Redenomination and the Spinal Tap fallacy

Fans of the “rockumentary” This is Spinal Tap will recall the scene where the band’s guitarist explains that his amplifiers are louder because their volume knobs “go to eleven.” When asked why this is different from having ten as the highest setting, he simply repeats “these go to eleven.”

Most of us have no trouble understanding that changing the units used to measure something does not change the character of the thing being measured. A day doesn’t get longer if you keep track of time in minutes instead of hours, four quarts isn’t more than one gallon, and paying for something in pennies instead of dollars doesn’t make it more expensive.

Yet somehow people continue to claim that a redenomination of the Iraqi currency will have important economic effects. (See this story.) Replacing all the dinars currently in circulation with new ones at a rate of 1,000 to one, thereby “knocking off three zeros,” is supposed to reduce the money supply, for example. Instead of the commercial banks holding 27 trillion dinars as central bank reserves, they will "only" have 27 billion. People won’t have to carry as much money once all the thousand dinar bills have been replaced by one dinar bills. And so on.

It would obviously be ridiculous to insist that an amp that “only” goes to ten would be softer than one that “goes to eleven.” Isn’t the claim that it matters how many zeros there are on a bank note an example of the same fallacy?

89 Responses to Redenomination and the Spinal Tap fallacy

  1. Stew 13th May 2011 at 06:05 #

    Ronnie... I think it's great you use "believing in Santa" as you comparison to the dinar.

  2. ronnie 13th May 2011 at 09:02 #

    the comparison was (not believing in your negatives) speak up believers--he is the opposite of the pumpers, trying to degrade our dreams. you think he is your friend by his downtreading remarks. you really think he is trying to save you? hold on folks--don't let them influence you. again, the rv may or may not happen, but don't let those upside down pumpers like Lz and stew and all the others that are against the rv drag you down. can't you see folks what they are trying to do. keep the faith---

  3. Stew 13th May 2011 at 09:41 #

    Ronnie… that’s ridiculous. I truly hope for everyone’s sake when Iraq redenominates they also increase the value and give a long exchange period so people can at least break even and maybe make a little money.
    I just don’t see it happening. No country has ever increased the value when lopping. It has always been a revenue neutral event at best. Some countries have even limited the amount of currency that can be exchanged causing people to lose substantial amounts of money. I don’t think Iraq will limit the amount… but I do think Iraq will give a short exchange period. They have a great incentive to do just that. They are very aware of the massive amount of dinar that has left the country and being held by speculators. A short exchange period would trap a large percentage of the currency outside of the country, and therefore not exchanged. That’s a payday for Iraq. And they don’t have to hurt any of there own citizens in the process… just a little inconvenience of a short exchange period.
    If you think Iraq is concerned about dinar speculators all over the world… you’d be better off believing in Santa.
    Maybe they will prove me wrong.

  4. ronnie 13th May 2011 at 09:52 #

    hey, i finally seeing a different side of you. at least you think there is an outside chance. forget what i said folks, stew just might have given us a reprieve. thanks

  5. Brit 13th May 2011 at 14:17 #

    Why is that people that cannot produce any evidence to support their views on the dinar revert to childish name calling and attempts to discredit those that can, and have, put forward intelligent arguments showing that what the gurus and pumpers claim are fantasy at best and outright lies at worst?

    In response to being positive vs. negative - First, I would state that 'negativity' on the unwarranted pumping of the dinar does not state anything about a persons views in life. Since when is realism considered negative while the acceptance of baseless lies and mental manipulation is a positive?

  6. ronnie 13th May 2011 at 15:08 #

    your one of the others--maybe you and yours are the experts. you have done your homework and your realism is commendable, but this continual bashing peoples hopes is not commendable. lay low for awhile and let investors decide their own fate. i'm sure you told your kids there was no santa clause. again maybe or maybe not on the rv, but your putting down all the aspirations of a lot of people by your constant badgering the facts true or not true is not right. you have done your homework and your views are probably warranted but sometimes enough is enough. some viewers have had their opinions torpedoed by you experts that is almost embarassing. i sure i'm just one of those dummies that sees the writing on the wall but just get tired of the relentless knowledge from the intelligent arugments that you'll bring to the table. basicly its your attitude. at least stew does or hopes their is a pie in the sky for us. its pretty obvious since you'll do not believe, that you have sold all of your dinars and no longer need to comment on something that you have none of. thanks

  7. Lz 13th May 2011 at 15:48 #

    Ronnie ,
    Maybe if we all pray hard enough , the big RV will happen! Frank 26 , Okie, Delta all say it's in Gods hands .

  8. ronnie 13th May 2011 at 15:55 #

    thanks Lz----good answer--i really believe you'll are right, but we all know not just dinar, we need to keep the faith

  9. Mike 14th May 2011 at 03:49 #

    Well said Brit. This whole thing has been turned from an investment into a cult of desperation / blind greed.

    Ronnie - if speaking the truth of the Dinar re-denomination (as the Iraq Central Bank have confirmed it is) and outing liars is "bashing people's hopes", then quite simply these people are living a lie. Telling people to shut up and get off the forum (which is what "lay low" really means) just because you disagree is nothing less than attempted censorship because the truth has made you feel uncomfortable. A lot of people find that downright sinister.

    You may not like what Brit says, but at least he hasn't tried to silence you or tell you where you can and cannot post on public forums. I have posted things on other forums, and I have received personal e-mails back from amateur Dinar investors (and potential investors) who "lurked" in the forum and actually thanked me for explaining what a re-denomination and showing them what the Iraq Central Bank *ACTUALLY* said, when all they got elsewhere was a pack of lies and empty promises by a bunch of cowboy salesmen. It is simply not up to you or anyone else to tell people who speak the truth to shut up and allow more people to be drawn into a scam just because you have been scammed yourself. That's just plain selfishness and irresponsibility.

    And to put this politely, "keep faith", "it's in God's hands", etc, from Dinar pumpers is absurd. God doesn't care about money (nor do real Christians) / God doesn't feed people's greed / God doesn't hand out $1m to those who ask for it / and God doesn't back lying pumpers who say "It's in God's hands" just because some others believe in him. Christians need to stop using God as a financial scapegoat / "bailout deity" for bad investment decisions, and start to seriously develop their sense of discernment, instead of being led around by the nose by a few salesmen strangers promising the age-old "Someone else will make you a millionaire in the future if you give me $1,000 now" Spanish-prisoner-variant confidence trick...

  10. ronnie 14th May 2011 at 07:15 #

    talk about gurus--thanks for your oratation--i bow to you experts. you see, it is your attitutde. you haven't proved to me that i have been scammed, only your information that you have compiled. i did say that maybe you are right, but so many of your posts no matter right or wrong make us read between the lines in a demeanor that downgrades our integrity. even though you seem very knowledgeable and have done your homework that doesn't make us all dummies. if you go back and read some of your posts, maybe you will see some of the hostilites that you represent. read your last post to me--wow--maybe if when each of you write your posts, you do it in a more delicate and sensitive manner. i think honestly you are trying to help us, but i think it could be better done and i'm expressing my opinion as you are. thanks for being a better person than me. you'll seen to have all the answers.

  11. Mike 14th May 2011 at 09:58 #

    Ronnie, my apologies if I upset you, but when I start reading people calling for censorship (which is what you did with "lay low" and "take a hike" - meaning "shut up if you disagree"), then many tend to react like that. You simply aren't going to win the censorship argument. More often than not, censorship is rife on some forums. The other day I literally watched a post containing the official April announcement of the Iraq Central Bank as reported on Iraq Alsumaria TV specifically calling it a "redenomination based on Turkey's experience with the Lira" get deleted from one site because the ICB "dared" to contradict what the pumper had been promising for months. That's just ridiculous.

    "Attitude" is also a two-way thing when it comes to the Dinar. As nice as it would be to believe that all Dinar investors are wonderfully polite and all "knowledgeable types" are always rude, on many forums the reverse can be more often than not, with all out name calling, smearing anyone who dares question the "gurus" (pumpers) with propaganda, "paid infiltrator", etc. I've seen all that before on other forums. Many times. It's actually a breath of fresh air here on iraq-businessnews to see two sides of the argument without hate screeching.

    And I never said I was a "better person" than anyone. You are now creating your own insults and projecting them onto me. I haven't called anyone a moron / idiot, etc, or said "I'm better than you". I just posted the truth as to what the Iraq Central Bank said they'd do (redenomination like Turkey) which is rather different than some outrageous "overnight millionaire" "RV" promises made by some dishonest pumpers who make vast sums on eye-watering trading fees & spreads over 100% (like Dinar Trade who charged $180 for $85 worth) before disappearing.

    Really I don't understand exactly what do you want? Do you want an honest debate on the Dinar with facts, or simply a private sect where dissenters can be silenced to maintain the unquestioned blind faith hive mindset? I don't post what I do to humiliate people who bought Dinars, I post what I do to give a more well-balanced and honest education on what the Iraq Central Bank actually said to those who haven't bought them, were thinking about it, but have a gut feeling that the salesmen promising the Earth isn't telling the whole truth...

    By the way, in a previous comment at the bottom of page 1 you yourself wrote "stew, you and LZ need to take a hike. bet you don’t have kids, but if you do i’m sure they don’t believe in santa clause" and "what do you’ll do for a living" and "know it alls" and "you’ll are a pair of chumps".

    I call that "attitude" too. Your whole post was spent lashing out on two people because you felt threatened by some facts they posted. So you attacked them. Isn't that hostility / insult towards their kids worth a little "self-reflection" too?

  12. ronnie 14th May 2011 at 10:30 #

    well, you put me in my place. again i bow to your convictions. i guess i did ruffle a few feathers. i guess i like the rest of the dire investors want to hear some good news every once in awhile. i search the latest news just like everyone else, hoping what we are hearing is not all devestating-- we as well as you'll probably would like to hear something positive, but all we seem to hear is negative. i understand about ali and all the other gurus that are leaving us flat, but i guess we all hope their is light at the end of the tunnel. we all are a little frustrated and mine came out angry and i apologize. guess thats about as good as i can do.

  13. Denny 14th May 2011 at 10:37 #

    What the main article fails to show is that if the three zero's are "lifted", "raised" or "lopped", then a "de-valuation" has taken place. For example, a 25,000 note becomes a 25 note.... That is a de-valuation.

    If that does happen, then I suspect the CBI will immediately "re-value" in the $3-$4 dollar range. Investors will see a 3-4 times return on their original investment. That is not the pie in the sky return that everyone has been hoping for, but it is a profit.

    The CBI could just re-value in the .03 to .04 range, but then the "buying power" of the dinar is still weak. That is why the first scenario is what will probably happen.

  14. Mike 14th May 2011 at 23:30 #

    No hard feelings Ronnie. I believe the truth is always more important in the long run even if it is a little frustrating in the short run. Realistically, there is only one serious source for Dinar news and that's the Central Bank of Iraq themselves (the people who are actually in charge of the process). Some other people's rumors that portray the whole process will be secret and sprung out of nowhere and that they will be the one to break the news really are false. Why? Because the changeover from old to new notes requires a huge logistical undertaking for over 30m people in what is still a 3rd world country. New notes have to be created, ATM's & bank money counting machines & software adjusted, bank accounts adjusted, prices for all goods / services in the country adjusted, etc. When all that is genuinely ready to happen, clear warning will have been given weeks / months in advance just as it was in Turkey, (even years in advance as with the Euro changeover), etc.

    Best thing to do is simply keep an eye on what the CBI say and avoid getting sucked into all these "I'm a member of a secret society and I know something that you don't" posers that are rife on some forums that use deliberately over-excited styles of writing to keep readers "hooked" into a seriously unhealthy almost permanent "roller-coaster" state of mind, constantly cycling between extreme eager anticipation and despair / disillusionment. I know you want to hear something positive, but a false positive is really a negative.

  15. Stew 16th May 2011 at 11:42 #

    Denny... that is not what is "probably" going to happen.
    What is "probably" going to happen is what ALWAYS happens with a redenomination. The current dinar is valued at .00085.
    A new currency will be issued. The new currency will be worth .85
    It will take 1000 current dinars to = 1 new dinars. So they will be exchanged at 1000 old for 1 new. That is lifting 3 zeros. That is how it has been done about 100 times. NEVER EVER has it been done as you described. So to say it will probably happen that way is a major stretch of reality.

  16. Brit 16th May 2011 at 20:46 #

    Sorry Denny, but that is a dinar forum myth that the removal of 000's is a devaluation... It is a lateral move in currency value... It is simply a method in which a central bank can wave a flag that their days of high inflation is over and that foreign capital is relatively safe again in their country...

    Could Iraq revalue to 2 or 3 cents USD? Possibly. It depends on whether they remain in Article XIV or not and what the CBI owns. The movement from Article XIV to Article VIII would allow Iraq, under IMF guidelines, to use non-liquid assets in addition to their foreign currency and gold reserves to back their currency. Unfortunately though, the CBI financial statements do not show anything substantial enough to make such a move. Non-liquid assets are items like buildings, land, cars, planes, etc - not oil and natural gas as those items do no belong to the CBI.

  17. Sorenson 8th July 2011 at 07:29 #

    RV is just a dream! Good luck.

  18. Leon 10th July 2011 at 12:42 #

    I thought the whole purpose of investing in the Dinar was to help the people of Iraq, with the hopes of some return on our investment. Eveybody has forgotten about them in their greed. Even the God fearing who pray that they will make their profits.The cards have been delt, it is how you play the hand.
    There will be no zero's at the end.


  19. Mike 13th July 2011 at 15:21 #

    I arrived in Iraq in 2004 and within a few hours was advised to buy dinar and get in on the bonanza. I laughed then, as I am laughing now, at the ignorance of people who think fiat currency has some kind of intrinsic value, and don't understand that those who control its creation out of thin air will never permit speculators to gain windfall profits when all they have to do is create more of the stuff.

    "Revaluation" of new dinar relative to old dinar is not the same as revaluation of dinar relative to other currencies. But once again... people who don't understand, don't understand. And no amount of explanation will change that.

    I would like to know how those who have smuggled their Dinar out of Iraq intend to exchange their old Dinars for newly issued Dinar when they lop off the zeros. There will be a deadline, after which the old notes will be worthless. I'll be watching the official exchange rate... on ebay.

  20. Silvio 15th July 2011 at 01:24 #

    The sole focus of the discussion is on all us small fish holding dinar....what about the big fish? Their stake in this is huge. I am just guessing that the US government is holding a very large amount of dinar. Dinar reserves they expect to use for future oil purchases. Have they been "scammed too"? I doubt it. Everyone is guessing at what will happen. None of us really know.

  21. Brian 17th July 2011 at 02:17 #

    Silvio, the US and other governments don't hold giant sums of Dinar. That's a pumper myth designed to make you buy them "because everyone else is" (even when they aren't). IMF COFER (Currency Composition of Official Foreign Exchange Reserves) figures debunk this. Also, oil is usually bought in $ not Dinar. That's why all the pumper talk of "oil will make the Dinar strong" is complete nonsense.

    Iran has much more oil than Iraq and yet their currency is 9x weaker 10560:1 than Iraq's 1170:1. Why aren't people madly buying Iranian Riyals and expecting to turn $94 into $1m? Because pumpers aren't hyping them with BS lies like they are with the Dinar. The Iraqi Dinar the way some "small fish" have been led by pumpers ($1k = $1m) to believe is little more than "Tulip Mania Reloaded".

  22. Marty 17th July 2011 at 05:53 #

    There is no need for too much speculation as it will be the same result as with any decision that is made by banks. It does not matter how many optimistic and preferable options there are, the bank will do the one that is the least beneficial to the public and foreign investors. So stand bye to lose money. Just my lowly opinion of course.

  23. AJ 17th July 2011 at 11:15 #

    The Amp comparison is quite interesting. The numbers on money are there for the purpose of stating it's value. The numbers on a volume knob attached to an amp are not measured in decibels or amperage. Perhaps if they were, this comparison would make more sense. It is interesting though.

  24. John 17th July 2011 at 23:11 #

    If I could only get a close friend to read what Stew, Mike, Brian, Sorensen have written. Her ne'er do well (and crooked) husband invested what little money he had into this Dinar scam in the fall of 2010. Today, July 17, she sent me a text telling me that Iraq had now pegged the Dinar to the British pound, so there would be 5.25 dinars = 1 British pound, and consequently $1USD=8 Dinars. "I could be a millionairess," she stated giddily. I've talked with her until I'm blue-in-the-face about the "pumpers" but she won't listen, in large part because her useless husband has brought them to the brink of financial ruin. I'm no currency expert, that's been part of my problem, but thanks to he explanations of the above-named writers, I now understand much more than I did before. I've read on the 'Net (and have no real proof) that as many as 3,000,000 Americans have invested in these Dinar scams. Apparently they have never asked themselves what motivation the Iraq government has in enriching a bunch of Americans who've never been to Iraq and don't really care about it. As PT Barnum said, "There's a sucker born every minute."

  25. LZ 18th July 2011 at 05:07 #

    I know what you mean. I have some friends who keep telling me ''Have Faith''! ''We are going to be very rich from the dinars''! Thats why I keep telling them faith is a virtue of not having to think. They dont listen and keep buying more that they cant afford. Frank 26, okie oil man, Medic are all paid pumpers . Why else would they write these huge bs stories every day?

  26. Stew 18th July 2011 at 08:23 #

    John. It’s quit interesting that you ask this question. “what motivation the Iraq government has in enriching a bunch of Americans?” Because the opposite is the reality. Dinar sales have been a massive interest free loan to the Iraqi government and I’m not sure they want to pay the money back at all.
    I saw an article years ago from an Egyptian journalist. He claimed to have a source that had attended meetings where Iraq and the coalition planned using the dinar as part of a psy-op plan to get support for the military operation. It was supposed to be just in the middle east… push out dinar in the region with this thought of a big RV and get as many people invested as possible. It get’s them emotionally invested in the success of Iraq. You can’t say it didn’t work. I know die hard liberals that despised any thing George Bush did… but they supported Iraq because they had some dinar in their closet and thought they were gonna be rich.
    I doubt we will ever know for sure if that’s a true… but it seems plausible to me. I have to believe that Iraq and the US gov are both very aware of this scam… and it amazes me that neither have spoken against it… until I realize that they are part of it… they got it started. I think they started it to get psychological support for the whole Iraqi experiment. Then the internet scammers came in and spread the dinar world wide and turned it into a cash cow for Iraq. Years ago I read an article about Iraq revenues, and of course Oil was their number one revenue generator. But guess what was number 2 on the list. You got it… the sales of dinars.

  27. John 18th July 2011 at 16:09 #

    @ STEW, Perhaps your scenario/theory is correct. When I was younger, I used to be much more of a conspiracy guy that I am now, primarily because as I gained life experience I realized how difficult it is to carry off a conspiracy. As an example, I used to believe that John F. Kennedy's killing was the result of a conspiracy, but over time, I came to realize that with the passage of decades, that at least one person, perhaps on his deathbed, would have revealed at least his role in it. But that has not happened. The Iraq Dinar conspiracy as you describe it, would require the cooperation of a lot of people

    But, hey, why argue about it? Your theory seems plausible. Who knows? I am a George Bush hater and I wouldn't put anything past him. But we end up in the same place, don't we? And why hasn't the US done anything. Well, you know, in the US, we all have the freedom to fritter away our money, don't we. These thieves, these liars, have the patina of legitimacy with their "Money Service Business" moniker.

    I spoke with my friend a couple hours ago. Her latest rationalization? Some clown, some disembodied voice going by the first name of "Tony," has told her and her husband that his "secret highly placed source in the US Treasury Dept." is working on the RV. Are you all throwing your hands in the air now? I'm just shaking my head. She did concede that she's getting disillusioned. She should. Her worthless, crooked husband has caused them to have their gas and electric cut off, and it was 95 here today.

    You go to these Dinar websites -- seldom do you see a name, a curriculum vitae, a track record. Just a website with a giant crock of BS for the fools who thing they can get rich quick. How people can be so stupid is beyond my comprehension.

  28. Carrie 20th October 2011 at 22:15 #

    Mike: I am new to reading the Fourm and have read most of your posts. Just curious, have you yourself invested in the Dinar?

  29. DeWeaver 20th October 2011 at 22:53 #

    Hi Carrie: No I never have. Mark

  30. cehona 23rd October 2011 at 15:22 #

    Carrie I inherited IQD's and I am sure, I inherited worthless paper. Sorry no bushing just observing trend.

  31. Mark 5th December 2011 at 21:53 #

    Why would people not think this is going to happen? I have owned mine for 3 years, I do not sell them,I just do research myself, it is very reasonable that this will become a great investment. But hey .50 cent to 1 will be historical returns. A lot of people made fortunes in currency trading, and Iraq is a country ready to explode with it economic growth and wealth. SO just use common sense. Yes they will play it down, and it may come out at .05 or .10 but that will be short lived , just a way to get dinars back cheap. This is not a throw it against the wall investment and see if it sticks. It is going to hweppne, the only mystery is when and how much. But make no doubt it will happen. I do not see 4-8 dollars like a lot of bumpers put out, but maybe years from now it could get close.

  32. Mark 5th December 2011 at 22:00 #

    Depends on what you call rich, I am being reasonable. Why would Jim Cramer hold up a dinar and claim it could be the great investment ever, do you no think that if this was a scam, that the media,espcially the liberal media would not have jumped on this? Anything that George W did they have attacked ecept for this hmm, why? Becasue it is real and the more peopel who talk it down like you cause peiopel to sell them back for a loss. I have wasted more money on a country club membership then I have on my Dinars and I have had them longer and have had more fun with them.o when this does happen , whether it is .10 or 1.00 you may feel a little dumb from not investing a little when you could and if it doesnt, then i walk away the same i walk away from a black jack table, it was fun while it lasted.

  33. jimroberts 6th December 2011 at 05:18 #

    Why do people say's this investment is not reasonable, I think before they say it again, it is an advice that they should review and do some research look how IRAQ do his development, look how many investor are willing to invest in IRAQ, and look who is supporting IRAQ right now! honestly I invest just a small amounth compare to some others who invest too much, but this is what we call investment and investing is a gamble no body knows if you will earn or you will going to lost it, but investing on those you know that there is a big chance to happen is not bad! for those people who doesn't believe then be it! but to be honest I know some of those who say that they doesn't believe! also has DINAR!!!!!!!!!!!

  34. PAFH 23rd December 2011 at 05:54 #

    This is an attempt to re-emphasize that: prior to the inevitable redenomination of the existing Iraqi Dinar banknotes and coins, the only way to truly invest in the IQD and actually see a return on your investment is to open a Bank account inside Iraq and then wait for an international revaluation of the IQD against the USD.
    Note the following:
    In economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation’s money supply.
    The other part of a nation’s money supply consists of bank deposits (sometimes called deposit money), ownership of which can be transferred by means of cheques, debit cards, or other forms of electronic money transfer.
    Nearly all contemporary money systems are based on fiat money ~ that is to say modern currency has value only by government order (fiat) and is not backed by gold or silver or oil or even sea shells. Having a lot of oil does not necessarily mean a country will have a high value currency.
    Usually, the government declares the fiat currency (typically notes and coins issued by the central bank) to be legal tender, making it unlawful to not accept the fiat currency as a means of repayment for all debts public and private.
    In most cases, each private central bank has a monopoly control over the supply and production of its own currency.
    To facilitate trade between these currency zones, there are different exchange rates, which are the prices at which currencies (and the goods and services of individual currency zones) can be exchanged against each other.
    Currencies can be classified as either floating currencies or fixed currencies based on their exchange rate regime.
    Altering the face value of a currency without reducing its (fixed) foreign exchange rate is a redenomination, not a revaluation.
    Revaluation (RV) means a calculated rise in a country’s official (fixed) foreign exchange rate of its own currency, relative to another country’s currency.
    Mazhar Mohammad Saleh, a senior member of the CBI Advisory Panel has repeatedly stated publicly that the GOI has adopted a CBI two-pronged plan to restructure the national currency ~ physical banknotes and coins.
    One prong is the long overdue (domestic) redenomination of the existing large denomination banknotes by introducing new banknotes and coins into circulation.
    The other prong is an (international) revaluation of the new banknotes and coins to increase the value of the IQD against the USD.

    Iraqi Dinar Currency
    Existing banknotes with the (current) CBI fixed exchange rate of 1:1170, can only be used inside Iraq, will never be used internationally and will never be able to be universally exchanged outside of Iraq.

    Existing IQD Banknotes:
    • IQD 25,000 = $US 21.37
    • IQD 10,000 = $US 8.55
    • IQD 5,000 = $US 4.27
    • IQD 1,000 = $US 0.85
    • IQD 500 = $US 0.43
    • IQD 250 = $US 0.21
    • IQD 50 = $US 0.04
    There are also IQD 100 and IQD 25 coins but they are not currently in circulation, and are not for sale to foreign investors on the Internet.

    New banknotes with the anticipated CBI fixed exchange rate of 1:1.17 are still yet to be issued, will replace the existing notes and the USD over time; and will be able to be exchanged and used for purchases outside of Iraq ~ only after an official international revaluation has been established.

    New IQD banknotes and coins not yet issued:
    • IQD 100 = $US 85.47
    • IQD 50 = $US 42.74
    • IQD 25 = $US 21.37
    • IQD 10 = $US 8.55
    • IQD 5 = $US 4.27
    • IQD 1 = $US 0.85
    • IQD 0.50 = $US 0.43
    • IQD 0.25 = $US 0.21
    • IQD 0.10 = $US 0.09
    • IQD 0.05 = $US 0.04

    When the redenomination process starts these new banknotes and coins with their new CBI (fixed) exchange rate will be introduced into circulation and will co-exist with the already existing banknotes and their old CBI (fixed) exchange rate until the existing notes are sufficiently removed from circulation ~ to the satisfaction of the CBI.

    In the recent past (2003) when the existing notes replaced those with Saddam's picture on them the process took approximately 90 days.

    Since the existing notes will never have the new exchange rate attached to them, they will not even be useful for future interbank transfers inside Iraq and will likely just be destroyed once they have been collected.

    In a practical everyday sense, it will be as if there were two separate currencies being used inside Iraq ~ both of them named the Iraqi Dinar.

    The Iraqi people will certainly be able to cope with using two different currencies, because they are already dealing with the existing IQD and the USD.

    What the Iraqi people really want is to become international citizens again with their own IQD international currency, instead of having to depend on the USD to purchase goods and services outside of Iraq.

    In fact, the Iraqis are so ready for equality that they are already using the existing domestic IQD notes against the USD in a de-facto ‘unofficial’ street level exchange rate of 1: 1000.

    For example, right now in Iraq and mainly because there’s no practical way to make small change:
    • IQD 25,000 = $US 25
    • IQD 10,000 = $US 10
    • IQD 5,000 = $US 5
    • IQD 1,000 = $US 1
    • IQD 500 = $US 0.50
    • IQD 250 = $US 0.25
    • IQD 50 = $US 0.05

    Something that needs to be re-emphasized ~ the existing IQD banknotes and coins can only be used and/or exchanged for USD inside Iraq ~ nowhere else.

    So, if anyone is holding the existing large denomination banknotes outside of Iraq, how are they supposed to cash them in for USD outside of Iraq?

    The answer is that they are not going to be able to ~ not now, not after the redenomination process starts inside Iraq and not even after the international revaluation of the new Iraq Dinar notes has been declared.

    The reason is that no bank outside of Iraq will ever recognize the existing large denomination banknotes as legitimate international currency and so will refuse to cash them in, even at the existing exchange rate of 1:1170.

    There will of course be exceptions, whereby an enterprising financial institution or even a forward thinking US bank may choose to trade through a third party that is willing to transport the physical notes back to Iraq for the final exchange with the CBI; however, the existing large denomination IQD notes will never be on that same bank’s ‘accepted currencies’ list for foreign exchange with the USD. The larger than normal fee for this exceptional service will most certainly wipe out any profit that might be anticipated.

    Anyone holding existing IQD notes outside of Iraq won’t even be able to get their costs back outside of Iraq (minus exchange fees).

    When an international revaluation takes place and the IQD is again recognized by the global community, it will be only the new notes with the new rate that will be recognized and exchanged and/or accepted as payment outside of Iraq ~ not the existing notes with the larger denominations.

    There is at least one “Dinar Guru” out there with three internet sites tied to an IQD news network that claims that he will be able to get the best group rate available when it comes time to “cash in” your IQD banknotes.
    All you have to do to get this great exchange rate for your existing IQD banknotes is join his VIP group and pool your banknotes together with a larger group for the leverage of a bulk exchange to take advantage of the best rates available.

    His stance is confusing because he seems to combine the redenomination process and the international RV into one event and at the same time ignores or seems to dismiss what the CBI senior board members have already put out to the public regarding the redenomination of the existing banknotes.

    Here is a November 2011 quote from him:
    “If the RV is at a dime and there is a mandatory turn-in of old notes, I am going to cash out half or more ~ I will be happy with that return. Then, I’ll reinvest the other half back into Dinar, so that I can take advantage of the future rate increases. Many people who have never heard of the Dinar will hear about it, and they will buy Dinar at US$0.10 because honestly, once the rate goes that high I don’t think it will go down. It will only go up and others will think so too. So, the notion that nobody will invest at a low rate of US$0.10 is just wrong in my opinion. Regarding the lower notes (the existing IQD500, IQD 250 and IQD50 notes), if there is a recall or a mandatory cash in of the notes, it will be across the board. Don’t listen to the pumpers that say low notes will be safe. That’s just a sales pitch”

    This guy has about 30,000 to 35,000 followers (his estimate) holding IQD cash who are heeding his advice and expecting to be able to cash in their existing IQD banknotes through him when the time comes. I’m sure that his popularity has increased in this regard, since most who have inquired about cashing in IQD with their local bank have probably already been told that it’s a ‘scam’ and can’t be done. Now, he is their only hope.

    A foreign investor holding the existing large denomination notes outside of Iraq may be able to at least retain what value the CBI gives the notes now by converting the physical notes into an electronic line item in a bank account ~ provided the bank will support an IQD account. Not too many (if any) of those banks are around outside of Iraq.

    Even though the value the CBI has assigned to the notes at the current rate of 1:1170 might be far less than what a foreign investor paid for them over the Internet; it would still be a way of rescuing the investment from being a total loss, and might even be a way of gaining more value (at least up to par) through financial products that such a bank has to offer ~ such as Certificates of Deposit or Savings Accounts with higher rates of interest than are currently offered by US or UK banks.

    Out of necessity, such a bank would have to be a private bank and probably would also have to be located in Iraq in order to accept physical notes for a deposit.

    One such bank is the Warka Bank for Investment and Finance with 120 branches and 350 ATM machines scattered throughout Iraq.

    Warka Bank IQD Account
    Once you have opened an account at Warka ~ with both USD and IQD savings accounts ~ the bank will accept FedEx shipments of physical IQD banknotes and even USD banknotes for deposit. You can also wire transfer USD to your Warka account and then choose to deposit the funds in either your USD or your IQD account.
    Besides remarkably higher interest rates offered for both USD and IQD savings accounts and certificates of deposit, Warka also has an Iraqi Stock Exchange (ISX) department which acts a broker for anyone wanting to invest in the ISX.

    There is strong historical evidence from other (recent) currency redenominations that when the redenomination process is started in Iraq; despite the fact that they are bank deposits and not actually physical banknotes and coins, electronic IQD bank accounts will also have their balances adjusted by the same method as the physical banknotes and coins. That is, the total balance will be reduced a thousand fold with the movement of the decimal point 3 places, but at the same time the exchange rate will be increased upward a thousand fold so that the value in USD remains the same after the redenomination as it was before the redenomination.
    This equality of value in terms of USD before and after the redenomination is something that the CBI has emphasized time and time again. They could not afford to lie time and time again to their own people ~ especially about the money ~ without severe consequences in confidence for the currency.
    In such a case, all electronic accounts in IQD would be affected worldwide; including the foreign currency reserves held by the various central banks and governments.

    Emotionally, it might be wise to accept that even thousands of USD invested in an electronic IQD bank account won’t make anyone an instant overnight millionaire ~ and that would hold true for Iraqi Citizens as well as foreign investors outside of Iraq.

    The advantage of a Warka Bank account (and other private bank accounts inside Iraq) is that because they are electronic they will be uniquely positioned to take advantage of future international revaluations of the IQD ~ possibly even up to past exchange rates of US$2 to US$3+ per IQD. That could double or even triple the investment.
    In addition, trading on the ISX through a Warka broker could mean explosive potential as the country and core infrastructure companies grow with the economy.

    The Iraqi Stock Exchange (ISX)
    The process to be eligible to trade on the ISX is at least a 4 month process to receive a personal trading account number but may well be worth the effort for future wealth.
    The next 'Microsoft' type company could emerge from the ashes of the current Iraqi economy.

  35. DeWeaver 23rd December 2011 at 13:49 #

    PAFH: I'm not sure if Warka is the safest place to put your money. Many depositors have had difficulty getting their money back from them.

  36. PAFH 28th December 2011 at 04:56 #

    Mark DeWeaver:
    Regrettable, but true.
    You are correct about encountering difficulty when asking Warka to wire money back to a US bank account.
    My first (test) wire back to the US took total of (10) days, my second request was completed in (13) days and the third (substantial) wire request took a total of (18) days.
    I found that after (politely) waiting for (too long) to get it done; if I took the time to nag the man in charge of International Foreign Relations ~ Mohammad K Issa ~ with an email, then the wire was completed immediately within 24 hours of my (nag) email.
    By contrast, once I have a confirmation number from my local bank (and Citibank, NY) referencing a wire transfer going the other way (to my Warka account), then the funds would show up in my USD Savings account at Warka within 24 hours and become available to transfer to my IQD account within 48 hours ~ even during an Iraqi weekend of Friday and Saturday.

    My conclusion from this is that (sub-consciously) the folks at Warka just don’t like outgoing funds and will lollygag around until prompted to get on with it. Perhaps they take it personally, I really don’t know.
    Whatever the case, from now on I will only wait the minimum time it should take (taking into account weekends and holidays) and then I’ll send a (polite) but explicate email to get on with it ASAP.

    I opened a Warka account to protect the IQD cash that I brought home from (3) consecutive tours in Iraq between the summer of 2004 and the summer of 2007.

    What I still like about Warka is:
    4% interest on a USD Savings account
    5% interest on a USD Certificate of Deposit
    7% interest on an IQD Savings account
    8.5% on a 3 month IQD CD
    9.5% on a 6 month IQD CD
    10.5% on a 12 month IQD CD

  37. niyaz 4th January 2012 at 15:08 #

    PAFH are you crazy to pot your many there i have 65 000 $ in there and they don't have the money to give it back to me . and i im from north of Iraq. because of the malki the persistent of Iraq has froze 1000,000,000$ of warka bank so the bank dosint has money to pay back to the customer.

  38. DeWeaver 4th January 2012 at 18:20 #

    Niyaz: Thanks for your response. Do you know if the Warka branches are even open? Are they doing any business at all?

  39. DeWeaver 4th January 2012 at 18:23 #

    Niyaz: Thanks for your comment. Do you know if the Warka branches are still open? Are they doing any business at all?