Financial chat: Exlpanation of deletion of zeros ( part 1)
The Plan Spelled out.
If you want to understand how it works without having to lop the zeros, then read this IQD report of The Plan from a former State Department economist. Our retired State Department economist worked on the original plan.
In a nutshell: create a new currency. Sell it to speculators and raise Iraq's official, aka Forex Reserves (currently over $50 billion) and when the time comes, use those massive oil reserves to cash in all those dinars. How -- Cheap (to extract and process), premium priced oil - lots and lots of cheap, premium priced oil. Iraq sells/exchanges oil worth $10,000 on the market (roughly 92 barrels @ $108), for $10,000 worth of post RV dinars. Well how does that work, simple - that $10,000 worth of oil probably only cost Iraq $1.50 to $150. Starting to get the picture now?
Retired State Dept economist:
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 USDís 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
a. controlling the rate of inflation,
b. controlling the value of the IQD in a declining economic environment and
c. implementing a digital banking system both internally and externally, but the variable was still the political environment.
Like most economist he doesnít 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 couldnít 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 heís 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, ATMís, 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 Saddamís 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.