ReVbo This looks like those money transfer companies, that they said they would approve to participate in the auctions, are finally actually approved. If that's the case, that street rate spread is going to vaporize.
To / remittance companies approved all (account money transfer companies)
This is a big one. I had thought that the DFI funds of $180 billion were going to be going to the Ministry of Planning, or Ministry of Finance, or some other government entity, but here's an Iraqi lawyer saying they're going to the CBI.
Why that money belongs to the bank and not the government is beyond me (probably just because we say so), but it's great news for us because that means CBI's reserves are going to be in the $300 billion range now.
Last year, they were saying they had all the Iraqi dinars in Iraq, roughly 35 trillion, covered 2.5 times.
Even if that number is the same, and I don't believe it is, they now have it covered 8.5 times, which would allow them, even if they wanted to keep their money supply completely covered 100%, and nobody covers their money supply 100%, to move the rate of the dinar to somewhere in the range of 137 dinars to the dollar, or close to a penny.
Even if you take the mostly likely vastly overstated 80 trillion dinar number that the l o p sters tout as the number, they've still got it covered 3.75 times, which would equate to a full cover rate of 310 dinars to the dollar. Again, that won't be the calculation as no central bank covers its currency 100%, so the numbers should be well above those, but it's an interesting exercise just to see just how undervalued the dinar currently is.
Legal expert: the abolition of the decree for the protection of the U.S. Iraqi funds will not affect in these funds
He said legal expert Tareq Harb said that "the abolition of the decree the U.S. to protect Iraqi funds will not affect or threaten the Iraqi funds.
Harb added in a press release on Thursday, received Agency (appointed Iraq News), said that "there are several reasons, including has been to settle all negotiations and proceedings of America whether governmental or corporate or for individuals in 2010 where Iraq paid $ 400 million to the U.S. in exchange for dropping all lawsuits, claims, administrative and legal procedures against Iraqi funds in the United States and considered this file finished and has been ratification of this Convention by Law No. 7 for the year 2011 did not highlight any claims after that.
added that "the Iraqi money outside America was protected by UN Security Council resolutions issued under Chapter VII has ended this protection the issuance of UN Security Council Resolution No. 1956 on 31 \ 12 \ 2010 and did not get claims since that date."
and that "the threat of significant financial Iraqi money abroad was the KAC has been agreed between the two countries to cause conflict and the abolition of lawsuits after Iraq paid $ 500 million for the company.
Abizaid said that "the Iraqi Central Bank will manage the Iraqi oil money without the mediation of the Development Fund for Iraq and the U.S. Federal Reserve Bank, where This is money belonging to the central bank and not belonging to the Iraqi government.
pointed out that he "continues to deduct 5% of the imports of Iraqi oil and paid to Kuwait as compensation for the occupation of the former regime of Kuwait by the Compensation Commission International.
, and continued by saying that "all negotiations and lawsuits were from the former regime did not remains of which only a few where the Paris Convention for the debt settlement and there is no serious threat to the Iraqi funds.
U.S. President Barack Obama announced on Tuesday lifted the immunity of the Development Fund for Iraq, imposed by UN Security Council Resolution 1483 to protect Iraqi funds from international claims after the fall of the regime the former in 2003. ended. Q. C.1. LINK
Tlar: Revbo - "reserves are going to be in the $300 billion range now. Last year, they were saying they had all the Iraqi dinars in Iraq, roughly 35 trillion, covered 2.5 times."
The CBI reported on December 31st that all the dinars that have ever been released everywhere since 2003 were 35 trillion. An article came out as we know that stated the CBI was going to replace the existing 250, 500, 1000, 5, 10 and 25000 dinar notes still circulating.
They only printed 5 trillion dinars in these denominations. The first article to come out about this Revbo pointed out the descrepency because the article stated they would print 5 trillion dinars but went on to say they were going to replace the existing notes of 2.7 billion USD.
We know that 5 trillion dinar is more than 2.7 billion USD so I made a leap of faith and determined that this number represented the total estimated circulating dinars which if correct, means there is only 3.148 trillion dinars estimated to be circulating.
That would make sense because Saleh told us in early 2012 that there was just an estimated 4 trillion circulating and that number through the auctions must have reduced some since then.
Also the CBI would absolutely print more than they needed because they can print all they want. Only circulating currency has to be accounted for when covering them with reserves.
The other tell tale point about this printing is it indicates they will soon be releasing the currency (smalls) because they only printed 5 trillion and that is not enough to buy back the billions of USD circulating in Iraq.
The point is this. Circulating dinars is the only number we care about. the 35 trillion dinars total out include circulating dinars which means aprox. 31.9 trillion dinars are not circulating.
The dinars you and I hold are not circulating and neither is any dinars held in central banks around the world including Iraq. Non circulating dinars don't have to be covered by the reserves.
So lets look at the numbers again assuming the above article does allow for these monies to go to the CBI and the CBI adds them to the existing reserves.
180 billion DFI funds
100 billion cash reserves
122.6 tons of gold
82 billion being held somewhere probably BIS from released frozen funds.
In total the CBI is sitting on over 400 billion potential while only having 2.7 billion usd equivalency in dinars circulating. The total of 400 billion means the multiplier is 148x's in reserves over what needs to be covered which at the present rate is 2.7 billion USD equivalency.
Depending on how Iraq is allowed to cover their currency under the laws of fractional banking, this gets very interesting.
In addition Iraq produces oil at a run rate of 3.75 million bpd as of last month and Kurdistan has not been producing oil for months. Kurdistan is coming on line and has recently stated their infrastructure can quickly get to 250,000 bpd at a target by year end of 400,000 bpd.
The Imf will undoubtedly let Iraq use some portion of the oil production to back their currency.
This is why I believe Iraq could come out higher than my original estimate for the last couple of years at 86 cents. This is partially why I now believe we could see $1.50 - to $2.00.
In 2008 when they did the strategic study that concluded that Iraq could support $1.13 they were producing approx 1.5 mbpd and the reserves were less that 40 billion. In Nov 2009 when the Forex's started to change in Europe showing the dinar at $1.49 all night, the reserves were less than 50 billion.
With all economic indicators that one would use to value a currency today, Iraq could launch their currency even higher that $2.00 but my gut feel is they will be conservative in the beginning for both their safety and the global econmies safety choosing to not try to milk the last dollar out of this change.
Truth is that is just a guess. Deleting the zeros is an all encompasing statement. Anything 86 cents or above qualifies under this statement. Deleting the zeros (86 cents) may not mean stoppinmg point that I have believed it was, but may be a starting point at a any value greater than 86 cents that Iraq decides to make their currency.
One last thing. The GCC is supposed to be activated in January of next year. Iraq is a charter member in the original idea of this helping early on to design the GCC. This was before the war.
Since the new Iraq has been in existance the currency alone would be a stopper to join the GCC. When they change the value of the currency it will be done in mind that once they join the GCC they will go into a basket of some pretty expensive currencies that will be locked together.
So their growth of their currency will be held to certain restrictions. So as the access the value today of their currency, Iraq will also be thinking about this and for that reason they might have the incentive to stretch some on the value. That would be a big plus for us. tlar
Revbo: I've only read enough of your piece to know that you're calling me out on my numbers, but I agree. I was only demonstrating the absurdity of keeping the rate where it is based on some worst case scenario numbers that, I agree with you, are BS. It's gonna be a whole lot better than either of the scenarios I presented.
Tlar: The spread is an IMF target. IMO they will chase this spread until they RV the currency. I don't believe it is a stopper as some do. Turki said he is ready. Turki said he would do itr today if the government situation were settled indicating he does not think it is a requriement to get to 2% to commence his program. tlar
Revbo: Tlar: Depending on how Iraq is allowed to cover their currency under the laws of fractional banking, this gets very interesting.
148 times cover! LMAO! Yeah, they don't need that, and you're right. If it's a fractional standard, and it will be because nobody covers at 100%, there's your 1000X RV. Actually, 1480X RV. That gives us a rate of $1.27.
Tlar: By the way, I would never call you out on your numbers. I was making your pooint in a different way and further the argument about a higher rate pointing out that my conservative estimate off 86 cents was most likely to low. tlar
Revbo: I agree. Those numbers from CBI are BS manipulated garbage, but it has to officially change before anything happens. I think it won't officially change until the day IT happens, so it really doesn't matter to me, except that the money transfer companies' participation in the auctions are, according to CBI, something that will move the street rate, so I take that to mean they have to go through the motions of letting them in before anything changes, so let's get it on.
Ralph: Ladies & Gentleman, Question for you all, In lieu of the DFI funds being released, & being released off of OFAC list (Iraqi banks can now trad intenationally). Iraq can now stand up on its' own two feet, so they can now pay thier creditors all by themselves. I can't help but think this "Fast Tracks' our Monetary Reform (read: RV), your thoughts??