Thread: Iraqi/Dinar news until March 1st, 2007

The famous 1260 rate.

The famous 1260 rate. I would like to express an opinion of the many times quoted and misunderstood 1260 rate that has floated around now for far too long. In the budget process, it was necessary to figure the upcoming budget on SOME level. They (GOI) decided to use the 1260 level to establish a baseline that resilted in a budget. It is an artificial rate that was "pulled" out of the air so as to complete the budgetary process. I think there are too many panties in a wad over this number and there is a historical precedent. When establishing the original budget, the IMF set the budget based on 1.7MBD @ $46. Of course the amount of oil they have produced is much more and the price of oil has been much much higher. Which has resulted in more money for Iraq. But that was where the budget was "baselined". So the 1260 level is a baseline number and if the exchange rate is higher, (and I think it will be) then this will result in a surplus for the GOI in terms of exchange rate and what it applies to, and as I have said before, "its all good for us". So IMHO don't let this magical number that was pulled out of the air to figure this budget cause alot of brain frost and negativity. Its just a number. Thank You.

Originally Posted by Wm.Knowles

The famous 1260 rate.

Always appreciate your input Wm., but in your opinion, why is it such a stretch to simply change the value from 1460 to 1260 overnight. After all, we are dealing in nano fractions when it comes to the difference. To me this slow crawl just seems like some kind of academic exercise.

Originally Posted by Loki

"BY May"

ok i can go along with may but who is going to pay these oil companies who are ready to drill hope they have plenty of beer they don't come cheap

Originally Posted by Wm.Knowles

The famous 1260 rate. I would like to express an opinion of the many times quoted and misunderstood 1260 rate that has floated around now for far too long. In the budget process, it was necessary to figure the upcoming budget on SOME level. They (GOI) decided to use the 1260 level to establish a baseline that resilted in a budget. It is an artificial rate that was "pulled" out of the air so as to complete the budgetary process. I think there are too many panties in a wad over this number and there is a historical precedent. When establishing the original budget, the IMF set the budget based on 1.7MBD @ $46. Of course the amount of oil they have produced is much more and the price of oil has been much much higher. Which has resulted in more money for Iraq. But that was where the budget was "baselined". So the 1260 level is a baseline number and if the exchange rate is higher, (and I think it will be) then this will result in a surplus for the GOI in terms of exchange rate and what it applies to, and as I have said before, "its all good for us". So IMHO don't let this magical number that was pulled out of the air to figure this budget cause alot of brain frost and negativity. Its just a number. Thank You.

I said it before that the 1260 is just a marker. Any exchange rate better than 1260 is money in the bank for the GoI. Think of it this way, at an exchange rate better than 1260 they can purchase more than they budgeted for. This is very good for us IMHO.

Originally Posted by Wm.Knowles

I think there are too many panties in a wad over this number and there is a historical precedent

1260 is about as important as the "magical" 1345 for December was.

Originally Posted by Wm.Knowles

The famous 1260 rate. I would like to express an opinion of the many times quoted and misunderstood 1260 rate that has floated around now for far too long. In the budget process, it was necessary to figure the upcoming budget on SOME level. They (GOI) decided to use the 1260 level to establish a baseline that resilted in a budget. It is an artificial rate that was "pulled" out of the air so as to complete the budgetary process. I think there are too many panties in a wad over this number and there is a historical precedent. When establishing the original budget, the IMF set the budget based on 1.7MBD @ $46. Of course the amount of oil they have produced is much more and the price of oil has been much much higher. Which has resulted in more money for Iraq. But that was where the budget was "baselined". So the 1260 level is a baseline number and if the exchange rate is higher, (and I think it will be) then this will result in a surplus for the GOI in terms of exchange rate and what it applies to, and as I have said before, "its all good for us". So IMHO don't let this magical number that was pulled out of the air to figure this budget cause alot of brain frost and negativity. Its just a number. Thank You.

Mr. Wm. Knowles, Thank you as always for your insight and posts that I as well as many others look forward to.
However for the first time..I noticed a 'loosening of the tie & shirt' and talking to us in a language that I found myself laughing out loud.

'too many panties in a wad', I guess we all understand that. Thanks for all you share. I look forward to hearing from you again.

STANFORD, California: Earlier this month, the House Committee on Oversight and Government Reform held a hearing that criticized the decision to ship American currency into Iraq just after Saddam Hussein's government fell.
As the committee's chairman, Henry Waxman of California, put it in his opening statement, "Who in their right mind would send 360 tons of cash into a war zone?" That attracted wide attention, feeding antiwar sentiment and providing material for comedians.
A careful investigation of the facts behind the currency shipment paints a far different picture.
The currency that was shipped into Iraq in the days after the fall of Saddam Hussein's government was part of a successful financial operation that had been carefully planned months before the invasion.
Its aims were to prevent a financial collapse in Iraq, put the financial system on a firm footing and pave the way for a new Iraqi currency.

Contrary to the criticism that such currency shipments were ill-advised or poorly-monitored , this financial plan was carried out with precision and was a complete success.
The plan, which had two stages, was designed to work for Iraq's cash economy, in which checks or electronic funds transfers were virtually unknown and shipments of tons of cash were commonplace.
In the first stage, the United States would pay Iraqi government employees and pensioners in U.S. dollars. These were obtained from Saddam's accounts in American banks, which were frozen after he attacked Kuwait in 1990 and amounted to about $1.7 billion. The second stage was to print a new Iraqi currency for which Iraqis could exchange their old dinars.
The final details of the plan were reviewed President George W. Bush and the National Security Council on March 12, 2003. I attended that meeting.
President Bush approved the plan with the understanding that we would review the options for a new Iraqi currency later, when we knew the situation on the ground.
To carry out the first stage of the plan, President Bush issued an executive order on March 20, 2003, instructing United States banks to relinquish Saddam's frozen dollars. From that money, 237.3 tons in $1, $5, $10 and $20 bills were sent to Iraq.
During April, U.S. Treasury officials in Baghdad worked with the military and the Iraqi Finance Ministry officials — who had painstakingly kept the payroll records despite the looting of the ministry — to make sure the right people were paid.
The Iraqis supplied extensive documentation of each recipient of a pension or paycheck. Treasury officials who watched over the payment process in Baghdad in those first few weeks reported a culture of good record keeping.
On April 29, Jay Garner, the retired lieutenant general who headed the reconstruction effort in Iraq at the time, reported to Washington that the payments had lifted the mood of people in Baghdad during those first few confusing days. Even more important, a collapse of the financial system was avoided.
This success paved the way for the second stage of the plan. In only a few months, 27 planeloads (747 jumbo jets) of new Iraqi currency were flown into Iraq from seven printing plants around the world. Armed convoys delivered the currency to 240 sites around the country, from where it was distributed to 25 million Iraqis in exchange for their old dinars, which were then dyed, collected into trucks, shipped to incinerators and burned or simply buried.
The new currency proved to be very popular. It provided a sound underpinning for the financial system and remains strong, appreciating against the dollar even in the past few months. Hence, the second part of the currency plan was also a success.
The story of the currency plan is one of several that involved large sums of cash. For example, just before the war, Saddam Hussein stole $1 billion from the Iraqi central bank. American soldiers found that money in his palaces and shipped it to a base in Kuwait, where the U.S. Army's 336th Finance Command kept it safe. To avoid any appearance of wrongdoing, American soldiers in Kuwait wore pocket-less shorts and T-shirts whenever they counted the money.
Later, American forces used the found cash to build schools and hospitals, and to repair roads and bridges. General David Petraeus has described these projects as more successful than the broader reconstruction effort.
But that wasn't the only source of dollars. Because the new Iraqi dinar was so popular, the central bank bought billions of U.S. dollars to keep it from appreciating too much. As a result, billions in cash accumulated in the vaults of the central bank. Later, with American help, the Iraqi central bank deposited these billions at the New York Federal Reserve Bank, where they could earn interest.

Finally, when Iraq started to earn dollars selling oil, the United States transferred the cash revenue to the Finance Ministry, where it was used to finance government operations, including salaries and reconstruction.
Many of these transfers occurred in 2004, long after the financial stabilization operation had concluded. Iraqi Finance Ministry officials had already demonstrated that they were serious about keeping the controls they had in place. The 360 tons mentioned by Henry Waxman includes these transfers as well as the 237.2 tons shipped in 2003 in the stabilization.
One of the most successful and carefully planned operations of the war has been held up in this hearing for criticism and even ridicule.
As these facts show, praise rather than ridicule is appropriate: praise for the brave experts in the U.S. Treasury who went to Iraq in April 2003 and established a working Finance Ministry and central bank, praise for the Iraqis in the Finance Ministry who carefully preserved payment records in the face of looting, praise for the American soldiers in the 336th Finance Command who safely kept found money, and yes, even praise for planning and follow-through back in the United States.
John B. Taylor, under secretary of the U.S. Treasury from 2001 to 2005, is the author of "Global Financial Warriors."
Dollars to dinars: We did get the money to Iraq - International Herald Tribune

Thanks MediaHound. And Welcome to Rolclub.

Originally Posted by Wm.Knowles

The famous 1260 rate. I would like to express an opinion of the many times quoted and misunderstood 1260 rate that has floated around now for far too long. In the budget process, it was necessary to figure the upcoming budget on SOME level. They (GOI) decided to use the 1260 level to establish a baseline that resilted in a budget. It is an artificial rate that was "pulled" out of the air so as to complete the budgetary process. I think there are too many panties in a wad over this number and there is a historical precedent. When establishing the original budget, the IMF set the budget based on 1.7MBD @ $46. Of course the amount of oil they have produced is much more and the price of oil has been much much higher. Which has resulted in more money for Iraq. But that was where the budget was "baselined". So the 1260 level is a baseline number and if the exchange rate is higher, (and I think it will be) then this will result in a surplus for the GOI in terms of exchange rate and what it applies to, and as I have said before, "its all good for us". So IMHO don't let this magical number that was pulled out of the air to figure this budget cause alot of brain frost and negativity. Its just a number. Thank You.

Question If the Budget is somewhat based on 1260 why didn't/haven't they moved the exchange rate to 1260 after ratifing and implemting the budget?
I understand they pulled it out of thin air but they have been very set on 1260 so why are we still seeing 1282?? and not 1260?? if it's only a number. I read the articale posted the other day stating the phone companies and market stores didn't know what to charge why not just move it to this non-magical number 1260 and lose all the confusion????
Thanks