Since we are seeing so many delete zero articles I thought it fitting to blog about them and try to give clarity to the zero controversy. We have only seen a handful of these articles in the last 5 months or so and now in the last few days they are coming out of the woodwork.
In Iraq, like here, we see controversy over what they mean. Are they going to do what Turkey, Lebanon, Russia and other countries have done in the past and just re-denominate their currency by making the 25,000 dinar note become 25 dinars without giving it any more purchasing power? ‘
Or is their intention to raise the purchasing power by giving the dinar a new exchange rate rather then just deleting the zeros?
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First of all none of these other countries had the perfect conditions that Iraq has, 23 years of UN sanctions that have just been lifted, 5th largest Oil Reserves in the world and some studies have it closer to the second largest. 11th largest natural gas reserves and this could be much higher as well. ‘
Iraq has huge rock sulfur reserves, estimated to be among the largest in the world and is exploited at Mishraq, near Mosul. Their phosphate production that started in 1980 is used in a large fertilizer plant at Al-Qāʾim.
Others included salt, steel, construction materials including stone and gypsum from which cement is produced and all are plentiful. Untapped Gold, producing copper minds and many other mining resources give Iraq the potential of being one of the wealthiest countries in the world and even the White House said earlier this year that Iraq will be the fastest growing economy in the world in 2013.
We are seeing this right now with over 164 companies registered already this year bringing in billions in capital.
Now does Iraq want to do what all these other countries have done and reduce their banknotes by three zeros just to ease currency transactions in the market place or do they want to spend the $175 million dollars that it takes to do this and give their currency more purchasing power at the same time?
Well, let us take a look at a few quotes from a few of these articles to answer this question:
Quote: there shall be the exchange rate of the dinar against the dollar (1300) or (1200) Iraqi dinar, that this price is when the balance was $ 10 billion, and today the balance of sovereign Iraq (76).
Quote: Central Bank required that there be a new price against the dollar
Quote: there must be a real rate of the Iraqi dinar
Article: Member of the Committee: on the Central Bank to determine the price of new Iraqi dinars before the old Laar
Here are a few more from another article:
Quote: to be of the Iraqi dinar purchasing power big match dollar
Quote: the value of the Iraqi dinar toward climb to more power because we passed the bottleneck
Quote: steps to strengthen the Iraqi dinar by turning the Iraqi market to a promising market
Article: Abdul Salam al-Maliki: the government will take urgent steps towards strengthening the Iraqi dinar LINK and another LINK
When the Iraqi Dinar value was last internationally recognized it was valued at $3.22 dollars per 1 dinar in the late 80’s, their oil production was 1.5 million barrels per day and now it is over 3 million.
They only had $30 billion in CBI reserves and now it is $80 billion and more by the end of this month according to articles.
Their population was not much less, so the only real difference between then and now is that their currency in circulation was 25 billion dinars compared to 30 trillion but this amount is controversial in itself due to the CBI not reporting an update in almost a year now and since 2011 they have been saying that they want to reduce that to 25 billion in the local market.
Dr. Shabibi said in a public announcement dated July 22, 2011 that starting July 1, 2011 they were going to start removing the zeros, was he talking about from in circulation or was he saying that they were deleting the zeros? Well, we know that it wasn't the zeros so I say it was from in circulation.
There have been many articles that state that the dinar is very worn out and that there is very low liquidity of dinar in the local market so I’ll leave that answer up to you.
We have also read that the CBI has wanted to reduce the amount in circulation to 25 billion from over 30 trillion so if they have been reducing it in country to this I say that it only makes since that these economist are now saying the time is right.
Folks, I am using my educated guess and saying that Iraq has the most undervalued currency in the world and that they and we want the CBI to show us the real value and I believe they are close to do this.
Our percentages of a windfall have just improved by Chapter VII release and with each day getting closer to Iraq emerging back into International Status.
A few more supporting links:
Happy Sunday, July 07, 2013 Stryker