Thread: Iraq/Dinar News until 5/23/07 Midnight CST

Originally Posted by DayDream

This was posted over on the darkside by "investindinar". Anytime he posts I sit up and take notice, I highly respect him and his opinions. I thought I would post it here for opinions regarding his thoughts on the r/v. If "WmKnowles" doesn't mind I would like to hear his thoughts on this also, as I highly regard his opinions also. As both men have extensive knowledge on economics, it may help us all to hear what these men have to say, and anyone else who would care to throw in their 2 dinars worth.

Neno: fell free to move this if its in the wrong thread

Originally posted by investindinar:

Al Shabibi has been very consistent in his 'go slow' strategy and he's been showing very good results in maintaining a stable currency. The IQD/NID is backed up 100%+ with USD plus some gold which gives the CBI the ability to keep the pace of revaluation without worrying about destabilizing the currency. There's virtually no risk of that happening now.

If what the MoF Jabr Zubaidi said was true regarding the pardoning of 80% of their 140 billion USD debt with the Paris Club nations, then Iraq is literally on the verge of making major progress in the direction of internationalizing their currency. There is simply no way they could internationlize their currency with the existing debt. They need their GDP to be greater than their debt before they can internationalize. They're scheduled to begin buying SDRs from the IMF beginning in 2008 and continuing through 2009. I can't help but think that this development is closely related to the latter. Internationalizing the currency will help increase demand for it. Iraq could use the opportunity to begin financing transactions such as petroleum sales with IQD/NID; not just dollars. Concurrently with this development is the movement by some central banks away from the USD towards a currency basket. This has a promising but unpleasant effect. The higher the IQD/NID goes in relation to the USD, the lower the USD will go in relation to other currencies. We'll be hearing about this a lot more in the near future.

[COLOR=purple]If we can indulge in a little of "reading between the lines" he's apparently inclined to continue the same strategy into the future. There's not going to be a sudden 'surge' in the value of the currency. Only an acceleration of the revaluation. As long as the Iraqi economy remains heavily dollarized, the CBI cannot suddenly increase the value of the IQD/NID. Too many merchants would suffer losses unnecessarily. Internationalizing the currency would accelerate the process of de-dollarization. After the currency is internationalized we may see some large moves, but not until then.[/COLOR]

Incidentally, the longer the IQD/NID stays at a low valuation in relation to the USD, the better their exports look and the more IQD the CBI is likely to soak up out of the economy. Hence there is really no rush to get to 1:1 anytime soon. Iraq wouldn't be able to do this anyway. There's simply too many currency units in circulation. This is a long term investment and the biggest gains are going to be made in the stock market (ISX).

Just my 2 dinars worth.

Sincerely,

investindinar
__________________

Cheers!
DayDream

How dollarized are they really? If this was true you’d still have a huge black-market for dinar. We know this is virtually nonexistent. All transactions are conducted in dinar. And what losses would Merchants suffer? With a bold adjustment they simply adjust prices… in fact it’s the slow dribble that got merchants hot. Remember the complaints of conducting business and writing contracts as the value changed day to day?

As far as exports look forget it it’s oil 95 % export, which is the very reason they can RV high. The slow dribble growth at some point will fuel further speculation which is something that Central bank governors have on more than one occasion said they wish to avoid.

Plus what about the IMF wanting to end the program and article IV discussions? The low rate doesn’t fit the economic model for the region.

Also this person wishes to accept the official record as accurate and this cannot be so, no way....if scoatias number are even close there is no way the official record is legit. like i've said before it's not in the CBI's interest to publish accurate figures at this time. so don't trust them. even the IMF says its perfectly ok to use deception as a valid ploy to ward off speculation.

Sorry I’m not indulging into this scenario one bit.