactions. "

"He added that large denominations equivalent to around $100 will be issued to simplify major purchases, and new coins and lower denominations will be introduced for smaller transactions."

Obviously a note equivalent to around $100 would be a 100,000 dinar note. We don't know what they will or won't do, but it's clear that they are in fact talking about it.

Read more:

Ive been tied up, i missed that article, i have started to focus more on getting my affairs lined up for law school. i stand corrected. I also take intersst in the theory that they are going to release the large notes that will match the 100,50.25, etc... im keeping an open mind, thanks for bring this to my attention. D.Green

[Kent]

Drox, thanks for the personal note and "welcome back" PM message. This is the response you requested. First, Thanks for putting in the time and thought. I always appreciate people who offer thoughtful opinion and analysis, even when we disagree. The people who offer respectful insight and even insightful questions make the site worthwhile. You are a great example of that.

Candidly, I have a tendency to take things closer to face value than your analysis. When an articles say "delete 3 zeros" and make comparison to countries who did a redenomination I think that is what they mean. We used to have the discussions about "they didn't really mean delete the zeros from the notes, they mean delete the zeros from the rate"? ...bunk. Apart from translation difficulties (which I admit are confusing) the articles seem pretty clear. As to whether they are "smoke screen" efforts to scare away investors that they would have to pay on RV day? I don't think so. It makes more practical sense that they have told the truth about an RD, but not so aggressively that it kills the CBI auction activity. I think they WANTED to keep selling those little red slips of paper in exchange for dollars and that they have been doing that for years now to increase their REAL currency reserves to shore up the value and stability of a currency that was ravaged by war - and it has worked beautifully. I rather suspect some of the "intel" our well intended gurus are getting from CBI folks is intentional for that purpose - to sell more junk paper in return for greenbacks. (side note, I seldom agree with someone being called a "pumper" or a "dumper" because either are probably well intended based on what they think is valid information from sources they think credible).

Remember, articles often spoke of inflation as a great fear and avoiding it as job #1 at the CBI. You rightfully comment that interest rates are not a tool to control inflation in a country where there is very little consumer borrowing. Often in the past I made a totally ignored, but no less valid point. Increasing the money supply is inflationary. Highly increasing the money supply is highly inflationary. Even if you assume all the rumors that all the guru say is true, even if you buy the premise that oil in the ground is the same thing as monetary reserves (and it isn't by the way) and even if you think those reserves are large enough to support a money supply larger than the US (and all you have to do on the surface is compare Saudi Arabia to know that isn't true) - still the question remains if increasing the money supply x3000 overnight is a good thing. My opinion is that would hyper inflate the economy of Iraq. The day after an RV you would have 3000 times more money offering to buy the same amount of "stuff". That is exactly what causes inflation - more money chasing the same amount of stuff (e.g. if you had 50 buyers for a piece of real estate rather than 2 and the 50 got rich overnight)

Personally, I am more inclined to believe CBI will use the past occasional "3 zero" announcement as fall-back to claim they were telling everyone the truth all along and we just weren't listening. They are certainly on no mission to clear up our misunderstanding because we are buying those pretty red bills, but they have been releasing enough to say later "we told you all along".

Think about it... All the reasons there MUST be an RV. They MUST have it to pay their bills (now Paris on the 11th). Really, no war ravaged country has ever had trouble paying their bills? They MUST do it for their poverty stricken people! Aren't there more efficient methods to distribute oil wealth to citizens? Look at other oil rich nations where they just give them a healthy income and benefits. They MUST recover prewar currency rates. Why? Pride? -Not a healthy economic policy basis and they could get there the way all other countries have done it - with a combination of market change and redenomination.

Drox, I still haven't been able to get anyone to document a single incident where a country has done anything like what would be represented in even a ten cent RV. My research indicated that there are just a few examples like Germany where there was a very nominal government (as opposed to market change) revalue. After WW II Germany needed to consolidate different currencies and in the process there was (can't remember the exact figure) like a 15% revalue. The rest of the growth came in economic horsepower and market change. Likewise, even Kuwait. The huge increase in value given seems to be the contrast between what shopkeepers would pay in the market for worthless mid-war money to post war values. That wasn't by government fiat. If the government RV'd the currency for 10, 100, 3,000 times the worst value I'd like someone to show the link. I have challenged others to show a single example in history. I can find more than a hundred RDs and even read studies on the motivation (grossly misrepresented on this site by the way), but I've never seen anyone give an example close to what is forecast as an RV for Iraq.

Ask yourself, really. If a government could get away with an overnight announcement that their currency was worth 1000 times more overnight, why hasn't anyone else done it to get out of THEIR debts. Answer? A). the world wouldn't "buy" it and . even if they would, it would wreck their economy with inflation.

Do I think Iraq has tons of growth potential? yes. Do I think Iraq's value will substantially increase? yes (if they don't "****** victory from the jaws of defeat"). Would I like to believe your "plan B" theory and see an RV and become an overnight multi-millionaire? H_ _l yes. Honestly though, I don't see it square with economic reality.

That leaves me in the uncomfortable position of disagreeing with some who see their view as spiritually motivated and all who see the dinar as a quick ticket to a much better life. It's no fun. Neither is giving you such a candid answer, but I could do no less for someone whose efforts and manner I respect. I have, however become very quiet in the last year. Over that time it seems the site has become even more harsh than it was before. I miss reading some of the old guys who no longer post.

Blessings to you and yours. As always, hope I'm wrong.

Kent

[Kent]

If any of you get a chance please review this thread from last December 2010. It had some great dialogue with folks and intertwines nicely with the articles lately.

http://dinarvets.com...ass-100-dinars/

Drox, That was a good thread and good to see you and Chas32 looking at a market driven approach to revalue.

[MrFnHappy]

Mudhhir Muhammad Salih, a member of the bank's advisory panel, told RFI on June 23 that in the short term, larger banknote denominations of the dinar will be issued to simplify major transactions.

He said that because so many Iraqis still deal mainly in cash, it is cumbersome to carry bags full of money to pay for expensive items like cars. The inconvenience leads people making such purchases -- as well as many entrepreneurs -- to use dollars for those kinds of transactions instead of dinars, something the government wants to end.

He added that large denominations equivalent to around $100 will be issued to simplify major purchases, and new coins and lower denominations will be introduced for smaller transactions.

In the longer term, Saleh said a redenomination is needed wherein three zeros will be dropped so that the 25,000 Iraqi-dinar banknote -- currently the largest denomination -- becomes a 25-dinar note.

He said the change is inevitable, considering the economy is expecting high growth in the coming years with a planned increase in oil production to finance reconstruction projects.

[1xtradinar]

Good one Drox...........................I only pray that Shabs and Maliki don't read from DV on occasion. Else you can be providing further speculative ideas

to either of them.....................and holy cow..............................we already have plenty of that.

My inside sources......................rumor mills at least equivalent to any here on this site............................one of which is in England.........................still seem

to believe there is something in the wind for next week. I remain hopeful and vigilant.........................and your perspective reads as good as any we've had

lately...................thanks again.