Newbie: Yep, there is no way they will float from 1166 dinars, they need to have a considerable rate increase that can be maintained for a small period of time to even consider a float. I agree with Tlar. Okie Dokie!
Kaperoni Moderator: Again, the IMF policy is for emerging markets to float their currencies. That has been the rule since 1973 and several IMF documents are posted in the Research Library on how they transition countries from the closed policy to the new float regime. You may not agree, but that is what is the norm and what we expect to happen.
Newbie: Also under the article Central Bank: report of the International Monetary supports our goals in the liberalization of the foreign exchange market.
Sounds like Turki completed his part by the Banking Reform Strategy and Action Plan in the World Bank Operations in Iraq. Okie Dokie!
Tlar Part 4: Recognizing that this process has been through at least two changes, the challenge is to determine where we are today. Although nobody has a claim on how this will turn out, we each can come to some conclusions on what we see as the facts. Personally I am troubled with a float.
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Tlar Continues: I think it will be at least two years until they free float the currency. Shabibi mentioned letting the market determine the price but we have to be cognizant that he was under duress by the Maliki government at the time and had just change the plan to a float in an attempt to get the currency going having decided this government was never going to cooperate for the best interest of Iraq.
It is also at this time at a banking convention that Shabibi signed a contract with the facilitator causing him to build infrastructure to drive the currency up from 1166. All this is true but today IMO is a contract that no longer is representative of where we are. Shabibi is gone and IMO so is the contract.
It may be yet that at some point the facilitator will get to drive the currency but the conditions IMO have morphed. I tend to believe the guys from the finance committee that are not under Maliki's control. We know Malikii has guys positioned on both the Economic and Finance Committees.
The two guys that have spoken out I don't believe are under Maliki's control. For on to say the currency will be 1.16 dinars per dollar in the 2014 budget, begs the question where did he get that number.
And I see it as more than coincidence that that number is again repeated for the 2016 budget. Also how do you deal with a finance member who unequivocally says, " the CBI told him they were going to delete the zeros in August and that they were going to release the smaller denominations".
This followed by a recent statement of returning to the "original plan." Those followed by saying members of both the Economic Committee and Finance Committee saying, "We need to do it now."
My question is do what? Delete the zeros or wait to de-dollarize Iraq and then start a float that hopefully, quickly will raise the value of the dinar?
Punisher: Kap if that is the case then how was Shabibi gonna rv in the original plan???
Tlar: I just re-read what I wrote above. I find it interesting that a couple of Jack and diet cokes removes all desire to proof read.
HandOverFist: Great question, P.
Carrello: Tlar, thank you so much.....I have never seen "Woopty do" spelled out before. 8)
Enorrste: HandOverFist, The incentive for the dinar to rise in value is the fact that it is worth toilet paper at the current rate yet it is backed better than any other currency in the world. Second, Iraq has the 2nd largest known oil reserves in the world. I could go on (the only ME country with two major rivers running through it!).
Believing inTheBest, The private banks will make money the way all banks make money. The fact that the country is running on dollars doesn't mean that they can't make money.
We run on dollars and our banks make money, right? The banks will have to start doing "banking" instead of money exchanging primarily. If they don't, then the international banks will do it for them.
But trust me, they'll catch on quite quickly. Remember, the IMF is helping them from the background. Enorrste
Enorrste: Tlar, TMI! I can't keep up with you! One or two thoughts at a time, please.
I will address one at a time.
First, Turki was not bragging. You inferred that. He was simply stating that he had ample funds to continue selling dollars. The rate was incidental to his primary argument, as I've already shown.
Second, he does NOT admit that he can't control the rate. In fact, as I've already shown, he makes it clear that he has ample funds to do just that.
Third, he does NOT say that "only 100 million is enough" or any thing like that. You again are making an inference. What he was doing was complaining to the IMF that he needed more help to monitor where the money is going. He never makes a statement about funding being a problem, or that he has found a solution of any sort regarding funding. Funding is not the issue. The issue is CONTROL of where the money goes.
Enorrste: Tlar, I agree with part 2 completely. Enorrste
Punisher: Enorrste, you have me confused. On one hand you say once the float begins you think it will go up rather quickly to $1...and on the other hand you say it will take all the way to January 2015 to get to $1. Which one is it? I might just be reading what you say incorrectly...
Enorrste: Tlar, paragraph 1 is "spot on." However, paragraph 2 requires some comments from me.
You claim that a bank cannot capitalize if all of the dinars are removed from the streets. Your theory is that they turn in their dinars and get dollars, so they can't capitalize, presumably, because there are no dinars to deposit. However, there are dollars to deposit, right?
Your argument that Iraqis live "hand to mouth" would mean that even if they didn't dollarize the banks wouldn't be able to caplitalize, so that argument does not hold water.
So we are back to dollars. Banks CAN deal in dollars. We do, and our banks do quite well.
My point is this: the problem isn't the currency (dinars or dollars). The problem is that banking in Iraq isn't like banking around the world. That has nothing to do with dollarization of the country whatsoever.
Banks will HAVE TO ADJUST TO WORLD BANKING METHODS in order to compete, or they will fail. The currency used at the time is irrelevant to that problem. Dollars will work as well as dinars.
Your second issue is "why not just RV after they dollarize?" I answered earlier that they could well do that but that they have no incentive (the CBI) to do so.
If they RV at $1 AFTER dollarizing, then they expose themselves to at least SOME risk, wherease if they float the currency, which KAP has shown is the norm for emergining economies, there is NO risk to the CBI.
It can watch as a bystander and has no NEED to interfere unless it wants to (presumably to slow down the increase in value, rather than to shore up the value).
Your next statement with respect to "paying their balance of payments with dinars" misses the point entirely. If, as I have suggested, they announce that all OLD dinars must be exchanged for dollars, then the balance of payments would be paid with dollars, not dinars, right?
The CBI would NO LONGER be using the old dinars, period. Therefore their $1 million debt would be paid with $1 million DOLLARS, not 1166,000,000 dinars.
Your next statement that the CBI goal is to reduce dinars in circulation therefore would work, since they would NOT be re-introducing dinars to pay off debts, since their primary currency during the transition would
Finally, I wouldn't get in the habit on speculating on the motivations of Iraqis, and especially of Shabibi. You state that he "had to do something" and imply that what he did was not what he really wanted to do.
You may be right, but you have no way of proving that just as I cannot prove that you are wrong. What I can prove is that this is an inference, again, on your part.
By stating that he was moving to a free float we have no idea what he was implying other than that: moving to a free float. We have no way of knowing his motivation for doing so.
However, as KAP has shown in great detail, we DO know that this is the IMF model for changing an exchange rate regime. Therefore, I would be inclined to take Shabibi at his word, rather than think he acted rashly and changed a plan in order to "keep the ball rolling" as you infer.
Now, I will agree with KAP that you tend to argue from what you WANT to happen rather than what is stated will happen. In this particular case, you state unequivocally that an RV was the original plan and that the float was brought up "under duress" as a second plan.
However, there is no empirical evidence that an RV "straight out of the shoot" was ever the plan. The plan, as presented, has, until now, not been specific on the method to get to the "about a dollar" or even how to get to $3.33, another rate used over the years.
What HAS been discussed is that the "project to remove the three zeros" is a definite part of the plan. Nothing has changed here. We have spent years trying to figure out what this means, with the LOPsters falling on one side and we on the other side. We believe we are correct.
However, we have had to change our previous views with regard to the TIMING of the removal of the three zeros. We, KAP and I, originally thought that they would announce the float and remove the zeros AS THE VALUE RISES for the dinar. We now are inclined to believe that the large notes will be removed as a part of the dollarization of the economy, either before or coincidental with the announcement of the free float.
In other words, by exchanging the large denoms at today's rate for dollars they eliminate any risk to the CBI in terms of a rising rate costing them more and more money to get the old dinars off the street.
That is the magic of Saleh's statement of the plan (I believe it is the plan, and not just his opinion). They completely eliminate risk to the CBI through dollarization. Enorrste
Punisher: Here is a question for Kap or Enorrste and it might be a silly one....lets say the float begins tomorrow at 1 o'clock...does that mean the dealers would then stop selling the notes in the U.S. with the 3 zeros on them?
Aloha Alex: Hi ya'll. My first post eventhough I'm celebrating my 5th Ramadan, unfortunately. Been following The Professor since his The Three Amigo days - or was that One Flew Over The Koo Koo's Nest?
Anywho, I have a pertinent question for him regarding Malaki, since it looks like he is still key to the rv despite his recent semi neuterization. Some research-based posters claim he wants to rv to make himself look good, while othrs state Malaki wants to derail it to maintain his delusional dictator power over the people. Is there a definitive answer to this? Happy Aloha Friday
Punisher: Thanks HandOverFist. If "IMF policy is for emerging markets to float their currencies" then what about Shabibi's plan to rv the currency.............I guess he was a mad man going against the norm.
Enorrste: Tlar, In Part 4 you are largely expressing your own opinion which is definitely your right to do. However, I'd like to piggyback on your comments with what KAP and I believe are clearer statements of the situation as it is today, not shaded by what we want but what we see to be actually occurring
I don't say this to slight you in any way whatsoever. I've fallen for "what I want syndrome" many times. It is very easy to do! You offer the following in quotation marks:
" the CBI told him they were going to delete the zeros in August and that they were going to release the smaller denominations".
I am not familiar with where that came from but I am familiar with the statement about deleting the zeros starting in August. This is entirely consistent with what KAP and I are saying.
If they announce that the plan to get to a new currency involves first dollarizing the economy entirely, then the deletion of the large notes is the next step and could well begin in August.
People will exchange for dollars, however, instead of small denom notes of dinars.
The second part of that quote will also be shown to be true, although we suspect that the release of the small denoms will not occur unti after the dinar is allowed to free float and gets to "about a dollar" as the CBI has stated numerous times.
Here we have a situation very similar to what Jesus did in a synagogue 2000 years ago. He stood up at the podium and read a quotaion from the book of Isaiah in which the prophet predicted the arrival of the Messiah.
Jesus closed the book and said, "Today this prophecy has been fulfilled." [Luke 4:16ff.] He was, of course, referring to himself. What he DID NOT do was read the next verse from Isaiah [Isaiah 61: 1-2, but only the first part, not the second, which he did not read]: "and the day of vengeance of our God."
I only bring this up because the CBI may well have been doing what Jesus did except that they "read the last part of the verse."
In other words, while Jesus did NOT refer to something that still 2000 years later has yet to occur, the CBI DID refer to something that has yet to occur, but hopefully not 2000 years from now.
On the other hand, 18 months from now would be more reasonable. In other words, as Saleh has said, 1/1/2015 will be the first time that we should expect the small denoms (NEW dinar) to be issued.
I am not trying to be flippant here at all. In fact, I'm trying to make a very serious point. Just because the word "and" is placed between two parts of a sentence does not mean that we may INFER that one will follow immediately after the other.
Clearly, over the last 7 years that I've been involved in this investment, we've seen that this is definitely NOT what has happened. We have seen statements made that appeared to mean that one thing would follow another like clockwork, only to be disappointed to find that a year, two years, or three years have passed between the two events.
In sum, I suggest that we be very cautious with inferences. They often lead to apologies later. Instead, as KAP and I try assiduously to do, I suggest cautiously allowing the pieces of the puzzle to speak for themselves, and stop at that. Speculation beyond that is risky, and often foolhardy.
I would love to see an RV. I don't believe that will happen, but I do believe that the free float will get us to a "cash in" position for some within months after the free float is announced. In any case, August has been stated to be a "big month" according to the quote above. Let's see how it plays out. Enorrste
Enorrste: Punisher, all I have said is that BY 1/1/2015 it must be "about $1" in order for Saleh's statements to work. I personally believe it will get there much sooner than 18 months from now.
Your second question is a really good one. "Will the dealers in the US stop selling the large notes?"
The answer is an unequivocal NO! Why would they? They make money exchanging legal currency.
As the dinar rises, people will buy and others will sell, and the dealers will make money all the way to the top, and then even AT THE TOP. Now, your next question might be this: "But what happens in Iraq?"
Answer: they are dollarized.
In short, a dealer cares NOT ONE BIT what the rate is. All he cares about is that there is a buyer, and a seller. Enorrste
Enorrste: Aloha Alex, I was the "research based poster" who stated, not that it was Maliki's intention to allow the float so that he could take the credit, but instead that it would be in his best interest politically to do so. On the other side of the coin, I've never said that he was holding this off because of his megalomanical desires to dictate. Bottom line: there is no definitive answer to his motivation, and ANY guru who claims to know it had better be SLEEPING IN BED with Maliki. Enorrste
Punisher: Thanks Enorrste, you are a wizard :) Just wish this 'surprise" from Turki would show it's face already! Maybe it was just an empty statement.
Enorrste: Jackjr, NO I am not saying that. In fact, we have numerous articles from the CBI that state that the existing dinars will remain legal tender "for a long time."
Furthermore, Saleh has stated that dinars outside of Iraq will become "reserve currency" to be held by central banks around the world "for a long time."
Therefore, putting these two together, it is logical to conclude that OUR dinars will not be called in by the CBI. Instead, they will REMAIN AROUND THE WORLD after we cash in to be held as reserves to support currencies around the world.
Now, it is important here to note that this is not what I MYSELF am saying. It is what I am reporting that the CBI and SALEH have stated.
Therefore, if this doesn't come out this way, don't blame me: blame them. I often get accused of making statements as if I had made them myself, when in fact all I have done is report to you all what the CBI and other reputable sources, like the IMF, are stating.
KAP and I occasionally get lambasted by "gurus", especially LOPsters, for statements that are in our post as if they are our own "made up" views. Then they call us liars because this or that hasn't happened.
Well, I'm sorry, but reporting what someone or some organization says is hardly lying. Things change. Enorrste
Enorrste: Punisher, add the "surprise" statement from the head of the CBI to the statement from the CBI that they would "remove the three zeros in August" and what do you get? You either get Tlar's RV or you get Saleh's dollarization. What else is there? Enorrste
Punisher: I guess we will see how August plays out like you said.. ..
Enorrste: Incidentally, what I WANT is Tlar's RV. What I SEE is Saleh's dollarization. Let's hope that this time I'm just wrong. Enorrste
Punisher: But you think the float will start this month if in fact it is a float....
Enorrste: Punisher, I believe in fact it is a float (IMF and the faciliator and an article from ME and the CBI say so) and I HOPE it will start shortly after the announcement of the "removal of the three zeros".
Clearly, if Saleh is stating policy and not just opinion they must call in the large notes for dollars first, and this could take 30 to 60 days, or so. Then the free float would be announced. By my thinking it cannot be announced prior to dollarization now. Enorrste
HandOverFist: Thinking of it as stated above, it would not be a great surprise (as Turki said) for Iraqis to have the 3 zeros removed, only to become completely dollarized. I'm sure they would like Tlar's surprise much better
Jackjr: Enorrste, Thanks for your response...I really appreciate your opinon which I hold in high regard Jackjr
Kaperoni Moderator: Jack, go to the Kaperoni and friends section, there are several good chats on the float in there. It will put you at ease.
Tlar: Ennorste, thank you for taking the time to present the counter point. I appreciate your effort to do so. I think both positions are defensible and I appreciate this site for allowing both to see daylight.
This is August so we are at the door that might see the answers to what this investment outcome is. That is assuming of course anything at all happens in August.
Either way it is shaping up to be an exciting month. Again, you and Kap are a class act and argue your position well. Whether this turns out be a float as you see it, or an RV as I see it does not diminish my respect for you and Kap.
It wouldn't hurt my feelings if they did start a float in August, but honestly, I can't return the favor of hoping I'm wrong concerning the RV as you did the float.
It appears that both of us are in agreement with one thing after all. We both would like to see an RV instead of a float. lol Until something definitive happens one way or another, I will expect to see evidence that supports my position, as you do yours.
Punisher: If this started to float tomorrow I'm sure everyone would be happy...if this rv'd tomorrow I'm sure everyone would be happy...just something start already!!! Lol.
Enorrste: Tlar, you are a class act. I truly appreciate and respect your professional attitude. I only wish that other sites could have the same spirited discussion without "ad hominem" [attack the man] arguments.
Remember our president? He was a pro at ad hominem attacks when simply dealing up front with the issue wasn't working. You, on the other hand, act more "presidential" than any other person I have engaged, either here or elsewhere. We stick to the issues and clarify them.
Then, when each of us has made his points, we finally get to the crux of the issue, which is simply this: I SURE HOPE YOU ARE RIGHT! Lol Enorrste
Bigbadassdog: Enorrste, lol..both of you guys are class acts. Like you said, I sure hope Both of you are right.
Kaperoni Moderator: I am just a fact finder. And I cannot argue with the fact that since 1973, the IMF requires emerging market countries into a float to let the market determine the countries exchange rate.
These documents in the Research Library lay out how the IMF goes about the transition. One thing is certain, Iraq is going a new Exchange Regime soon so they can engage with the international trade and financial system.
That being said, here is a great quote for all those who want to know who really is in charge...
"The IMF can exercise “firm surveillance” but it cannot compel a country to change its exchange rate. Nor can it order commercial foreign exchange dealers to change the prices at which they trade currencies.
It can offer economic advice and discuss how changes in countries’ exchange rates might be in their own interest. It can also provide a forum, such as its new multilateral consultation mechanism or discussion on the IMF executive board, where other countries can urge a country to change its exchange rate procedures. However, in the end, the authority to make the change resides with the country alone."
ZenMav Moderator: Well, this looks like a great place to wrap up one of the all time great threads on Dinar Alert. We will/ should know soon who has been reading the tea leaves correctly, likely in the next few days as Ramadan nears it's end and the feast approaches.