"How It Might Work" summary: Post By Rico
WHAT YOU WILL RECEIVE:
If the RV were to happen at $1.00 and you were to cash in your 10,000 IQD note with a bank that charges you a 2% spread, you would personally receive a net take-home of $9,800 credited to your bank account. Of course, after taxes (35%) you would keep $6,370.
WHAT YOUR BANK WILL RECEIVE:
Your Bank will receive a $10,000 credit to its Federal Reserve Account. They will also be able to add the $200 profit to their “capital account”.
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WHAT THE US TREASURY WILL RECEIVE:
First off, the US Treasury will receive $3,500 in estimated taxes in the quarter after the exchange, because you are now in the “rich” category and get to enjoy the 35% tax bracket.
This lowers the “net cost” of the IQD exchange to the US financial system to $6,500 USD (i.e. $10,000 out – $3,500 in).
Furthermore, the US Treasury’s rate is higher than the banking rate (we will use in this example 1.25), thereby further reducing their “net cost” from $6,500 to $4,000.
OIL NOW ENTERS THE PICTURE:
At some point, a Fed-appointed agent orders $12,500 worth of oil from Iraq. Payment will consist of a $12,500 transfer from the Fed’s foreign currency reserve IQD account to the IRAQ Oil payment account at the CBI in a form otherwise known as PetroDollars/PetroDinar.
Even though the world spot price of oil is defined in terms of USD, the actual transaction may take place in any internationally recognized currency agreed to by the parties.
For example, Iran only accepts Yen from Japan for their oil orders, because they don’t want USD in their foreign currency reserves.
HOW THE CBI “RECAPTURES” THE MONEY:
The $12,500 order is filled with 250 barrels of oil based on the spot price on the date of the sale (for this example we used a $50 USD spot price). What does it cost Iraq to produce the oil to fill this order? Well they have negotiated productions agreements for approximately $1.50 USD/barrel.
From that price $.50 USD goes to the national Iraqi oil company who is the partner in the field the oil came from.
Out of the remaining $1.00 the other oil field partners have to pay the Iraq government a profit tax of $.35 USD (35%). The net cost to Iraq to produce a barrel of oil used in this scenario is $.65 USD. (i.e. $1.50 – .50 – .35)
WHAT DOES ALL THAT MEAN?
It cost Iraq $162.50 to bring back a 10,000 IQD note! Can they afford that? I think so! So, instead of paying out $12,500 for a 10,000 IQD note, they only pay $162.50!
That doesn’t add to the money supply much at all does it! They receive their IQD back and place it in the CBI, or destroy it.
The transaction is completed with the Federal Reserve exchanging foreign reserve credits which are equal to $12,500 USD (which had a net acquisition cost of $4,000 USD for the US) for 250 barrels of oil (which has a TOTAL COST to produce of $162.50 USD for Iraq.
More completely explained, and simply put, it cost Iraq $162.50 USD from their foreign currency reserve accounts to redeem the value of 10,000 IQD, which goes into their operating accounts.
At the same time the US got $12,500 worth of oil for a net cost of $4,000. That’s how it was originally planned for Iraq to RV at 1 IQD = 1 USD.
So, here’s the summary for all the “players” involved, giving ballpark numbers, and not taking into account superfluous costs, fees, and other small details that don’t really affect the larger picture:
Investor’s Net Gain: $10,000 – $200 = $9,800 x .65 = $6,370 for an investment that cost $10
Bank’s Net Gain: $200 added to “capital account”, plus $2,000 they can use to loan out.
US Treasury Net Gain: $2,500 from the .25 spread on top + $3,500 in quarterly taxes = $6,000
CBI/GOI/Iraqi People Net Gain: $12,500 – $162.50 = $12,337.50 + Profits from “Other Factors”
Overall Net Gain for All Involved: $6,370+$200+$6,000+12,337.20 = $24,907.20
This is the wealth that was generated from a single 10,000 IQD note that was given an original value of approximately $10!