Thread: Iraq/Dinar News. before Febuary 2nd 2006

I received this PM from someone who thinks dinar hasn't been actually removed from the economy. Since I am busy, would any one else like to respond?

I have a question for you re: supply of dinar in Iraq, and whether the CBI is, in fact, the sole source of supply. If you read page 24 of this document from the Federal Reserve Bank of Boston http://www.bos.frb.org/economic/ppdp/2004/ppdp0401.pdf

you will find the following description of the relationship between the CBI and the MOF:

"Central banks in small open economies typically intervene in currency markets to limit extreme volatility. Currently, the tool used by the Central Bank of Iraq to influence the exchange rate and control the growth of the domestic monetary base is a foreign exchange auction, which has occurred on a daily basis since October. The Ministry of Finance sells dollars from its oil receipts to the CBI, purchasing dinars to pay for government operations. The CBI then sells some of those dollars in the daily foreign exchange auctions. Transactions at this auction were typically $10-$15 million a day by the end of March 2004."

My question to you is this: If the MOF is purchasing dinar to pay for government operations, isn't the dinar purchased going right back into the Iraqi economy, paying for salaries and all kinds of government projects? Because of this relationship between the CBI and the MOF, I wonder whether the dinar in Iraq really is "drying up."

Feel free to post this question on the forum if you wish, I'm very interested to hear your reply.

Originally Posted by Gloribee

I think it means that when the lower denoms are issued a 1 dinar note will be given the same value as the 1000 dinar note, and the 1000 will be worth that much more again. JMHO, but we have said the lower denoms are one of the keys to this whole thing.

Gloribee

Errr, that would be a 'zero lop'... that's our biggest fear folks!

Exactly what Turkey and Romania have done in very recent years.

The simple answer to the above is yes. This is how it always was then suddenly someone assumed that the CBI was withdrawing the currency (taking out of circulation) which is not true. If it were true it would leave Iraq with no local currency.

The MOF sells oil for USD, that USD is sold to the CBI for dinars to pay needs and then the cycle repeats. This is likely the same cycle that will occur with the budget and a reason 57 trillion dinar will not be needed.

Another myth is the HCL being important to a reval, not so if they continue selling oil for dollars. It will be a very long time if ever that oil is sold for dinar.

Originally Posted by RetMil

what it means for us. Anyone have an idea?

When this was orginally published this was one members take on it.

Originally Posted by SoFla

OK, I believe this to be the meaning of that article...

"Iraq is considering redenominating the dinar, printing new banknotes to remove inflation-generated zeros from its currency", the finance minister said on Thursday.

Meaning:

Iraq is poised to release the lower denominations that have already been printed so that they could be used in normal every day commerce once the value of the dinar has been raised to near parity to the dollar.

Senior government and central bank officials have told Reuters the proposal has been under consideration for some time to "make one new dinar equal to 1,000 current dinars, a move that would bring the currency closer to parity with the U.S. dollar".

Meaning:

Simultaneously along with the release of the smaller denominations, the value of the 1,000 dinar (which is now worth .68 dollars) will become the value of the newly released 1 dinar. By doing this, it would bring the currency closer to the same value of the USD.

Make sense to me! 1 dinar = .68 USD or 1,000 dinar = $680 USD This would equate to the 25,000 dinar = $17,000 USD

LOOP THE LOP! HANG 'EM HIGH!

Cheers!
DayDream

Originally Posted by njd2004

Errr, that would be a 'zero lop'... that's our biggest fear folks!

Exactly what Turkey and Romania have done in very recent years.

Fuzz, guess Im not explaining myself very well. NO LOP a reval, with a major increase in value of the dinar. Thats what Im trying to say.

Gloribee

PS Thxs DD, was having a heck of a time.

Originally Posted by Wm.Knowles

I received this PM from someone who thinks dinar hasn't been actually removed from the economy. Since I am busy, would any one else like to respond?

I have a question for you re: supply of dinar in Iraq, and whether the CBI is, in fact, the sole source of supply. If you read page 24 of this document from the Federal Reserve Bank of Boston http://www.bos.frb.org/economic/ppdp/2004/ppdp0401.pdf

you will find the following description of the relationship between the CBI and the MOF:

"Central banks in small open economies typically intervene in currency markets to limit extreme volatility. Currently, the tool used by the Central Bank of Iraq to influence the exchange rate and control the growth of the domestic monetary base is a foreign exchange auction, which has occurred on a daily basis since October. The Ministry of Finance sells dollars from its oil receipts to the CBI, purchasing dinars to pay for government operations. The CBI then sells some of those dollars in the daily foreign exchange auctions. Transactions at this auction were typically $10-$15 million a day by the end of March 2004."

My question to you is this: If the MOF is purchasing dinar to pay for government operations, isn't the dinar purchased going right back into the Iraqi economy, paying for salaries and all kinds of government projects? Because of this relationship between the CBI and the MOF, I wonder whether the dinar in Iraq really is "drying up."

Feel free to post this question on the forum if you wish, I'm very interested to hear your reply.

I believe the daily budget (spending) is far, far less than the intake of Dinar.

True, when the daily amounts were $10-$15 million a day (in 2004) the transactions resulted in a "wash" of sorts when you place the Dinar back into the economy via wages, etc.

Since the end of October 2006, the daily auction amounts have increased nearly ten-fold. I'm no mathmetician, but I think the amount being absorbed into the CBI greatly exceeds the amount going back out...thus the "removal" of Dinar from circulation.


So, how did I do?

Thank you.

Originally Posted by DayDream

When this was orginally published this was one members take on it.

Originally Posted by SoFla

OK, I believe this to be the meaning of that article...

"Iraq is considering redenominating the dinar, printing new banknotes to remove inflation-generated zeros from its currency", the finance minister said on Thursday.

Meaning:

Iraq is poised to release the lower denominations that have already been printed so that they could be used in normal every day commerce once the value of the dinar has been raised to near parity to the dollar.

Senior government and central bank officials have told Reuters the proposal has been under consideration for some time to "make one new dinar equal to 1,000 current dinars, a move that would bring the currency closer to parity with the U.S. dollar".

Meaning:

Simultaneously along with the release of the smaller denominations, the value of the 1,000 dinar (which is now worth .68 dollars) will become the value of the newly released 1 dinar. By doing this, it would bring the currency closer to the same value of the USD.

Make sense to me! 1 dinar = .68 USD or 1,000 dinar = $680 USD This would equate to the 25,000 dinar = $17,000 USD

LOOP THE LOP! HANG 'EM HIGH!

Cheers!
DayDream

is this article from june of 2006 or is there something new???

I didnt mean to revisit this zero lop stuff again in posting the article, I just found the 1000:1 interesting as we have heard it again in recent articles. So
I thought I would post this article I found which clarified things so much better as far as the "three zeroes".

The Ministry of Finance and the Central Bank a proposal to lift the value of the Iraqi dinar Iraqi returning to normal, and is this proposal and supported the World Bank. This announcement l (morning), Finance Minister Jabr Al statement said : We have suggested to the Governor of the Central Bank raising three zeroes on the Iraqi dinar and the lifting so that the value of the dinar was equal to the dollar.


Translated version of http://ht/

Sorry link no longer available

Cheers!
DayDream

Originally Posted by duck2000

is this article from june of 2006 or is there something new???

July '06

Cheers!
DayDream

for some reason i feel like there going to hit us with a left hook when we dont expect it, just a gut feeling ,hope im wrong