A lot has happened since November 2013.
- Maliki is no longer PM.
- Turki was removed/resigned from the CBI and replaced LAST minute before Maliki left office.
- There were guru posts reporting some of the CBI reserves were/are missing...it is not clear how much nor what the reserves are now.
- Maliki's charges against Shabibi have been mostly dropped and many gurus would not be surprised to see Shabibi as CBI governor again.
Regardless of your experience...this is a MUST read for every dinarian...
Enjoy
Blanche
PART 1
11/06/13 Float verses Staging rate
I have been asked this question for a while dealing with the float verses RV.
There are two trains of thought in how this will go down. Both can be supported and neither is necessarily in conflict with the other. At some point the dinar will float.
The two trains of thought are that the dinar will start to float at 1166 and be market driven from there, or that it will open at a staging rate and float either by a controlled float or open exchange. [See Dinar Guru Resource Bar on dinarguru.com home page left to see guru float vs RV percentages]The goal is for the Iraqi dinar to reach one dollar under both lines of thought.
The staging rate, which I believe to be the way this will start, is the removal of the leading zeros that has been told to us by members of the finance committee. That is removing the leading zeros from the exchange rate or also called the nominal rate. Support for this can be found all the way back to 2007 when the CBI announced the project.
The US Treasury actually printed the smalls on the only run of currency in 2002 under contract with de la Rue in England. Cost was 80 million dollars.
They printed 14 different notes. We know this because in 2006 a meeting was held at the CBI to strategize the program to delete the zeros and it slipped out in an article that the original notes printed consisted of 14.The notes in circulation at the time were the same as they are today. The only notes were the 25,000, the 10,000, the 5,000, the 1000, the 500, and the 250, and 50. That left 7 notes that were printed but never distributed. That suggests that the planners had in mind a revaluation of the dinar in 2002 when the currency was initially printed.
I thought those missing notes would have been the 1, 5, 10, 20 and the 100 leaving the last two notes as fils 250 and 500.
The CBI commissioned a study in 2008 to find out at what value they could support the dinar if it were to go international. The results were that they recommended that the CBI come out at approximately1.13 dinars to a US dollar and control and defend that rate to let the currency settle in so to speak.
In January 1, 2010 the CBI announced to Forex that they intended to redenominate the currency by the end of the year. The ISX also announced that they 2 would be international by October meaning that they believe the dinar would be an international currency by then.
So what happened.
We know that in early January of 2010 Maliki signed favored trade agreements with both Iran and Syria. Syria and Iran both accepted Iraq's dinar as an accepted currency and Iraq bought billions of shoddy goods from both countries being paid in dinar. Trade along all three countries borders was done in all three currencies with Iran and Syria exchanging their currencies for dinar at their banks. So the governments of Syria and Iran were accumulating trillions of dinar.
We know that the UN stepped in and through sanctions placed on both Iran and Syria, they all but collapsed their currencies and at the same time the CBI announced they would no longer trade in the currencies.
Iran and Syria being desperate for hard currency started selling their accumulations of dinar for dollars in the only country that used Iraqi dinar, Iraq.
This has been going on now for at least 30 months and when it first started US currency sales through the auctions were in the 300 million range per day. Those sales are now starting to tapper off and some days are now reported as low as 80 million per day. The CBI is dollarizing not only Iraq but Iran and Syria. They are cleaning up their currency markets.
In 2012 Saleh the deputy governor of the CBI, announced that there was approximately 30 - 33 trillion dinar out of which 4 trillion dinars were circulating in Iraq. This was all the dinar ever released in total by the CBI. This number represented all the dinar currency everywhere including what you and I hold and what is held in central banks.
Iraq's reserves at the time were 76 billion US plus 30 troy tons of gold. We know that at 1166 dinars per dollar, 33 trillion dinars value at the time was a little more than 28 billion dollars. That mend the CBI had the equivalent of 3+ times the amount of reserves that the value of all dinar out. Since Saleh made this statement as to how much physical currency was out, the CBI has bought back trillions and trillions of dinar through the auction while at the same time increasing their stated reserves to 80 billion USD and they just announced that they have more gold bullion that all the cash reserves on hand.
A few months ago the CBI found four more billion in a dormant account and a few months ago they announced that 80 billion of frozen funds funds were in the process of being released to the CBI because they had been removed from UNSC sanctions under Chapter VII.
No currency in the world is backed better than the Iraqi dinar to the best of my knowledge. No currency is as undervalued as is the Iraqi dinar.
Here is other facts that we know.
Iran began counterfeiting the 10,000 Iraqi dinar note about the same time that the UNSC put sanctions on their currency.
We know that Iran grew their counterfeiting ring into a sophisticated operation and finally started counterfeiting the 25,000 note.
Their intent was to sell these notes for hard currency (US dollars) in Iraq since the dinar was not international.
Our government reported this to the Maliki government but no action was taken and no connection or acknowledgement has been brought to light by the Maliki government.
We know most of this bogus currency is circulating in Iraq is in the outer territories.
We know the CBI has de la Rue machines and they check incoming currency closely so the likely hood is that little if any of this bogus currency is getting into the CBI.
We know Iraqi's are concerned about these bogus bills and the condition of their own currency to the point that anything that looks new or anything torn and tattered, they no longer want to use in trade, so they are rushing to the dollar.
The idea of the float originated near the end of 2012.Some have not moved on from this for their own reasons. It may yet be true this is what they do, but I don't think so. There is just to many reasons why to float this currency would be bad for Iraq.
The first and most obvious is that if they go international at 1166 and start using the currency to pay their balance of trade, they would flood the markets with dinar.The second most obvious reason is it would not de-dollarize Iraq mor would the banking system be infused with new depositors as these were two stated goals of the plan all along.
Shabibi had tried to get government support on multiple occasions as we know to institute the plan to remove the zeros. Each time he found himself under personal attack and threats by the Maliki government. Each time he backed off.
The new currency designs had been done and approved by parliament and Shabibi had already announce that two contracts had been let to do the printing, one in England to print notes (I think de la Rue won that bid), and one in Germany to print coins.
Just before Shabibi was removed he met with the IMF. He came back emboldened and stated he was going to start the program whether or not the government was on board. He stated that he would just "float" the currency and let the market decide what the currency is worth. We know he was immediately removed by Maliki under false charges before he could start the float.
So the float theory was born as the last thing Shabibi was going to do before he was removed. It also suggested to me because Shabibi was intent on opening the currency at all, that during Shabibi's meeting with the IMF that both Shabibi and the IMF had come to some kind of conclusion that they repatriated enough dinar from Iran and Syria to commence with
making the dinar an international currency.When Turki took over the CBI being hand picked by Maliki, most thought he was a Maliki stooge that would give Maliki control of the bank and the reserves. I believe Maliki thought this himself. What Maliki had not counted on is the IMF swooped in with our Treasury people and camped out at the CBI.
Turki announced within weeks that the CBI only answers to parliament and that the reserves were off limits to the government. We know Turki was accused by Maliki of theft but the charges were unproven. When it was announced that Iraq was to receive 80 billion dollars in frozen funds the government said those funds were coming to them. Turki stated publically that those funds once released would end up as part of the reserves and not one dollar would go to the government.
So it is for these reasons I believe Turki to not be a Maliki lackey especially since Maliki announced that he would fire Turkey and replace him with another guy. Maliki found out the hard way, he does not have any constitutional authority to do so.
Either way it is unheard of any country that stock piles these kinds of massive reserves to back a 28 billion in currency out. The dinar is way undervalued as it sits today.One thing missing that I noticed in the month or two before and after Shabibi was being removed that was the articles about deleting the zeros. Most articles that were coming out were just noting that the currency would start as a float and be market driven. Then on or about one month of Turki assuming the position of governor of the CBI, the articles about deleting the zeros started to appear again. Since Turki has taken control of the bank there have been articles that have talked of deleting the leading zeros and articles from the finance committee that have stated that the budgets for 2014 - 2016 are based on 1.16 dinars per dollar.
We have seen many articles all talking about deleting the zeros again.
So they were going to delete the zeros but Shabibi changed due to lack of government support to just a float, and if you see this as I see it, it is back to the deletion of the zeros. It looks to me that they are following the study from 2008 that said they could safely come out at a staging rate of 1.13 dinars per dollar and then hold, support and defend that rate for two years before you allow the currency to free float. Iraq has cleaned up their currency markets and is continuing to do so.They have not published any numbers on the amount of currency that they have out since 2012 but we know it has to be a lot less because of the trillions and trillions that they have recaptured through the auctions. The flow coming into the auctions is much more than the ebb being paid out.
Iran and Syria are low on dinars as witnessed by the amount of cash sales at the auction. Iraq is out of chapter VII and has just passed an election law with I can assure you will be closely internationally monitored.
If as we have been told by the guys who wrote the budget, it is based on 1.16 dinars per US dollar, then we have a lot of good things coming our way.
