The Recent 2% Spread Article on the IQD
Maynard57 Posted Today, 08:02 AM
I know I'm constantly Mr. Rah Rah guy on this investment, but just humor me.
I've been getting bombarded by emails regarding recent remarks from a dinar commentator, and his former XXX Team boy Friday claiming that the official rate of the IQD and the street rate is no longer within the 2 percent margin as per IMF rules.
This is just my opinion (Breitling shares it) but poppycock and balderdash, I say. The IQD rate of 1166 and the variations thereof is an ARTIFICIAL PROGRAM RATE.
It was imposed on Iraq from beyond its borders in order to rebuild the local infrastructure after the war and to dry up the resources of terrorists running loose in the country. It is as simple as that.
And since it was not established by market forces by even the most tortured calculation, it does not react to market forces. That's why when the M0 note count number reduced from 9 billion, to 6 bilion, to 4 billion and who knows thereafter, there was no corresponding change in value.
You would think that according to basic Friedman economics on supply and demand, that the commodity known as the IQD would spike when they reduced the supply by 60 percent. Know what, it didn't freaking move!
Since there is no announced "market rate" of the IQD, and again, THERE ISN'T, the IMF 2 percent margin rule simply DOES NOT APPLY. It is not relevant at this juncture, so anyone who read that poop should forget it and not let it spoil your Christmas.
If one is going to read these articles so with such pathological strictness, you're gonna get duped and misguided and come up with alot of silly conclusions.
If the IQD is going to float initially, and we don't know that yet 'cuz it hasn't happened, the question is float FROM WHERE?
If you are going to float according to market forces, and I'm cool with that, you have to have an IQD market calculation computed in the manner that all other currencies are calculated, you have to start with an initial market rate calculation to begin with, so you have something to which those market forces can attach.
Why in the *** would Iraq start at 1166 when they know perfectly well that number is wrong, has no basis in reality and is insanely undervalued? Think of all the money they'd lose?
How many persons or entities within Iraq's borders are gonna see the IQD as very attractive as opposed to the dollar at that rate. How is currency velocity EVER going to rise when you've set up a scenario that it will never even begin?- Make sense? Maynard
Maynard Continues: If you want to keep sane in all this, just view IQD as a commodity. That's exactly what it is. MillionDay, bless her heart, posted this recently:
On occasion, a country must introduce a new currency. Turkmenistan, the former Soviet republic in central Asia, decided in 2008 to undertake a currency reform.
A major gap between the official exchange rate and the informal or market rate meant that Turkmenistan’s price system had become complex and inefficient.
This, in turn, created complexities `in accounting and statistical reporting. So the government decided to introduce a new currency before launching market-oriented reforms.
Currency reform was regarded as the foundation for further strengthening the macroeconomic framework, particularly monetary transmission: the more the population relies on the local currency rather than U.S. dollars, the more control the government has over macroeconomic policy.
The total and orderly overhaul of Turkmenistan’s currency system in 2008–09 in many respects serves as a model for other countries
Maynard57 With More Thoughts: We would do well to keep in mind when considering an opening rate that Ernst & Young's audit as reported by the Finance Committee reported a rate (about 2 YEARS ago!!) estimating Iraq could support $1.13. I believe that this was prior to when the M0 note reduction was at 6 billion.
We know it got down to 4 billion, but beyond that, Iraq qot a waiver from IMF for further publishing that M0 figure, so savvy investors couldn't just plug in a number for that variable on their ipads and make a pretty darn good calculation of the rate of the IQD.
The point is that above a buck seems like a very conservative ballpark number, so maybe Mr. GET team can work his intellectual magic in applying the 2% spread rule with a number like that.
If they are still pulling in their notes, like they have been saying, I'm liking the rate to go above a dollar, soon, or even right out of the gate. GIddyup!! Maynard
mistamista, on 23 Dec 2014 - 3:15 PM, said: Thank you Maynard for starting this great post! Triple bumps! So, the economics of this include that the lower the number of notes in circulation or being held outside Iraq, the higher the rate?
Maynard57: Not just outside Iraq, inside too. Its supply and demand, the fewer they are, the harder they are to come buy, and those that want them will pay more.
As for demand, think about all the international trade agreements that are already in place, and all the companies just waiting to get into Iraq, etc. They are doing this the right way.
They are reducing the supply and pumping demand by literally creating a vast market for IQD in advance.