(Thank you George for emailing this to Dinar Recaps.)
Let's talk RV today and catch up as the where we are in the process.
Still lots of confusion as how the RV will take place. So let me clarify it for everyone.
Remember this RV is going to be a two stage process. The process is underway but not yet to the parts we really want to see exposed to us.
First they must launch the lower denominations at a 1:1 and then later comes the RV with an increase in value. This article below explains the 1:1 very nicely so there should be no misunderstanding after reading this post today. The new value will coincide with the post war value plus equity.
So in today's news I am going to re-hash most of what everyone should already know (like preaching to the preacher) but I feel there are still many out there in these dinar communities that - simply put - "still don't get the process" and can't see the trees from the forest. I think this is because they feel they must stay faithful to the same people who led they into this mass confusion, anxiety and stress in the first place.
Please read the article below first and read my comments in bold italics underlined.
Economists divided over deletion of zeros on Iraqi dinar
Author: Amina al-DahabiPosted October 1, 2013
The Central Bank of Iraq (CBI) has been attempting to delete three zeros from the Iraqi currency since 2003. This project has raised many concerns among the Iraqi public and within the business community, and Iraqi economists are divided.
While some support the project and consider it a chance to decrease inflation and unemployment, others warn of economic shocks that may prevail over the Iraqi market as a result of the project’s implementation.
While the Central Bank of Iraq has been considering deleting three zeros from the currency for several years, economists remained divided over how markets would be affected.
Author Amina al-Dahabi
Posted October 1, 2013
Following amendments made by the CBI, implementation of the project has been postponed several times. (Why?)
This is because of fears that are mostly related to the lack of security, the presence of a market open to foreign commodities without any restrictions, the prevalence of counterfeit money in the market and rampant corruption in the country.
The independent Iraqi News Agency (INA) quoted Abdul Hussein al-Yasiri, a member of the Iraqi parliamentary Finance Committee, as saying that 2014 will witness the deletion of zeros from the Iraqi currency.
He noted that the deletion will occur in coordination with the CBI, and that as a result of the project, the number of banknotes in circulation will be reduced from 4 billion to 1 billion. (this alone will increase the value 4 times)
Haider al-Abadi, the head of the Iraqi parliamentary Finance Committee, told Al-Monitor that while deleting zeros from the current currency is possible, this has been postponed until after parliamentary elections.
He noted that studies are being carried out to ensure that, following the currency change, counterfeiting is limited and that Iraqis don’t go back to trading in the old currency.
The step to delete zeros from the currency has been postponed several times, (this means it was slotted to go many times and was stopped) leading the parliamentary Economic Committee to demand that the CBI accelerate this project, (okay now you know they are no longer fooling around and mean business and are being aggressive) as Al-Sharqiya reported.
In a news conference held July 6, 2013, the Economic Committee confirmed that the deletion of zeros will lead to an increase in the value of the Iraqi dinar and will have positive repercussions, including a reduction in unemployment and poverty rates in the country. ("will lead to an increase in the value" - means not initially but as the second part of the plan)
Nafee Elias, a financial advisor at the North Bank, told Al-Monitor that the step to delete zeros is merely an administrative process, and the currency equation should remain the same. This means that the purchasing power of the new currency should be equal to that of the old currency. (how many times have we listened to these intel gurus tell us the purchasing power only in going to increase for Iraqi citizens?, never made sense to me since the value would have to rise too if that was true and it is not true - inside Iraq)
He added that the two currencies should both remain in the market for a period not exceeding three years, then the old currency should be gradually withdrawn.
Elias expected problems to arise if debtor-creditor transactions are not set according to the new currency, or there are defects in withdrawal or payment transactions. He added that it is unlikely the change will affect inflation or poverty rates.
Ahmed Faizullah, deputy head of the parliamentary Finance Committee, agreed with Elias. Speaking to Al-Monitor, he noted that the deletion of zeros will not affect the Iraqi dinar’s purchasing power,(opps there it is again) because the latter is linked to the size of industrial production and imports.
He added that the CBI’s hard currency reserves have saved the Iraqi dinar and served as a cover for it.(proof they need the reserves for the process to be effective and why the IMF said they can't go below 52 billion thus they made some major changes already in the auctions)
Faizullah called for not applying the project at the moment, because it will confuse Iraqis and disrupt the market. (article written in Oct 2013)
Amid these views, Enas Mohamed, deputy director at Naseem Al Shemal Brokerage Company, told Al-Monitor that the stock market will be harmed the most by a change of currency and the deletion of zeros. The price of a share is one dinar, so currently 1,000 dinars are equal to 1,000 shares. Following the deletion of zeros, the new dinar will be equal to 1,000 shares, which would further confuse the stock market, which is already muddled as a result of the security situation.
Amina al-Dahabi is a political-economic researcher and reporter trained in the field of oil and energy journalism. She holds a doctorate in American Containment Policy.
This is an amazing article and tells us so much. So let's pick it apart and make some sense of it.
Did you read the article above? Did you read me comments in bold italics underlined?
Now lets talk about it.
This article confirms that the RV is a two step process.
The First step: I quote from the article above "that the step to delete zeros is merely an administrative process, and the currency equation should remain the same. This means that the purchasing power of the new currency should be equal to that of the old currency. He added that the two currencies should both remain in the market for a period not exceeding three years, then the old currency should be gradually withdrawn".
So how do they get the old currency to equal the new currency value from an RV we all keep hearing about?
For instance 4 of the $25,000k notes today is worth $100 dollars. Then they launch the lower denoms.
The new $100 notes will be worth $100 dollars. Easy one note instead of four notes. No value change yet.
But when they go to the bank to dump (exchange) their cumbersome, extra large 3 zero notes it will be a 1:1. They will turn in 4 of the $25,000 notes for one $100 new notes. Get it? Value stays exactly the same. Still no value change.
So citizens in Iraq will have the exact same purchasing power only they won't have to carry wads of these 3 zero notes of to purchase. Note they did not say 1:1 with the USD they simply said 1:1 with the old currency to the new currency value. Get it? How much this has been misinterpreted in the dinar intel community.
How does this effect us in USA?
At this point in time there is NO EFFECT to us as dinar holders in the USA. Read my lips - NO EFFECT!
After this you can go to bank all you want and our value will still be 1166-1180 as before.
Because at this point the notes we hold are still 1166-1180 or $25 dollars per a $25,000 note. ( one tenth of a penny) Right?
When do we make our millions then?
This is step #2: The process calls for bringing the dinar back to the true value pre-war years. This is the bonus for us, this is the RV. But this new rate will not have any effect on the Iraqi citizen as I have said they exchange only 1:1.
Later when they RV if (a big IF) they were to exchange the $25,000 note for the lower denoms they would still get a 1:1 since they exchange rate we keep hearing about of $3.22-$4.20 is for the USA value in dollars. They are in Iraq AND use dinar not USD. Read me lips again NO EFFECT on Iraqi citizens.
So our $25,000 dinar notes get exchanged to dollars. So at an RV of $3.00 we would get $75,000 for our $25,000 note. But the citizens in Iraq are not exchanging to US dollars they are exchanging the larger 3 zero notes for new smaller demon dinar notes not US dollars. By the time the new RV happens they want to have as much of the 3 zero notes already exchanged in Iraq as possible. The e-dinar implementation will also help too since I believe this is why they will use the e-dinar for months to pay people instead of hard currency. (from Sept 1st 2016 thru Jan 1st 2017) This will not put any more new currency back into circulation and thus limit the possibility of 3 zero notes later. (5 billion monthly payrolls back in to the Iraqi economy).
Now if a citizen goes into the bank and asks for US dollars they would also get the $75,000 with the three zero note as we would after the RV happens, but they hope to collect all of them prior so this would not happen very much. This is the contention and the corruption they are afraid of. Too much money in the hands of citizens which could go to terrorists. But it will still happen to some extent they just want to lessen it as much as possible.
Now let's put this all together in what we have been seeing since January 2016 when they postponed the project to delete the zeros for the third time.
So they needed all this time to clean up the financial and banking system. Remember the IMF came into being a major player in the process in Oct 2015 and took trusteeship of the CBI to help them along. This new 5.4 billion loan in bait. Simply like going fishing and bating Iraq to go alone with the needed reforms. Also they do not want to give them this aid unless they can pay it back and the reforms are their assurance. They are supposed to get another 2 billion of the loan by the end of the year.
Do you now see just how close we are to the RV?
I thought it very. very important to inform everyone just how close we are. We are approaching an RV window like never before. The window is Sept 1st 2016 thru Jan 1st 2017 so hang on to your hats......its coming....at least they will attempt it one more time. This is my opinion but if you have other news please share it in the dinar investment community.
For comment section, please scroll down. Thank you.
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