Iraq Coinage One Step Closer to Reality - Article 10/18/2011

[Dalite]

I was going to ask you about your stated intention last night - namely, how exactly would a Warka account be affected differently by a LOP. But more directly, do you think the Iraqi security ministries have sufficient force to withstand the nationwide riots that would ensue if all Iraqis suddenly found their life savings lopped overnight?

Why would they riot?

There is no loss of value

There is no loss of purchasing power

They get to use their current money for up to two years.

Even the slowest learner would learn by example in two years that there was no loss of value or purchasing power...

That refers to a redenomination.

If they LOP ( whatever that is) they could riot, or worship the landing aliens.

If the RD; not so much.

[Dalite]

LOL your right....Im not much for conspiracies, but I do believe it was all part of this plan to overtake Iraq and topple Saddam.....you dont think that the UN would want some kind of plan set for a country wanting permission to invade another and take out its leader and rebuild the country?

I doubt the US would walk in there and just be at the point of taking over the country without a procedure in place for how, why, when, where and who. I mean that document released about the "future plans of Iraq" was made before we invaded so Im quite confident that they had alot of this planned out a couple years in advance....

If you will google the Project for a New American Century (PNAC), you will get a little bit more of an indication of timeline.

It doesn't address specifics; just the prevailing thought processes.

Look at the sponsors on the link provided below.

FWIW, this became the basis for the National Security Strategy (NSS) of the Bush administration.

PNAC was first introduced in 1997, during the Clinton Administation.

PNAC

[Darin]

burn_the_village,

I would quote you, but I don't want to create a big post..

I agree with a lot of what you said.

We don't know how many foreigners hold IQD speculatively. It may not be as much as we think, but I would argue that a lot of people would cash-out upon a R/D. A good majority are in it for the big pay-off, no point in arguing that. In the event of a R/D (LOP), I plan to cash-out.... Upon cashing out, I'll than re-assess my options on what to do. Purchase lower denoms? Create a Warka account if I have not done so yet? Or just spend the money I invested on whatever I please and forget about this ride.

I imagine that many others will do the same. Now, re-denominations are common as history has shown us. But if we also look to history on re-denominations, rate adjustments are done after the old currency becomes invalid. We have the ability to safe-guard ourselves against missing out on the opportunity by exchaning for lower denominations (the new currency) or going digital through Warka. But, how much will we have to fork over in losses to obtain the new currency or account creation? Will taking that avenue be profitable? If we're still paying up to 40% above and beyond the value of lower denominations, I certainly will argue that route is not the correct one to go. A lot of fees will be paid upon creating an account.

Why do they adjust the rate after the old currency is invalid? Because for all old notes not cashed in, that is pure profit for the central bank. It gives them the ability to adjust their rate higher. They would likely conduct an audit, find out what is in circulation and compare it to how well they can back it. If they continue to maintain their current policies, I highly doubt they'll really adjust it by more than double. For the CBI to do that, 50% of their liabilities of cash in circulation would have to miss the deadline of being cashed in. Many of us over paid for what we hold (especially if we went through currency dealers). Some of us were fortunate enough to buy from their country itself, or through banks that didn't charge an extreme mark-up. So many of us will have a difficult time seeing any returns, unless we purchased when the prices were much less.

Now, I am an optimistic person and hope for better results, but I am just posting what is a realistic possibility. I see a re-denomination as more of a status quo type plan while basically just removing 000s from both the notes & exchange rate to appease cash transaction & ease accounting. It may have a more appealing exchange rate, but for anyone following the progress of the CBI & GOI will understand the reasoning behind it. It will not represent a success, but more of a value-neutral event to fix past issues.. However, upon removing the 000s from the notes, will help increase the demand for the IQD to use it in daily transactions. This will help compete with a dollarization issue, but will not entirely eliminate it.

I would imagine, even going this route, the IQD may never become internationally traded like you & I would imagine (I.e., Fx account, and so forth) until at least after the plan is completed. From there, it may enter a Fx market, but with their monetary policy, I still don't see it happening. It may become easier to exchange through exchange stations, banks, and so forth, but the value may not fluctuate to speculate against.

As far as their circulation, I will continue to have my doubts. We know they started with 6.38 Trillion, and 2 trillion of that was allocated to reserves. It is hard to imagine how they would nearly expand their money supply by nearly 5 times that original amount in 7 years. We also do not know what they pull in from circulation based on the idea that the currency is soiled. We only can find what is issued overall through their annual bulletin. In 2010, they were sitting at 27 trillion. Articles now days used to list that figure as high as 31 trillion. They've expanded 4 Trillion from 2010 to 2011, and we don't know the exact dates from when their 2010 Bulletin gathered their data to what that # is currently. Was the 27 Trillion at the end of 2010? If so, they've already released up to 4 Trillion into circulation in 9 months or less. That's an astounding figure to grasp. If this is right, they've clearly have had no interest in pulling in IQD from circulation. However, what would clearly make sense is if they're accounting from what they issue out, but not subtracting what they pull in. Now keep in mind, I'm not talking about pulling notes that are not defective, I'm speaking of notes that are falling apart, stained, ripped, faded, etc. In a region where a note has a shorter life span due to extreme environments, dirty hands, incorrect storage, and higher frequency of usage, the notes will likely soil out faster than how we would imagine in the U.S. When that happens, those notes need to be replaced.

So in theory, which would make a whole lot of sense, each note issued is the direct result of drawing in a soiled bill. Big Iron Worker sort of started this idea through his heavy research, and I've sort of gotten on that train with him in how it somewhat makes sense. If this theory were to be true, it would completely make sense on how only 4 Trillion exist from articles that have been released. The figures would likely be freom 4-5 trillion, all while still holding 2 trillion in reserves. Since the initial release of the new currency, the currency has also appreciated in value, to the 1170 we all hate to see everyday.

So, what is they're really only accountable against 4 trillion? Well that changes the ball game significantly. I would argue that under that result alone, they could simply & nearly back a rate of $0.01.

At an exchange rate of $0.01, the 25,000 note would buy $250 worth of goods. We would see modest returns, and most of us would be estatic. Going this route would also push some people to cash-in a good portion, while others would continue to wait. The CBI would not be liquified so quickly as some would argue if it were to straigh-up R/V at a higher rate.

So, maybe after the first wave off cash-outs, they draw in all 25,000 notes. Leaving the economy with only 10k notes which would be valued at $100. They now have a bill that can be used for larger purchases. 25k's would be more non-existant, and 10ks & 5ks would start to decrease as well. They would need a couple lower denominations, but they would be able to add them over time. This could all be done upon maintaining their current monetary policies. They could simply alter that policy in itself, become internationally traded, and allow it to appreciate that route. But, would $0.01 be too low?

From my review of the annual bulletins (which are found on the CBI), I have never found any indication of accounting for soiled bills. We would be naive to believe they don't exist. Money that is used frequently does not exist or last forever. They do need to be replaced... Does the CBI report that? Could an even exchange of soiled for fresh still be marked down as issuing additional currency? This would be something to research & look for.

R/V or R/D, their foreign cash reserves are going to take a hit... It almost appears as if they really do intend to R/D, but they're trying to trick speculators into not cashing out all at once right away. The hint is by stating that they wish to be strong like 1980s, or how this method will help strengthen the currency. Well, I highly doubt many will wait. In 2004, many foreign countries had people who held the old regime IQD. They were locked out of Iraq as they did their exchange. Some people lost a LOT of money... I would assume they do not wish to re-live that fate & would exchange as soon as possible upon an official R/D announcement.

As for all other countries, we may do the same, simply because we were led to believe of higher returns. We may not have fully believed it, but we hoped for it. Could the CBI handle cashing out the old currency and liquidating their reserves they were so proud to build up?

I am doubtful of all possible scenarios.. Just hoping for an outcome that I can be happy with

[keepmwlknfny]

I was going to ask you about your stated intention last night - namely, how exactly would a Warka account be affected differently by a LOP. But more directly, do you think the Iraqi security ministries have sufficient force to withstand the nationwide riots that would ensue if all Iraqis suddenly found their life savings lopped overnight?

Dalite pretty much touched all the bases on your question,

But I dont think that a Warka account would be affected differently at all....whatever is to happen with the physical bills will also apply to any electronic funds as well. So if they drop 3 zeros, then it comes off the account as well but there is no loss in wealth because prices will be adjusted accordingly and purchasing power would be increased so it makes up for taking the zeros off. I read that there was no issue with this in 2004 during the exchange and that banking accounts didnt need to be adjusted since it was a 1 to 1 exchange for the most part.

[Sanssouci]

Well, I see that our fearless leader, Adam Montana, lately says: Today is a great day to be a dinar investor! I am VERY positive on this right now. I have people emailing and calling me, people I work with every week, and I respect their opinions, telling me that YES, Iraq can sustain an RV.

Read more: http://www.another site.com/#ixzz1bG4sF99x

Edited October 19, 2011 by Sanssouci

[keepmwlknfny]

YES, Iraq can sustain an RV.

I dont think that they cant.....Im sure they could sustain some kind of RV, its just a matter of how much they can support!!!!

[Dalite]

Well, I see that our fearless leader, Adam Montana, lately says: Today is a great day to be a dinar investor! I am VERY positive on this right now. I have people emailing and calling me, people I work with every week, and I respect their opinions, telling me that YES, Iraq can sustain an RV.

Read more: http://www.another site.com/#ixzz1bG4sF99x

There is no doubt they can afford a RV.

With the CBI openly stating that at $58 billion in foreign reserves, they can back the Exchange Rate 110%.

They openly admit they can revalue at a 10% increase in current value.

They also openly state that they are looking to increase the backing to $70 billion in foreign reserves.

So, currently, there is no doubt that they can RV 10% (117 Dinar per Dollar) to a new rate of 1053:1 and still be able to cover the new rate at 100%.

The question is, will they be allowed to use fractional reserve banking to make more significant increases in the value of currency still holding the zeros added due to hyperinflation, while on debt to the IMF and the Paris Club.

Currently 10% with full backing. Above that, the creditors may have some say in how much of the debt that Iraq has contracted to pay back can be allowed to be inflated away by Iraq revaluing the currency as a means of canceling debt.

[zigmeister]

There is no doubt they can afford a RV.

With the CBI openly stating that at $58 billion in foreign reserves, they can back the Exchange Rate 110%.

They openly admit they can revalue at a 10% increase in current value.

They also openly state that they are looking to increase the backing to $70 billion in foreign reserves.

So, currently, there is no doubt that they can RV 10% (117 Dinar per Dollar) to a new rate of 1053:1 and still be able to cover the new rate at 100%.

The question is, will they be allowed to use fractional reserve banking to make more significant increases in the value of currency still holding the zeros added due to hyperinflation, while on debt to the IMF and the Paris Club.

Currently 10% with full backing. Above that, the creditors may have some say in how much of the debt that Iraq has contracted to pay back can be allowed to be inflated away by Iraq revaluing the currency as a means of canceling debt.

Question Daylite, we have been reading some articles where Iraq is trying to get their debtors to forgive some of their debt or maybe all I don't know. What I wondered was if they were indeed RD'ing would that be important to them, it seems if they are RV'ing it might be very important.

[MrFnHappy]

There is no doubt they can afford a RV.

With the CBI openly stating that at $58 billion in foreign reserves, they can back the Exchange Rate 110%.

They openly admit they can revalue at a 10% increase in current value.

They also openly state that they are looking to increase the backing to $70 billion in foreign reserves.

So, currently, there is no doubt that they can RV 10% (117 Dinar per Dollar) to a new rate of 1053:1 and still be able to cover the new rate at 100%.

The question is, will they be allowed to use fractional reserve banking to make more significant increases in the value of currency still holding the zeros added due to hyperinflation, while on debt to the IMF and the Paris Club.

Currently 10% with full backing. Above that, the creditors may have some say in how much of the debt that Iraq has contracted to pay back can be allowed to be inflated away by Iraq revaluing the currency as a means of canceling debt.

I'm not aware of any treasury or CB that employs fractional banking. It is the commercial banks that are allowed to use fractional banking which in turn, increases the M2, which then becomes the burden of the treasury or CB to cover said M2.

I know some people are going to say, "look at the US".....different game...internationally traded fiat currency, not to mention it is THE reserve currency the world over.

I'm not aware of any currencies other than the major traded ones (JPY, USD, CAD SWF, EUR and GBP) that aren't backed fully.....if there any such currencies, then I doubt they are accepted as payment anywhere but inside the issuing country.

Edited October 19, 2011 by MrFnHappy

[Sanssouci]

There is no doubt they can afford a RV.

With the CBI openly stating that at $58 billion in foreign reserves, they can back the Exchange Rate 110%.

They openly admit they can revalue at a 10% increase in current value.

They also openly state that they are looking to increase the backing to $70 billion in foreign reserves.

So, currently, there is no doubt that they can RV 10% (117 Dinar per Dollar) to a new rate of 1053:1 and still be able to cover the new rate at 100%.

The question is, will they be allowed to use fractional reserve banking to make more significant increases in the value of currency still holding the zeros added due to hyperinflation, while on debt to the IMF and the Paris Club.

Currently 10% with full backing. Above that, the creditors may have some say in how much of the debt that Iraq has contracted to pay back can be allowed to be inflated away by Iraq revaluing the currency as a means of canceling debt.

Generally speaking, anything under 1IQD:.01USD does not interest the majority of us here. When nearly every other nation in the world uses fractional reserve banking, and when most are already in debt for trillions, what right would the IMF/Paris Club have to deny Iraq the privilege - that is, if they are to be readmitted to the community of nations (i.e., Chapter VII release). I would liken it to Star Wars III: Revenge of the Sith, wherein the Jedi Council awarded Anakin Skywalker a seat on the council, but refused to give him the rank of Jedi Master. I confess: I am a Star Wars geek.

Question Daylite, we have been reading some articles where Iraq is trying to get their debtors to forgive some of their debt or maybe all I don't know. What I wondered was if they were indeed RD'ing would that be important to them, it seems if they are RV'ing it might be very important.

Right. I understand that at least Algeria has forgiven Iraq of its debt.

Edited October 19, 2011 by Sanssouci

[jmw]

I'm not aware of any treasury or CB that employs fractional banking. It is the commercial banks that are allowed to use fractional banking which in turn, increases the M2, which then becomes the burden of the treasury or CB to cover said M2.

I know some people are going to say, "look at the US".....different game...internationally traded fiat currency, not to mention it is THE reserve currency the world over.

I'm not aware of any currencies other than the major traded ones (JPY, USD, CAD SWF, EUR and GBP) that aren't backed fully.....if there any such currencies, then I doubt they are accepted as payment anywhere but inside the issuing country.

Correct...fractional reserve banking only applies to commercial banks...and Iraq already has this for their commercial banks (I believe it is currently 15% reserve)...Iraq is a pegged currency which means they have to back their currency at 100% as they are required to buy back any currency offered at the pegged rate...or they would need to adjust the rate...if they moved to a float they would not be required to back it 100% but if they did not have the GDP or reserves to support it the rate would quickly fall based on the mood of the open market.

But Dalite is correct in that they have enough reserves to adjust their rate and soon they could move as much at 20%...

Edited October 20, 2011 by jmw

[MrFnHappy]

I wanted to add to my last post that Iraqi banks are allowed, and do employ fractional banking. The CBI has allowed different percentages as a means to boost the banking sector and the economy while managing inflation.

[MrFnHappy]

Correct...fractional reserve banking only applies to commercial banks...and Iraq already has this for their commercial banks (I believe it is currently 15% reserve)...Iraq is a pegged currency which means they have to back their currency at 100% as they are required to buy back any currency offered at the pegged rate...or they would need to adjust the rate...if they moved to a float they would not be required to back it 100% but if they did not have the GDP or reserves to support it the rate would quickly fall based on the mood of the open market.

But Dalite is correct in that they have enough reserves to adjust their rate and soon they could move as much at 20%...

Thanks for the post. What you wrote, and I highlighted, seems to be unknown, or simply ignored by many.

And yes, 15% appears to be the current reserve rate.

[JWJW11]

Thanks for the post. What you wrote, and I highlighted, seems to be unknown, or simply ignored by many.

And yes, 15% appears to be the current reserve rate.

I thought the lopsters were being moved to lop talk??? They are all out in full force on this one!

[uncirculd]

Arguing for the sake of arguing :D

This was released by World Coin News, not the CBI.

Therefore, they only have what the media has released to go by.

So, they may not know what the CBI intends to do, so they take what the media has portrayed as a sign.

Highly doubt they have full details in information from the CBI & released it to the public prior to the CBI doing so themselves.

So basically, this is just an opinion(s) article...

I don't know about that. Numismatist dealers usually know what coins are coming up. They also can buy coins direct from the mint that we cannot. For instance some coins the US Mint use to offer can no longer be sold to the public. 1/10 Platinum Bullion Eagle Coins Un-circulated coin is one of them. You can only buy the Proof Ounce. A few years ago you could buy Platinum Eagle 1/10 ounce un-circulated. This is bullion investing. Like Gold.

CBI has 2 coins on their website. They tell you they are Iraqi coins but not in circulation. Only sold to dealers for collectors. You can buy them from a dealer. But do they tell you that? No. I have not seen it on their site anywhere. If you click on any of the coin & currency all you get it a picture. I am not sure if you can buy the coins directly or not. But I am not so quick to discredit the numismatist. This is what they do for a living. They don't speculate much, they buy bullion & currency to hold it. For occasions like now with the rise of Gold prices.

Many people didn't know about the 2009 Lincoln Penny Series. They got them in change and thought they found an old cent. Same with the Sacagawea, and Presidential Dollars. Matter of fact, some folks still hoard the Susan B. It is all advertised on the US Mint site. Iraq must have somewhere they put this info. We just don't know where to find it.

Edited October 20, 2011 by uncirculd

[Dalite]

Question Daylite, we have been reading some articles where Iraq is trying to get their debtors to forgive some of their debt or maybe all I don't know. What I wondered was if they were indeed RD'ing would that be important to them, it seems if they are RV'ing it might be very important.

Over 80% of their debt was negotiated and forgiven, much due to the efforts of the Paris Club.

The remainder was amortized under two schedules, Iraq's choice.

One would be paid off in 2038, and the other in 2028,

Iraq makes two payments a year; one in January, the other in July. IIRC, they fall on the fiest of those two months.

If it is RD, there is no difference which Iraqi currency is converted to dollars to make the payment ; no change in value.

If it RVs, a large part of the debt to both the Paris Club and IMF would be inflated away, as a much smaller dinar liability would purchase a much higher USD or SDR equivalent, and pay the debt off with money with a new declared value that was exponentially higher than when the debt terms were negotiated.

I won't say it is not possible, and won't say it would prevent either the Paris Club or IMF from ever offering their assistance to Iraq again; but it would certainly be a possibility.

I think I stated before that it is usually considered to be bad manners to relieve your self in your benefactors cereal bowl while dinning on their dime.

I'm not aware of any treasury or CB that employs fractional banking. It is the commercial banks that are allowed to use fractional banking which in turn, increases the M2, which then becomes the burden of the treasury or CB to cover said M2.

I know some people are going to say, "look at the US".....different game...internationally traded fiat currency, not to mention it is THE reserve currency the world over.

I'm not aware of any currencies other than the major traded ones (JPY, USD, CAD SWF, EUR and GBP) that aren't backed fully.....if there any such currencies, then I doubt they are accepted as payment anywhere but inside the issuing country.

I am of the same opinion, that the CBI would not be allowed to break the pattern of central banks backing the currency; especially when hard pegged to another currency.

Their press releases state they are set to back it at 100%+.

I just put that in there to soften the reality of what the numbers indicate.

Who knows, they might try to do so at the front of the line, but the guys and gals waiting further back could be SOL, as in any other Ponzi scheme that try's to offer fine dining from a bowlful of crumbs.

10, 15 or 20% increase would be huge as an increase in monetary value...

[keepmwlknfny]

Thanks for the post. What you wrote, and I highlighted, seems to be unknown, or simply ignored by many.

And yes, 15% appears to be the current reserve rate.

It appears as people are now deemed a lopster if they speak about factual information on how the CBI or other CB back their currency, even though that has nothing to do with a RD.....wow......is that because it shows serious flaws in the idea of Iraq being able to cover a high RV with fractional banking??

[JWJW11]

It appears as people are now deemed a lopster if they speak about factual information on how the CBI or other CB back their currency, even though that has nothing to do with a RD.....wow......is that because it shows serious flaws in the idea of Iraq being able to cover a high RV with fractional banking??

Im just a fan of consistency. 6 months ago the lopsters took a stance that an RV is NOT possible but now its they could sustain an RV....which one is it?

I dont really see a whole lot of members hoping for a huge RV like you imply....just lookin fpr somethin north of .10 cents. You guys sure like to twist things......way to smart for your own good!

[MrFnHappy]

It appears as people are now deemed a lopster if they speak about factual information on how the CBI or other CB back their currency, even though that has nothing to do with a RD.....wow......is that because it shows serious flaws in the idea of Iraq being able to cover a high RV with fractional banking??

Clearly, a case of "shooting the messenger".

[JWJW11]

Clearly, a case of "shooting the messenger".

No shooting of the messenger....I just think you way off. There is much more to all of this then lops and fractional banking. Take a look at the big picture...

[keepmwlknfny]

Im just a fan of consistency. 6 months ago the lopsters took a stance that an RV is NOT possible but now its they could sustain an RV....which one is it?

I dont really see a whole lot of members hoping for a huge RV like you imply....just lookin fpr somethin north of .10 cents. You guys sure like to twist things......way to smart for your own good!

And that seems to be the issue is that you try and group people together as if they all think the same thing....shame shame.....

I dont believe a RV is impossible.....just a high one (being around 1 dollar) overnight seems like a stretch.....I was referring to the "economists explanation" of how a high RV around a dollar would work....it gets passed around all the forums and whenever it makes its way here again, its always picked apart about how it wouldnt work that way. Try not to assume what a bunch of people believe, take them all as individuals and things wont be so confusing for you.

[dhardage]

Might want to check your first sentence Keep. You sure about that?

[keepmwlknfny]

Might want to check your first sentence Keep. You sure about that?

What do you mean? He thinks that all these people that understand RD think the same exact way.....making an assumption that we all think a RV is impossible

[dhardage]

What do you mean? He thinks that all these people that understand RD think the same exact way.....making an assumption that we all think a RV is impossible

CR** I misread AGAIN, sorry, too early! thought you said I dont believe it is possible. I need COFFEE. or a xanex

[2fast4u2c]

An RV is possible but I don't think as likely based on the CBI statements. Are they smoke and mirrors..maybe. Just have to wait and see.

For the record...I am here for an RV!