Not looking good. Two articles that don't leave me feeling happy

[theadicts]

New Dinars for Old

At the end of last month, a spokesman for the Central Bank of Iraq (CBI) told reporters that a plan to redenominate the Iraqi dinar will be presented to the Council of Ministers in the near future. (See here and here.) The Council is then expected to submit the relevant legislation to Parliament for a vote. If the lawmakers approve the project, all existing banknotes will be replaced with new currency at the rate of 1,000 old dinar for one new over some unspecified period of time.

Given Parliament’s current backlog, this change can hardly be imminent. Still, you might think they could get around to voting on the CBI’s proposal some time before the end of this year. In that case, the redenomination could presumably be completed by the end of 2012.

The process will necessarily involve both the exchange of new banknotes for old and the restatement of contractual obligations in terms of the new currency. Among other things, three zeros will have to be eliminated from the share capital of the ISX listed companies as well as from the number of shares each has outstanding. (This will keep the par value at one dinar.)

I’m told this should be a relatively straightforward change for the depository center to make. Trading should not have to be suspended for more than a few days and it may be possible to proceed in phases of a few names at a time so that the entire market does not have to shut down during the transition period.

Similarly, it seems reasonable to expect the CBI to exchange new dinars for US dollars at one thousandth the rate for old dinars. In other words, if the original rate were IQD 1170 = US$ 1, post-redenomination this would become IQD 1.170 = US$ 1.

All of this seems reasonably straightforward for anyone holding assets such as currency or shares inside the country. For those holding dinar cash outside Iraq, however, things may not be so simple. How and on what terms their old dinars will be convertible into the new currency remains an open question.

Iraq Prepares to Redenominate its Currency

According to a report from Al Sumaria News, Iraq’s Central Bank announced on Thursday that it is planning to delete the zeros from its currency, the Iraqi dinar.

This step is one of the bank’s strategic missions, the Central Bank said adding that the new currency will include the Kurdish language in addition to the Arabic language.

“The zeros that were added to the Iraqi currency previously constituted a large money supply up to 28.500 trillion Iraqi Dinar and 5 trillion banknotes”, the adviser of Iraqi Central Bank governor Mothahhar Mohammed Saleh [Mudher Mohammed Saleh] told the agency.

“The Central Bank has prepared all requirements needed to delete the zeros from the Iraqi Currency”, Saleh said.

“This step is one of the Iraqi central bank’s strategic missions. The monetary policy of the bank aims to structure and reduce the currency in a country moving towards an economic phase”, he added.

“The project of deleting zeroes is complete. It will be submitted to the central bank’s administration in the next session. Then, it will be passed to the ministerial council before presenting it to the Parliament for vote. The mechanisms of changing the currency will be gradual. It will be preceded by awareness campaigns for citizens”, the adviser of Iraqi Central Bank governor said.

“The new currency will be printed after deleting the zeros and will include the Kurdish language in addition to the Arabic language. It will also bear photos of Iraq’s civilization in addition to symbols of Iraqi intellectuals and figures”, Saleh noted.

Sanan Al Shebeibi [sinan Al-Shabibi], Governor of Iraq’s Central Bank, affirmed during the meeting of independent commissions on June 19 with Prime Minister Nuri Al Maliki that the bank is preparing all requirements needed to replace the Iraqi Currency.

Iraq’s Central Bank has four branches including Basra, Sulaimaniah, Erbil and Mosul. It was founded as an Iraqi independent bank by virtue of Iraq’s Central Bank Law issued on March 6, 2004.

The bank is responsible for the prices stability and the implementation of monetary policy including exchange rates, the management of foreign reserves, the issuance of currencies and the organization of the banking sector.

It’s six years since neighbouring Turkey redenominated its currency, making one ‘new Turkish lira’ equal one million ‘old Turkish lira’.

Link: http://www.iraq-businessnews.com/?s=zeros& also there are other interesting articles on the same page.

[BJinMontreal]

Information or disinformation?

If true, I'm not liking the sound of either of those articles either.

[happygilmore]

I have a feeling the article's are telling us exactly what is going to happen and all the wishful thinking in the world won't change there plans.

[theadicts]

Funny how this gets moved to different section. Its got a link to a credible news site. Silencing the truth???

[billio0]

Thanks Theadicts for the post.

I believe these articles have surfaced here before, and I for one don't see the need to be overly concerned about them as far as our investment in IQD is concerned. Yes, it says there is a plan to eliminate the large notes with 3 zeros and replace them with new ones without the 3 zeros. Yes, it says that the value overall shall not change.

What it does not say, and will not say, is that the exchange rate must also change sooner or later in order for their currency to be internationally tradeable. The good news for us is not in what they plan to do in replacing their old currency with a new one. It has more to do with the fact that we are the least of those who hold the larger notes outside of Iraq. Both large and small companies, corporations, and investors worldwide, not to mention many other governments hold the same large 3-zero notes that we do.

If their intention was to simply delete and remove all of these large notes from existence forever, then yes I think we have much to worry about. But, it has always been my belief that as long as those with more to lose than we ever have are holding those same large notes, we have nothing to be concerned about since those folks are the ones who will not agree to lose their investment in IQD.

I'm not saying here that there won't be that dreaded word and concept, LOP. But, even if that were the case, we still would not lose what we paid in (or most of it). And, as such, if Iraq is all that it is promoted to become, then we will just need to wait and see how long it shall take for the currency and country to gain in value worldwide.

Just remember, we own their currency rather than some stock in their country. They must continue to honor it on matter what. We were given the rights of Iraqi citizens through Presidential Executive Order to purchase and own this currency, and therefore we can only eventually profit if we remain patient.

Keep in mind, this is just my opinion since I am not an expert on such things.

Thanks again for the post.

[tyron]

Funny how this gets moved to different section. Its got a link to a credible news site. Silencing the truth???

I don't think its silencing the truth, Bug. Nobody really knows if it is really the truth, and the media has been known to be willing to lie when the government tells them to. And on this site there are too many people that believe that to be the case.

[Aqua Dude]

ANOTHER NEWS BLOG

HAHAHAHAHAHAHAHAHAHAHAAHAHAH

[xyzzy]

What it does not say, and will not say, is that the exchange rate must also change sooner or later in order for their currency to be internationally tradable.

Sure, the new dianr will have an exchange rate of (if they only do a 1000:1 RD) of $0.86 USD per dianr, or 1.17 IQD per 1 USD just as the articles say. Are you thinking a change in the rate beyond that is needed for international acceptance?

[billio0]

Sure, the new dianr will have an exchange rate of (if they only do a 1000:1 RD) of $0.86 USD per dianr, or 1.17 IQD per 1 USD just as the articles say. Are you thinking a change in the rate beyond that is needed for international acceptance?

I'm really not comfortable trying to guess what the rate will come out at. I will say that my personal belief is that it shall be at least close to a 1 IQD:1 USD, but probably a little more than that.

The problem that Iraq has is that we now have the Internet and are connected worldwide and instantaneously. Therefore, what could be kept secret in the past is virtually impossible for very long today. And, with so many now invested all over the world, all they are able to do is release confusing or contradictory information to hopefully throw us off. But even that doesn't work for long or very well.

Thus, we are in the position of knowing this event in moments of it happening. Yes, we will continue to get the rumors that either give us hope or bring us disgust. But, in the end on one rather mundane day and time, hopefully sooner than later, we will all hear about it and respond with disbelief because we've hear it so often that it just won't seem real, even though it will be real.

We will laugh, cry, sing, dance, pray, shout, and probably every other human expression of joy and emotion. I for one am looking for that rather mundane and otherwise uneventful day and time. That is why I come here each and every day to find out what I can.

I know we shall get our RV, and I hope you do too.

[firefighter_218546]

I hope this puts your minds at ease.. The date on the first post was July 5 2011 and the second news report was June 27 2011... I hope things have changed since than, all we can do is wait and see. There is nothing we can do to change what happens so please don't get too worked up about this, what happens happens..

Go Rv

God Bless America

[Froto]

Sure, the new dianr will have an exchange rate of (if they only do a 1000:1 RD) of $0.86 USD per dianr, or 1.17 IQD per 1 USD just as the articles say. Are you thinking a change in the rate beyond that is needed for international acceptance?

International acceptance? Before you believe the gurus who told you it must be a certain rate for international acceptance, you might want to look at South Korea.

[mrref]

I dont know why its sooooo hard to believe that removing the zeros means lop.

Plain and simple folks

People just don't understand why would Iraq want a lop, that will only put them farther behind. They want to move forward not backwards. They want a tradeable currency.... Now thats plain and simple folks

[xyzzy]

I'm really not comfortable trying to guess what the rate will come out at. I will say that my personal belief is that it shall be at least close to a 1 IQD:1 USD, but probably a little more than that.

I agree with that, but that is WITH an RD of 1000:1 and an associated or concurrent RV of 1.2x . That would bring the current dinar's exchange rate from $0.00086 to $0.001 so that an 1000:1 RD on top of that brings out the new dianr at an even $1 .

The problem that Iraq has is that we now have the Internet and are connected worldwide and instantaneously. Therefore, what could be kept secret in the past is virtually impossible for very long today. And, with so many now invested all over the world, all they are able to do is release confusing or contradictory information to hopefully throw us off. But even that doesn't work for long or very well.

Here is where we disagree as I don't think there is any evidence of a mis-information campaign. If they were not planning to RD at all I see no reason to even bring it up, but they have done so for years now. An RV of couse (of any size) is kept secret.

I know we shall get our RV, and I hope you do too.

I hope so too. I think we have a decent shot at a small profit but no instant millions

[Camelspiderman]

I have a feeling the article's are telling us exactly what is going to happen and all the wishful thinking in the world won't change there plans.

Is this the same happy gilmore that worked at steel dragons back in 2004?

[theadicts]

People just don't understand why would Iraq want a lop, that will only put them farther behind. They want to move forward not backwards. They want a tradeable currency.... Now thats plain and simple folks

To reduce the number of bills in circulation. To combat the growing inflation rates.

There are plenty of valid reasons.

[xyzzy]

People just don't understand why would Iraq want a lop, that will only put them farther behind. They want to move forward not backwards. They want a tradeable currency.... Now thats plain and simple folks

Moving forward means growing the economy. There are no magic beans to do this. The RD is NOT the magic means to move forward, its just one needed step on that path. As Shabibi said in the video posted the other day, people exaggerate what the RD is about, its just to make transactions and accounting easier, get their exchange rate up to around what other countries in their region are using, and undoing the massive currency printing done by Saddam. I think there is also a healthy dose of PR in it, as having the 000 notes makes them look bad. Then they move forward from there, hopefully including a small RV, but we'll have to see.