Investing in Dinars: 11. Finally Iraq Makes a Committment

[tlar]

WAR EAGLE. YOU ANSWERED YOUR OWN QUESTION BY MIS- UNDERSTANDING THE TERM IN CIRCULATION INCIRCULATION MEANS JUST THAT,CURRENCY THAT IS IN CIRCULATION FOR COMMERCE IN IRAQ AND COUNTRIES DIRECTLY SURROUNDIN IRAQ SUCH AS STREET VENDOR ETC. wHAT THE US CENTRAL BANK AND THE OTHER CENTRAL BANKS THAT HOLD THE DINAR AND INVESTORS SUCH AS YOU AND ME HOLD AS INVESTMENT, AND WHAT THE WORLD BANK AND IMF HAVE IN THEIR VAULTS IS NOT CONSIDERED IN CIRCULATION. REMEMBER THE CURRENCY THAT IRAQI'S HOLD WILL BE TRADED OUT WITH THE CBI, NOT SOLD BACK. YOU AND I AND EUROPE AND ASIA WILL SELL TO OUR OWN COUNTRIES BANKS WHO WILL THEN SELL TO THE CENTRAL BANKS TO BE HELD, NOT RETURNED TO IRAQ IMMEDIATELY. THIS IS STILL NOT IN CIRCULATION. ONLY INDIVIDUALS IN THE MIDDLE EAST, STREET VENDORS AND SUCH WILL SELL TO THE CBI.

[jeff stevens]

always great info from you . Great job

[DmsC]

How long until this takes place?

We are now in a position to talk about timing. We have two factors to consider. The first is the RV itself, and the second is the removal of the large denominated notes.

Taking the second item first we see that the timing has already been given us: the large denominated notes will be withdrawn gradually throughout the remainder of this year.

Regarding the timing of the RV itself we can use our reasoning powers to deduce a time frame. This is not difficult. Clearly the CBI, in making the announcement of its intent to do this, has opened the door to speculation from the world market. Therefore it is in its own best interest to complete the RV as soon as possible. Every day that it waits invites more and more speculators into the market. At some point the speculators could literally foul the RV play if the CBI did not act quickly. Therefore we can reasonably assert that the RV will take place within the next few days, and almost certainly before the 12th of February.

The 12th of February is important because that is when campaigning will begin for the next election. Maliki would be foolish to revalue the currency during this period, since it would appear obvious that he is doing so for electoral support. Therefore, in my opinion, this is the outside date for the RV to occur, and most likely it will occur before that date.

Thank you for the insight and I hope this will calm some of the sky is falling attitude that has been going on !

[booters]

In short, there is distrust of the people in the banking system in Iraq. From other sources we know this to be true, so we may rest assured that this is the meaning of this statement.

What does this statment hold for the warka bank acount holders furure then AYE?

[Heff]

Excellent Work Enorrnste, on your evaluation of a subject that concerns many of us. Just a little feedback and food for thought. I think that sometimes you have to look at the smaller frame of the subject, and on this subject I think that the Dinar being introduced to the global economy is important, without that the Dinar can go in several directions. Also the IMF, is important. The economy getting on its feet is critical, and oil may be produced at the end of the year. Combat troops are out of the cities and should be out in August 2010, a lot of combat equipment is leaving. Governance of Iraq will soon be in the hands of the Iraqi's, a major step. On the U.S. dollar and Iraq is was to begin phasing out in October of 09, $50 dollars a month, but you could get enough to spend in Dinar, that you needed. Just a couple of things to look at. Just out of curiosity: Who runs the CBI?

[LynnMarie]

thank you wonderful information..

[terr]

Thank you E..I do so understand your posts more so than anyone else's , I hope you are right, and we can put this all behind us and get on with helping both economies. I have only been visiting this site since November 09, but seems like years, I just can't imagine how it has been for those that have been waiting for 6 yrs. or so. I do feel it will be just a few days, again, hopefully this is the time it really hits. I can feel it , I just don't see it yet. But, you explain in your posts so well , it is so appreciated.For those of you that do alot of typing and posting, and really do not know, or just want to see yourself debate, please stop, all of us want the same things, how great it will be if the little guy gets something for a change, what a true miracle it is, I for one believe it is in God's hands however it turns out. Once it happens, I hope we share and help those less fortunate than us, I really hope . c'mon RV , it is time!

[saphire]

You are forgetting the gold reserves and other assets that are being included. If you look at it like a company's balance sheet the picture will be much clearer.

Example:

Balance Sheet of XYZ, Ltd. as of 31 December 2006

ASSETS

Current Assets

Cash and cash equivalents

Accounts receivable (debtors)

Inventories

Prepaid Expenses

Investments held for trading

Other current assets

Fixed Assets (Non-Current Assets)

Property, plant and equipment

Less : Accumulated Depreciation

Goodwill

Other intangible fixed assets

Investments in associates

Deferred tax assets

LIABILITIES and EQUITY

Creditors: amounts falling due within one year (Current Liabilities)

Accounts payable

Current income tax liabilities

Current portion of bank loans payable

Short-term provisions

Other current liabilities

Creditors: amounts falling due after more than one year (Long-Term Liabilities)

Bank loans

Issued debt securities

Deferred tax liability

Provisions

Minority interest

Equity

Share capital

Capital reserves

Revaluation reserve

Translation reserve

Retained earnings

[***ucme1stnow***]

what happened to all the yippie, go rv,, look theres no way possible to think of that anyones gonna loose money, so relax

[Heff]

Forgot one point: How much money has Iraq made on making and printing the Dinar? They bought the paper they sold the value. For said rate.

[kjurb]

always very informative and thanks for all the work you put into this

[Enorrste]

Afarns: you wrote the following:

"I have yet to see anything where the government has said that the large notes would be drawn in and eliminated."

In response, here is the quote, found within this very chapter and within the article discussed.

[WIGO]

Thank you Enorrste.. as always great job!

[afarns]

Actually, my objection was to your statement

the large denominated notes will be drawn in and eliminated

in reference to them naturally being drawn in as a result of cashing in after an RV. I obviously understand and read that the 3 zero notes will be taken out of circulation and new notes without the 3 zeros will replace them. Hence the lop idea.

[keylime]

How about this. Everybody is WRONG until it actually happens. Then and only then will somebody be RIGHT. E.....I hope you're right, because that's the way I see it also.

[rriver1010]

Great post! Thanks.

[kamm]

Thanks again Big E.....

[Dex70]

Enorrste - very straight forward and to the point.

[saphire]

Forgot one point: How much money has Iraq made on making and printing the Dinar? They bought the paper they sold the value. For said rate.

All this information is on their balance sheet which obviously we are not privy to. Except for the few snippits the media snatches for us. Hang in there.

[ShannonLMT]

thanks for being so clearly informative. It does help to ease the miscommunication that can occur at times.

[texman]

I believe therefore i am

[Enorrste]

Afarns, you wrote this:

Actually, my objection was to your statement

"the large denominated notes will be drawn in and eliminated"

in reference to them naturally being drawn in as a result of cashing in after an RV. I obviously understand and read that the 3 zero notes will be taken out of circulation and new notes without the 3 zeros will replace them. Hence the lop idea.

Afarns, for the life of me I cannot understand what you wrote in response to my answer to you. I have a suggestion: state clearly what you mean and I will deal with it. You need not be cryptic anymore. I have admitted already that I do not understand you. If that is my weakness, so be it. But I suspect no one else knows what you were trying to say either. So I recommend you just say it, clearly, OK?

[Enorrste]

rt59, as I promised earlier on chat here is my response to you.

You wrote this:

"Enorrste, the only way to draw them (IQD) in to eliminate them is to make them worth something, ie an RV. That is the easy part, paying for them is the hard part. You say people (in country) or governments (out of country) will put money into banks or hold in federal reserve. That is fine, but backed by what?"

Now, since you are paraphrasing my own words in most of this there is obviously nothing that I can disagree with in it! So I will just deal with your question at the end.

Your question is this: what is backing the RV?

In order to answer this question we must first ask if it is a legitimate question, and the answer is that it is in fact NOT a legitimate question. I can say this with ample authority, since RVs have occurred throughout recent history with no proof whatsoever that the country doing it could afford it.

In fact, and more to the point, there is absolutely no way to quantify the question. If you know of one and can apply it to any country in the world, I would welcome that. The reality is that even the IMF itself has trouble deciding what value to place on any currency in the world. Admittedly they use a lot of "models" and "theories" and probably a huge database of various sorts of "figuring", but in the end the number that they come up with has nothing to do with what you have suggested in your post.

The bottom line is this: the reserves of a country have very little to do with whether or not they can afford to RV. Admittedly, they are a factor, but they are only one factor, and almost certainly not the most important factor.

The IMF has stated in its own position papers that its goal is to evaluate countries in the world based on their "inherent wealth", whether in natural resources, manufacturing, tourism, or even "good will". I have never seen the IMF use currency reserves as one of these factors, although obviously it is among the many factors in the long list that determines a country's inherent wealth.

Now, if we were to even attempt to try to figure out what is "backing" the RV, we would only be able to do so in a general sense. I have written two chapters to attempt to give a comparison that would show that Iraq is in position to afford the RV. In this latest chapter I added the reserves as another element in that view, but not the only element.

Here I will add a few more elements, none of which is sufficient to "quantify" the "backing" but when taken with other factors, and all eventually, you will get the picture.

First, MM17 reported today that the EU is sitting on about 280 tons of gold that belongs to Iraq. That would be a nice place to start, and I see no reason why that gold cannot be considered in this situation since it has to be returned to Iraq in time, and definitely after Chapter 7 is released.

Next, and most important in my opinion, is the known reserves of oil and natural gas in Iraq, currently estimated conservatively at second highest in the entire world. Whether this is a "realized" reserve or a "potential" reserve is moot, just as the "full faith and credit" is only "potential" and not "realized", thankfully.

Next, Iraq has let out contract to build its tourism in a grand way. As an example, it recently let out a contract to turn Babylon into one of the biggest tourist sites in the world, on a par with the great pyramids. The site will have a 7000 acres international airport. The US Corps of Engineers will help restore the archaelogical site for tourists. Hotels and spas will surround the ancient site.

Next, contracts to rebuild the remainder of Iraq have been signed. I will only mention one: in Najaf they are planning to build 135,000 residences, a university, shopping centers, and on and on.

This underlying wealth of Iraq is almost certainly the single biggest factor that the IMF would consider when determining a fair RV rate for the IQD. We have read that the IMF is recommending $1.49, but I cannot verify that. Still, it is an interesting number and has floated around for months. How do think that number came up?

In summary, the question you ask is not appropriate. There is no way to quantify an answer. But there is a way to "see" what is obvious, and that is that Iraq, of all countries in the world, is better poised to afford an RV than any other country in the world. And that is NOT an understatement.

The most obvious comparison to Iraq is Kuwait, whose dinar is at about $3.90 now. They have much less oil in reserve, are substantially smaller, and have no water. I submit that water will become as big a "money winner" for Iraq as oil is now. Just think on that a bit. Two large rivers run through this desert. Kuwait has none, Saudi Arabia has none, and on and on.

I think if I go on I will lose the audience. I submit that my case is made.

Steve

[Muhammad]

rt59, as I promised earlier on chat here is my response to you.

You wrote this:

"Enorrste, the only way to draw them (IQD) in to eliminate them is to make them worth something, ie an RV. That is the easy part, paying for them is the hard part. You say people (in country) or governments (out of country) will put money into banks or hold in federal reserve. That is fine, but backed by what?"

Now, since you are paraphrasing my own words in most of this there is obviously nothing that I can disagree with in it! So I will just deal with your question at the end.

Your question is this: what is backing the RV?

In order to answer this question we must first ask if it is a legitimate question, and the answer is that it is in fact NOT a legitimate question. I can say this with ample authority, since RVs have occurred throughout recent history with no proof whatsoever that the country doing it could afford it.

In fact, and more to the point, there is absolutely no way to quantify the question. If you know of one and can apply it to any country in the world, I would welcome that. The reality is that even the IMF itself has trouble deciding what value to place on any currency in the world. Admittedly they use a lot of "models" and "theories" and probably a huge database of various sorts of "figuring", but in the end the number that they come up with has nothing to do with what you have suggested in your post.

The bottom line is this: the reserves of a country have very little to do with whether or not they can afford to RV. Admittedly, they are a factor, but they are only one factor, and almost certainly not the most important factor.

The IMF has stated in its own position papers that its goal is to evaluate countries in the world based on their "inherent wealth", whether in natural resources, manufacturing, tourism, or even "good will". I have never seen the IMF use currency reserves as one of these factors, although obviously it is among the many factors in the long list that determines a country's inherent wealth.

Now, if we were to even attempt to try to figure out what is "backing" the RV, we would only be able to do so in a general sense. I have written two chapters to attempt to give a comparison that would show that Iraq is in position to afford the RV. In this latest chapter I added the reserves as another element in that view, but not the only element.

Here I will add a few more elements, none of which is sufficient to "quantify" the "backing" but when taken with other factors, and all eventually, you will get the picture.

First, MM17 reported today that the EU is sitting on about 280 tons of gold that belongs to Iraq. That would be a nice place to start, and I see no reason why that gold cannot be considered in this situation since it has to be returned to Iraq in time, and definitely after Chapter 7 is released.

Next, and most important in my opinion, is the known reserves of oil and natural gas in Iraq, currently estimated conservatively at second highest in the entire world. Whether this is a "realized" reserve or a "potential" reserve is moot, just as the "full faith and credit" is only "potential" and not "realized", thankfully.

Next, Iraq has let out contract to build its tourism in a grand way. As an example, it recently let out a contract to turn Babylon into one of the biggest tourist sites in the world, on a par with the great pyramids. The site will have a 7000 acres international airport. The US Corps of Engineers will help restore the archaelogical site for tourists. Hotels and spas will surround the ancient site.

Next, contracts to rebuild the remainder of Iraq have been signed. I will only mention one: in Najaf they are planning to build 135,000 residences, a university, shopping centers, and on and on.

This underlying wealth of Iraq is almost certainly the single biggest factor that the IMF would consider when determining a fair RV rate for the IQD. We have read that the IMF is recommending $1.49, but I cannot verify that. Still, it is an interesting number and has floated around for months. How do think that number came up?

In summary, the question you ask is not appropriate. There is no way to quantify an answer. But there is a way to "see" what is obvious, and that is that Iraq, of all countries in the world, is better poised to afford an RV than any other country in the world. And that is NOT an understatement.

The most obvious comparison to Iraq is Kuwait, whose dinar is at about $3.90 now. They have much less oil in reserve, are substantially smaller, and have no water. I submit that water will become as big a "money winner" for Iraq as oil is now. Just think on that a bit. Two large rivers run through this desert. Kuwait has none, Saudi Arabia has none, and on and on.

I think if I go on I will lose the audience. I submit that my case is made.

Steve

So, Iraq has to improve the tourism industry as well. If they ensure that all higher denominations may be officially declared obsolete by the end of 2010, we may have to exchange them all into smaller denominations they may introduce. If they don't revalue fast, how we as foreign tourists going to Iraq to be able to carry tons of IQD to buy things ovethere? Not all cheaper hotels, shops and restaurants permit us to use credit cards, perhaps. What say you, fellow bashers and supporters?

[hope4sas]

Enorrste,

Great posts as always. You have a great ability to read information, digest the message and then put it in the posts in a way that helps us understand your line of thinking which seems to be very well thought out. I certainly appreciate all the time you spend putting this all together so we can try to make sense out of all that is happening lately in such a expedient manner. It appears we are close. I look forward to your next post. Thanks