The Dinar

[wilecoyote]

watch the propaganda folks....... settle down..

[scottiraq04]

Very interesting. Thanks for the article sprullis. You should consider posting that as a news string. Personally, the way I read that it appears that the Ministry of Finance (top of article) disagrees with the CBI (bottom of article) on whether to do a lop. That moves us to a question of who pulls the switch. Personally, I think CBI is controlling things. That is who has controlled the rate and release of the currency. Still, though it sure seems like they would be on the same page and they obviously aren't. (And keylime, I would love to get on with an rv).

Kent - I believe you are correct in your interpretation of the article. I just had 2 Iraqi Interpreters re-translate and interpret the original Arabic in the article. Bottom line is that the article is saying the Ministry of Finance does not agree with the CBI's decision to LOP/redenominate the IQD...BUT...no where in the article does it say that this redenomination will be stopped. Only the CBI has the power to start or stop a LOP/redenomination.

[keylime]

Kent - I believe you are correct in your interpretation of the article. I just had 2 Iraqi Interpreters re-translate and interpret the original Arabic in the article. Bottom line is that the article is saying the Ministry of Finance does not agree with the CBI's decision to LOP/redenominate the IQD...BUT...no where in the article does it say that this redenomination will be stopped. Only the CBI has the power to start or stop a LOP/redenomination.

Can you verify "only the CBI has the power to start or stop a LOP/redenomination?" Or is that what you heard? Just want to learn who really "pulls the switch" as Kent has said, with verifiable info. Thanks Scott.

[kaperoni]

BS. u can both notes in circulation just like 10 dollar bill and a 100 dollar bill. total bs.

[diane10718]

Armondtoth I appreciate your opinion on the Dinar however I still don't understand why all the LOPers even bother to be on these chat rooms. Please explain your real agenda because I for one just want this thing to happen one way or the other. I also agree with the fact that everyone has secret intel and friend in high places but this is the internet and anyone can say whatever they want to. That includes all the pumpers from Frank, Adam and the rest of the people to the naysayers looking to make a buck on the side off of desperate people looking to get rich or the naysayers which as I stated what is your angle and where are you going to make money because you cannot short this currency? I am not impressed with your so called intel because there are 1000's of people with the same or opposite sides. However it is good to get conflicting sides to keep this thing real. Thanks

[TexaSwa]

kreativity, let's slow this down a little. On an RV your 1Mil dinar that cost you $1,000 becomes worth (on a 1:1 RV) $1Mil dollars (that's what we all hope). Likewise, the 43Trillion Dinar M2 money supply (that is worth 43 billion US Dollars presently) of Iraq becomes 43Trillion Dollars. That means overnight, the money supply of the country increased by 1,000 times. That is a drastic increase in the money supply.

The big bills being removed do not decrease the money supply, because they are exchanged (except in the case of us private, foreign investors). All in-country exchanges are simply an exchange and all bank and foreign reserve account balances are converted.

Now, if the government of (fill in blank) is holding dinar in reserve account and it RV's Iraq owes the larger sum (increase of a factor of 1,000 in the example) overnight. That means Iraq owes them more money or increases their debt. An RV therefore increases Iraq government debt, but increases the buying power of all the non-Iraq government holders. It does not improve the buying power of the government of Iraq, it makes the government poorer. It does, however increase the wealth and power of people they must pay (you and me).

Whether there is an RV or a LOP, they will need lower denominations and will not need larger ones.

Kent, I follow what you are saying about Iraq owing more after an "RV" to a point. But i am not sure I see it exactly that way, or that it is that cut and dried. While it is true that, assuming a 1:1 "RV", Iraq will have to pay out $25000 for every 25000iqd, the IQD that is being returned to them is also worth 1000 times more than it was before. I believe it would be more of an asset transfer on a balance sheet rather than a liability on an income statement (to put it into accounting terms). If the money they were buying the IQD back with was solely from the money they sold them for, then yes, there would be a huge deficit. But supposedly much of that is being forgiven, traded for contracts, supported by natural resources... etc.

[Selkirk77]

Sorry, something does not ring true about this. Iraq does not in anyway help to create a middle class with no values for goods changing. It sounds to me that armondtoth's high-up people either are not understanding or are trying to mislead. My first reaction would be that they are from another Muslim nation and their is an envy thing going on here. Hope I'm right and bless armondtoth "that he's wrong". DV folks hang on for the ride, it'll all turn out good in the end, I'm confident. Selkirk...

[Riverman]

thanks ScotIraq04.. very well worded and studied approach to this ...

[allIneedisonemillionusd]

Kent, I follow what you are saying about Iraq owing more after an "RV" to a point. But i am not sure I see it exactly that way, or that it is that cut and dried. While it is true that, assuming a 1:1 "RV", Iraq will have to pay out $25000 for every 25000iqd, the IQD that is being returned to them is also worth 1000 times more than it was before. I believe it would be more of an asset transfer on a balance sheet rather than a liability on an income statement (to put it into accounting terms). If the money they were buying the IQD back with was solely from the money they sold them for, then yes, there would be a huge deficit. But supposedly much of that is being forgiven, traded for contracts, supported by natural resources... etc.

Exactly, Iraq is not "buying" the IQD back, period, dot, end of sentence. It is exchanged! It has value and is exchanged for whatever, at that same value. Whether its usd or any other currency. Its a swap. GOI isn't (simplifying) gaining or losing debt with an RV, they still need to pay or be paid. Before I get trampled with that last sentence I understand its not that simple, just trying to make it bite sized! Look at the amount of the Iraq reserve. Its close to 300% of the documented IQD in circulation. That's crazy, the US is at 10%, the UN stipulated 25%. They did this recently, the last few days. Why would they do this?...........Makes you wonder!

[scottiraq04]

Can you verify "only the CBI has the power to start or stop a LOP/redenomination?" Or is that what you heard? Just want to learn who really "pulls the switch" as Kent has said, with verifiable info. Thanks Scott.

Keylime - Sorry for the delayed response...

First, I will admit that you are not going to find a document anywhere that states "A Central Bank has the authority to start or stop a redenomination". However, what you will find to be inherent among Central Banks is the authority over Monetary Policy and Exchange Rates; a redenomination of any type would fit both of the catagories. Here are some sites that will help...please read them carefully, as they will also state the pros, cons, changes and trends of Central Banks and their overall authority:

http://en.wikipedia.org/wiki/Central_bank

http://en.wikipedia.org/wiki/Central_Bank_of_Iraq

http://en.wikipedia.org/wiki/Monetary_policy

http://www.cbi.iq/thecbi.html

Second, I like to give all information that I have even though it may be against my arguement, so here is something to consider. Just because the CBI is not directly controled by the GOI, that does not mean that the GOI can not exert political pressure to get some of its policies enacted. Meaning, that in reference to the article about the Ministry of Finance (MOF), if the MOF does not want the CBI to redenominated the currency (LOP zeros) then it can influence other Ministries and the parliment to put pressure on the CBI. It is a fact that although Central Banks are seperate from their Governments, they still have to follow their Government's intent (domestic and international political intent)...for example: if the Iraqi PM promises to the people to lower inflation, then the CBI will "try" to do this through its Monetary Policies; but only as long as the PM's ideas for lowering inflation do not have a negative impact on the economy. Remember, it was the MOF in 2007 (higher inflation at the time) that was pushing the idea of "rebase" (redenomination) to the CBI. The CBI obviously could not do it then...but enacting this type of policy can take years; as we are seeing now. Why the MOF is now coming out with an opposite opinion is anybodies guess...

I hope this helps...

[Kent]

Kent, I follow what you are saying about Iraq owing more after an "RV" to a point. But i am not sure I see it exactly that way, or that it is that cut and dried. While it is true that, assuming a 1:1 "RV", Iraq will have to pay out $25000 for every 25000iqd, the IQD that is being returned to them is also worth 1000 times more than it was before. I believe it would be more of an asset transfer on a balance sheet rather than a liability on an income statement (to put it into accounting terms). If the money they were buying the IQD back with was solely from the money they sold them for, then yes, there would be a huge deficit. But supposedly much of that is being forgiven, traded for contracts, supported by natural resources... etc.

You are raising a really good question. Yes, the government of Iraq says that note they bought from me is worth $25,000. That is only true if they can sell it for that. Where is your buyer if Iraq incurred $43 Trillion dollars in debt on an economy that only produces (GDP) $95Billion. Even if Iraq had the oil production and GDP of Saudi Arabia (less than $500Billion) no one would buy it! Let's face it. Are you a buyer or a seller of Iraq dinar after a $1 RV? You are an anxious seller and so would everyone else! It is a declared market value transaction. If I want to trade my Mazda tomorrow for your Mercedes are you going to swap with me? Not without a little financial push. This is primarily a balance sheet transaction (by the way, assets and liabilities are reflected on a balance sheet, Income and Expenses are reflected on an income statement, but I know what you mean.) but one where an insane amount of money must be borrowed to balance the statement. Iraq simply can't pay what they don't have and they can't declare an internationally accepted and traded monetary value by government fiat. Others have to believe it is worth it. I hope that helps.

[Kent]

Hello,

-- Major Powers" whether they be foreign governments or currency markets will only go so far in loaning money --

What was one of the greatest tricks we saw right in fornt of our eyes ? I guess the answer to this will be the product of this question : How do you loan a country money, without loaning them money ? You forgive thier debts !, USA - 100% forgiven, Paris club- 80%, China- 80% and the list goes on.

For example, if you have $70,000 in debt. Would you want a loan for $70,000.......or would you want that debt just cancelled ? Exactly, just 2 different paths leading to the same house. Hope that helped anyone who might be confused.

kreativity, it is interesting to me that one of the most common reasons people state for an RV is the amount of currency the US government holds and the fact that we want pay-back. Yet it is at the same time assumed that the US will forgive the debt. It can't be both ways.

Honestly though, I really don't think that matters. Unless you don't believe the CBI figures, currency held by all foreign governments being forgiven would not be enough to solve the problem. I am not at the office computer so I can't look up the link, but I believe the hard currency in circulation (as opposed to M2 or M3) is about 23Trillion Dinar. Run the same numbers. Even if Iraq were the size of Saudi Arabia tomorrow they couldn't support a 23Trillion dollar hickey for us and their people. I hate that, but it's true.

[Kent]

Sorry, something does not ring true about this. Iraq does not in anyway help to create a middle class with no values for goods changing. It sounds to me that armondtoth's high-up people either are not understanding or are trying to mislead. My first reaction would be that they are from another Muslim nation and their is an envy thing going on here. Hope I'm right and bless armondtoth "that he's wrong". DV folks hang on for the ride, it'll all turn out good in the end, I'm confident. Selkirk...

Selkirk, I hope Iraq does create a huge middle class and that they do it the way some of the other oil rich nations have - with a big government give-away of oil revenue. If you think about it, with ownership of dinar spread around the globe and with foreign contractors in country, wouldn't it be more efficient for them to do it the way the others have done it rather than hand you and me millions each?

[malachi]

the more I read the explanations on this redonomination stuff, the more you don't know what to believe. When in doubt always trust the Lord. Yeah that is exactly what I am going to do He is in control of the World affairs.

[Kent]

Exactly, Iraq is not "buying" the IQD back, period, dot, end of sentence. It is exchanged! It has value and is exchanged for whatever, at that same value. Whether its usd or any other currency. Its a swap. GOI isn't (simplifying) gaining or losing debt with an RV, they still need to pay or be paid. Before I get trampled with that last sentence I understand its not that simple, just trying to make it bite sized! Look at the amount of the Iraq reserve. Its close to 300% of the documented IQD in circulation. That's crazy, the US is at 10%, the UN stipulated 25%. They did this recently, the last few days. Why would they do this?...........Makes you wonder!

You really have a great point on the reserve issue and that is something I am looking into. Frankly, it is the only logic I have heard so far for Iraq being able to do a large RV. --still don't agree with your description above it though.

[TexaSwa]

You are raising a really good question. Yes, the government of Iraq says that note they bought from me is worth $25,000. That is only true if they can sell it for that. Where is your buyer if Iraq incurred $43 Trillion dollars in debt on an economy that only produces (GDP) $95Billion. Even if Iraq had the oil production and GDP of Saudi Arabia (less than $500Billion) no one would buy it! Let's face it. Are you a buyer or a seller of Iraq dinar after a $1 RV? You are an anxious seller and so would everyone else! It is a declared market value transaction. If I want to trade my Mazda tomorrow for your Mercedes are you going to swap with me? Not without a little financial push. This is primarily a balance sheet transaction (by the way, assets and liabilities are reflected on a balance sheet, Income and Expenses are reflected on an income statement, but I know what you mean.) but one where an insane amount of money must be borrowed to balance the statement. Iraq simply can't pay what they don't have and they can't declare an internationally accepted and traded monetary value by government fiat. Others have to believe it is worth it. I hope that helps.

You got me... I meant to say "expense". Typo sort of. I meant one thing and said another. I also understand what you are saying that the 25iqd note will only be worth $25k if someone is willing to pay, and agree to a point. If it were like a stock IPO, introduced at a predetermined price and allowed to immediately float based solely on buy/sell orders on the open market, then I believe you would be spot on. But being a fledgling currency I believe it will be supported by forces outside the open market that will hold it at the initial price for a time at least. Think ERM, oil contracts, pegs to other currencies. Its not as if im putting my dinar up for sale to another investor on an exchange, but taking it to a bank who, in turn, trades it with IRAQ.

[Kent]

Hello,

-- kreativity, let's slow this down a little. On an RV your 1Mil dinar that cost you $1,000 becomes worth (on a 1:1 RV) $1Mil dollars (that's what we all hope). Likewise, the 43Trillion Dinar M2 money supply (that is worth 43 billion US Dollars presently) of Iraq becomes 43Trillion Dollars. That means overnight, the money supply of the country increased by 1,000 times. That is a drastic increase in the money supply. --

I can't wrap my mind around this one either because I am confused on the increase in money supply because, the only thing that is going to increase here is the VALUE of each bill. It was always 43 trillion Kent, the value is only 43 billion usd but in actual cash itself it's 43 trillion so the supply does not go anywhere. This is not including money and assets that are frozen because of the sanctions, Iraq is going to be a powerhouse and kuwait knows it !!

I respect your opinion and don't want to banter, just want to clarify something. Inflation is caused by too much money chasing too few things. That makes the price of things go up. The price of bread is 3,000 dinar today. Tomorrow after the RV (please, God) the price is initially 3,000 dinar. Has the buying power of the Iraq people gone up after the RV? Sure. Their million dinar became worth a million dollars just like yours and mine. If almost everyone in the country is given a million dollars tomorrow has the money supply increased? Sure. Is that street vendor going to sell his bread for 3,000 next month? No way. He lives around millionaires. What about houses? Everyone all of the sudden wants to go build one! Does the price go up? Yes. Cars, dishwashers? It is like the gold rush days when picks and shovels were $100.

On a smaller scale, that is one way Central Banks try to influence inflation. They increase the money supply to stimulate a stagnant economy. Our fed has done that (big time) in the shadow of the financial crisis and they better reel that back in before our economy heats up or we will be looking at Jimmy Carter inflation rates again. Money supply can be a tool to stabilize an economy or it can be a hammer that will crush an economy with hyperinflation - just run those presses and print more money! An RV that is too large does have the same effect. If the people of Iraq have more money to buy stuff and you have the same number of people, then you have an increase in money supply. It is that simple. If you do too much of that you will get inflated prices. Too much inflation is bad.

By the way, we totally agree about the future of Iraq. I think it will be the fastest growing economy on the globe. My issue with an RV has to do with the scope of the RV relative to the size of the economy. In order to support a declared value of a dollar or three dollars, other countries have to believe it is worth it or it won't trade. Iraq has to be able to pay to cash everyone out that wants to cash out an that is dependent on others accepting that the declared value is valid.

[Kent]

Hello,

-- kreativity, it is interesting to me that one of the most common reasons people state for an RV is the amount of currency the US government holds and the fact that we want pay-back. Yet it is at the same time assumed that the US will forgive the debt. It can't be both ways.--

Sorry it took so long to get back I was training some people at the gym. I don't know how to understand what you are saying because it seems as everything is centered your belief that the U.S. has not forgiven Iraq's debt when they were I believe the first country to do it but, I could be wrong on that :

http://www.militaryinfo.com/news_story.cfm?textnewsid=1324

Military News

United States Forgives 100 Percent of Iraqi Debt

By David Shelby

Washington File

December 17, 2004 - Washington, December 17, 2004 -- The U.S. government has written off 100 percent of Iraq's sovereign debt to the United States, a total of $4.1 billion, with an agreement signed by Secretary of State Colin Powell, Treasury Secretary John Snow and Iraqi Finance Minister Adil Abd al-Mahdi December 17.

"Lifting the crushing burden of the old regime's debt is one of the most important contributions we can make to Iraq's new beginning," Powell said at the signing ceremony"

Unless our military is putting out bogus articles, I think Iraq owes us an...........RV and we will be square !!

I know I am saying too much and I wan't to let others contribute, so I am going to back out of this thread, but I had to add this:

kreativity, Good post. Good article. I mis-spoke. Sorry. The arguement people make isn't that the US won't forgive debt, but that they are holding a ton of Iraq currency which (on an RV) creates new debt that can be sold to pay for the war. That is really what I was thinking of and I didn't explain that well.

Regardless, though, I still think the second part of my post is the main thing. Past debt forgiven or not (and most has), there is still a big question about how much Iraq currency value the globe will support. Ultimately (pegged or no) other countries have to believe it is worth it. They have to believe Iraq and their government can cash flow the value that is declared. If the value has inadequate basis in substance and productive capacity, the world won't support it. You are going to say that we have very little reserve basis for our own currency and you are correct, but we get away with it because a huge, resiliant economy and a very stable government still (for now) make us the safest place for foreign governments to put their money. That will be true for Iraq as well - to a point. Does an increase in currency value x1,000 exceed that limit? Most on this forum say no or they don't think about it. I am in the minority. "that dog won't hunt". Thanks to those of you who accomodate my rant. I intend to inform, but am sorry if I consumed the thread.

[JOHNJOHNNY]

common sense here please,,,,,, the Iraqi public ain't gonna take a LOP. Look for the last 6 years Ali-bobo (whoever) has worked his azz off and has stuffed his NID in a clay jar under his bed. He's sittin on 10ea. 25,000 NID notes he has saved. I they LOP him, he's screwwed! Riots & Mayhem everywhere.

[fatcat]

They said drop the zero's......Which would mean 25k to 25d. Not cash them in for smaller bills, they said DROP THE ZERO'S. Have a bad feeling again, but prepare yourself also for what may happen.

[aricfrost]

Lets hope they are wrong...