Mike Again, instead of saying Iraq was going to print a 50K note, this article is telling us the exact opposite, that there's no reason to print a larger note because of the problems it would cause.
it also tells us that they have completed all the steps: "has taken all actions relating to the restructuring of the Iraqi currency, including the design of the currency and denomination and the quality of paper used her."
Somehow, the IQD Team, Breitling and Steve are all taking the old articles from 2011/12 and turning them into a positive with the latest news from Saleh. No on ever thought that Iraq was going to print a 50K note until the recent rash of articles out of Saleh and the FC, we've always believed that they were talking about "categories" not the actual note.
To be clear, if Iraq prints this note, I don't see how it can construed for anything other than a delay in the adding value to the dinar. I don't think Iraq can do that now, they're only making around $55 billion this year and salaries and pensions are $41 billion.
That leaves very little for infrastructure, ration card items and fighting the war against ISIL. Like all speculation, we'll just need to sit tight and see what happens. If they release the 50K notes it's going to be important to watch the money supply and see if it grows.
hi-five Mike, you just stated my position as well - - Thank you!!
If Iraq was going to float the dinar value up, it would make more sense to leave the 3 zero notes that they already have in circulation. The argument that this 50,000 dinar note is a transitional note is, IMO, a bridge leading to nowhere.
I'm having a hard time trying to fit the 50,000 note in the monetary reform process-- whether it be the float or RV scenario.
Interestingly, Kap, Steve, Bondlady, Mtn. Goat, IQD, and Shred see this as part of the reform process. I would say BGG and Montana are in a wait and see mode, and Randy K. doesn't believe a 50,000 dinar note will be issued. Based on Iraq's history of timely follow through, we could be waiting a long time for answers to this question.
Mike Here's an article that relates to Iraq, they're going to print, or add money, to the supply while the economy is in it's current state, which will cause inflation.
Why Printing Money Causes Inflation
One way to finance government spending is to print money, but printing more money leads to inflation. How economic theory justify this?
Ceteris Paribus, if Money Supply increases faster than real output then inflation will occur. The Quantity Theory of Money seeks to establish this connection with the formula MV=PY. Where
•M= Money supply,
•V= Velocity of circulation (how many times money changes hands)
•P= Price level
•Y= National Income (T = number of transactions)
Rather than delving deep into the quantity theory of money. Let’s think about a simple example.
•Suppose the economy produces a 1,000 units of output.
•Suppose the money supply (number of notes and coins) = £10,000
•This means that the average price of the output produced will be £10 (10,000/1000)
Suppose then that the government print an extra £5,000 notes creating a total money supply of £15,000; but, the output of the economy stays at 1,000 units.
Effectively, people have more cash, but, the number of goods is the same. Because people have more cash, they are willing to spend more to buy the goods in the economy.
The price of the 1,000 units will increase to £15 (15,000/1000). The price has increased, but, the quantity of output stays the same. People are not better off, and the value of money has decreased; e.g. A £10 note buys less goods than previously.
Therefore, if the money supply is increased, but, output stays the same, everything will just become more expensive. The increase in national income will be purely monetary (nominal)
If output increased by 5%. and the money supply increases by 7%. Then inflation will be roughly 2%.
This is a simplification. For example, in the real world it is hard to measure the money supply (there are many different measures from M0 narrow money to M4 wide money)
Also, in a liquidity trap (recession, different printing money may not cause inflation. (see: Why Printing Money doesn’t always cause inflation)
However, this provides a rough explanation why printing money usually reduces the value of money causing prices to increase
Mike Somehow, there are folks who believe Saleh when he says that this will be a neutral event and yet there's not an example on the planet that will support this model.
Saleh stated that it would be an even exchange, two 25K's would come in ( or other 000 notes) and one 50K would go back out, but that doesn't make any sense unless they're making change with dollars or another currency.
Iraq will still need at least some of the lower denom's to make change in the normal course of day to day transactions.
Mike: YW, hi-five. So far, Kap and Steve have been all over the place, in the past three years they've gone from RV at $3.41 to now the dinar will float up from 1166. I can remember Kap and Steve both thought that Maliki would win his third term as PM and no matter how many times we said he didn't have the votes, they scoffed. I also remember when I posted an article from CC over at DA stating the FC had capped the auctions and they ridiculed that as well.
If you listen to the IQD team Mike clearly states that the 50K note won't effect inflation and then later in the call he said the prices will probably go up, heck, that's inflation.
It's comical to think that Iraq is stating they're ready to add value to the dinar and then they print a larger denomination, it don't make sense. If they were truly ready why not begin the process now instead of printing another, larger note?
My biggest fear is that Iraq will do what's it's done for the past three or four years, continue to kick the can down the road on economic reform. By printing the 50K note it will make things easier on the citizens in regards to how much money they carry around, but it won't add value to the currency itself. We'll just have to wait and see.
Mally I agree Mike. If they really print them IMO ONLY, it spells a redenomination where 3xs our money is about the best we could hope for. The reduce the note count doesnt jive with me either.
It doesnt matter what the note count is if the total number of dinars stays the same or goes up.
Countries dont add higher denoms to add value, I agree. They had hyper inflation, its how we got to where we are now with 25k notes. If they make 50k notes its kicking the can down the road for a bit to help with liquidity followed by a redenomination where a new 50 and old 50k will be worth the same.
The most exciting thing about the news to me, as Rissas Dad said, is it might mean we are at the end of this ride and we finally get to see what they are going to do.
If its what we are hoping for you can bet there would be no logical notice given so hopefully this is all misdirection. The news doesnt make sense any way you look at it and we still havnt seen a picture of any new note, 50k or lower denom, so that bodes well for us I would think, if they truly are about to do something.
Oldwazhisname Mike makes a compelling point here. We "neutral" believers think we are seeing a situation where two 25K notes get exchanged for one 50K.
What happens when a citizen gives to the bank three $20 USD and asks for a new 50K IQD? Does anyone think he will be denied that transaction? Of course not. I'm beginning to pay more attention to what Mike is saying. Thanks, Mike
Aloha Alex Isn't it odd that the ITTS service at DA still hasn't (I'm assuming) mentioned the 50k note, while articles spew it out? Kinda feels like either some kind of gag order or some very heavy misdirection.
WHAT’S THE SCOOP WITH 50,000 DINAR NOTE?
mally So are the "my ladies" in the camp that believes it will be an in country lop but out of country our dinars are honored like they are part of different new series of notes?
If not what does this statement bleow mean? And why is increasing the money supply but not the note count good? I was of the opinion that the note count going down is only significant because its an indication that the total number of dinars is too.
THE SAME NOTES WILL SERVE AS THE LOWER NOTES WHEN THEY REMOVE THE ZEROS FROM IT DURING THEIR CURRENCY REFORM
hi-five Hi Sager - - I'm still trying to be objective in considering the 50,000 dinar note. But, no matter how I try, I can't see a 50,000 dinar note introduced into circulation and later, after the value rises, use this same note by blacking out the 3 zeros. (I, also, don't understand how that can happen in a float scenario.)
If this happens, I agree with mally, that we are looking at a lop first, and then applying the new exchange rate ( for example, 50,000 dinar = 50 dinar X 3.41 exchange rate = 170.50 dollars. So, if you purchased the 50,000 dinar note for 50.00 dollars, you would be a little more than trippling your initial investment.)
Sager, I'm not trying to be difficult. But, if you can help me by giving an example of what a typical Iraqi with a 50,000 dinar note will do when his 50,000 dinar note becomes a 50 dinar note, I would appreciate it. Also, help me understand how the 3 zeros can come off this 50,000 dinar note, and not come off our 25,000 and 10,000 dinar notes.
Lotus BondLady & Admin Chat: 50,000 Dinar Notes
5/13/2015 [Shredd] I was thinking about this 50k news and had this thought:
The CBI plans to move gradually from the dollar to the dinar. While this happens in the beginning, the dollar will still need to be used but the CBI wants to continue to reduce the large notes. This can be done with the 50k. The rate will be low enough at the beginning to support this note being in circulation.
If this is the case, the beginning of the change to the dinar may be close. The gradual (managed imo) change will begin as the reduction of the note count continues but is more agressive since the most used denoms will be coming in.
This is the only scenario I can see that would make sense regarding the release of the 50k note. The articles, while not yet from the horse's mouth, are supporting this; no increase in notes and no change in monetary policy.
[BondLady] in a sense I feel like if they bring out the 50 k note it will give them time to drag in a lot more 250, 500, 1000, 5 and 10k notes, letting them use the 25k and 50k abundantly, all the while pulling in massive amounts of the smaller than the 25k notes.
Since they already released the new 25 k notes...which should cause the rate to increase over time as they take in all these other notes...as they withdraw the notes ...less in circulation ...rates increase imo.
Just like its done throughout the years all the while the tariffs and other fee's charged by the state and all the new contracts as well and pumping more oil now than Saddam ever did...to me this all increases the exchange rate.
All of these things contribute to raising to the rate on notes we hold. Like I said above a slow grow, this is like owning stock in a company and as the company grows so does the value of your stocks !
It is also my opinion that they are doing this to make them stop using the dollar. They would carry less notes with the 50k. One of the reasons they used dollars anyways and that also to me would cause the rate increase on the dinar... less dollars more dinar....and reason enough to do it.
It looks more and more to me like no straight up RV but steady growth like it's been but on a quicker scale than before because they pull in a huge amount of notes lower than the 25 and 50k.
[tlm724] here is an article with direct quotes from Saleh which to me is about as close to the CBI as we can get without an actaul statement from the CBI:
BAGHDAD - Iraq Press - 12 May / May: detect Prime Minister for Economic Affairs, the appearance of Mohammed Saleh, that the central bank provides to the draft printing large cash categories need to market to those groups adviser.
Said Mohammed Saleh in a press statement that "Project Print Central Bank of Iraq large cash categories, an important step on the road to monetary reform, which supports the country's economy," as described, pointing to "the market need to large groups, because cash payments exceed dealing instruments, cards, e-payment ".
Saleh continued that "printed large cash categories of project is not about monetary policy but the payments system management, and that the plan would be reduced cash amounts especially since large groups constitute 90 per cent of the money supply,"
noting that "put these large groups is to ask how much Monthly itself of the money supply in the market but different categories, and not increase the original amount. "
He ruled out the possibility for inflation by the implementation of the new project, but in the case of lending to the government and the issuance of large cash categories can get inflation in prices, The country suffered a contraction in liquidity both in dinars or in dollars with total money supply in Iraq size less than 40 trillion dinars (about 31 billion dollars). "
Tlm724: These quotes I find interesting : that "Project Print Central Bank of Iraq large cash categories, an important step on the road to monetary reform and "printed large cash categories of project is not about monetary policy but the payments system management
what is interesting is Saleh is saying this is a "step" only in the reform but is NOT policy. I see it as a temeporary stopgap if you will to the furtherence of the currency reform, an action needed to buy time perhaps.
Tlm724: I argree Shredd that it will reduce the note count throughout the country and as BondLady said " all the while pulling in massive amounts of the smaller than the 25k notes" but a question still remains in my mind and that is to what purpose ?
: even though this 50,000 note will reduce the number of "notes" in circulation the value amount will not change, in other words if there 40 trillion dinar out there, even with this new note there will still be 40 trillion "dinars" maybe not as many notes but still the same amount.
Saleh said "and not increase the original amount" Just wanted to point that out. BondLady is correct imo that while this stopgap measure is happening it will give them time to fully implement the tariffs etc...
Tlm724: I have to admit over the last few weeks since the news broke about the 50,000 note I was insistant that there was no way they would print it, that is had to the 50 dinar note instead BUT I was wrong !
After reading BondLady and Shredds comments now I see this as a "step" in the currency reform and not as a bad thing at all . Thank you both for your opinions and helping me understand it !
[BondLady] Thank you. No one knows the exact plan and we base our thoughts and opinions on the most current news. We will continue to watch, study and assess the news as it is presented to us !
mike Thanks, Sager. It's kind of funny to see all the guru's jumping on the 50K bandwagon, no one has ever taken these "50K" articles seriously until the past couple of days with the statements from Saleh.
My Ladies: Iraq has accomplished several things with this 50K note, they are increasing money supply without increasing note count, they're curbing inflation. As Iraq grows they are going to have to increase money supply which they are doing now.
In the this thread there is an article that demonstrates what happens if you increase the money supply without growing the economy, you will have inflation. Instead of curbing inflation, which is low in Iraq today, the 50K note will increase inflation. Too much money chasing too little product.
Already, the street rate for the dinar is 1305-1, the dollar is what Iraqi's want, they don't want the dinar because of the loss of value, if you push out more dinar's the spread will increase and the dinar will lose further value.
Simple economics tell us that you can't add currency without value or the result is inflation. Also in this thread is a discussion about how adding larger denom's would reduce note count, which, so far, we can't figure out either.
Sager, do you think Iraq will lower the note count with higher denom's and do you think Iraq will print the 50K note?
Aaanth while i get the "note reduction" position it doesn't seem practicle to pull in "massive" amounts of lower denoms. if what they are alluding to is correct iraq is moving to mostly 25k / 50k notes, if they do, in fact, print the 50k note. that would be like walking around with $1000 bills here in this country.
how would you spend them? you'd have to go to the bank and GET CHANGE, right? or the place you're spending them would have to be able to break them, right? but, if there isn't any change (lower denoms) how do merchants facilitate transactions? what good is a 25k note if no one can give you change for it.
you can't use it. it's DEAD money. while i do see that the scaricty would cause the notes to increase in value it seems like commerce and retail transactions would grind to a halt as no one would be able to do business without lower denoms.
so while the "evaluations" that all the gurus and knowledgeble dinarians are making might be true in the idealistic sense, they don't make sense in the real world kind of way. there is obviously a missing piece to this that either hasn't made itself known yet or that we are just not seeing.
perhaps from a monitary/banking viewpoint it makes sense but from an economical real world sense it looks like it has the opposite effect... you HAVE to have lower denoms.
it's what oils the wheels of commerce in the daily lives of the people on the streets. no way they can pull "massive" amounts of lower denoms off the streets, use only the larger notes, and still run business smoothly, soooo... in order for this to work there would have to be an immediate RV to create the ease of exchange, otherwise it could be a disaster. JMO
mike Good stuff,, it's just not logical to think the note count would decrease with a higher denom. Mally and hi-five, Kap's concerned about the exact same thing.
Mcduff82 Thanks everybody for all the levelheaded post In my mind a 50 k note makes no sense This may just may be misdirection
DreamWeaver My conjecture has taken me a different route than anyone in dinar community.
See these 50ks being all about bridging from current rate 1166 (.00086) to delete the zeros rate 1.16 (.86) by FIRST moving rate from 1166 to 1000 (.0010). Now, that's my idea of a real bridge as it serves a specific purpose related to preparing to change rate through deleting 3 leading zeros.
No question CBI intention is 1-to-1 rate (1.000) ... not 1.16 (.86). How are they going to do it? IMO using those 50,000 notes would be a perfect solution. At rate of .0010 a 50k note would be worth $50 USD.
Then, all CBI has to do, when they're ready is delete the three leading zeros in the rate is move rate from .0010 to 1.00. Viola (wah-lah), 1-to-1 accomplished smoothly without negatively affecting economy or causing confusion.
50ks would be "education" tool to bridge the transition in a way that doesn't cause chaos or have to deal with fluctuating rates that will lend stability. They've even talked recently about adjusting rate, which I didn't take to mean street rate and program rate but 1166 to 1000 rate adjustment.
Don't think releasing 50ks is about pulling in more notes as it doesn't work both ways, guys.
They are either concerned with large denoms in marketplace and want to pull them in--or there are no large denoms in the marketplace, as they've already been pulled in.
IMO they are done pulling in large notes as that's what Phase 1 of the project was all about--and Phase 1 is done and they're now in Phase 2.
Phase 2 doesn't involve releasing larger notes back out into the marketplace solely to pull in more 3 zero notes--Phase 2 is all about moving / changing the rate.
Pushing large notes back out into the marketplace at this point is absolutely nonsensical to me--UNLESS their purpose has nothing at all to do with pulling 3 zero notes. Bingo.
Bottom line: Those 50ks seem to be a contradictory move because folks aren't considering there are other (unknown) components that come into play.
If, for instance, we knew they planned to first move the rate to 1000 "in preparation of delete the zeros" (sound familiar), THEN issuing those 50ks would make perfect sense. See what I mean?
We're not going to riddle this one correctly standing on one side of the bank or the other. Need to get in the middle of the stream, where the missing components lie, and riddle it right there by trying to decipher WHAT OTHER COMPONENTS MAY BE INVOLVED THAT WE DON'T YET PERCEIVE.
My dart thrown in the dark on this one is that they'll move the rate to 1000 when those 50ks are released. I think they go hand in hand.
No doubt, I may be dead wrong about what I'm perceiving as "the" missing parts in all of this as well as how they fit in--but at least I'm out there thrashing around in the "missing components stream of thought."
IMO, none of the other theories about those 50ks being tossed around in the dinar community can be correct, as they clash with what we expect to be occurring.
Though my theory is definitely out there, it doesn't clash with anything. It BRIDGES from current currency regime to delete the zeros by first moving the rate slightly in "preparation" to delete the three leading zeros off the rate.
Honestly, it may be the Kentucky Derby longshot theory, but nonetheless it or something that isn't that far out there when you really consider that nothing stops them from slightly moving the rate first to 1000.
Time will tell if this--or similiar vein of thought--is correct. Until then, I'm comfortable that all is well and those 50ks are part of delete the zero program. Everyone needs to find their happy thought. That's mine. :D ~ DW