Joeg: My opinion, for which the hopium smokers wil boo me yet again, is that the cat is out of the bag. This is merely another opinion piece by someone without any power.
We've seen tons of these kinds of articles over the years and we're still sitting here waiting. There's one sentence that let's us know what to expect.
Those in power will continue saying the time is not right because of political instability, and that the time will not be right until after some kind 2014 election, which if I remember correctly is in April 2014 (I forget the details). In my opinion, that's the key takeaway of the entire interview.
All the rest of the article is merely Saleh's stance, which is meaningless because he lacks power. Sorry guys. To misquote the XX beer guy, "Stay hopium free, my friends."
Read More Link On Right
ZenMav Moderator: Joeg, you're welcome to your opinion, but to me, your resaons for nay-saying are no longer valid. Perhaps a few months ago, even weeks ago, they were spot-on, but in light of recent events and information, it doesn't hold up.
First, the IMF Mission Chief for Iraq, Sdralvage, revealed that the 76B in reserves of the CBI cover all dinar in circulation and in deposit by 104%.
Second, the CBI will have even larger reserves to report at the end of August, as well as, the 80 or so billion from the DFI will be added, too.
And, lets not forget that Sdralvage also mentioned in his interview, that the exchange can be defended with proceeds from oil revenues alone. In other words, as Iraq exists now, as jacked up as it is now, the foreign exchange can be liberalized and defended, and that is why he said to liberalize the foreign exchange as soon as technically feasible.
Third, there is the quid pro quo between Turki and the private banks that are currently selling the dollar at net, no spread and no profit, which banks will stop doing that if they aren't compensated, and fairly soon.
Knowing banks, and bankers especially, to think that they are going to do that for Turki out of kindness or some idealistic, boyscout duty offends even mild skepticism.
I think even you see/understand that something has to happen to compensate the private banks for assisting Turki in this manner, or Turki's word means nothing and the CBI loses ground taken.
Fourth, the CBI's autonomy today versus last year is without question, and Maliki has no where to go with false arrest warrants and trumped up charges. Parliament knows he fights dirty, and the relationship between Parliament & the CBI is stronger today than last year.
The support of Finance Committee MPs has become quite vocal, and lest we forget, numerous articles from different agencies, gov't officials, economists, the IMF & the World Bank saying that the time to do this is now. People are clamoring for this. Like you said, the cat is out of the bag.
There is no doubt this bronco is going to buck, Joeg.
And, I think you and I both know it is going to buck hard. But, I think that today, more than ever, when one considers the autonomy of the CBI, the coming enormity of the CBI reserves after the DFI is added, Iraq's release from Ch 7 sanctions, the public political support of monetary reform, and the general knowledge & anticipation of this event that the actual time-line for activation is actually sooner vs. later. At least, that is my take on it, and I'd like to think a hopium-free take on it, as well.
Tlar: I think all the back and forth, pro and con arguments between those that support the deletion of the zeros and those that oppose it, is just window dressing. Turki has made statements that support the deletion of the zeros and show that he has a plan that is already in motion.
The bank itself, the CBI, is not publically weighing in this time as did Shabibi when he tried to delete the zeros.. Turki did his thing behind the scenes one on one attempting to get as much support as he could , but the reality is he was attempting to get support for "something that is already decided upon and in motion."
Statements by Turki about Iraqi's and friends of Iraq being happy very soon, the slip up by a member of the Finance Committee on the rate of 1.16 dinars per dollar, the reference on going back to the original plan, the article day before yesterday saying they were going to do this in August. and more.
The recent spat of articles of support for this process and non support saying the time is not right, tell me that the one on one meetings that Turki had with the members of both committees, had the effect of making them believe the deletion of the zeros is proceeding.
Turki stirred up the bees nest an since then has wisely stepped away. If you look at the press releases of the ones not on board, once again we see that their arguments are trying to stop the process which implies what the member of the Finance Committee told us. The process has begun.
The CBI under Shabibi fought back vehemently arguing their side of the equation publically attempting to logically dispel these arguments. The more Shabibi tried to engage and reason with the Maliki idiots, the uglier those detractors became. Ultimately we know it did not happen under Shabibi and charges were brought against him.
This time the bank is not engaging. Turki has said his piece behind closed doors. He is done trying to convince and he is moving ahead. One more thing that is new this time.
The Association of Independent banks of Iraq. There has to be a relatively quick positive ending to their "selfless" act or they will come back selling USD above the rate and Turki won't get a second chance to get these guys to do this again..
These banks can't do what their doing very long and stay in business. Turki knows this and so he must follow through or he will exacerbate this problem. Turki knows he has one shot to get this done. He won't be around for long if this doesn't work and the rate returns to non stability.
These independent banks are his only hope to get this done. He must do it in a timely manner to keep the banks sacrifice to a minimum. These independent banks have greatly pressurized this.
ZenMav Moderator: Nice post tlar. Guess we will know who was reading the tea leaves correctly pretty soon, right!?
Terry: Zen and Tlar, you both expressed my thoughts exactly. I am impressed how both of you are able to put your thoughts to print so perfectly. Keep em comming, makes DA by far the best source for info anywhere. Thank you!
Tobyboy: Tlar & ZenMav - Love you postings I agree with both of you, plus remember the ogininal article posted in Aug 09,2012 concerning the deletion of zeros from CBI said the removal of zeros next July 2013 which the government had agreed to this.
They may be a little late maybe a month or so but I to feel this is going to happen soon. Both of you please keep up your opinions they are great and your knowledge is awesom.
Forgive me Kap & Steve not taking anything away from you , I believe this site would be lost without your knowledge of what is happening with our investment. This is what is great about Dinar Alert with such talented people here. I believe we all reSpect each of your opinions tremendiously.
HandOverFist: Great posts, Zen Mav and Tlar.Thank you very much. :)
Tlar, let me ask this for clarification.........regarding the "slip-up" of 1.16 dinars per dollar: People have said the 1.16 works out to .86 cents, but the way you wrote it sounds like $1.16. Which one do you think is correct? Thanks in advance, Tlar.
ReVbo: I know that was addressed to tlar, HoF, but more opinions never hurt, right? It reads as 1.16 dinars to the dollar, so I'd say it's 86 cents. Great posts, Zen and tlar. Agree completely.
Sweetpea: Great thread guys, very good observations and opinions. Hope to see Enorrste chime in on it , as well.
HandOverFist: Thanks, ReVbo. :)
ZenMav Moderator: Sweetpea, I can't wait to hear Enorrste regale us all on the next CC with his color commentary, especially while he has a few cocktails!
2COLLECTG: should make everybody smile! Central Bank reserves are a debt owed by the Central Bank by Iraqi dinar holders!! yep came out and just stated it!
i bought this stuff for a penny i just want to sell mine back for a dime!
Bigjon: holy crap ur right , 2collectg
2COLLECTG at July 30, 2013 at 11:11 AM: this should make everybody smile! Central Bank reserves are a debt owed by the Central Bank by Iraqi dinar holders!! yep came out and just stated it!
Punisher: 2COLLECTG, Where did they state that?
Corvetteman: so,how much longer can this go on,before they push the money button
Punisher: Corvetteman, one can read this article two ways...after the 2014 elections in April or before...I say before on New Years ;)
2COLLECTG: right here p In this case use of the reserve is fully or partially?
Use are partly estimated as needed, a Central Bank reserves are a debt owed by the Central Bank by Iraqi dinar holders, sovereign wealth funds were surplus from the public budget
--i bought this stuff for a penny i just want to sell mine back for a dime!
Enorrste: This article has two extremely important points, in my opinion.
The first point made by Saleh is that :
"The answer is, no, it's the year parliamentary elections, and not in political stability, replacing the currency in 2014 is questionable."
This is the most direct statement that we have seen from Saleh on this matter, and he is quite specific. What he is telling us is that our currency will remain legal tender until at least 2014 and then beyond.
That much is certain. In addition, however, he is stating that our currency will not even begin to be replaced until after the next election in March 2014.
The fact that he states that the process of "removing the three zeros" must take place at the beginning of a fiscal year makes 1/1/2015 the earliest date for that process to begin.
While on the surface that would seem to be a "downer" for us all, actually that is not the case at all. It is Saleh's second point that makes this become more clear, and KAP rightly brought it to our attention:
"For example, a Central Bank can pull all the Iraqi currency and replace it with foreign currency."
This statement is amazing, because it appears that Saleh has told us in no uncertain terms how he will reduce the money supply of Iraq by 99.5%. He will exchange (buy) the dinars back from Iraqis for dollars.
How can he do that? First, he needs only buy back dinars that are located in Iraq. By their own records the M1 is about 33 trillion dinars, worth about $30 billion.
The larger M2 is about 78 trillion (this would include deposits and other "non-cash" money in the economy). So how could they buy back all of this without destroying their reserves?
The answer is really not that difficult to determine, since Saleh himself referred to it He made the bold claim that the DFI funds are the property of Iraq, and specifically of the Central Bank.
Assuming that this totals up to $80 billion, then there would be ample funds to buy back the dinars with dollars directly from the Iraqi people.
However, it gets even better, because they do not have to buy back M2. They only have to remove the cash (M1) from the economy in order to achieve their purpose of reducing the "money supply" to 25 billion dinars.
The "electronic money" can simply be "dollarized" digitally by making the statement as follows: "if you have 1000 dinars in the bank, you now have $1 in the bank."
There is no "cost" to the CBI in making this statement. The equivalent VALUE is changed from dinars to dollars as an accounting procedure, not an actual purchase made by the CBI with real dollars.
Therefore, let's assume that the CBI spends $30 billion to buy back all of the dinars in circulation in Iraq.
This leaves $48 billion in reserves, to which they will add up to $80 billion from the DFI funds, giving them almost $130 billion in reserves to cover a NON-EXISTENT money supply (since all of the cash dinars are then removed).
They then issue the new currency (2015), at 1 dinar for $1, and they issue 25 billion dinars (worht $25 billion). With $48 billion in reserves (not even counting the DFI funds), they have well over 150% coverage of the new money supply.
The Iraqis who did not use a bank would be required to turn in their dollars for new dinars at no loss in value. The electronic money is just switched from dollars to dinars within the account (no cost to CBI).
Here is the best part, because it refers back to Saleh's first point. He has until 1/1/2015 to prove to the people of Iraq that the dinar is a real currency with real value. We therefore may reasonably suspect that the CBI will float the currency during the next 1.5 years unti it reaches about $1 per dinar.
Now, the question becomes this: when must they make the announcement that they are totally dollarizing the country? The answer depends on how much the CBI wants to pay for the cash on the street.
Clearly it is to their best interest to announce the change PRIOR to the announcement of the free float. In doing so they get the dinar back at today's price.
If they float the currency first, then the cost to buy back the cash in circulation increases with the rise in value of the dinar.
Remember, changing the electronic money is not a factor in terms of expense to the CBI. It is simply an accounting switch.
Therefore, I look to see the announcement of a PLAN that will lead to the introduction of the new currency. The first part of the plan will be the conversion of all dinars in country to dollars.
The second part will be the floating of the currency for 1.5 years, with the goal to be at 1.16 to 1 by 1/1/2015, at which time all accounts in banks are converted back to the NEW dinar and the NEW dinar is issued to buy back the dollars on the street.
After watching the dinar rise in value for 18 months the Iraqis will be happy to convert dollars into the NEW dinar.
In sum, our next thing to look for is an announcement that the country will totally dollarize in preparation for the issuance of the new currency. Enorrste
Corvetteman: are they saying that they are not going to start the float until next year.
JR: Thanks Enorrste Question! At what point does the currency become internationally recognized?
--"If you want something you've never had, you need to do something you've never done"
AdminBob Site Owner: As soon as they accept Article VIII.
JR: Bob, I am with you "sooner"....
"If you want something you've never had, you need to do something you've never done"
Kaperoni Moderator: Keep in mind articles today imply the CBI is following the IMF directions. So the float should begin soon. Though Saleh makes these statements, the dinar needs to rise so the people settle down. I expect this to start any day.
Corvetteman: Thanks to all,It means alot to me on all of you that help me understand what is going on!!!!
Gale Richardson: Oh my.....this is looking very promising! Thanks everyone! Without you I wouldn't understand anything! :)
Terry: My thoughts are due to Saleh being arrested by M and being away from the CBI for so long now. What are the chances he isn't on the inside of how Turki wants this to go down? Is there a chance he is not up to speed on the plan??
Treyb Moderator: Excellent interpretation of a very interesting post, Tlar and Zen. Maybe just maybe we are moving ahead in the correct path and that bright light is the train heading our way and not a missile.
Tripphood: Ennorste, I thought that Iraq was already well on there way to being completely dollarized. No?
Punisher: Enorrste, let me get this clear...you are saying it is going to take 1.5 years to float the dinar to $1?
Tlar: Ennorste, as usual your logic is impeccable. It is one workable plan out many possibilities, but I have to respectfully disagree with your conclusions.
IMO it fails to address the most important issue that I see. How do the Independent banks fit into your thoughts. To ignore theses banks and expect these banks to continue sacrificing their profits is a recipe for disaster IMO.
These banks cannot wait until the rate is sufficient to warrant Iraqi's using independent banks. If we assume these same banks have been and is making a selfless sacrifice making no profit on dollars sold, how long can they hold?
If they can't hold then it is my opinion they will be working against the value increasing maybe not intentionally, but just to survive. as they just go back to selling dollars above the program.
These banks temporarily have endangered the own well being. IMO they are an important factor in this puzzle and must be recognized and dealt with. If they think the light at the end of the tunnel is a long ways off, IMO they won't/can't hold. For profit businesses can not survive long making no profit.
I don't believe they would have agreed to make this short term sacrifice based on your timetable of 2015, because most are already strapped for both profits and capital.
How do you see these banks in relation to your thoughts on how this will go down? Under your premise what do you see as the problems for the CBI if these banks don't hold and bolt from their sacrifice, selling the dollar again at much higher than the program rate?
I would like to also ask, is Saleh a part of the CBI anymore or is he speaking opinion as are members of the Finance and Economic Committees are? If he is not a part of the CBI then might this just be considered his thoughts on this, even given his qualifications and experience?
In your opinion do you think at this time he is a part of the inner circle that makes this decision or just voicing his opinion as you and I are? I'm trying to establish from what value do you hold Saleh's views over other outsiders making their own thoughts known?
Personally, the way this interview is given, I think he is just weighing in, not telling us the reader, how this will go down. Unless you know something I don't I hold that as my opinion.
Enorrste: Tipphood, the dollarization has been ongoing, but the CBI has stated that there are still 4 billion "pieces of paper" still outstanding in the economy. We don't know what denominations, but they talk about 33 trillion to be removed.
Punisher, KAP called me this morning on another article that states that the rate will be 1.16 dinars to 1 dollar at the beginning of the 2016 budget.
We have no way of knowing how quickly they will get there, but we expect the float to be announced shortly. I've held the position that the rate could rise to $1 fairly quickly (months) while KAP tends toward thinking they will manage it so that it takes a little longer.
Tlar, the banks will begin making money once the float is announced. In fact, they may be allowed to participate in the conversion from dinars to dollars PRIOR to the announcement of the float.
In both cases they will earn a "spread." Therefore they do not have to wait for the introduction of the new currency to make money. They can make money with a currency denominated in dollars.
Remember, there will be a heavy push for more commercial activity during the next 1.5 years as the dinar rises in value. Commercial activity means that banks will make money.
Chase and others are already chafing at the bit to get inside Iraq, so they obviously figure they will make money doing so. Iraqi banks will also participate in this commercial activity.
I therefore see their "sacrifice" as a short term measure with an implied or stated promise from the CBI that this is definitely short term and will be followed by an influx of capital into the country (thereby allowing the banks to profit). Enorrste
Art: great opineons by all tx again
Tobyboy: Enorrste I believe 2-3 mos ago they had talked about less than 7 trillion dinars outstanding in the markest now. They have been pulling in a tremendous amount each month of cash amounts so I would think down to around 4 trillion in streets now JMO
2COLLECTG: they imf rep told us he has been given the green light to start the process of liting the 000`s it could have started or been a ongoing process!
--i bought this stuff for a penny i just want to sell mine back for a dime!
mexia7: So they will float a currency that does not exist "in-country". It is a currency that will be held by you and me and central banks around the world? I'm not sure I grasped this. Who will be trading the currency to drive up the price?
Punisher: Enorreste, thanks. I don't think Saleh's voice of opinion is as important as it once was when he was in fact at the c.b.i. so Joeg could be right that what he states might not hold too much...he is not in Turki's inner circle. I personally don't see it taking so long to get up to $1.16 once they start this thing going. To get to $3 yes...to get to $1...no!
Kaperoni Moderator: mexia, all of this is well documented in the Kaperoni & friends section..
2COLLECTG: the currency is already trading in the GCC region in middle east was in several articals on here!
--i bought this stuff for a penny i just want to sell mine back for a dime!
Carrello: I am assuming that Turki's inner circle is heavily influenced, if not directed by, Dr. Shabibi.
Punisher: Kuwait is Iraqs neighbors ...imagine Kuwait has a $3 currency and Iraq does not once it becomes internationally tradable...I just dont see that imho. Enorrste, I still see a $1 rate out of the gate on January 1st. We all know the c.b.i. can support that and then some...
Hacker: Thanks all. The time table seems to be a moving target, but they must start "something" soon, or chance what little economy they have failing.
Tlar: Thanks Ennorste for the quick response. If the CBI goes from Article XIV to VIII, and their desire is to dollarize Iraq, what would be the Iraqi citizens incentive to continue to buy the dollar?
Almost all Iraqi's are paid in dinar and if the dinar was going to go up, they would not need to stand in line to buy the dollar.. Why would he want to buy dollars after the first pips are removed?
It has been drummed into him for 3 plus years that the CBI wants to see the dinar equal to the dollar.
As the dinar starts to go up, it should make believers out of those Iraqi's that have been buying the dollar. No body wants to own a currency that is going down in value as will be the dollar under your premise.
There will be very few wanting to buy that dollar and the spread to the independent banks will be minimal along with their profits.
Also once the process is recognized as having started with the end goal of being $1.00 in value Iraq runs the risk of increased counterfeiting because with each new increase in pips that still uses the old money we have, counterfeiters will have a greater incentive to produce an increasingly more valuable bogus currency.
Also they cannot operate another 18 months with its current currency because of condition. Their is also an increased risk of state sponsored counterfeiting as the currency becomes more valuable.
Syria and Iran both already have in place the people to handle and distribute the bogus currency. It is logical to assume then that there will be increased smuggling if this is done gradually as you proposed because of the increased counterfeiting.
I can see many more problems if they approach this plan they way you have described it. A question I would like you to answer if you care to, is the same question I have posed in a few of my posts.
Why do they continue to refer to this plan as the deletion of the zeros when in fact that only occurs at the very end of the cycle when finally all three zeros will be gone. At first its just pips until the first zero is removed. It goes on until the last zeros is removed.
Why would they continue to say that the smalls will be released on such and such a day? How would they know on an exchange rate that is crawling up sometimes daily, sometimes weekly.
Shabibi said he would release the smalls in Sept of 2012. The article released day before yesterday by the finance guy said they would release the smalls in August.
The article is dated 7/28/13. Why would this article that says they are going to delete the zeros in August mention the release of the smalls in the same article if the currency is to just float?
Lastly one of the problems as has been stated over and over by the CBI is the under capitalization of the banks in Iraq. Chase, Citicorp and other international banks will be able to take advantage of the opportunities coming to Iraq by making the major loans necessary to finance pipelines and infrastructure etc. Iraqi banks do not have the capital to be involved as stated by the CBI.
Under your plan the independent banks will be unable to compete with these internationals. The exception is if deleting the zeros is an actual all at once event.
Shabibi was looking for a way to get Iraqi's using the banks again and recapitalizing these same banks. This was all apart of the "original plan." By deleting the zeros two things happen immediately.
The first is de-dollarization. The second is that Iraq's will beginning to bring in the old dinars in to trade for the new ones. Shabibi had told the banks to "take your time with each person coming in to swap his old dinars for the new ones.
Talk about the banks services and attempt to set up savings and checking accounts." If an Iraqi has (3) 25000 dinar notes as an example, and after the deletion of the zeros he received 65 to 70 thousand dollars worth of small dinars, the bank was to try to get him to leave most of it in the banks, taking only walk around money for his own personal safety.
That dinar held by that Iraqi is not different than what you and I hold. Its value is determined by the exchange rate. It was Shabibi's hope that this money left in the bank would be a recapitalization of the bank.
If this were to happen this way, it is more likely that the independent banks of Iraq would be in a better place to compete with the internationals. IMO these benefits only come with deleting the zeros. Not with a float. Respectfully, tlar
ZenMav Moderator: Very good point, Kap. I feel like Iraq will become a powder keg if they wait too much longer.
Punisher: Tlar, if and when September hits and no rv or float then that deal Turki made with the banks must not have been so serious.