Tlar & Members Reason & Rate Guesstimates Part 2
AND JUST IN CASE YOU CONFRONT ANY LOPSTERS LOL…..
Tlar 7-7-13 What raising the zeros means
Comment - There is still some confusion on what "remove or raise or delete the zeros" means. Turki, the governor of the CBI, lately is using the term "raise the zeros".
The confusion comes in for most people whether this means removing the zeros off the currency as did the country of Turkey which would be a lop, or does it mean removing the big three zeros notes (5000, 10,000 and 25,000) from the streets, or is it removing the zeros off the nominal rate (exchange rate).
The CBI has been as clear as they could be without giving all the goodies away over the last few years. Remember they can not just come out and say we are going to raise the rate this much on this day.
Speculators would eat them alive. China is a good example. The day before they raised the value of their currency, the government of China published a denial in their newspapers. No government would ever say exactly what their plans on a currency would be. The cost to that country would be enormous.
The reason we think we know what we know is because of today's technology. We are ease dropping in on Iraq as they attempt to educate their people on an event that will be very important to them.
10 years ago you and I would be oblivious to what's happening unless we could read Arabic and lived in Iraq. Thank goodness for translation software. Although not perfect it does give us an opportunity to "get the jest" of what they’re doing.
There was an article that came out about two months ago. I sent it to you. It was an article in which the CBI stated that they intended to "raise the zeros from in front of the number not behind it."
Logically if you look at a note or the currency, the zeros are always stated at the back as is the big three notes, the 5000, the 10,000 and 25,000.
It is only the nominal rate or exchange rate that we see the zeros are in front of the numbers, .00086. So to pick a number to remove the zeros from in front of that number, it can only be the exchange rate.
There has been multiple articles over the years that both Shabibi and Saleh have either slipped up or just intentionally told us that they intend to remove the zeros from the nominal value. They said these things not to us but to educate their people. We just eased dropped.
The CBI hired Dr. Bakri to educate the people on what's to come. He held symposiums at universities country wide explaining what "raising the zeros" means. Quite simply he explained it that if you have a 1000 dinar note that today buys you a coke, tomorrow that same note will buy you 1000 cokes.
I've included an article in this email that details Dr. Bakri's educational symposium. It is broken down sentence by sentence by Kaperoni. I thought he did a good enough job that I sent you this version.
Other signs are there for all to see. The CBI stated on many occasions that they want the banks to take their time in switching the currency out to the new smalls.
They want each bank involved in the process to make sure they open savings and checking accounts for each Iraqi that comes in to swap for the new smalls.
It's a very odd plan if you are going to just lop the currency considering today the average Iraqi makes just 76000 dinars a month and is barely getting by. If they were to just lop the currency, what would he be able to set up an account with.
The bank has also stated that this event will juice the banks bring in new capital and getting people to start using the banks again. It was thought that Iraqi's would only take what they needed in pocket change and leave the rest in the bank.
Again this implies that the will be an increase in value or where is this new money coming from? Remember Iraq is mainly a cash society now and its people are broke.
Another major concern that has been stated over and over is the day of and the few days following of the "raising of the zeros."
Their concern is Iraqi's have an average education of the third grade and by and large don't read newspapers or follow the news.
The banks fear is of them being taken advantage of because they don't know it has happened. Unethical vendors that sold an apple yesterday under the old system for 1000 dinars might try to take advantage under the new system of those that don't know the change happened.
In a currency neutral lop there is no way to take advantage because a 1 would equal 1000. It is only where a new one is now one of 1000 and the 1000 is worth 1000 times that one that this scenario of being taken advantage of could occur.
Having said all of this I'm sure some will still be confused. Every time an article mentions Turkey, who did lop their currency, people are concerned.
Turkey removed the zeros off the currency which made the old currency obsolete. Iraq intends to still be collecting the old notes for at least two years and has stated that they will both be good currency and usable for that length of time.
Ultimately the zeros will be gone off of the Iraqi currency as they were in Turkey's case but it is the way they are going to do it that is different. I hope this helps. Tlar
Tlar - LOP 5-4-14 aanth, a lop does not add purchasing power to the currency as Iraqi's have been told over and over since 2007 by the government and the CBI as one of the benefits of this project.
No one will get additional purchasing power so no one will go to the bank and set up savings and checking accounts which is a stated goal of this program by the CBI.
To get people using the banks again has been a stated benefit of this project since 2010. To juice the banks with an influx of new capital is also a stated goal and a benefit from all the new depositors.
By the way the CBI under Shabibi put out an edict to the independent banks instructing them to take their time swapping currency when this happens and be sure to get the people to set up new accounts and de3posdite some in the banks. Just like we here will also be encouraged to do.
Most countries that LOPed their currency had an immediate decrease in value for a while following the LOP because of loss in confidence in the currency.
In a LOP scenario you don't push two years before hand to dollarize the economy by removing as much of the present currency as you can and replace it with dollars.
There is no reason to do it. In a LOP you don't make as one of your requirements to your independent banks that want to sell USD, that you surrender all your dinars to the CBI so they can disperse dollars on request from your now electronic account.
There is no logical reason to do this unless you are just getting them out of banks so the bank doesn't have a windfall when you delete the zeros.
In a LOP there is no reason to build as much reserves as the CBI has done. You would be a tying up a tremendous monetary resource that could be better put to use into rebuilding the infrastructure.
All the dinar ever let out according to year end 2013 is only 35 trillion dinars worth only 30 billion USD, yet the reserves have 100 million cash reserves, 80 tons of gold and still buying and 82 billion in released funds, all to cover 30 billion in USD equivalent dinars all over the world.
By the way, the reserves only have to cover circulating dinar which the CBI thinks is 2.7 billion. Now look at those numbers again. They have 260 hillion to cover 2.7 billion estimated to be circulating.
That's approximately 100 dollars in reserves to cover every 1 dollar equivalent circulating. An unheard of number unless you’re going to increase the purchasing power (delete the leading zeros)
In a lop scenario you don't delete "leading zeros" as we were told by the FC. There are no leading zeros found on the currency. The Leading zeros only appear in one place, on the exchange rate also referred to as the nominal rate.
The CBI periodically has told us they are going to delete the zeros from the nominal rate with this project. In a LOP you just change the currency by having everyone swap it out in a 30 to 60 to 90 day period as the country Turkey did.
In a lop scenario you don't study it for now 7 years and you don't need the government firmly behind the project to see it goes smoothly.
The central bank just advertises bring in your old for new like we did with the Saddam dinar giving the people a reasonable time to swap telling everyone that that 1000 dinar notes is now only worth 1 dinar. The two notes are the same. This is not what the CBI has done.
The CBI hired Dr. Bakri a noted economist, and put him on the road for almost a year to teach and explain this project to the people at symposiums in auditoriums and at Universities.
His statement paraphrased to his crowds was "if it cost you 1000 dinars today to buy and apple, that same bill will buy you 1000 apples after the change."
Admittedly and over simplication of what he was teaching but you can go to any site DA included and read his speech for yourself.
In a lop scenario you don't threaten vendors and shop keepers with heavy fines if on day one they are found to be taking advantage of a customer who has not heard about the change yet by still charging a 1000 dinars for that apple that now only costs 1 dinar.
In a lop the old 1000 and the new 1 would carry the same monetary value for a period of time or at least until swapped for the new one dinar bill.
aaanth, I could go on with steps the CBI has taken as they relate only to an immediate raise in the value of the currency, but I think you see where I'm going with this.
If you still think that it is going to be a LOP, I can't help you. The good thing is this. You obviously have bought the ticket for this ride and are waiting your turn as we all are.
No matter what you believe or what I believe, we are both on the same ride. When this ride stops we will both get off. There are no winners or losers here based on belief.
You just have to have the ticket firmly in your grasp. When the ride is over we will all hi-five each other and then the stories will begin of how smart we all were. We will be the ones telling it. tlar
Mike: Not to split hairs, but Iraq's M1 money supply does include the currency we hold here in the states and across the world.
DEFINITION of 'M1' A measure of the money supply that includes all physical money, such as coins and currency, as well as demand deposits, checking accounts and Negotiable Order of Withdrawal (NOW) accounts.
M1 measures the most liquid components of the money supply, as it contains cash and assets that can quickly be converted to currency. It does not contain "near money" or "near, near money" as M2 and M3 do.
INVESTOPEDIA EXPLAINS 'M1'
M1 as a definition of a country’s money supply focuses on money's role as an exchange medium. A customer paying for groceries can use coins, paper currency or write a check.
All of these payment methods are part of M1. Demand deposits and checking accounts have become increasingly popular as an exchange medium with the advent of ATMs and debit cards.
M1 is the most narrowly defined component of the money supply and does not include financial assets such as savings accounts. Economists use it to quantify the amount of money in circulation.
And this from Fed Reserve in NY. It speaks mainly to the US dollar but the banking laws are applicable across the globe.
The chart below shows the relative sizes of the two monetary aggregates. In April 2008, M1 was approximately $1.4 trillion, more than half of which consisted of currency.
While as much as two-thirds of U.S. currency in circulation may be held outside the United States, all currency held by the public is included in the money supply because it can be spent on goods and services in the U.S. economy. M2 was approximately $7.7 trillion and largely consisted of savings deposits.
For me, this has always been the biggest question, how much dinar does Iraq have in the system? The latest numbers from Iraq state 40 trillion.
If this is true, I don't see how Iraq could RV their currency at 1-1, the US only has 1.4 trillion dollars in circulation and it's a pretty safe bet that Iraq doesn't have the economy of the US.
Hopefully, Iraq has much less currency in circulation and they're running a shell game on us, otherwise, Kap's float theory works perfectly with adding value to the dinar. Slowly reducing the money supply while adding value is the only way Iraq can do this if there's 40 trillion in circulation.
And yes, our Fed will ultimately take our dinars and turn them into dollars, but the currency, even in the Fed, will still be part of the M1 category.
" We are all born ignorant, but one must work hard to remain stupid " Benjamin Franklin
AAA: January 10, 2015 Tlar and everyone the rate doesn't worry me. I believe it will be over worth three dollars to one dinar. Just using history for the dinar to find what I think it would be worth today.
After five years for me it the date. Yes I said it. Hard to keep the faith with the bad job market. Just holding on. I know eveything will work out one way, just hopefully the way I want it. There are so many others that need this also. God Bless
High-Five: January 10, 2015 : My prediction is $3.40 which is the same as Kuwaiti Dinar. Iraq and Kuwait share a port, and are economically connected, so I think the RV will boost the IQD up to the KWD value.
By the way, my favorite Tlar quote from the above posts is "they have eaten their own body fat." From now on, I will use this quote as much as possible! lol
Sun Devil January 10, 2015: I'm not here to predict a rate but I still maintain my "dream rate" from when I first got into this four years ago - $1.00.
That alone is beyond something I can comprehend happening to me, never mind $2.66 or $3.40 or whatever. Those numbers actually becoming a reality to my life is something I can't wrap my brain around. I can only hope you guys who are far more tapped into the in's and out's of this nail it with your predictions.
Tlar : January 10, 2015 : Mike I don't dispute that but circulating currency is what we should be looking at. The dinars you hold is not circulating and neither is the dinars held in central banks around the world. What the reserves are required to cover is circulating currency.
Mike: January 10, 2015 DEFINITION of 'M1'
A measure of the money supply that includes all physical money, such as coins and currency, as well as demand deposits, checking accounts and Negotiable Order of Withdrawal (NOW) accounts. M1 measures the most liquid components of the money supply, as it contains cash and assets that can quickly be converted to currency.
No dispute, I thought the statement above referred to all currency, whether in circulation or not. Physical currency, even sitting in a safe deposit box, has the potential to impact the value because it can be immediately used to purchase items. I believe this includes currency held outside of a particular country. " We are all born ignorant, but one must work hard to remain stupid " Benjamin Franklin
Dinarblowyourhorn January 10, 2015 : We might need to be using the term M0 (as in zero).
DEFINITION of 'M0' A measure of the money supply which combines any liquid or cash assets held within a central bank and the amount of physical currency circulating in the economy. In the United Kingdom, the M0 supply is also referred to as narrow money.
Candy January 10, 2015: Sun Devil at January 10, 2015 at 12:16 PM I'm not here to predict a rate but I still maintain my "dream rate" from when I first got into this four years ago - $1.00. That alone is beyond something I can comprehend happening to me, never mind $2.66 or $3.40 or whatever. Those numbers actually becoming a reality to my life is something I can't wrap my brain around. I can only hope you guys who are far more tapped into the in's and out's of this nail it with your predictions.
I'm with YOU on this, Sun Devil (like your name, BTW)!! :D8)
NCtallguy: January 10, 2015 Here's enorrtses (spelling) lastest take (may be out of context)
Enorrste 1-10-15 This economist, if that is what he is, doesn't know what he is writing about.
"1. If the float of the Iraqi dinar, Vstthalk its purchasing power and standard of living of ordinary people become rickety level due to high prices then, especially since domestic production is scarce. And it becomes a great dependence on imports.
"2. When imported goods Pushing would be the dollar, if the dollar exchange rate has become or will become low, the amount of dinars paid dinar will double, instead of 1122 dinars to the dollar, could rise to 50,000 dinars to the dollar, and of course we will have inflation Falt Oanvjari will become people's lives prohibitively expensive actually.
Here is where he falls out of the apple cart. In No. 1 above he claims that the float will cause the dinar value to be "rickety", apparently implying that it will fluctuate greatly.
He says this will happen due to "high prices" but fails to explain how the float will cause the high prices. In short, he just assumes that this will happen, and he is incorrect.
Then, in No 2 above he makes the outrageous statement that imports will cause the collapse of the value of the dinar to the point that it will destroy the livelihood of the average Iraqi citizen. Nothing could be farther from the truth! In fact, a floating dinar will have a DEFLATIONARY impact, not an inflationary impact.
First, moving to a floating currency, in the short run, will not change a thing. It comes out at 1166 to 1 and is now a world-recognized currency. Within Iraq there will be no change at all, initially.
However, over time (and this is the most important fact that this guy misses) investment will come into Iraq that will improve the lives of the people. As the investment improves the lives of the people the value of the dinar will rise, not fall.
Add to that international speculation in the dinar and it will rise even higher. At that point, imports into Iraq will become cheaper, not more expensive. This means that the influx of imports will improve the lives of the people of Iraq rather than hurt them!
There is no way, and I emphasize, NO WAY, that moving to a float will destroy the dinar. Just the opposite will occur: the dinar will rise in value.
With respect to opening at 1 to 1, as Punisher and Chinadawg suggest, there is nothing in this article that supports that view whatsoever.
Just as it is impossible to RV at $3.50 it is also impossible to RV at $1.00 per dinar. It would destroy the economomy of Iraq because, overnight, their money supply would be $40 trillion! That is larger than the entire money supply in the world. It won't happen.
Similarly, if they LOPped, which may be what Punisher and Chinadawg are referring to, then there is no benefit whatsoever to the Iraqi economy and the paragraph that Punisher quoted (No. 6 above), referring to Shabibi wanting to protect the value of the dinar, would make no sense at all.
A LOP would do nothing good for the value of the dinar. It is "revenue neutral" and the CBI is and has been on record for years that the goal is to "restore the value" of the dinar to what it was in the late 1970s. The LOP will not accomplish that, and it is not in the cards, irrespective of Punisher's or Chinadawg's opinions to the contrary.
Nothing personal here: it just isn't happening. Also, the LOP theory does not flow from this article in any case: in fact, the article has nothing to do with a LOP. It is simply an attempt by an ill-informed person to bash the upcoming float. Unfortunately, the man doesn't know jack about basic economics.
Writing a long article doesn't make one smart.......
Thanks to Punisher for sending me a message to comment on this article. It is just too bad that it is so long on words and short on simple logic. Enorrste
Schiz: Sorry for late reply. Well, it was just a guess really. I sat and thought about what their rate used to be in the 80's, thought about how much oil they were producing then, also thought about if that was when they were fighting with Iran....
figured their infrastructure couldn't have been that great but defo better than how it is then guestimated. Took into consideration the gold reserves and that is a good indicator and the value they want behind the dinar as it goes live.
That much reserves definitely doesn't spell free float from 1166 lol.
So yeah just a guess, not even an intelligent one. In the back of my mind I hope they come out higher. Coming out at a true value makes sense to me but also does coming out just above 1 and doing it in stages. Hope we find out soon! (yeh i said it)
Schiz: and enorrste, the money in circulation doesn't change because the value does. I totally don't know anything about m1 m2 stuff as i have never looked in to it.
Is that what he means? is it worked out by the money in circulation or the value of that money....notice i say money...money is and always will be the paper money that exists....anything digital is called currency.
Money is what gets printed every time the central banks give a blank cheque to whoever...a bond.
Tlar: Ennorste - "With respect to opening at 1 to 1, as Punisher and Chinadawg suggest, there is nothing in this article that supports that view whatsoever. Just as it is impossible to RV at $3.50 it is also impossible to RV at $1.00 per dinar. It would destroy the economomy of Iraq because, overnight, their money supply would be $40 trillion! That is larger than the entire money supply in the world. It won't happen."
Unfortunately Ennorste has a miss-understanding of what the CBI has to cover. His argument that the CBI has to cover 40 trillion dinar is just plain wrong. The CBI has only to cover "CIRCULATING CURRENCY" period. I have done an extensive study on what this means.
Depending on when his post was written and the true number of dinars "out of the CBI" which in no way is the number circulating, is one factor in determining value.
The problem here is he has no understanding as to what the difference between "CIRCULATING AND NON CIRCULATING DINAR IS". Mike came closest to figuring it out.
The currency you hold and I hold and people like us around the world is "NON CIRCULATING CURRENCY". Why? Because it is not accepted anywhere and you don't live in Iraq.
The dinar sitting in vaults around the world in central banks is "NOT CIRCULATING" either.
According to the IMF it too is not considered in this equation. What is considered by th IMF is "CIRCULATING CURRENCY" and that is the currency being used in Iraq whether in a bank account or otherwise as defined in Mikes post.
So out of the 35 to 40 trillion dinars let out by the CBI, how much is CIRCULATING still? The CBI won't publish that number but in Jan of 2012 Saleh let a little of the cat out of the bag.
He stated early in 2012 that there were only 4 trillion "circulating" which indicates that the rest is "NOT CIRCULATING". That was in the first part of 2012 and we know from the auction numbers that since then CIRCULATING DINARS have been reduced.
A good clue is they only minted 5 trillion in big notes in 2014 (250-25000), the intention of which was to replace all big notes in circulation left in Iraq.
We know they printed more than they would have needed to cover all notes that were circulating because banks always do this when replacing a currency or notes so as not to end up short.
5 trillion is a telling number. It says to me that in early 2012 when Saleh stated there were only 4 trillion left "CIRCULATING" he was right on or at the very least he had a close estimate.
So what can we gather from this?
We might assume that today we have less than 5 trillion dinar "CIRCULATING" and that the rest lie in investor hands such as you and I, and with central banks around the world and that this currency is not "CIRCULATING" and is not to be considered in what Iraq's reserves must cover.
This would affect what Iraq's currency is valued at exponentially IMO and it mutes arguments by Enorrste and the folks who truly don"t understand what constitutes the rules of currency reserves. Prove me wrong. tlar PS great thread. tlar again
Comments may be made at the end of Part 2 Thank You