Rrrr: Understanding Fractional Banking - It will cost Iraq approx $162.50 to buy back approx per 10,000 dinar
HOW FRACTIONAL BANKING WORKS TO ALLOW FOR A REVALUATION OF THE IQD - JOSEY WALES At OOMF - 10/17/2011
From Dinar Recaps (Post by Red Lily)
How Fractional Banking Economics will allow a high RV EXPLAINED:
First off, I’ll use the exchange of a 10,000 IQD note as my example. To help explain the economics of this cash-in example, I will use a 1:1 cash-in ratio between the USD and IQD, that is given a two-tier payout, and a 2% bank spread.
( Note: This is a example only and the numbers may or may not reflect todays situation)
What You Will Receive:
If 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.
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”.
If you don’t understand the “Fractional Banking“ concept that runs our country, you may want to, as that is what this is based on, and is what is behind this entire concept and plan.
To learn more about this concept, I suggest you click HERE, and go to a video post I brought to the forum previously, and posted in my “Tidbits“ section.
Ultimately, the bank wins because they are able to gain $2,000 in lending power under the 10% “Fractional Banking“ model.
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 notherwise 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, with the variable being the political element (i.e. UN Sanctions, GOI actions, IMF actions, World Bank actions etc.)
Other Factors that Strengthen Iraq’s Position and Ability to RV:
DFI Funds Returned & Other Assets: $280+ Billion USD, plus other frozen assets (estimated at $100 billion) will be returned back to Iraq and added to their foreign currency reserve, bringing it up to $430+ billion USD.
CBI IQD Reserve Requirement
Adjustment: The CBI will change the current fractional IQD reserve requirements from 100% to 15% at the appropriate time.
As a result, the the total potential money supply will be raised in value to $2.8 Trillion (430 billion/15), while at the same time, the total physical IQD in circulation will be reduced by removing the large bills with the 3 zeros over a period of 2 years, as they have indicated.
Oil Production Increased: Iraq will also execute the plan they announced to increase oil production from 2+ million barrels/day to 10 million barrels/day with the resulting revenues flowing directly to the Iraq treasury.
Oil Futures & Forex Contracts Added: To further stir the pot, the CBI will continue to use it’s sales window to market oil futures and forex contracts. They have shown they can generate significant cash flow in the private market. Think of their impact in public markets.
There, my friends, is how this plan will be enacted and made possible. Taking NOTHING, and turning it into SOMETHING, then bringing it back to a “manageable and reasonable something” that is accepted and supported by seeming endless supplies of oil.
This is how the world’s ENTIRE NEW MONETARY SYSTEM will be regenerated and supported and backed, given, in essence, a re-birth and renewed for most governments and economic regions… even by “Black Gold”.
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! Is that amazing or what?! You tell me… can Iraq afford NOT to RV?!!!
Will the IMF allow them to NOT RV their currency, but simply replace their large denoms for smaller ones?!!! LOL!!!
In this scenario, EVERYONE WINS… and the IQD is slowly (over 2 years) taken back in to the CBI… eventually destroyed, leaving a manageable M2 behind, having created HUGE WEALTH throughout the world to re-supply what was allowed to be destroyed in the “great bleed” over a period of just a few weeks a couple of years ago, even the greatest redistribution of wealth the world has ever seen.
Believe it or not, it has happened for this very purpose, and it IS coming! Rainmaker
Daz: DINAR IS REAL IRAQ IS REAL...RV IS REAL BASED ON LOGIC AND HISTORY...STICK TO THE BASICS
Steveo418: Lets see my question is simple "Why would 2 presidents sign a directive I think its 30303 every year allowing citizens to purchase Dinar as it was a terrorist currency previously.Are we stupid enough to believe they were part of the scam as without that no one would own any
Playmaker1: I just spoke with my good friend that has earned about 20 Business Degrees. (Minor Exaggeration) He read the Entire Doc and gave me a list of why it is nothing to worry about. To much to share. None the less I am no longer sick to my stomach and no longer concerned with it.
Rrrr: Everybody, please take a deep breath and take stock in what is happening. Throughout modern media history, when a major event is about to occur that requires secrecy, there will be an abundance of negative information flooding the airwaves. This miss-information acts as a cloak to protect the covertness of a major event that is about to unfold, you need to look no further than the last Kuwait RV. Relax! Sit back and enjoy the coming Blessing we are about to receive.
Wanting Freedom: DIZZIE BEAR w/an Explanation on How Close We Are to The End
PIMCO Total Return Bond Fund liquidated over 60% of their government bond holdings in the past month! Considering that is a BOND FUND, that is a HUGE revelation, and VERY telling of the massive sell off underway.
To get an understanding of how close to the end we are, I mentioned that bond retailers had reduced inventories they hold down to 1985 levels. Since that is hard for people to quantify, considering the equity markets closely parallel the bond market, let's look at the respective Dow Jones Industrial Average (DJIA) to understand the degree of hurt the bond market is in. IN 1985, the DJIA closed the year at 1,546 points.
TODAY's DJIA closed at a hair over 18,000 points! NOW do you see the huge sell off ... over a 91% sell off. That is NOT sustainable for any significant amount of time.
As for Greece, they have been running a very painful unemployment rate for months between 25% and 28%. The left-wing party wants to desperately end that situation. As the Greek social security minister said, "we either default to save the IMF, or default to save our people, it's a no brainer."
Greece simply can NOT meet the demands of the European Union and IMF. Technically, Greece has ALREADY defaulted. BUT, the magic word is a "forced default" which would push Greece out of the EU and collapse the bond markets and derivatives.
Everybody knows that. However, one analyst in Brussels noted, that Greece is acting like it has another currency! Indeed.
The heated rhetoric between the EU ministers and Greece is pushing the two sides further and further apart. In fact, it looks suspiciously like a scripted drama to end this draconian economic system! And for that, the end seems more certain. This weekend may very well be the start of what people in Dinarland have been anticipating for years!! If not, from tomorrow night on, the situation will finally be "ripe" for picking! :)
I just want people to understand, the real process to end this wait has already begun, with a tremendous amount of power behind it. DB
SassyD: Iceland put bankers in jail rather than bailing them out — and it worked - Updated by Matthew Yglesias on June 9, 2015, 11:30 a.m. ET
Yesterday, Iceland's prime minister, Sigmundur Gunnlaugsson, announced a plan that will essentially close the books on his country's approach to handling the financial crisis — an approach that deviated greatly from the preferences of global financial elites and succeeded quite well. Instead of embracing the orthodoxy of bank bailouts, austerity, and low inflation, Iceland did just the opposite.
And even though its economy was hammered by the banking crisis perhaps harder than any other in the world, its labor didn't deteriorate all that much, and it had a great recovery.
How great? Well, compare the evolution of Iceland's unemployment rate with what happened in Ireland, the star pupil of the Very Serious People:
How did Iceland pull it off?
Let the banks go bust
For starters, rather than scrambling to mobilize public resources to make sure banks didn't default on their various obligations, Iceland let the banks go bust.
Executives of the country's most important bank were prosecuted as criminals.
Iceland was nonetheless hit by a very serious recession that caused its debt-to-GDP ratio to soar. But even after several years of steady increases, the government didn't panic. It prioritized recovery. And when recovery was underway and the ratio began to fall, the government let it fall gently.
There's no free lunch in life, and no country recovers from a severe recession without some bad things happening. But while most developed countries have gone through years of grindingly high unemployment paired with super-low inflation, Iceland did the reverse. It let the value of its currency tumble, which naturally brought about higher prices.
But as a result, the country's export industries rapidly gained ground in international markets. Unemployment rose, but maxed out at a modest 7.6 percent before falling steadily to a very low level. In the US and Europe, the priority has been on low inflation to protect the asset values of the wealthy. Iceland prioritized jobs, and it worked.
Impose temporary capital controls
In the context of bank defaults and a plunging currency, the government felt it was necessary to impose an additional measure — capital controls, regulations restricting Icelandic citizens' ability to take their money out of the country. This is a serious violation of free market orthodoxy. More importantly, it can be a major hassle to ordinary people's lives and an impediment to starting new businesses. In some countries, like Argentina, capital controls become a breeding ground of corruption and mischief.
That leads some to believe that no matter how well heterodox policies work economically, they're ultimately doomed to political failure.
Iceland shows that's not the case. Getting policy right is difficult, but it can be done. And the upside to doing the right thing — devaluing the currency massively, then imposing capital controls to contain the fallout, then ending the capital controls once the economy recovers — can be enormous.
Iceland has had a rough time over the past seven or eight years, but so have a lot of other countries. Things are looking up there now because the country's leaders had the wisdom to reject elements of the self-satisfied conventional wisdom that have proven so harmful elsewhere.
For charts and more read here: