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Iraqi Dinar Revaluation Enthusiasts are Unaware of Bernie Madoff’s Fame

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Iraqi Dinar Revaluation Enthusiasts are Unaware of Bernie Madoff’s Fame

By Tom Cleveland, market analyst for Forex Traders, exclusively for Iraq Business News. Forextraders.com is an online resource for the foreign exchange market.

“Buy on the rumor, sell on the news” is a time-honored investment phrase that is oftentimes more confusing than the wisdom it attempts to impart. The meaning relates primarily to company securities that appreciate in expectation of a big news announcement. Early speculation drives ups the price, such that when the real announcement is made, most investors sell on the news to take their profits, often driving the price down, rather than up. “Pump and Dump” stock frauds also follow a similar scenario, but in this case, criminals benefit and investors lose.

A similar situation has been building for years, some say as many as eight years, surrounding the potential “revaluation” of the Iraqi Dinar. As the rumor would have it, the Iraqi economy has stabilized, and the potential for enormous foreign currency reserves from increased oil exports will drive the value of the Dinar to unconscious levels versus the U.S Dollar. The government authorities will be forced to revalue the currency from 1,175 to 3 per Dollar, resulting in an outrageous windfall for anyone owning stockpiles of the currency. Does something here sound a little too good to be true?

In actuality, the Iraqi Dinar, or “IQD”, is a “controlled” currency. The central bank of Iraq determines the exchange rate and must support that rate by maintaining adequate foreign currency reserves to handle capital flows across its borders. The IMF permits countries with a transitional economy to implement currency controls in order to stabilize their economy during its redevelopment phase. Presently, international banks will not accept the Dinar, and it is not traded on any forex exchange. Actual purchases can be made through currency dealers that have been authorized to buy and sell banknotes that are already in circulation.

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700 Responses to “Iraqi Dinar Revaluation Enthusiasts are Unaware of Bernie Madoff’s Fame”

  1. Stew says:

    Rich… the exchange rate is 1166:1. Do you think inflation had nothing to do with that?

  2. GT5Junkie says:

    “but if they had that much in circulation surely they would have higher inflation than what they do”

    It takes 75,000 dinar to buy a pair of shoes, that isn’t enough inflation for you?

    Iraq used to print money like crazy. The worst inflation occured during the Kuwait war, when Saddam was printing 10,000 dinar notes as fast as he could and spending all the currency reserves, but even as recent as 2006 the inflation rate has been near 100% (Google, you’ll find these are facts, not made up guru lies).

    Now they aren’t printing money like crazy, so their inflation rate is fairly low, generally less than 10%. Just because their inflation rate NOW is less than 10%, doesn’t eliminate the fact that they have already printed 75 trillion dinar, does it?

    Seriously. Think about it. If Iraq stopped all currency printing right now, except for exactly enough to replace worn out notes, their inflation rate would be zero, right? It’d actually probably be negative if they continued to make minor improvements in their economy. But does that eliminate the 75 trillion dinar they’ve already printed? Of course not.

    Current inflation is more an indicator of money supply GROWTH, not money supply SIZE. Inflation is an indicator of how much they’re printing NOW, not how much they printed in the past. Get it?

    Think of it this way. If Iraq started buying 1 trillion dinar a year and burning it, their inflation rate would likely be negative. But ten years from now, after ten years of negative inflation (deflation), they’d still have an M2 of over 70 trillion dinar. Does that help you understand why your “if they had that much in circulation surely they would have higher inflation than what they do” statement doesn’t make any sense?

  3. rockinrich says:

    wow thanks stew im sorry to dissapoint you but im not just someone who invested and do you really believe these numbers can be accurate i dont, tell me what are the numbers for m1 in the united states

  4. GT5Junkie says:

    “but im not just someone who invested”

    Then what are you?

    “do you really believe these numbers can be accurate i dont”

    So you believe the inflation numbers (which are published by the CBI), but don’t believe the M2 numbers (which are also published by the CBI)? So you just believe whatever you want to believe?

    It’s incredibly obvious that there are many, many, many trillions of IQD in circulation:
    1. They have 25,000 dinar bills.
    2. It costs 1000 dinar to buy a loaf of bread.
    3. Dinartrade sold over 500 billion dinar in 2011 alone (Google it).
    4. One time I actually checked, and there were over 350 million dinar on sale on eBay just on ONE DAY.

    The fact that you think it’s possible that all those things could occur with there only being 70 billion dinar in circulation leads me to believe that you either haven’t done any real research on the currency situation in Iraq, and/or you just really have no understanding of how economics work.

  5. rockinrich says:

    i meant im just someone who invested and maybe you can tell me what are the united states m1 m2 numbers

  6. rockinrich says:

    so looking at the m1 numbers for iraq your telling me they put in 4 trillion dinars more into circulation from march to april?

  7. GT5Junkie says:

    I’m not telling you, the CBI is telling you.

    It’s less than 4 billion dollars, why is that so hard to believe?

  8. GT5Junkie says:

    You know that during the same time period, the US pumped what, 65, 80 billion into our money supply? 4 billion into Iraqs money supply isn’t really surprising at all.

  9. Laurie says:

    M1 is not telling you anything! It’s M0 is where the currency is recorded. They stopped putting that out to the public. M1 is all currency they hold with the value of any liquid assests included.

  10. rockinrich says:

    ok 70,305 m1 is that amount of notes or the worth of those notes?

  11. Gt5junkie says:

    Amount, obviously.

  12. Stew says:

    Rich… look at these numbers.
    http://dollardaze.org/blog/?page_id=00023
    This chart shows how much currency is in circulation in the entire world(in dollar value). It shows 5 trillion, but it’s a few years old, so carry it out a few years and say it’s now $6 trillion worth of currency in circulation in the entire world.
    Iraq currently has 39 trillion dinar in circulation. A 1:1 RV would give Iraq $39 trillion in currency, 6.5 times more than the whole world combined. You said they can RV to $2.50. That would give Iraq 16 times more currency than the entire would combined.
    Do you realize just how silly that is?
    Rememeber. Iraqs GDP is less than 1% of the worlds economy. And most of that GDP is from oil sales which are in dollars. 6 to 16 times more currency than the whole world with less than 1% of the economy. No words exist to describe just how nonsensical that is.
    When dinar gurus get flustered by facts they always fall back on the “nobody knows what will happen” and “no one can say a big RV wont happen”. With numbers like I just showed you it can be said without a single shred of doubt, with absolute certainty, no big RV of the dinar will happen.

  13. rockinrich says:

    anyone have comments on what lauries has said??

  14. Gt5junkie says:

    1. The notion that M1 is meaningless is nonsense.
    2. “Currency outside banks” is 34 trillion.

    There are trillions and trillions in circulation. Do you dispute this? If you do you’re deluding yourself.

  15. Laurie says:

    I did not say it was meaningless. But that number does not tell you how much dinar is out there. M1 is the dinar, any other currency values they hold plus the value of all liquid assets. So there is no way to know for sure how much dinar is in circulation.

  16. Stew says:

    Stop listening to dinar pumpers for info. They will make you look like a fool when you go out in the real world and repeat their bs.
    Iraq has and continues to report their currency in circulation on their financials link for anyone to see. They have also mentioned the amount in a number of the remove 3 zero numbers.
    http://www.cbi.iq/documents/key%20financial.xls
    Simply add lines 79 (currency outside of banks) and 83 (ID vault cash). Last reported is 39 Trillion.
    M1 is simply taking that number (all the cash in circulation) and adding demand deposits.

  17. Stew says:

    The CBI even provides this document to help explain their financials link.
    http://www.cbi.iq/documents/Key_Financial_Indicators_Documentation.pdf

  18. Laurie says:

    And your link tells nothing of M0. Which is only the IQD like I said. And if you read your link you will see there is more than just IQD there. Which again does not tell you the amount in circulation. If you look at the CBI website it has not been published in a few years. I do not listen to gurus. You are assuming. Look up the definition of M0 for yourself. I am not spreading rumors or speculating myself. Only the facts.

  19. Gt5junkie says:

    M0 is 39 trillion, they just don’t refer to it as M0. This is confirmed by recent articles in the Iraq news.

    If you’ve got a source that says otherwise, by all means post it, otherwise you’re just engaging in wishful thinking.

    Regardless of what any source says its obvious its many many trillions. Do you dispute this?

  20. Stew says:

    Iraq does not use M0 as currency in circ. They never have.
    From Wiki money supply link.
    “M0: In some countries, such as the United Kingdom, M0 includes bank reserves, so M0 is referred to as the monetary base, or narrow money.”
    That’s the same thing Iraq does. Here’s the proof. From their website.
    Click the “sheet 2” tab at the bottom of the page.
    website.http://www.cbi.iq/documents/Monetary_Aggregates_f.xls
    Monetary Base( M0 ) Developments
    You can see they have been tracking it that way since 2004, so it’s looks a bit silly to say they don’t report M0.

  21. Stew says:

    Again from that link
    http://www.cbi.iq/documents/Key_Financial_Indicators_Documentation.pdf
    “a – Currency outside banks, i.e., the currency component of the money supply as shown in the Analytical Balance sheet (Item 8) which is derived from the following sources (currency put into circulation reported by Issuing Dept. less vault cash(item 8.1 of Analytical Balance Sheet) reported by Research & Statistics Dept.).”
    I don’t know how more plainly it can be written. Currency outside of banks is the currency component of the money supply.

  22. Laurie says:

    See you just proved my point:) includes Swiss dinar sadam dinar and any currency reserves. Which is not the IQD in circulation at this current time. And this us still not M0. Read the title of that three page document. This is old news

  23. Gt5junkie says:

    Prior to 2003 it included Swiss and Saddam. It doesn’t now, otherwise they wouldn’t have said prior to 2003, would they?

    And it doesn’t include currency reserves. Because reserves, by definition, are not outside banks.

    You’re very confused Laurie, like most dinar investors.

  24. Ted says:

    This is from The Currency NewsHound.

    http://thecurrencynewshound.com/2013/07/23/economists-anticipate-usd-to-fall-in-iraq-hope-for-3-30-exchange-as-it-was-although-difficult-to-achieve/

    I’m a house painter, in layman’s terms please explain how the 50,000 dinar I bought for like $99 plus shipping doesn’t turn into $150,000 or so?

    Not trying to be a smart alec, if I understood currency I wouldn’t be a house painter.

  25. LZ says:

    Ted…. Congratulations!
    You now have about $43.00 worth of dinar.
    If you tried to re sell it , you can get about $30.00.(minus shipping and handling of course!)

  26. GT5Junkie says:

    “I’m a house painter, in layman’s terms please explain how the 50,000 dinar I bought for like $99 plus shipping doesn’t turn into $150,000 or so?”

    Because Iraq has “printed” (I use quotes because I’m speaking of both physical and digital dinar) almost 80 trillion dinar.

    Think of it this way, there are less than 1,000 1952 Mickey Mantles in the world. Consequently, they’re worth a lot of money. Hundreds of thousands of dollars.

    Now imagine someone discovers a warehouse full of millions of totally legit, 100% original, pristine 1952 Mickey Mantles. Think they’re still going to be worth hundreds of thousands each?

    Of course not! It’s the most basic rule in economics. The more there is of something, the less it’s worth. It’s the reason coal is worth less than diamonds.

    Back when the dinar was worth 3 bucks each, there were only billions of them. Now there are 80 trillion. Do the math, the dinar should be worth thousands of times less than it used to be, which it is.

    You know QE? You know how people talk about how the fed is printing 60-80 billion a month? And how it’s a bad thing? How it devalues the USD, and causes inflation?

    To print as much as Iraq has since 2003, we’d have to print 650 billion a month, every month, for 10 years straight. Add in the fact that the dinar isn’t the world reserve currency like the USD is, and the FACT that Iraqs economy is less than 1/10th the size of the US economy, and it’s actually more like we’d have to be printing 10 TRILLION a month to be in as bad a shape as Iraq is.

    Iraqs currency is worth right about what it should be, given the size of their economy and how much dinar they’ve printed.

  27. GT5Junkie says:

    Ooops, typo, Iraq’s economy isn’t 1/10th the size of the US, it’s less than 1/100th.

  28. Stew says:

    Ted. To address that article in particular. The economist even admits that it is far fetched to think it could get back to $3.30 and then says he thinks it could get back to $1. What he doesn’t talk about is the mechanism by which they will get back to $1. There is only one way they can get back to that level and that is to redenominate/lop/delete 3 zeros which means Iraq will issue a new currency. Your 50,000 dinar will then be worth 50 of those new dinar. You will probably have to sell them back to a dealer who has the ability to get them back to Iraq for exchange. He will probably give you about $25 for them, but you will have to pay to ship them to him.
    The question you need to think about is this. If Iraq did have a plan to raise their currency 100,000%, do you think they would be announcing it openly like this?

    Good news is… my house needs painting. Do you live in Southern California?

  29. LZ says:

    Stew…. Your funny!!
    I think you should be addressed as Professor Stew.

  30. Ted says:

    I used to, back when I was in the service. Kind of a long commute from ohio.

  31. Carla says:

    Stew more than funny,
    He helped me understand and see the big picture !
    Ted, I am glad that you only invested $43 worth!
    Hey, I invested a lot …. A lot more and there are so many
    That have even invested their entire whole life savings…
    And to this very moment really believe they will be millionaires,
    It will be hard braking when the pink elephant sinks in, so bad that perhaps
    It will be better for those people to die full of hope than to find out
    The ugly truth! :(

  32. Carla says:

    Hey Stew,
    Did you hear that Saudi Arabia changed the days of the week equal to those of Iraq?
    Because, Since Iraq will be the POWER of the world, Saudi needed to that so they can
    do business with them in a more convenient way!!! Lol, Lol
    What a Joke!!
    Dinar pumpers are using what ever to twist and keep this HUGE
    investment SCAM alive!

  33. LZ says:

    The dinars will NEVER RE VALUE…. Period.

  34. Pan says:

    The value of Iraqi cash
    1. China wants it; the actual cash that China has in hand provides them the opportunity to buy oil from Iraq with oil credits due to paying Iraq with its own cash.
    2. The US has lots of dinar. And owes China.
    3. China is willing to take the dinar from the US in exchange for US’s debt to China.
    4. China saves lots of money on oil with the credits for paying with dinars.
    5. Iraq sells oil.
    6. US reduces debt by quite a bit by knocking down the debt it has with China.
    7. The higher the dinar value vs the value of china’s currency value or the us’s is better for all three countries: so I bet they agree on it.
    8. Afterwards, the greater worth of all the currencies that Iraq and others like Vietnam enjoy will not affect the top three wealthy countries at all.
    9. Those countries that haven’t been “wealthy” will now be enjoying having more valuable money, which is worth more globally like most of us enjoy.
    10. So, after top players in this currency game are done, then our brothers from around the globe will begin to find themselves on a more level playing field due to the new value of the currency they receive with their work effort. Seems like we all win.
    11. I think the VNN will be worth 3.75. Maybe over 4.

  35. GT5Junkie says:

    Any other guru lies you want to regurgitate? I’m sure you missed a few.

    Everything you said is absolute gibberish that makes no sense whatsoever.

    You are either:
    1. A pumper trying to make money off lying, in which case: get a job.
    2. One of the most gullible people on the planet, in which case you might want to not take investment advice from anonymous people on the internet.

  36. Barry says:

    In response to “Pan” (Oct 1st):-

    1. China doesn’t “want it”. They’re simply trading directly with many countries local currencies (eg, Australia, Japan, etc) without the $ as an intermediate.

    2. Pumper lie. The US doesn’t have “lots of Dinar” at all. COFER figures are hardly some “big secret”.

    3. Pumper lie. China holds that much US debt precisely to underpeg the Yuan it to the $. It has nothing to do with the Dinar.

    4. Same is true of every other country (Iran, Nigeria, etc)

    5. Just like 100 other countries then…

    6. Nothing to do with Iraq

    7. ROFL!!! The higher the Dinar value vs every other country, the more expensive it becomes to invest in Iraq, and import goods from Iraq. That’s why Iraq is maintaining a stable exchange rate!

    8. The Vietnamese Dong has actually lost 25% of its value since the Dinar pumpers started pumping it. Anyone who still pumps the VND is utterly clueless beyond measure.

    9. Those countries currencies is already worth 1,000-10,000x less precisely because they’ve overprinted it. Iraq has 80 TRILLION Dinar – Vietnam has a staggering MULTI-QUADRILLION Dong money supply. It seems you’re one of those “special” people who thinks the more money you print the more valuable it becomes but only for non-Americans…

    10. See 9

    11. LMAO!!!! So you believe that Vietnam is going to have 12x Planet Earth’s worth of resources then? This cr*p debunks itself…

    GT5Junie – Indeed! Trying to explain to people like Pan why Vietnam (who have a 0.15% share of the global economy) isn’t going to have a money supply of $3,510tn when the whole global economy is only $80tn is like arguing with a 3yr old about the existence of Santa…

  37. LZ says:

    It still amazes me how people still think the BS the pumpers spew is really gonna happen.

  38. ChristmasShopper says:

    GT5Junkie states that today Iraq’s economy is 1/100 the size of the US economy based mostly on oil production. (I hope you’re right!)

    1. If 5 years from now Iraq has held several rounds of free elections will this have an impact on investment into the Iraqi economy? Will the dinar demand move at all at that point?

    2. When Iraq increases oil production from 3 million bpd to 4 million bpd does this mean their economy will become 1/80 the size of the US economy? Will the dinar demand move at all at that point?

    3. When Iraq increases oil production from 3 million bpd to 6 million bpd does this mean their economy will become 1/50 the size of the US economy? Will the dinar demand move at all at that point?

    4. On Oct 23 2013 Barclays announced that Iraq’s GDP grew by 8.4% (Almost 10% growth during a civil war!) GT5Junkie when the civil war is over and the dust has settled will Iraq’s oil mean anything to its economy and the demand for the dinar?

    5. Today you can buy IQD for ~1000$ per million online and sell it back with 20$ shipping for ~860$…That puts the margin including shipping to sell it back at ~15 points give or take. I just picked up some for a christmas gift for my nephew since i probably would have blown it anyways and he cant really learn anything about saving for the future if I add any more video games to his collection :)

    6. Today you can also buy 1 oz silver eagles online at Ampex for 25.50 a piece with a credit card and sell them back at 22.07 + the going rate for shipping (silver is much heavier than dinar to ship!) all in all a margin of ~13.5 points. I picked him up a some of those as well :)

    7. Do you believe that the IQD I picked up for my 8 yr old nephew will be worth more or less then the silver eagles I got him by the time he can spend them when he’s 18?

    Thanks and forgive me for any sarcasm a lot of people have invested more than just money into Iraq. I hope those investments will bear fruit for all the pain and suffering that has been felt around the globe, and I hope my nephew learns that America invested a lot of lives into Iraq and that it was worth a great deal… I pray it wasn’t just for oil or the dinar… Hopefully for a brighter less cynical more tolerant and safer future for his generation!

  39. Gary says:

    What’s not accounted for in Tom Cleveland’s article is the fact that the CBI has been selling US dollars in lieu of dinars, during their daily auctions; and have been doing so for a number of years. As a recent example, The CBI sold $4,563,000,751 USD in their currency auctions during the month of August, 2013 alone. (See Iraqi News Article, dated September 24, 2013, by Ibrahim Khalil: “Rise in USD sales in CBI Tuesday auction session.” http://www.iraqinews.com/business-iraqi-dinar/rise-in-usd-sales-in-cbi-tuesday-auction-session/#axzz2nZr4Qr2B)

    In other words, Iraqi banks, businesses, and citizens have been primarily using US dollars for commerce, not dinars. Over time, paper notes wear out and have to be destroyed. As a result, I don’t think anyone truly knows how much “physical” dinar really exists in the Iraqi and global economies. If most of the paper dinar is gone, except for that held by investors, then the value of the remaining dinars is likely higher than the CBI is stating.

    At this point in time, the CBI has arbitrarily set the value for exchange at 1166 dinar per US dollar. However, the CBI can change that exchange rate any time they want, simply by going away from their selling of US dollars in their currency auctions, and reinstating the dinar as their currency of choice. If most of the paper-based currency has in fact been destroyed, then the CBI will have a lot of flexibility in deciding what the value of the dinar is, vis-à-vis the US dollar.

    Trading Economics (http://www.tradingeconomics.com/iraq/money-supply-m1) currently lists Iraq’s M1 figures at 71,445.00 Billion (e.g. ~71.5 Trillion). That’s a lot of Iraqi Dinars flooding their economy – roughly 2,192,000 dinar for every Iraqi citizen.

    However, notice how many Iraqi banking articles mention the deletion of three zeros? (For numerous examples, simply Google “deletion of three zeros”) If, for example, the CBI deleted three zeros, then the current MI figure would fall to 71.5 Billion… and the value of the dinar would raise accordingly, 1000 fold. In that scenario, the amount of Iraqi dinar would fall to ~2,192 per citizen. That would not be nearly enough liquidity to support their economy. As a result, Iraq’s CBI would either have to add more money supply (e.g. print or electronically create more dinars) or increase the value of the dinar to support commerce.

    The real question is: what does the CBI really mean when they say “deletion of the three zeros”? They can’t change the value of the existing 5K, 10K and 25K notes that have three zeros printed on them. But, since their economy has been dollarized – and assuming paper-based dinars have been substantially depleted, when they go back to using dinars they can pretty much set M1 and the value of their dinars at whatever rate they choose.

    In my opinion, it’s very likely that when the CBI posts their M1 figures, they are converting their US-based cash assets into their arbitrary 1166 dinar rate… and not basing it on actual printed and electronic dinars. So, if 1166 is arbitrarily set by the CBI, they can just as easily set their rates at 1:1 or even 3.44:1. The only thing that would hold them back from doing so is if there really is 71,445.00 Billion (e.g. ~71.5 Trillion) in physical (e.g. paper and coin based) dinars printed and remaining in the world economy. Since currency printed under Saddam Hussein’s regime was largely replaced by the newer 5K, 10K and 25K notes, and then not used in country – do to dollarization… I doubt there is.

    For more information on the subject of dollarization, note the formal definition and economic reasons for implementing “dollarization” policies, as noted in Investopedia: http://www.investopedia.com/terms/d/dollarization.asp

    In the US, $1, $5 and $10 currency notes only have an average life span of between 4.2 and 5.9 years. The US Federal Reserve publishes the life span of its paper-based currencies at this web location: http://www.federalreserve.gov/faqs/how-long-is-the-life-span-of-us-paper-money.htm

    - Gary

  40. GT5Junkie says:

    “Over time, paper notes wear out and have to be destroyed. As a result, I don’t think anyone truly knows how much “physical” dinar really exists in the Iraqi and global economies.”

    The CBI does, and they publish updates monthly. Worn notes are taken to banks and exchanged for non worn notes, citizens don’t use them until they turn to dust and then just eat the loss.

    “If most of the paper dinar is gone, except for that held by investors, then the value of the remaining dinars is likely higher than the CBI is stating.”

    This is a fantasy with zero basis in reality, and directly contradicted by the numbers (independently audited) that the CBI publishes. In addition, it makes no logical sense whatsoever. The CBI is going to RV the currency because most is in the hands of speculators? So they’re just going to give money away to foreigners and screw their own people? Ridiculous.

    “At this point in time, the CBI has arbitrarily set the value for exchange at 1166 dinar per US dollar.”

    There’s nothing arbitrary about it. It’s their money supply (M2) divided by their currency reserves. That’s how almost every pegged country does it, and again there is absolutely nothing even remotely arbitrary about it.

    “In that scenario, the amount of Iraqi dinar would fall to ~2,192 per citizen. That would not be nearly enough liquidity to support their economy.”

    It’s the EXACT same amount of liquidity that is supporting their economy right now, so I don’t understand your logic.

    “As a result, Iraq’s CBI would either have to add more money supply (e.g. print or electronically create more dinars) or increase the value of the dinar to support commerce.”

    They’ve been adding more money supply every year for the last decade, and there’s zero reason to doubt their figures.

    “The real question is: what does the CBI really mean when they say “deletion of the three zeros”?”

    A 1000 for 1 redenomination. How can that be the “real question” when there is ZERO doubt that that’s what it is? It’s been done 50 times in the last century. It’s a common phrase in currency economics. There’s is no question what it means, except in the minds of dinarians who’ve been lied to by con men.

    “In my opinion, it’s very likely that when the CBI posts their M1 figures, they are converting their US-based cash assets into their arbitrary 1166 dinar rate… and not basing it on actual printed and electronic dinars.”

    Completely ridiculous. The US based cash assets are accounted for in their foreign reserves. The notion that you think it’s “very likely” something is true, when you have zero evidence and there’s no reason to think it would be true is insane.

    “So, if 1166 is arbitrarily set by the CBI, they can just as easily set their rates at 1:1 or even 3.44:1. The only thing that would hold them back from doing so is if there really is 71,445.00 Billion (e.g. ~71.5 Trillion) in physical (e.g. paper and coin based) dinars printed and remaining in the world economy. Since currency printed under Saddam Hussein’s regime was largely replaced by the newer 5K, 10K and 25K notes, and then not used in country – do to dollarization… I doubt there is.”

    So your entire argument boils down to: “The CBI says there’s 72 trillion in circulation which means they can’t RV, but I think there isn’t 72 trillion in circulation, so they can RV”.

    That’s basically the worst argument I’ve ever heard. It’s complete garbage. You’re saying they’re going to increase the value of their currency by 300,000% BECAUSE there isn’t any of it in Iraq (which isn’t even true anyway). Think about that for a second. WHY? To give hundreds of billions of dollars away to foreigners? Use your brain.

  41. GT5Junkie says:

    “1. If 5 years from now Iraq has held several rounds of free elections will this have an impact on investment into the Iraqi economy? Will the dinar demand move at all at that point?”

    Why would it?

    “2. When Iraq increases oil production from 3 million bpd to 4 million bpd does this mean their economy will become 1/80 the size of the US economy? Will the dinar demand move at all at that point?”

    Did the dinar increase in value over the last 4 years when they went from 2 mbpd to 3 mbpd? Nope. Why would it now? The answer is: they keep printing more and more dinar, and they show zero signs of stopping. There’s no reason they WOULD stop in order to let the currency appreciate, if it’s even capable of it (which the 1250 to 1 or worse market rate in Iraq indicates isn’t likely).

    “3. When Iraq increases oil production from 3 million bpd to 6 million bpd does this mean their economy will become 1/50 the size of the US economy? Will the dinar demand move at all at that point?”

    See previous answer.

    “4. On Oct 23 2013 Barclays announced that Iraq’s GDP grew by 8.4% (Almost 10% growth during a civil war!) GT5Junkie when the civil war is over and the dust has settled will Iraq’s oil mean anything to its economy and the demand for the dinar?”

    Demand? Maybe. Value? Nope. They’ll just print more of it. They’ve been doing it for the last decade, look at their M2 numbers.

    “5. Today you can buy IQD for ~1000$ per million online and sell it back with 20$ shipping for ~860$…That puts the margin including shipping to sell it back at ~15 points give or take. I just picked up some for a christmas gift for my nephew since i probably would have blown it anyways and he cant really learn anything about saving for the future if I add any more video games to his collection

    6. Today you can also buy 1 oz silver eagles online at Ampex for 25.50 a piece with a credit card and sell them back at 22.07 + the going rate for shipping (silver is much heavier than dinar to ship!) all in all a margin of ~13.5 points. I picked him up a some of those as well

    7. Do you believe that the IQD I picked up for my 8 yr old nephew will be worth more or less then the silver eagles I got him by the time he can spend them when he’s 18?”

    There is zero chance of a massive RV, and by massive I mean to even 1 cent, so if you’re “investing” in IQD for a massive (1 cent) RV you’ve been scammed.

    If you’re investing in IQD has a hedge against inflation, you’re kind of a boob, to be honest. Investing in the currency (backed by fiat currencies) of a violent third world toilet in order to avoid inflation of a fiat currency. Not very bright, for obvious reasons.

    So what other reason are you investing? You really looking for investments that have a 99% chance of losing you 25%+ and zero chance of hitting it big? Why?

    In all likelihood they will redenominate long before then and your nephew will have the fun of exchanging his about to become worthless IQD for their new currency, probably losing 40% in the process. But maybe he’ll learn a less about internet scams from his gullible uncle, so at least there’s that.

  42. Gary says:

    GT5Junkie:

    I acknowledge you raise some good points… up to a point. By the way, your obvious anger and name calling on this subject doesn’t add much value to the conversation. I just want to get smart about all this. So, let’s try again.

    In your comments back to me, you didn’t mention the daily Auctions by the CBI – wherein they are selling US dollars to Iraqi Banks at the 1166 rate. Nor have you addressed the fact that the CBI has dollarized their economy – as Iraqis couldn’t trust the value of their own currency – as so much of it is and was being printed (as you yourself noted, and the M1 and M2 values posted by the CBI confirm).

    From Iraq’s ongoing daily Currency Auctions ($184,945,000 sold to 23 Banks in today’s auction), it’s clear that Iraq’s banks have been purchasing US dollars to conduct commerce inside Iraq, in lieu of purchasing Iraq’s own dinar from the CBI. So, using your own arguments, if Iraq’s MI values (M1 includes all physical money, such as coins and currency, as well as demand deposits, checking accounts and Negotiable Order of Withdrawal (NOW) accounts) are largely based on Physical Currency that has been printed, then by your reasoning, it must be mainly international investors who are purchasing the 5K, 10, and 25K notes from the CBI… because Iraqis are largely using US dollars for their commerce.

    So, what I believe you’re saying – intended or not, is that the CBI is essentially scamming everyone by printing Physical dinars – not for use in country, but rather to sell them to international investors. I guess that would be one way Iraq could further increase their foreign reserves. Though it’s hard to see why they need to do so, given they are selling so much oil, and receiving US dollars in exchange. But, your arguments don’t explain the CBI’s rationale for dollarizing their economy… only to hold on to and report such massively outrageous amounts of currency.

    So, let me see if we can find some common ground. For example, I think you and I can agree that the only way Iraq can increase the value of their currency is if they somehow reduce their M0 and M1-based money supply. The disagreement I think you and I would have is on your comment that the CBI’s M1 figures only includes Iraqi dinar, and that US dollars are maintained only as Foreign Reserves.

    Under normal circumstances, you would be correct… By definition, foreign-exchange reserves are assets held by central banks and monetary authorities… and are not counted as currency that is being used for internal commence. However, since Iraq dollarized their economy, and US dollars are being used for commerce in lieu of the Iraqi dinar, then I believe the CBI would use those US dollars that are in circulation as part of their M1 figures.

    In fact, if you research scholarly papers on this subject, you will find foreign currency deposits held and used within commercial sectors, outside the central government, are counted toward M1 in dollarized economies. Ergo, I believe the CBI is counting US dollars in circulation (e.g. used for conducting commerce in Iraq) in their M1 figures, as that would be the typical approach in a dollarized economy.

    The real question that’s most important to this conversation is how much of Iraq’s M0 value includes Bank Reserves. If the Central Bank of Iraq (CBI) is holding a substantial part of Iraq’s dinar as Bank Reserves, then that currency could be destroyed… and there’s no reason the CBI would have to print more currency to replace it. And they wouldn’t do that just to make a bunch of dinar investors happy. By accumulating the dinar as bank reserves, and then destroying it, the remaining Iraqi currency held by Iraqis would be proportionally more valuable.

    I don’t know if this is the intention of the CBI… but it would be the best action they could take on behalf of the Iraqi citizens. Clearly, ATMs and electronic banking, or at least from what I’ve been led to believe, are a relatively recent additions to Iraq’s banking industry… so it’s not like there could have been a lot demand deposits, checking accounts and Negotiable Order of Withdrawal (NOW) accounts in Iraq. So, I believe it’s safe to assume the CBI is mostly including Physical forms of cash (e.g. dinars and US dollars) to calculate their M0 and M1 Money Supply values.

    In the meantime, as their economy became dollarized, what has the CBI and Iraqi banks done with all the Physical Dinar they would have taken in from their citizens, in exchange for US dollars? If they actually destroyed much of their physical dinars, then the M1 and M2 figures could only be ledger entries in the CBI’s computers – as Bank Reserves, with the remaining being US dollars and Iraqi dinars in circulation.

    Printing money and expanding money supply are two different things – especially as the CBI and Iraqi Banks move to electronic forms of banking. That’s why I suggested we don’t really know how much Physical dinars there are… and, if most of their M1 figures are based on previously printed dinars now destroyed but held as Bank Reserves in electronic form plus US dollars and remaining dinars in circulation, then there is nothing that prevents the CBI from “deleting the zeros’ to decrease M1 and simultaneously increase the value of Iraq’s currency.

    If the CBI chooses to do that, that would have very positive impact on the value of the remaining printed money that’s in supply… unless they choose to eliminate it altogether – as you’ve suggested they might do. e.g. replace Iraq’s dinars with some other entirely new form of currency. But, there would be no value to the Iraqi if the CBI were to go that route.

    Personally, I just don’t see where they would have any justification to replace their physical currency… except with the lower denomination notes we keep hearing about. However, introducing lower denomination notes will not cause the higher denomination notes to lose their value. The CBI would have to dictate that the existing three-zero dinars are no longer valid currency, and therefore no longer worth anything. I certainly don’t see that going over very well in country.

    Sincerely,

    - Gary

  43. Stew says:

    Couple things Gary.
    Where are you getting this crazy notion that Iraq has “dollarized their economy”? You make it sound as if it was an official policy. That’s pure nonsense. Dollarization has been a problem but they have fought very hard to keep it from happening. They even enacted official policies which mandated dinar use in some cases. That certainly dispels any claim you are making about the “CBI dollarized their economy”

    Next, on the CBI financial balance sheet. I don’t pay much attention to it any longer, but for the longest time they had a separate column that tracked foreign currency deposited in banks. That certainly suggest the that money in not in M1 or M2. As for this claim of yours. “In fact, if you research scholarly papers on this subject, you will find foreign currency deposits held and used within commercial sectors, outside the central government, are counted toward M1 in dollarized economies.”
    Show me, please, just one. I’ve researched the Central Bank financials for dozens and dozens of countries and never saw anything such as that. Maybe in countries where the local currency was given up on totally and they decided to use only dollars, but in that case it would be listed as dollars on their financial sheets.
    The CBI even has a document on their site that explain what makes up their M1 and M2 numbers and it doesn’t mention dollars at all, only dinar.
    Once again… just use a bit of common sense. You are suggesting that Iraq has taken all or most of the dinar from their people, and will now RV 100,000%, or some other crazy number, only for the benefit of foreign speculators. Is that really what you believe??

    Lastly. You claim to have researched “scholarly papers”, but at the end you show that you don’t have even the basic knowledge of what a redenomination is and why and how it is enacted. There have been about 80 redenominations in the last 40 years. Tons of information out there on the subject. Iraq has stated over and over again that they plan on redenominating. Yet you show absolute ignorance on the subject. Why?

  44. Coozbee says:

    I can’t believe this BS is still going on about the Iraqi Dinar. Sorry Stew, but Gary is RIGHT ON TARGET!!!! This Dinar thing has worn OUT its
    popularity and BOGUS HYPE. Maybe, that is WHAT it was ALL about to begin with. Common sense SHOULD kick in, but you DIE HARDS, still KEEP preaching about this worthless currency. And yes the American dollar is the CHOICE of currency being used in IRAQ!!!! Your RESEARCH, that you claim you have done, is BS. Do you SELL this Dinar, or are you just a partner with these SCAMMERS, trying to regenerate a LOST CAUSE??? People have given up on this RIP OFF story. And the U.S. dollar is what is being used in IRAQ. If, I’m lying, PROVE IT! Prove, that the Dinar is being used for transactions
    ANYWHERE????? Can’t be done,don’t know WHY, BECAUSE, IT JUST AIN’T HAPPENING, STEWY!!! Sorry!!! I don’t know WHY, Gary is wasting his time on this MALARKEY!!!

  45. Stew says:

    Cooz… that was all over the place. Maybe try again without so much screaming and shouting. You say Gary is “right on” then accuse me of selling dinar? Huh?
    I will say again, Iraq does have a dollarization problem. But to claim Iraq has a policy of dollarization is simply nuts. Iraq has a 80 or so Trillion dinar a year budget, and about 80% of that budget is spent in dinars. How much more proof do you need that the Gov doesn’t have a dollarization policy?
    The CBI is going to print a 50,000 dinar note. That too is in an attempt to fight dollarization. Again proving there is no policy to dollarize.

  46. GT5Junkie says:

    “are largely based on Physical Currency that has been printed, then by your reasoning, it must be mainly international investors who are purchasing the 5K, 10, and 25K notes from the CBI… because Iraqis are largely using US dollars for their commerce.”

    No. The GOI is purchasing them. You think the GOI is paying all their employees and domestic contracts and contractors in USD? Think again.

    The GOI sells a barrel of oil for 100 USD. The GOI gives that hundred dollar bill to the CBI in exchange for ~117,000 dinar. The GOI pays 117,000 dinar to Ahmed for a weeks worth of work cleaning the Senate parking lot. Ahmed gives that 117,000 dinar to Abdul in exchange for a Ramadan present for his mother. Abdul goes to the bank and exchanges his 117,000 dinar for 100 USD so that he can import some gold plated camels for Ramadan presents, because no one makes them locally. Then the GOI sells another barrel of oil for another 100 USD and the cycle repeats itself.

    The CBI says they’re not reducing the money supply. There’s really no reason they’d want to reduce the money supply.

    “The real question that’s most important to this conversation is how much of Iraq’s M0 value includes Bank Reserves. If the Central Bank of Iraq (CBI) is holding a substantial part of Iraq’s dinar as Bank Reserves, then that currency could be destroyed”

    None of it. Central Bank reserves, especially destroyed ones, aren’t part of M0. Period.

    Why would the CBI destroy their own dinar in order to increase the value of everyone elses, including foreign speculators? They wouldn’t. It makes no sense whatsoever.

    “I don’t know if this is the intention of the CBI… but it would be the best action they could take on behalf of the Iraqi citizens.”

    Lol, that is absolute nonsense. Let’s say that due to increased demand and increased economy and less violence and yadda yadda yadda, that the CBI, instead of 80 trillion dinar at 1000 to 1, could support 80 trillion dinar at 500 to 1 (doubling the value of their money supply). What’s better for Iraq and Iraqis:
    1. Letting the value of the dinar appreciate 100%, a significant portion of that value going to foreign currency speculators.
    2. Printing off another 80 trillion dinar and pumping them straight into the local economy.

    The notion that you insist 1 is better for Iraqis than 2 indicates that you’re probably not thinking rationally about this situation at all. You know how #2 is possible? They’ve been doing it for the last five years. Look at their M2. #1 results in value leaving Iraq, #2 results in value staying in Iraq. In addition a stable currency value is a GOOD thing, not a bad thing.

    “and, if most of their M1 figures are based on previously printed dinars now destroyed but held as Bank Reserves in electronic form plus US dollars and remaining dinars in circulation”

    Except destroyed dinars or bank reserve dinars aren’t included in M1, and never would be. In addition, if they’re no electronic they haven’t been destroyed, merely converted. They’d still need to have their value supported by their reserves. In addition your entire argument centers around the CBI taking dinar from their own citizens and destroying it and giving the value away to foreign currency speculators. It’s completely nonsensical.

    “then there is nothing that prevents the CBI from “deleting the zeros’ to decrease M1 and simultaneously increase the value of Iraq’s currency.”

    Deleting the zeros is a redenomination. It’s happened over fifty times in the last hundred years. Your 1,000 dinar note worth 86 cents is exchangeable for 1 new dinar also worth 86 cents. There is ZERO ambiguity in what delete the zeros means as long as you actually read and comprehend the articles about it.

    None of your arguments make any sense. You like them because they’re good for you. Problem is that they’re terrible for Iraq and don’t make any sense from an economics perspective.

  47. GT5Junkie says:

    Gary, in your fairy tale world of dinar RVs, how many trillion dinar are out in the wild? How many trillion dinar are they on the hook for?

    Keep in mind that Iraq backs their entire M2 with foreign currency reserves in order to try and prop up the dinars value (which still isn’t entirely successful, as proven by the fact that the market rate in Iraq is typically 1250+).

  48. WhiteShadow says:

    You all are watching Iraq when you should be watching the dollar.

  49. Kenny Powers says:

    Wow, I wish I hadn’t spent that $50,000 on my dinar investment. Sounds like I may have been scammed…Just kidding. It’s gold and silver for me!


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