this was from a guy who did a lot of research a few years back and posted this...i cant remember the name....i copied because i thought it was a good read. I would love to credit the original author if someone knows who wrote this. It was inman or iman or something like that...anyway...heres another point of view for how this will play out.
In our 40+ year career as a Retirement Consultant we have been blessed to meet some very talented professionals. One of them is a retired State Dept. economist who introduced us to the IQD investment in 2005. He had worked on the original plan to install a new monetary system for Iraq after the 2003 invasion.
He had originally indicated that the plan was for the IQD to achieve financial parity with the USD over a 7-10 year period from the introduction of the new system. At that time the USD’s use would be completely discontinued and it would be replaced by the IQD for in-country use and international exchange. The variable factor in the timetable would be the political environment.
I visited with him recently and got an update on several issues:
(1) He indicated the original time table was proceeding on a fast track due to the financial management skills exhibited by the CBI and the Finance Ministry in (1) controlling the rate of inflation, (2) controlling the value of the IQD in a declining economic environment and (3) implementing a digital banking system both internally and externally, but the variable was still the political environment.
Like most economist he doesn’t talk in absolutes (i.e. rate/date) but in probabilities. His knowledge base is pretty current since he is still part of a subsection of the original group that Iraq, State Department and IMF financial people bounce things off of.
(2) We raised the issue of the large number of IQD reported as being in circulation (current estimates are at 25 Trillion). He indicated this was mostly made up of (1) in country physical currency, (2) the foreign currency reserves of the central banks around the world which are electronic, (3) currency that had been printed but not released (i.e. small denomination bills) and (4) privately held physical currency sold to increase the foreign currency reserves.
The export oil revenues are still under the control of the UN supervised DFI, and Iraq only gets roughly 30% of the fair market value of the oil they are selling, which is to be used only for budgetary expenditures. Since Shabbi, the head of the CBI, knew he couldn’t get anymore cash flow out of the controlled revenue system the IMF/UN had him under, he opened a currency sales window at the daily auctions to tap into the wallets of the worlds speculators. Worked pretty good, since he’s built his foreign currency reserves to over $50 billion USD.
(3) We then moved to the removal of big bills (the ones with the 3 zeros on them) and he said that this activity was always built into the plan. The activity was to begin as soon as Iraq had implemented a modern digital financial system (i.e. bank branches, credit/debit cards, ATM’s, direct wire transfers etc.). The removal of the large bills in-country would be the reverse of the process that was used to remove the pre-2003 currency with Saddams picture on it. The example was a 25,000 IQD=$25USD/pre-rv note would be brought into the bank and exchanged for a 25 IQD note=$25 USD post/rv. The 25,000 IQD note would then be destroyed removing it from the currency in circulation account. I told him a lot of people would call that a LOP and he laughed, saying they are partially right, because 25,000 IQD was being lopped from the currency in circulation account, but the only reason for this process was to improve money handling ability at all organization levels, and reduce the actual physical currency in use in all areas of the Iraq economy.
Interestingly enough, he said this activity could happen in-country without an approved RV rate being released to the International financial system. I asked how much physical IQD did he estimated was in circulation in-country, and he said probably less than had been originally introduced in 2003 which was about $4.5 billion USD worth at an exchange rate of 2000 IQD = $1 USD, because there has been a continuous process of not replacing the larger bills as they wore out. In fact this has resulted in currency shortages in some areas.
(4) The next obvious question was how would the removal of the large bills with the three zeros work outside of Iraq, because of the number of world speculators holding IQD. He indicated, the amount of IQD held by speculators was relatively minor (less than 10%) compared to the IQD held as foreign currency reserve by the central banks of a number of major countries (US, China, England & France were the largest) with major financial interest in Iraq. He didn’t have an exact estimate of speculator holdings but ventured an educated guess of 750,000 individuals worldwide with the majority in the US. Estimated value of their holdings $1.5 Trillion – $1.7 trillion IQD.
(5) Before discussing the planned process of how currency exchange would take plan after the IQD was released as an international tradeable currency, he asked if I remembered my economics 101 and what the real purpose of currency is? Yes teacher I replied, it’s a medium of exchange that facilitates the orderly distribution of goods and services among individuals, companies, country’s etc. The often used example, is the use of currency allows an automobile dealer to exchange a new mustang GT (composed of many diverse parts each with its own individual market value) for the cash down payment + bank financing check of a proud new owner, and each has received equal market value at the moment of exchange.
This is an important concept because the value of a particular currency may be defined by the value of what the currency can be exchanged for, instead of the usual underlying economic indicators.
The complete discussion was rather lengthy so here’s the executive summary of how the exchange should work with IQD owned by a US speculator:
(1) IQD is released internationally with an exchange rate of $1 USD = 1 IQD
(2) IQD is exchanged by Mr. & Mrs. X at Bank Y. Their exchange value is credited to their designated financial account, Bank Y forwards the IQD currency to the Federal Reserve and Bank Y’s account is credited at the bank private exchange rate. Yes, the banks will have a private rate and then they will add their profit spread to come up with their public rate. By law this bank spread could be as high as 8%, but it will be a competitive marketplace and the banks know investors will shop around. There is a possibility that there might even be a three rate structure (i.e. Treasury Rate – Bank Private Rate – Bank Public Rate) imposed, but he had no input on that subject.
(3) The Federal Reserve adds the value of the exchanged IQD to their foreign currency reserve accounts and destroys the actual physical currency under agreement with the CBI, which serves to reduce the total IQD physical currency in circulation. This build up of the foreign currency reserve accounts serves to strengthen the USD in the marketplace, because heretofore the US has never held significant foreign currency reserves, because there wasn’t any country whose currency was perceived as being equal to or stronger than the USD. The IQD with it’s commodity (oil+others) base, potential for agriculture growth and aggressive private development growth, has the capability to become the most valuable currency in the world in the 10 years after it’s revaluation and approval as an internationally recognized currency. Other countries have lots of oil, but they can’t feed themselves, they operate under a monarchy or religious tribunal and they have no private development system in place.
(4) Mr. & Mrs. X tithe to their church, local charity etc. which stimulates activity in that sector. They pay off their debts, making currency available for re-lending by their creditors. They buy a new house and car which stimulates their local economy and set up a conservative investment portfolio which adds capital to the investment markets. They also pay their estimated taxes which increases the cash flow to the US Treasury.
(5) The Federal Reserve under a controlled redemption plan supervised by the IMF, will use it’s foreign currency reserve IQD account to buy oil for the national strategic reserve, DOD reserves, other country reserves as part of international support agreements or resell it to private oil companies etc.
This gives the Federal Reserve a powerful market force capability to control the supply/price of imported oil which has far-reaching economic and national security implications.
The economics of this scenario look like this, using the exchange of a 10,000 IQD Note with a two-tier 2% bank exchange spread as an example:
(1) Mr. & Mrs. X get $9,800 credited to their non-interest bearing checking account.
(2) Bank Y gets a $10,000 credit to its Federal Reserve account, and by adding the $200 profit to their capital account, allows them to increase their lending cap by $2,000 under the 10% fractional banking model.
(3) The Treasury gets $3,500 in estimated taxes in the quarter after the exchange, because Mr. & Mrs. X 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).
(4) The Fed’s designated agent, at some point, orders $10,000 worth of oil from Iraq. Payment will consist of a 10,000 transfer from the Fed’s foreign currency reserve IQD account to the IRAQ Oil payment account at the CBI. 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.
(5) The $10,000 order is filled with 200 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 $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)
(6) The transaction is completed with the Federal Reserve exchanging foreign reserve credits which are equal to 10,000 IQD (which had a net acquisition cost of $6,500 USD) for 200 barrels of oil (which has a net cost to produce of $130 USD.
Simply put, it cost Iraq $130 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 $10,000 worth of oil for a net cost of $6,500. 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.)
Now let’s really stir the pot by:
(a) Having the DFI ($280+ Billion USD) plus other frozen assets (estimated at $100 billion) turned back to Iraq and added to their foreign currency reserve, bringing it up to $430+ billion USD.
(b) Then change the current fractional IQD reserve requirements of 100% to 15%. That just raised the total potential money supply value to $2.8 Trillion (430 billion/ 15), while at the same time the total physical IQD in circulation is being reduced by removing the large bills with the 3 zeros.
(c) Also execute the plan Iraq 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.
(d) To add a little more intrigue have the CBI 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.
We leave it to your analytical ability to determine how high of an RV exchange rate IRAQ can really support. There is strong political pressure to set the initial rate at $3.22 USD = 1 IQD, so it can be proclaimed that IRAQ has moved back into the International community of nations and has re-established it’s currency at the internationally traded rate in effect before Saddam invaded Kuwait in 1990.
1. Monetary policy was a success talking inflation from 35% or higher to around 7% currently.
2. Any type of currency devaluation (LOP) is considered a failure of monetary policy. Dr. Shabibi has not failed.
3. Lesser value notes in circulation such as 50, 250, 500. Devaluing the larger 3 zero notes would make them worth less than these lesser notes.
4. Iraq wants the dinar to be an international reserve currency. Cannot devalue the notes in reserve (25,000), circulate them as payment, or traded amongst countries.
5. Iraq holds arguable the second largest oil reserves and is mineral rich. They are too wealthy to not honor the value stated on the notes.
6. Iraq has stated..They want the “strongest currency in the Middle East” Any such type of LOP would be a devaluation and therefore not considered strong.
7. US holds dinar as a result of funding the CBI's initial reserves. This dinar will eventually payoff the war debt.
8. One of the authors of the currency exchange plan - Assistant Professor Dr. Fadel states in his documentation, “We must emphasize the extremely important issue is that if you remove three zeroes from the currency should not affect the actual value thereof to be trading in the old currency…”
9. In 2003 when the NID was introduced at it’s initial rate, the previous currency was in essence devalued taking all wealth from the country to prevent funding of terrorism. Raising the currencies value will in essence, return that wealth now that the GOI is stable and economic conditions have improved.
10. The CBI has stated “both currencies will co-exist” and the process will not change the “monetary value” of the dinar.
The CBI reported selling 20 Billion USD at the auctions in June....
that would translate to roughly 20 Trillion dinar pulled in off the street.
They have been doing this since december.. though not at that huge amount.
Kap stated that he has heard reports that in country they are down to about 4 trillion Dinar on the street.
I think dollarizing so heavily is HOW Shabibi deals with not having to pay much to the citizens...
but I seriously DOUBT he will screw them with an in country LOP.. while foreignors get full price RV.
I believe his plan is to continue to drain the country of Dinar through the auctions..
right up to the day of the RV.. and any Iraqi who has been smart enough to hold onto some dinar will benefit.
Heck.. If there is an in country lop,,,why wouldn't any Iraqi holding Dinar simply
take his dinar out of country to cash in in Qatar or Kuwait?
The in country lop.. screwing the citizens worse
than they are getting screwed by the auctions dollarizing the country..
just does not make sense to me.
Last edited by BlueyesinLevis; 07-25-2012 at 01:43 AM.
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.
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.
DINAR FOR DUMMIES .... A HISTORY OF THE DINAR
(Post by Hoosierbuster) 10/01/2011
The modern/ current Iraqi DINAR is the currency of Iraq that was adopted and began printing in 2003 after the fall of the Saddam Hussein dictatorship. The US gov under G. W. Bush 41 planned and directed the dinar project with the help of the US military invasion. Military oversight began with the invasion of Iraq and the subsequent overthrow of Saddam.
The Central Bank of Iraq was established to formulate new economic policy and service the monetary system of Iraq's new regime. With the US intervention came the influx of the USDollar into Iraqi economy. Iraq has been a dual currency society since the US invasion...with the dollar being their primary currency in the market place. The plan was to create dependency as we created and set the value of the new dinar, and at such a low exchange rate that it would not be tradable and difficult to be of any practical use in the market place.
All world currencies have an established value which is stated in relation to the USDollar (the world standard). All currency values are based upon a given country’s GNP/GDP (resources and production which is marketable to other countries) and the currency value which is mathematically regulated by the IMF (International Monetary Fund).
Iraq natural resources are evaluated (according to studies) to be the richest land/ country on the planet. The US invaded Iraq in order to gain a foothold in their valuable OIL resources. The value of the dinar in the 1970s was 1 dinar = $3.22 usd.(It dropped considerably after Sadaam invaded Kuwait) When we (GW.Bush .) invaded Iraq, and Saddam was overthrown, we devalued the old Saddam dinar currency to a ridiculous level in order to discourage its usage and create dependency. At that time the value of the dinar was taken down to an all time low of 3000 dinar = $1 USD. It was then that the US directed the creation of a new currency (a new dinar) with a world wide master plan that would eventually see trillion$ into the pockets of the US Gov and elite individuals. ...Slowly the value has risen today to the current exchange rate of 1170 dinar/QD =$1 USD. Today 1 million dinar (IQD) is worth approximately $860 USD. One will pay more through dealers who charge a fee for their handling and services. ($1,128.00 as of May 2012~ Blue)
Because of Iraqi atrocities done to Kuwait under Saddam, the UN (United Nations) placed embargos and sanctions against Iraq during the rebuilding efforts which were lead by and under the direction of US gov. Iraq was no longer a sovereign nation. Our efforts in Iraq and the UN intension was to one day see Iraq free, independent, and a sovereign nation that would be able to function in the free world as a major international contributor of natural resources (oil, natural gas, minerals). Iraq is a valuable resource provider that we need...and Iraq needs us.
For US aid and efforts to establish a new democracy in Iraq, the US was granted 4 trillion dinar (IQD) of the 30T newly printed currency. The US currently holds nearly 4T dinar for what we know will one day be our pay off when Iraq establishes their government, and once again gains their independence and sovereignty. The culmination of Iraq's new status in the world will be evidenced by their ability to re-enter the international economic world, and this will necessitate a revaluation (RV) of their new currency (the dinar/IQD). At this time Iraq will be fully able to function as a sovereign nation with one currency (no more USDs) that has established value that reflects their indisputable worth.
UN sanctions have deprived Iraq of oil profits which have been held in a fund (DFI) (holds nearly 831 billion in May of 2012 ~ Blue) by the US and the UN until such time that Iraq once again establishes themselves by:.....1. fully functioning integrated banking system, ….2. fully seated government, …..and 3. reparations paid under UN sanctions.
At this time the UN, IMF, USA will release Iraq to update/ revalue/ raise the value of their dinar and begin their ascendency into the world banking, trade, and economic systems.
This plan to rebuild and revalue (RV) has taken longer than many expected. Many thought this was designed and intended to take place during the G.Bush Jr. administration...it did not. Iraq was simply ....not ready! The revaluation/RV will bring trillions of dollars into the USTreasury coffers...possibly enough to pay the US DEBT? (although we will not do this) ....Because of problems and the delays in recent years....the information of the RV (Iraq revaluing) leaked to the public and individuals found avenues to begin to purchase dinars in hope of the one day ...RV. Word has since spread to thousands who have invested dollars to buy dinar with the idea that we will soon exchange the revalued dinar for dollars ....which will be at an established exchange rate near the previous value before the US invaded Iraq and devalued the dinar. Great News!
According to the consensus of intelligent analysis of news and events....on 30 June 2011, Iraq received the release of $250m of the DFI fund. They immediately began to pay debts and reparations to other countries in an effort to satisfy and remove UN sanctions in order be declared a fully functioning sovereign nation.
We get closer all the time.. and one day....... We are the generation that will see the greatest wealth transfer in the history of the world.
Last edited by BlueyesinLevis; 07-25-2012 at 02:00 AM.