Posted by dinardoggie: Tale of Two RV's
I know that some people are annoyed by my hyper-critical posts sometimes. This time I would like to give you some thinking on an important topic that I am sure most of you will find very helpful because it will remove a lot of the confusion that exists in posts, in questions, and in answers.
I am pretty sure that even many of the gurus do not really understand this process. And if they do, they are not articulating it clearly.
For a moment place a new thought into your minds, a new understanding of RV, of cashin, and of the story of the Dinar. I would like to ask you to think of the Dinar that we hold as speculative investors as having a completely different destiny and purpose than the Dinar held within Iraq.
The tale of these two separate and distinct currencies (according to this view) is vastly different.
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Within Iraq the 2003 issue of Dinar - the ones that we hold - were never meant to be permanent. They were printed and issued under a program managed by outside forces.
The initial purpose of the 2003 issue was to eliminate Saddam Hussein's smiling face from the nation and to create a transitional currency that would one day have some specific purposes.
We'll get to those later. Iraq was infused with billions of Federal Reserve Notes which became the currency of trade during the turbulent period from the fall of Saddam Hussein until more stability has been steadily achieved recently.
This is the part of a grand plan the first part of which we generally refer to as, "Phase One".
During Phase One, as above, the USD was and is still being used as the domestic currency of trade. Remember, we are not talking about our Dinars which we hold here or that are held by the United States Treasury.
And also remember that nothing in this transitional process is static, nothing is linear, it is not a clearly demarked black and white situation. Things phase in and out continuously. Get adjusted to it because it will be that way for several years!
During Phase One the 2003 issue was purposely kept down in value by outside forces and three zeroes were placed to the right of the decimal point to make the actual cash value nearly nothing. Many people are confused about the purpose of the three zeros.
It's quite simple. This is called, "The Artificial Program Rate" and was imposed on the people and on the currency with the thought in mind that it would someday be lifted, i.e., that the three zeroes would be removed.
In decimal notation the fourth decimal place to the right means 1/10,000th part of one. Removal of the three zeroes therefore INCREASES the value of the Dinar by 10,000 times.
Again, keep in mind that this is for internal purposes only! It has nothing to do with our Dinar held outside of Iraq! I know it sounds crazy but it's the truth and we'll see why in a few moments so don't start an argument with me in your head! We only watch for this removal of zeros so that we can determine when one phase has ended and another has begun.
So, the important things about Phase One are these: the value of the Dinar has been held down artificially by imposing three zeroes to the right of the decimal point. Second, the USD has been the primary currency of trade within Iraq. And third, it was always planned that the three zeros would be lifted at the appropriate time and that would mark the beginning of, yes, Phase Two of a much bigger plan to re-value the currency WITHIN Iraq. We are now right at the beginning of Phase Two! Let's stop here about the domestic value of the Dinar. We'll come back to it later.
One thing that must be pointed out is that this is not a hit and miss situation. No. There is a very definite plan of action in place. And it is called a lot of things, usually the wrong things. But it is made of of THREE phases. They were formulated a long time ago and they are being implemented in a very organized way except for the inevitable difficulties that pertain to the middle east.
Our 2003 issue is obviously not in Iraq and is not subject to these phases in the same way. Not at all!
The purpose and destiny of our Dinars is to be purchased by our bankers, to be passed along through the appropriate channels and increased in value by buyers and sellers, finally making their way to the United States Treasury.
Those familiar with the creation of money by means of Tranches in the international banking realm will recognize this process. As the Dinars we sell locally at our banks move their way up the investment chain they will go up in value incrementally until they finally reach the time when they are purchase by the treasury at a discount over and above the agreed upon price of future oil.
In essence, we are trading up discounted paper. In this way everybody along the way makes a profit and the banking system is re-infused with cash. This is in effect a domestic roll program, rolling the paper bills up through the system and thereby creating asset value at every step of the way.
The treasury will then hold the value of the notes that have been vastly increased. As has been very often mentioned, these new units of value (they are no longer paper notes) will be held as future credits against the purchase of resources, primarily oil, at very reduced and stable prices.
This is a spoil of war that goes to the victors! And in this way it is clear that the value that we receive for our Dinars has very little to do with the domestic saga of the Dinar within Iraq. They serve two very, very different and distinct purposes and the destiny of these two essentially separate currencies is not the same!
So, let's just think for a moment. Do our Dinar get used in the domestic economy within Iraq? No. Of course not. Are they subject to Phase One and The Artificial Program Rate? No, not really.
But their transitional value does run commensurately with the domestic currency during Phase One and at the outset of Phase Two. And will our privately held Dinar go directly to the Central Bank of Iraq? Most of them will not but some will.
Again, the destiny of our 2003 issue is for them to roll themselves upward in value as they travel through OUR domestic banking system, thus comprising our own internal tranches or rolls, thereby re-infusing the coffers of our institutions, and then ending up mostly in the UST as credits against future delivery of resources, mostly oil, at low prices.
And that's why our institutions will be willing to pay more for our Dinars outside of Iraq! Yes, they are being sold up a financial feeding chain to the UST. Every bank and investor knows that the value of these Dinar is measured for our purposes against the future value of oil!
At this point I could launch into a general explanation of Phase Two and the progression to Phase Three but I know that there will be countless people reading this that are going to be coming un-glued and who will want to argue with nearly every jot and tittle.
I would suggest that you all just slow down and realize the difference between the currency within Iraq and the currency held by us outside of Iraq. This was not intended to be a perfect, detailed, technical explanation of every intricacy of this plan.
The intent here was to take the confusion out of so many discussions by explaining the massive differences between externally held Dinar and those which are now being released into domestic use within Iraq.