TABLE C (Munny Model)

[MunnyBaggs]

As we wait for the Iraqi Finance Ministry and Government to enter the World financial complex, the biggest question is at what level will they revalue their currency. The one thing we do know for a fact is that somewhere down the line they will have to make the Dinar integrated and convertible with other major World currencies. This is a solid fact if Iraq wants to thrive as a nation. There is no other choice. Add to the fact that many of their officials have said they want foreign investment and want the ISX to trade with other World stock exchanges. By looking at the current IQD denominational structure we can easily calculate the range of a potential re-val. This Model will give the upper value of that range if no new lower IQD denominations are released.

Some of the things we can deduce from the situation are pretty clear. We know that this whole thing was well thought out when the currency and CBI were first put into action.

1. They purposely left room at the lower denominations for a smooth increase in value.

2. No reprints needed. In less than 4 years the GCC will start to unify into one currency. Why on earth would Iraq dissolve the currency they have now, spend time redesigning/reprinting, and spend millions printing up new notes?? It makes no sense whatsoever especially since they have a built in denomination level to allow value increase with the current currency. They've printed 13 to 17 Trillion worth of Dinar. That'll easily carry them into the GCC conversion. In an unstable 3rd nation type country with bombs blowing up every single day you don't change up the people's economic confidence by changing the currency. Case closed.

3. No need for zero lop. You simply "bump" the currency in the right direction and let it float up (managed or pegged if need be) to a level between Egypt and Saudi Arabia. You already have the denominations necessary to let it happen. If it cranks up too quickly it's no problem to add one or maybe two new denominations. No zero lop needed!!!

4. No way is Iraq’s currency going to stay on the same level as Lebanon at .0007. They blow Lebanon away when it comes to resources. The wealth comparison between the two nations is not even close. The current IQD denominations show they can ease up towards .10, .20 levels in a slow but sure manner. It can happen in even as fast as a year or less because it allows purchasing and prices to move with the value (ie allows everyday small commerce to “make change”).

We know that any re-val must leave room for the average Iraqi to transact common trade and allow merchants to have enough denominations to “make change”. We know that the Iraqis mostly use their 25K, 10K, and 5K notes for common purchases. Mostly the 10K and the 5K. This is great news because even with no new denominations being introduced there is a built in safety net for future value increases!!!

Here is the value of IQD as of tonight:

{1 IQD = .000680 USD}

25,000 IQD = $17 USD
10,000 IQD = $6.80 USD
5,000 IQD = $3.40 USD
1,000 IQD = 68 cents USD
500 IQD = 34 cents USD
250 IQD = 17 cents USD
100(coin) IQD = 7 cents USD
50 IQD = 3 ½ cents USD
25(coin) IQD = 2 cents USD

Now say the yaysayers are correct and on an upcoming Friday the IMF and Iraqi Finance Ministry declare the next Monday morning there will be a re-val of IQD to make 1 IQD = $1. Let us suppose that currently a pack of cigarettes costs around 5,000 IQD ($3.40). Let us suppose a candy bar costs 1,000 IQD (68 cents USD). And finally let us assume a pack of gum costs 500 IQD (34 cents USD).

Here's what the value chart would look like Monday morning:

{1 IQD = $1 USD}

25,000 IQD = $25,000 USD
10,000 IQD = $10,000 USD
5,000 IQD = $5,000 USD
1,000 IQD = $1,000 USD
500 IQD = $500 USD
250 IQD = $250 USD
100(coin) IQD = $100 USD
50 IQD = $50 USD
25(coin) IQD = $25 USD

So Monday morning Salwa wants to buy a package of cigarettes. Ali wants to buy a candy bar. Zenab wants to purchase a pack of gum. Shatha wants to go buy a pair of shoes. How can they? How do the merchants give them change for their purchases? Every monetary denominational structure in EVERY country on Earth must have room at the bottom for every day commerce. You MUST have the equivalent of pennies or nickels, or dimes, or quarters. You instantly stop commerce in Iraq with that move. The original denominations and values for those denominations were not randomly picked. There was a lot of calculation involved. There is a built in value increase but it must be a gradual to semi-gradual movement.

Let's see what it would look like at a 50 cent re-val open:

{1 IQD = .50 USD}

25,000 IQD = $12,500 USD
10,000 IQD = $5,000 USD
5,000 IQD = $2,500 USD
1,000 IQD = $500 USD
500 IQD = $250 USD
250 IQD = $125 USD
100(coin) IQD = $50 USD
50 IQD = $25 USD
25(coin) IQD = $12.50 USD

Again it's clear this is not feasible. How can Joe Iraqi buy his $3 cigarettes the next day? Prices HAVE to adjust at a slow rate as does the value of the IQD. Let's try it at another popular re-val figure of .30 USD:

{1 IQD = .30 USD}

25,000 IQD = $7,500 USD
10,000 IQD = $3,000 USD
5,000 IQD = $1,500 USD
1,000 IQD = $300 USD
500 IQD = $150 USD
250 IQD = $75 USD
100(coin) IQD = $30 USD
50 IQD = $15 USD
25(coin) IQD = $7.50 USD

OK, it’s a tiny bit closer but still not doable. The vendor still cannot give the customer change for his cigarette purchase. The prices of all the consumer goods are all out of alignment with the denominations available to the Iraqis. Thus even a re-val of .30 is still too high!!! So let’s continue to try to find the TOP END revalue the Iraqis can implement without adding any new lower denominations. Let’s plug in a .10 R/V:

{1 IQD = .10 USD}

25,000 IQD = $2,500 USD
10,000 IQD = $1,000 USD
5,000 IQD = $500 USD
1,000 IQD = $100 USD
500 IQD = $50 USD
250 IQD = $25 USD
100(coin) IQD = $10 USD
50 IQD = $5 USD
25(coin) IQD = $2.50 USD

We are definitely getting closer. But it's still not a logical re-val starting point. The cigarettes were worth approximately $3 USD value and now we have the 25 Dinar coin at $2.50. You still don't have enough denominations low enough to give Iraqis change for their lower end purchases. Any initial re-val cannot move the marker all the way to the bottom of the Dinar denominations.

So, let’s get to it. Finally, here in this post it will be revealed. This IS very close to the absolute highest re-val the Iraqis can make without adding lower denominations. To figure it out let’s take a closer look at the notes they use the most.

Here again are the notes they use the most for everyday commerce:

25,000 IQD = $17 USD
10,000 IQD = $6.80 USD
5,000 IQD = $3.40 USD
1,000 IQD = 68 cents USD
500 IQD = 34 cents USD
250 IQD = 17 cents USD

To repeat, they use the 10K and 5K notes the most in everyday trade. The 100 and 25 Dinar coins are pretty much stockpiled in banks and simply are not used for trade. They are of so little value in the Iraqi price structure, kids use them for toy tokens and people use them to make jewelry. The bottom line is this, folks, there must be at least three denominations left at the bottom for the average Iraqi merchant to “make change”. So, the answer would be the following:

{1 IQD = .02 USD}

25,000 IQD = $500 USD
10,000 IQD = $200 USD
5,000 IQD = $100 USD
1,000 IQD = $20 USD
500 IQD = $10 USD
250 IQD = $5 USD
100(coin) IQD = $2 USD
50 IQD = $1 USD
25(coin) IQD = 50 cents USD

Or to illustrate it a bit more clearly we’ll take the current most used IQD notes and show how they would compare to the new price value structure:

25,000 IQD = $17 USD (replaced by new value 1,000 IQD = $20 USD)
10,000 IQD = $6.80 USD (replaced by new val 500 IQD = $10 USD)
5,000 IQD = $3.40 USD (replaced by new val 250 IQD = $5 USD)
1,000 IQD = 68 cents USD (replaced by new val 100 IQD = $2 USD)
500 IQD = 34 cents USD (replaced by new value 50 IQD = $1 USD)
250 IQD = 17 cents USD (replaced by new value 25 IQD = .50 USD)

So the Iraqis could potentially go as high as 2 pennies USD and even that is pushing the “upper edge” as you can clearly see above. I’m not saying this is what the Iraqis will choose to do. They may only “bump” it a little bit say from 1470 IQD/1 USD to 1400 IQD/1 USD to start with. At that point they can continue to gradually appreciate the IQD value until they reach close to the .02 level. When they get to that area they would release some lower denominations. They currently have 9 denominations and there is some evidence that a total of 14 are “in play”. I’d say because the Iraqis traditionally like notes over coins the 100 IQD coin and the 25 IQD coin would be replaced by notes. Thus most likely the additional new denominations contained in the 14 total would be the 100 IQD note, 25 IQD note, and a 10, 5, and 1 IQD note. (Fils could be added at later years if the value continues to increase but keep in mind that the GCC wants to combine a lot of the States sometime starting in the year 2010).

For the fun of it, let’s see what a potential re-val could be if the Iraqis were to add the three new denominations of 15, 10, and 1 IQD:

Current values would be:

{1 IQD = .000680 USD}

25,000 IQD = $17 USD
10,000 IQD = $6.80 USD
5,000 IQD = $3.40 USD
1,000 IQD = 68 cents USD
500 IQD = 34 cents USD
250 IQD = 17 cents USD
100(coin) IQD = 7 cents USD
50 IQD = 3 ½ cents USD
25(coin) IQD = 2 cents USD
15 IQD = 1 cent USD
10 IQD = .007 USD
1 IQD = .0007 USD

And at the highest approximate potential re-val we could see:

{1IQD = .17 USD}

25,000 IQD = $4250 USD
10,000 IQD = $1700 USD
5,000 IQD = $850 USD
1,000 IQD = $170 USD
500 IQD = $85 USD
250 IQD = $43 USD
100 (coin) IQD = $17
50 IQD = $8.50 USD
25 (coin) IQD = $4.25 USD
15 IQD = $2.55
10 IQD = $1.70
1 IQD = .17 cents USD

Note again when we have the 14 denominations in play we are at a level of Egypt’s exchange rate and close to the three target states of Saudi Arabia, UAE, and Qatar. Every calculation and chart seems to have Iraq slotted next to these fellow OPEC member states exchange rates. Huge coincidence or a well thought out value plan design???

[worf]

You really like to work the numbers don't you!!! Well thought out but with a few items not included.

The first one to consider is how is this going to stop the dollarisation phenom? At 2 cents vs 1 dollar, why would the Iraqis prefer the dinar over the dollar? Everytime they look at the denominiations' face value (ie 25,000, 10,000, 5,0000 etc. they are reminded how poor their currency really is as compared to the dollar).

Next is the national pride issue. How does 2 cents compare in their minds favorably to where it was before?

Next is the questions how does 2 cents make them feel like they are doing better than under Saddam when their dinar was worth 31 cents?

Like I said earlier you certainly have worked the numbers. I hope you are wrong but time will tell. Thanks for all of your hard work and giving us another perspective.

worf

[livefree]

Your model is interesting!

[Innkeeper1]

very good models... I agree if they dont have the lower denominations circulated how can they make change with a large reval?? and adjusting the prices of goods still comes short because a pack of cigs wont cost 7 bucks.. and they wouldnt have currency small enough for the lower priced goods or change.. they would have to introduce the smaller dems at exactly the same time.. dont know how this would be possible to all the people on the streets vendors etc.. I'm hoping for a high reval at say 1 to 1 or better but even if its a slower one as many have predicted we are still going to be rich within the next few years.. hang in there everyone! i agree with worf about how their people feel.. but you gotta think how have they been feeling over the past three years at this current rate?? anything higher would be an improvement and let them know things are getting better...at worst case scenario i believe that by the time their in the combined arab currency in 2010 we will be filthy rich..lol in the best case mabey in the next few weeks??lol lets hope

[D-Day]

For those who still doubt that there are lower denoms trust me, they're there. Five of them to be exact. It has been posted & verified a thousand times. What? Still doubting? If not lower denoms, higher? Higher than the 25K's? Come on...

[40plus]

very good models... I agree if they dont have the lower denominations circulated how can they make change with a large reval?? and adjusting the prices of goods still comes short because a pack of cigs wont cost 7 bucks.. and they wouldnt have currency small enough for the lower priced goods or change.. they would have to introduce the smaller dems at exactly the same time.. dont know how this would be possible to all the people on the streets vendors etc.. I'm hoping for a high reval at say 1 to 1 or better but even if its a slower one as many have predicted we are still going to be rich within the next few years.. hang in there everyone! i agree with worf about how their people feel.. but you gotta think how have they been feeling over the past three years at this current rate?? anything higher would be an improvement and let them know things are getting better...at worst case scenario i believe that by the time their in the combined arab currency in 2010 we will be filthy rich..lol in the best case mabey in the next few weeks??lol lets hope

Munny, you've been crunching numbers for a long time, adjusting them to fit current events. I recall when you originally seemed against any rv, but you changed your story. That is ok, simply updating your theories with the news. I bought in 2003 with the notion that it would return to the .21-.30 value it was at prior to our entry for Saddam. Everyone looks at it differently, some blow a lot of air while they wait.

Your calculations are 'interesting', but of the same value to me as the evening news on CNN.

[jpadrino]

For those who still doubt that there are lower denoms trust me, they're there. Five of them to be exact. It has been posted & verified a thousand times. What? Still doubting? If not lower denoms, higher? Higher than the 25K's? Come on...

My thoughts exactly. Does anyone doubt the lower denom bills are already stockpiled in the CBI? How could Iraq accomplish the stated goal of "returning the dinar to the previous level" without them? This is not rocket science.

[PaulieThaGreat]

My thoughts exactly. Does anyone doubt the lower denom bills are already stockpiled in the CBI? How could Iraq accomplish the stated goal of "returning the dinar to the previous level" without them? This is not rocket science.

Very True.

[MunnyBaggs]

You really like to work the numbers don't you!!! Well thought out but with a few items not included.
The first one to consider is how is this going to stop the dollarisation phenom? At 2 cents vs 1 dollar, why would the Iraqis prefer the dinar over the dollar? Everytime they look at the denominiations' face value (ie 25,000, 10,000, 5,0000 etc. they are reminded how poor their currency really is as compared to the dollar).
Next is the national pride issue. How does 2 cents compare in their minds favorably to where it was before?
Next is the questions how does 2 cents make them feel like they are doing better than under Saddam when their dinar was worth 31 cents?
Like I said earlier you certainly have worked the numbers. I hope you are wrong but time will tell. Thanks for all of your hard work and giving us another perspective.
worf

Thanks, worf, for your reply. I do love working the numbers and the model changes as soon as I get new info or numbers to crunch. I've put some major hours into this and the good news is I consider it fun to do so (most of the time, sure we all get a bit burnt out here and there). I'm open to all the theories that are out there. Unfortunately my theory is so huge I can't cram it all on one page (as you can see). But it is basically summed up in my sig. You ask some great questions. The entire picture needs to be looked at. First off keep in mind the .02 is only if they don't add new denominations. It is not their end value or their final target value. But don't forget my IQD % increase chart. Here's part of it once again for reference:

1430 IQD to 1 USD
1 IQD = .0007 USD Baseline starting point.

1300 IQD to 1 USD
1 IQD = .00077 USD = 10% increase in value.

1000 IQD to 1 USD
1 IQD = .001 USD = 43% increase in value.

700 IQD to 1 USD
1 IQD to .0014 USD = 100% increase in value.

500 IQD to 1 USD
1 IQD =.002 USD = 186% increase in value.

100 IQD to 1 USD
1 IQD =.01 USD = 1329% increase in value.

50 IQD to 1 USD
1 IQD =.02 USD = 2757% increase in value.

25 IQD to 1 USD
1 IQD =.04 USD = 5614% increase in value.

10 IQD to 1 USD
1 IQD = .10 USD = 14,186% increase in value.

As you can see an increase in value even to .02 is a 2757% increase in the Iraqi purchasing power!!!! As the CBI gradually increases IQD value the Iraqi purchase power grows in an exponential manner. That is the perspective of where we are at today vs where we will be in a few months. Believe me as the value continues to rise the de-dollarization of Iraq will increase. Also remember that my model does project an eventual rise well above the .02 level (with new lower currency denominations added as they go past .02). I fully believe they are targeting a level equivalent to their fellow OPEC members Saudi Arabia, Qatar, and UAE each of which are at .27. I can easily see the IQD value landing between .17 all the way up to .31 in the future. Best of luck to everyone involved.