Thread: Iraq/Dinar News. 09/05 to 01/14/07

If an internal peg is suppose to happen tomorrow (I saw this rumor in an earlier post), how will that affect the price to buy it outside of Iraq. My assumption is it will cost us more to buy, if we want to add to our stash.

Thanks,

Johnny

Johnny,

I believe the earlier post was actually speculating that the internal small reval would happen last Sunday, which did not happen. Personally I find the concept of an "internal" reval to be completely contradictory. The exchange rate is by definition not internal. I would recommend not worrying about that possibility at this point. Just join the waiting game and see what happens.

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I don’t know about you all but as far as I’m concerned a Zero Lop is an unacceptable ending to my IQD investment adventure. To be quite honest I would not be all that happy with a 30% to 70% ROI. I realize this is a high risk investment and normally those types of returns would be stunning in their breadth. But when I did my research for a risky investment I was looking for what could be a potential “home run” type hitter. Seeing the grossly undervalued IQD I thought I had found my mark. A Zero Lop basically ends that, except maybe my ISX portion of the investment. Naturally as we get closer to finding out what the real outcome of this is we will get articles such as those we have seen. Thus I decided to sit back and make a complete “blow by blow” analysis of the “Zero Lop” article under question. First off the following analysis borrows from some others who also have looked at this and I give them credit for their work and thank them for a unique look at the material. Some of the analysis is originally mine as well. With so many people interested in this we will have some duplication in effort.

http://www.msnbc.msn.com/id/13738902/
http://www.gulf-daily-news.com/Story...&IssueID=29109

Let’s start with the headlines. The MSNBC headline reads: “Iraq says considering knocking zeros off dinar.” The Gulf Daly News Voice of Bahrain reads: “Iraq plans to revalue currency.” Holy Smokin’ Jokers!!! Talk about two extremely different headlines!!! The articles are identical but the headlines are vastly different. Of course we’ve all read news headlines in the past that have very little to do with the content of the actual article. I think the Bahrain (1 IBD = $2.7 USD btw) version is the one we hope for! And before we get into the meat of this article, keep in mind it was translated from Arabic to English, thus trying to ascertain the true meaning may be a futile attempt. More likely we’ll have to wait for the July meetings to find out what the Iraqis final plan will be.

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

Some have taken this first sentence to mean a complete reprint and removal of the current NID (IQD) notes ie a Zero Lop. (Again I stress that many times translated writings are hard to understand and carry over the same meanings in the original language). This could easily mean getting rid of or “removing” the higher denominational 25K/10K/5K notes. If you revalue (as the Bahrain title states) the IQD to nearer the $1 USD we all know from the first Munny Dinar Theorem the higher notes become obsolete for everyday commerce. They then become savings certificates and bank to bank transaction notes. So no complete reprint is needed. Instead they “print new banknotes” of lower denominations (50, 25, 10, 5, and 1 Dinar notes) to cover the increase of value (re-val) of the IQD.

“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.”

A few other AD.C members have already pointed out this could be interpreted as meaning Iraq wants to print a new Dinar note worth One Dinar. By re-valuing the Dinar from .00068 to .68 the newly printed One Dinar note WOULD equal the old 1,000 IQD note (again no need for a Zero lop) AND accomplish the goal of really moving the Iraqi currency closer to parity with the US dollar!!!

“Asked about such a suggestion in an interview on Arabiya television, Finance Minister Bayan Jabor said: "This is the ministry's suggestion to the central bank. We think in the long term it will be for the benefit of Iraq."”

That one is pretty clear to understand.

“Jabor said surveys indicated popular support for the move. The oil-rich nation's currency was once worth more than $3, he recalled, before the ruinous wars and international sanctions during the rule of Saddam Hussein.”

Here we get the first “red flag” of this article. The term “international sanctions” has always been used to blame the United States and the UN for the woes of the Iraqi people under the Saddam Hussein regime. In fact we did provide food for oil but the food rarely reached the needy Iraqi people because of the greedy controlling murderer Saddam Hussein.

“There are currently about 1,450 dinars to the dollar, a rate that has been relatively stable since shortly after the U.S. invasion in 2003. At that time new banknotes were issued by the U.S. occupiers to remove Saddam's image.”

US occupiers????? Who but anti-Iraq war anti-Americans use that term? Another “red flag” about the author of this article. He seems to be showing he is not exactly a fan of the United States with his biased slant.

“Other nations that have been through rampant inflation have followed a similar course, notably Russia in the 1990s.”

The Russians did do a Zero Lop as have others with rampant inflation. But again this sentence is the authors view or analysis of the material. This is NOT words the Finance Minister is using. The author sees the lastest information as meaning there will be a Zero Lop. But we don’t have enough information to draw that conclusion. In fact a Zero Lop makes almost NO sense whatsoever. The quickest way from one destination to another is a straight line. Why bother redesigning and reprinting the entire Iraqi IQD denominational structure, pay out a couple hundred million to do it, and go through the logistical mess of distribution just to lop Zeros? Lopping Zeros does not change or improve the value of the IQD. And then re-val it to 1:1 so the Iraqis get a 30% value increase towards the USD???? The easier more logical approach would be to bump the current value from 1470 to around 1000 IQD to 1 USD giving the same 30% increase and not having to do any other hoop jumping. And if the IQD should continue to grow in value with the Iraqi economy all you need do is print up a few new lower IQD denominations to add to the current ones.

“Until the 1980s, many prices in Iraq commonly also used the fils. One dinar equals 1,000 fils. The smallest denomination note today is 250 dinars.”

The final crowning “red flag” to this article. Either the author has no clue what he is talking about or it’s a poor translation of the meaning. We all know the lowest IQD note is the 50 and the lowest legal tender coin is the 25 IQD.

So, in conclusion, when you take a bit by bit look at our latest information we are still in this game. The newest translated articles might be pointing to where we are headed but we don’t have enough information to make a 110% decision of where this will end up. In other words hang on to your IQD and your seat belts. This ride is only going to get wilder before the final destination is reached.

Look at this scenerio-


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As I understand them and special thanks to the example Invisible man gave, it really brought home the idea. I decided to do this for the benefit of newcomers. I laid the two out so the reader can evaluate them both and draw a conclusion. If this is similar to another post I apologize ahead of time.

The lopping theory says knock off three zeros off the currency and push to the dollar.

Lets see:

Iraqi has 3000 dinar pre war at the rate of .30 USD was worth about $900.00 USD. After the invasion a one for one exchange of dinar is made and the rate becomes 1450/ dollar so now that same 3000 dinar is now worth about $ 2.04 USD now lets lop;

Knock off three zeros and lift to the dollar. Now you have 3 dinars worth 1.00 each so the prewar worth of the Dinar was $900.00 USD now it has become $3.00USD. So democracy has yielded a loss of $877.00 USD in this case.
How in Jesus’ name is that parity with the dollar and how does that benefit this person?

No it does not work and would make this person yearn for the good ole days of Saddam.

Do you think the US is going to let that happen? I do not think so.


Now we have the lifting of the three zeros off the exchange rate.

3000 dinars @.30 pre war = $900.00USD now valued at $2.04 USD

Lets lift: current exchange rate @ .000685 New rate becomes .685

3000 dinars now revalues post war to $2055.00 USD

This gives that same person $1155.00 USD profit or increase on his monies worth.
Now to this person democracy has really paid and improved his quality of life. He likes democracy under this formula.

After looking at this it becomes simple to understand, which direction is the proper one both financially and politically. But you decide for yourselves. I'm sure the reality will prove that this is the road Iraq soon takes.

Maybe they will peg the dinar to the euro ( which would help us americans )

http://www.middleeastforex.com/index.php?section=94

REGIONAL FX HEADLINES Saturday, July 08, 2006





Kuwait: Rethink on US Dollar peg urged
Kuwait City: Kuwait should stop pegging its dinar currency to the US dollar because rising US interest rates are pushing up local borrowing costs and hurting the Kuwaiti economy, a leading legislator said.

Parliament's finance and economic committee chairman Youssef Al Zalzalah attacked the dollar peg, saying he preferred linking the dinar to a basket of currencies, a policy Kuwait abandoned in 2002. "Pegging the dinar to the dollar is not a sound policy. Pegging the dinar to a basket of currencies was better," Al Zalzalah said, confirming comments reported by local media. The dollar's long decline against the euro over the past three years raised pressure for an end to currency pegs in the GCC states.

Unbelievable post cigarman. You are just a cure to the mind of so many reading these wonderful Articles that you come up on. Thank you so much for sharing them with us all. It is very slow in here today. They will all be glad to study these up on their arrival back. I have spent the last 45 minutes reading and re-reading these and they are what I hope to see. The part where the Occuppiers got answered was my only problem I was having. Thanks.

...Crossing my fingers that they peg against the Euro!

Wonderful posts!

I would like to state that I know nothing about economics but it has occurred to me that if Iraq has 11 billion in reserve money to back their dinar at present wouldn't zeroe lopping reduce this reserve amount back by heaps if that where to happen. If this is the case I don't think they would want this to happen do you?

So what is the first thing you are going to do when revalue is announced?

Hey Mike,

Do you think they will actually 'announce' the revalue or would they just put up a message on the CBI website stating the change in exchange rate?? It seems to me that it would be better not to announce a revalue publicly this way if it hits 1:1 and they just 'silently' place a message and change the rate on the CBI website then perhaps it might keep millions of people scrambling to exchange most of their dinar? Just a thought for what it's worth lol. Perhaps it's just the beer talking eh?!?!?!

Cheers all,

Rob

Hey Adster, how trust worthy is xxxxxxsusie on IFF. Just wondering because she said for a fact the reval is within a month and it will be more than 1:1. Sure hope she has connections. LOL