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Iraq Said To Be Planning Currency Overhaul, Redenomination

Iraq's 25,000-dinar banknotes apparently won't get you as far as they used to.
Iraq's 25,000-dinar banknotes apparently won't get you as far as they used to.
BAGHDAD -- A senior Iraqi Central Bank adviser says the government has adopted a two-pronged plan to restructure the national currency in order to facilitate large transactions and make government accounts more efficient, RFE/RL's Radio Free Iraq reports.

Mudhhir Muhammad Salih, a member of the bank's advisory panel, told RFE/RL on June 23 that in the short term, larger banknote denominations of the dinar would be issued to simplify major transactions.

He said that because so many Iraqis still dealt mainly in cash, it was cumbersome to carry bags full of money to pay for expensive items like cars. The inconvenience leads people making such purchases -- as well as many entrepreneurs -- to use dollars for those kinds of transactions instead of dinars, something the government wants to end.

He added that large denominations equivalent to around $100 would be issued to simplify major purchases, and new coins and lower denominations would be introduced for smaller transactions.

In the longer term, Saleh said a redenomination was needed wherein three zeros will be dropped so that the 25,000-dinar banknote -- currently the largest denomination -- becomes a 25-dinar note.

He said the change was inevitable, considering the economy is expecting high growth in the coming years with a planned increase in oil production to finance reconstruction projects.

Saleh said there were currently some 29 trillion dinars in circulation in Iraq, represented by some 6 trillion banknotes of various denominations, most of them quite small. He said this also caused complications for the Central Bank and government, as well as commercial accounting departments.

Saleh said the monetary-restructuring plan was drawn up with the help of foreign experts and financial institutions, including the International Monetary Fund, of which Iraq has been a member since 1945.

The plan will soon be presented to the cabinet, which is expected to subsequently send a bill to parliament.

Saleh noted that until 1980 the Iraqi dinar exchange rate was 1 dinar/$3.3 compared to $1/1,168 dinars now due to hyperinflation that occurred during the latter part of the late ousted leader Saddam Hussein's reign.
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by: Big Dave from: USA
June 24, 2011 16:30
Come On RV!!

by: wciappetta from: Canada
June 24, 2011 19:15
Here's something strange: considering the smallest note in circulation is a 50 how is it possible that 6T notes only equals 29 T in total? I guess its that Fuzzy math......lol something isn't right.....
In Response

by: Danj from: Florida
June 24, 2011 20:54
wciappetta; That is not fuzzy math. If you have one 25000 note, it is 1 note but equals 25,000 dinar. Yes the 50d note is the smallest and the 25,000d note is the largest.
In Response

by: Quadraph0nic from: ....
June 24, 2011 21:20
29trillion is the total amount of currency value
6 trillion i think is the physical count of the currency not the value, just physical notes. If I read it correctly

by: Bill W. from: Buffalo, NY
June 24, 2011 20:02
I own several 25,000 dinar bills that I have kept as an investment. What happens to their value if their is a redomination. Will they have a value of 25? I was hoping they would be valued higher against the dollar and I would be able to make a profit on my investment.
In Response

by: David from: NC
June 24, 2011 20:55
Sounds like you will get no more than you paid for them about 1 mil Iraq will = 1000 US. If you get anything.

by: Bill from: Buffalo, NY
June 24, 2011 20:03
i have several 25,000 dinar notes that I have as an investment. If they are

by: Eric Sandovol from: Ireland
June 24, 2011 20:40
So if a 25,000 note becomes 25, then what would be the value of each dinar? Does the value of one Dinar change? Compared to now 1 US dollar is 1,168 Dinars?

by: u lose from: texas
June 24, 2011 20:50
you just lose your money dude too bad for everybody

by: Brian
June 24, 2011 21:34
Hi Bill, yes "redenomination" means they will remove 3 zeroes from notes. So your 25,000 notes will be exchanged for new 25 notes but at a new ratio of say 1.175:1 instead of 1175:1. You won't lose any money (value is retained minus the trading fees), and in the long run you may make some profit if the Dinar appreciates naturally vs the $, but all these "become a millionaire by changing up $1k worth of Dollars for $1k worth of Dinars" "Dinar pumpers" have been lying and scamming people all along with fake invented "intel", etc. A 99,900% profit has never, ever happened in any RV process. Take a look at what the Turkish Lira (6 zeroes removed), Venezuelan Bolivar (went from 2000:1 to 2:1), the pre-Euro (franc, pesetas, deutschemark, etc) to Euro currency changeover went through to understand the process better. Hope this helps.
In Response

by: Peter Hirsch from: London, Ontario, Canada
June 26, 2011 18:50
Your explanation on "re-denomination" in this case I think is flawed. In my opinion if you take their present total outstanding currency of 29 T Dinars, remove three digits and you get 29 B Dinar. Now spread this over the collective wealth of the country and your Dollar value per Dinar would be in the hundreds it not thousands. The rumored value of 3 to 4 dollars reflects the current outstanding money and to issue smaller bills is only in light of the new reality.
In Response

by: Brian
June 27, 2011 06:31
No Peter, my explanation of how every single redenomination has worked in history including Iraq's neighbour Turkey isn't "flawed" at all:-

USA : There are $10.2 trillion (last M3 figures) from a country with a population of 310m people. This works out to approx $32,903 printed per American.

Euro : There are €8.5 trillion in existence (ECB M3 figures) from an entire continent with a Euro-using population of 327m people. This works out to approx €26,000 Euro's printed per European.

Iraq : There are 29 trillion Dinar's in existence from a country with a population of 31m (Iraq). This works out to 935,483 Dinar's printed per Iraqi (blatantly obvious hyperinflation).

If you remove 3 digits, yes you get 29bn Dinar but those Dinar will be valued at say 1.17:1 instead of 1,170:1. The dollar value will not change - just as the Iraq Central Bank have openly stated it won't back in April as reported on Iraqi Alsumaria TV. It's only a few vested interested conmen who just happen to sell Dinar who keep pumping the "instant millionaire" nonsense. If holding just $1k worth of Dinar will make you a millionaire, then by extension, you must believe every Iraqi who owns a house / car will be given between $50m-100m each if they sold it and changed the 50m-100m Dinars up at an FX outlet, and that the average $2k-$4k Iraqi income will become $2m-$4m. Um, no. That's not how it works at all.
In Response

by: Brian
June 27, 2011 06:37
Just to add, Peter : Countries can't and don't just magic 99,990% more money into thin air through an RD (re-denomination). The "rumored" value of $3-4 you mention was the value of what were known as "Swiss Dinar's" under Saddam Hussein. They got their name from the Swiss printing plates used (which were of much higher standard than the 3rd hand ones Iraq otherwise had), and this was the currency used prior to the 1990 Gulf War (the first one) after which they ceased to be legal tender. Since the supply of Saddam notes increased while the supply of Swiss Dinar notes remained stagnant (even decreased because of torn / damaged notes without replacement), the Swiss Dinar appreciated against the Saddam Dinar notes (which is exactly what "inflation" is that some pumpers absurdly claim "doesn't affect Iraq and thus makes it 'different'"). In fact, the northern part of Iraq (Kurdish) which continued to use Swiss Dinars partly evaded inflation, which ran rampant throughout the rest of the nation. The old Dinar was $3.33 against the $ because it WASN'T inflated. The Saddam Dinar fell below 1100:1 against the $ due to inflation during the economic sanctions (if you can't borrow or trade then you can only print). The $3-4:1 from the 1980's also involved Saddam picking an arbitrary value to peg the Dinar to which is also not the case with the market valued NID today. The reason the Dinar is so weak is because it's overprinted. It really is that simple.
In Response

by: Peter from: London, Canada
June 27, 2011 15:42
Bill your explanation is excellent and makes perfect sense for the basis of a re-denomination. However the thrust her is on re-valuation with the re-denomination as a consequence and not the guiding principal.
In Response

by: Angela
June 28, 2011 05:57
Hi there! Your explanation does make quite a bit of sense, however the iraqi dinar replcaed the Kuwaiti dinar after iraq stole large amounts of banknotes in 1990 when Iraq invaded Kuwait. Later the Kuwaiti dinar was restored once Kuwait's currency and new banknote series was introduced. This resulted in a drastic devaluation of the Kuwaiti dinar at about just a few cents. It wasn't until 2003 when Kuwait finally pegged their currency to an exchange rate of approximately 1 dinar= 3.33745 dollars. Keep in mind that Iraq and Kuwait's situations were a bit different, however the profit of those who invested in the Kuwaiti dinar did in fact become millionaires overnight. An opportunity like this investment does not come along that often so I would jump on it while you still have the chance, even if you have just an extra $100 you can afford to spend. It's not like your loosing your whole life savings (unless you are one of the gullible ones) on this investment. As long as Iraqi wants to progress, the rate of the currency should revalue. I don't quite get why people believe that Iraq wil just drop the 3 zeros off of their banknotes and just leave the value as is, it would be ludacris to do such a thing. Let's say the United States was faced with this situation and you have a $100 but they decide to drop the 2 zeros (3 zeros in Iraq's case) off of your hundred dollar bill, that would leave you with a one dollar bill, therefore your hundrend dollar bill is now only worth only one dollar because the value of our currency stayed the same. 1 dollar bill= 1 dollar...simple as that. In Iraq, they are currently carrying around 25,000, 10,000 etc. dinar banknotes. Once Iraq drops the 3 zeros from that 25,000 banknote, it will become a 25 dinar banknote, but they are saying the value will stay the same. That cannot happen, everyone will loose so much money and business that have invested and are currently being ran in Iraq will loose tons and tons of money. Let me make this a little more simpler for those who are new to this investment. Say you have a 50,000 dollar bill (just as an example, I know we don't really have a $50,000 bill) for a new home but the U.S. decided to drop the 3 zeros off of your $50,000 bill making that bill only $50. What kind of house is fifty bucks going to get you? Nothing. Iraq has to revalue their currency if they not only want to have their money to be worth anything, but also if they want to progress as a country. I don't know if many people know this but, Iraq has the largest oil reserve in the entire world, they will not stand to have such a devalued currency for much longer if they want to make any money at all. Just my two cents.
In Response

by: Brian
June 28, 2011 14:57
Bill, the Iraqi Central Bank have openly stated "re-denomination" multiple times, and "revaluation" not once. Only Dinar salesmen with vested interests are using "RV" over and over whilst the ICB are saying RD (lop) over and over. They do intend to appreciate the Dinar somewhat on top of the RD, yes, but not the 99,000% some people have got confused with (and it won't happen overnight either).

Angela, you're confusing the Kuwaiti Dinar with the Kurdish (Old Iraq) Dinar. They're not the same. You're also seriously misunderstanding how redenomination works. It doesn't take 99% of wealth away from people, but nor does it magic 99,900% of wealth out of nothing. Purchasing power is retained so businesses don't lose anything. What happens when zero's are lopped is that prices are readjusted to match:-

For example, if current 25k Dinar notes are turned into 25 Dinar notes, prices are adjusted by same. So eg, a 75m Dinar house now becomes a 75k Dinar house. A 1,000 Dinar loaf of bread becomes a 1 Dinar loaf of bread, etc. Look at what happened to Turkey to understand the process better - they lopped 6 zeroes off. Of course Turkish bread was not still priced at 1,000,000 Lira when 1m Lira banknotes changed to 1 Lira, it was repriced down to 1 Lira along with the new banknotes. This is the whole point of a redenomination : get prices of thing (in terms of zeros) back to sanity and parity with other countries which boosts confidence in the currency & economy.

Also, not only is your fact on Iraq's oil reserves "being the largest" incorrect...
http://www.nationmaster.com/graph/ene_oil_res-energy-oil-reserves

...but it's also irrelevant to the value of the Dinar because it is just as much a FIAT currency as everyone else's. Just because a nation has a nationalized oil industry doesn't mean its currency is backed by anything (any more than the $ is backed by Chevron or the £ is backed by BP). That's the first mistake first-time Dinar gamblers usually make : confusing nationalized oil with a specie currency. They are not the same thing at all. The Iraqi Dinar is a unbacked FIAT currency (which is precisely why it was so overprinted and devalued in the first place). What's more, most of the world's oil is purchased in $ not Dinars (hence the origin of the term "petro-dollar"). And on top of that, many of Iraqi's oil fields are part-owned by non-Iraqi's (remember the 2009 oil services contracts?), so even if the Dinar was oil-backed (which it won't be for as long as buying countries are using FIAT currencies of their own), you can't just pick a figure and say "lets print ourselves all that wealth now before we've even dug it up, and then try and earn it all again when we actually do sell it in years to come". That's not how the Forex market works at all.
In Response

by: Angela
June 28, 2011 21:12
Brian, I apologize, you are correct about the oil reserve in means of “what was supposedly proven”, but it is believed that Iraq has much more oil (approximately twice as much than what was previously estimated) than what it was said to have, we will have to wait and find out. However, it is the Kuwaiti Dinar, not the Kurdish dinar that I am referring to. Here is the link so you can see what I am talking about http://en.wikipedia.org/wiki/Kuwaiti_dinar Also, if prices are just readjusted to match and one Iraqi dinar is still equivalent to approximately $1170, then Iraq will still stay just as poor. You would think that a country with so much oil and potential wealth wouldn't have such a undervalued currency, especially if they plan on progressing anytime soon. In 1959, 1 dinar= $2.8 dollars, then in 1971 and 1973, 1 dinar= 3.3778, later reducing to 1 dinar= $3.2169. After the United Nations put sanctions on Iraq (because of Iraq invading Kuwait) new notes were issued. Finally, in 1995 the Iraqi dinar devalued to $1 = 3,000 dinars. The value did increase a bit throughout the years, but why keep the currency devalued for so long? Do you believe they will keep their currency at such a low rate for much longer? Back to readjusting their prices to match their currency, what happens if the prices do get readjusted but someone only has a 25,000 note wanting to buy something that is only worth 25 notes? Does that mean the cashier will have to hand back that person 24,975 banknotes in lower denomination notes? They wouldn’t even have nearly that much in their drawer. Not everyone will have a credit card (smart card) just like not everyone uses a credit card in the United States, England, Australia, etc. The bigger denomination notes such as 25,000, 50,000, etc. are still going to be allowed to be used until they are all out of circulation, businesses will not be able to deny a person who wants to purchase items with a larger note. The Turkish Lira and the New Turkish Lira were both allowed to be used until December 25, 2005 which was the last day the old Lira would be accepted. After this occurred, the value of the Lira was valued at USD $1= 1.51 YTL. The Turkish Lira ended up stabilizing and rose against the U.S. dollar, which means their currency did in fact revalue. This same exact process seems to be happening right now with Iraq and its currency. Wouldn’t you say that once the 3 zeros are taken off the banknotes, then the currency will revalue just as it did with the Turkish Lira?

Your input is very much appreciated and please correct me on any mistakes I may have made, thanks again!
In Response

by: Kathryn from: UK
June 29, 2011 00:16
Hello Angela and Brian,

I have enjoyed your posts more than the rest, i must say. I would be curious to know what your profession is Brian. All of your arguments come from a purely economic background, and anyone who has ever taken a macro econ course in college should understand these basic principles of world economic systems. Angela- It is not a strange phenomenon that Iraq has so many natural resources and it's currency is practically worthless. Take other oil and mineral rich countries like Nigeria, who enjoyed a very successful economy after independence until their financial systems imploded (due to many different circumstances than these) and now you will see a value of hundreds of Naira to the dollar or pound. But they are one of the largest producers of high quality sweet crude oil. There is no currency based on resources, at least not since Nixon took us off the gold standard in the 70's. Currency is a floating value controlled by systems and institutions based on many factors.

Brian is correct in his explanations of the differences between revaluation and re-denomination- they are indeed two very separate processes. The currency does not automatically revalue when the zeros are deleted from the notes.

It will be interesting to see what happens, and I do hope that people keep an open mind and stop being blinded by promises of wealth and abundance. Learning about real investments and economics is central to gaining the upper hand in your own financial future...not speculation and gambling. And, that's not to say that I don't have my own 25,000 note sitting in my drawer here...just for fun! Or that I occasionally buy a scratch off lottery ticket in the corner shop...

Side note: Doesn't it drive you crazy when people argue a point with grammatical errors like I saw previously in the comment stream? There, their, they're, for example? :)

Have a good rest of the week guys...

In Response

by: Brian
June 29, 2011 07:35
Hi Angela, thanks for your comment. As mentioned previously, the Dinar is "undervalued" because it's overprinted and the cure for that is not a further 1,000x expansion in the money supply (turning a $27bn Dinar supply into a $27tn supply by giving every 1,000x more for their Dinars than they bought) - that will just result in another Zimbabwe (where everyone's a billionaire but the price of a loaf of bread is 1.3m).

I can only repeat what I mentioned earlier : The Dinar is a FIAT currency, and like other FIAT currencies, it's value is derived by how many are printed and traded. What's underground and won't be sold until 2015-2020 is as irrelevant to the current Dinar value as untapped Texan oilfields are to the Federal Reserve $ or undiscovered Canadian "shale oil" is to the CAD. Norway has a lot of oil, and neighboring Denmark hardly has any, yet both currencies (NOK & DKK) are within 5% of each other. Simply finding oil does not magic a currency's value up by x0,000%. That smaller influence occurs when it is actually sold and money changes hands (and only then if it's actually sold in its native currency and not "petro-dollars"). You can't sell the same barrel of oil twice (once to yourself by printing yourself imaginary wealth now, and once again when you actually dig it up and sell it for real in a decades time).

Kathryn's excellent post (UK) correctly addresses the issue : Over 103 other countries on Earth also have oil and / or natural gas reserves in some form. There is absolutely nothing whatsoever unique about Iraq's. Every country on Earth has debt-based money (FIAT currencies) including the Iraqi Dinar. No country has an asset backed anything and hasn't for decades since the world came off the gold standard in the 1970's.

To those who think oil will magically sustain 1,000x more Dinars, here's a Mid-East reality check : There are only 1tn Saudi Riyals (approx $266bn) in circulation for a country that has more than 4x Iraq's oil reserves and more than 5x Iraq's daily oil production. There are also only 985 UAE Dirham's (approx $268bn) in circulation.

$29tn worth of Dinars would also mean that people who claim the Dinar will be "RV'd" to near 1:1 vs the $ are basically saying that a 3rd-world war-torn country smaller than Canada should have a monetary supply that's larger than all US & Canadian Dollars, Euros, Renminbi, Rubles and Yen *combined*, and approx 60% of the entire planets global combined GDP (even though Iraq sells less than 5% of the worlds oil), not to mention a currency that's 116x higher than Saudi Arabia) just because they found a little oil that 100 other countries also have and because they sell slightly more oil than Algeria and less than Mexico or Brazil. It literally defies all common sense, and basic mathematics / economics.

No matter how you "cut the cake", you simply cannot print yourself more wealth because the more you print, the weaker the currency gets. Take a look at Zimbabwe for a nation of "self-declared paper millionaires". Iraq won't stay poor in the long run because they can reinvest oil sales - but the point is that it's the *sale* of oil revenue already sold today not an RV/RD that generates wealth. An RD won't make Iraq wealthier no, but that's not its intention (and nor is it possible for any country to become 1,000x richer just by declaring it), and the only people who have been sucked into believing an RD = "a millionaire for $1,000" are confused amateur first-time Forex gamblers who do not understand the process, have never held any other currency through a similar RD before, and are being "bounced" around from one confused Internet "pumper" to another.
In Response

by: Brian
June 29, 2011 08:25
"Back to readjusting their prices to match their currency, what happens if the prices do get readjusted but someone only has a 25,000 note wanting to buy something that is only worth 25 notes? Does that mean the cashier will have to hand back that person 24,975 banknotes in lower denomination notes? "

No, no, no. OK it's clear there's some confusion here, so I'll explain the 3 steps of a redenomination : A redenomination (RD) simply means taking the zeroes out of the economy. Three things are done:-

1. All old banknotes are swapped for new lower denom ones at a fixed ratio (usually 1,000 for ease of exchange) within a fixed time-frame (3 months for prior Iraq banknote swaps). Eg, 25,000 Dinar notes are swapped for 25 Dinars. Iraqi's will change their old for new notes at their banks. The below article explains what happened during Iraq's prior bank-note swap when the "Swiss Dinar" was taken out of circulation in the Kurdish region for good during 2003 and Saddam's face removed from notes. When the time-limit is up, any old notes not exchanged for new are demonetized and become worthless.

It also states in the final two questions : "Q:Can dollars also be exchanged for new Iraqi dinars What will be the conversion rate for dollars?
A:Dollars will not be converted directly into new dinars during the official exchange. Following the exchange, dollars will be convertible directly into new dinars at the market exchange rate" and "Q:Will it be possible to exchange currency outside of Iraq? A:No. The only official currency exchange locations will be located within Iraq":-
http://www.exchangerate.com/iraq_currency_exchange.html

2. The currency is adjusted by the same factor for the *new notes only*. Eg, a 1170 vs the $ becomes 1.170 vs the $. You won't be paid $1m for handing in $1k worth of old notes, you'll just be given the equivalent in new notes (1k Dinars at 1.17 in place of 1m Dinars at 1170). This is what confuses many amateur Dinar speculators the most.

3. Prices in Dinars are also adjusted by the same factor. Eg, a 75m Dinar house becomes a 75k Dinar house. A 1,000 Dinar loaf of bread becomes 1 Dinar. 250,000 Dinar average rent becomes 250 Dinar rent, etc.

This doesn't have to be in multiples of exactly 1,000, it could be anything. But the PP (Purchasing Power) of *current* notes doesn't change the same way some "pumpers" are hyping it. The Iraqi Central Bank have openly stated the Dinar RD will be "based on Turkey". For those who don't remember Turkey's RD / lop, here's the official brochure explaining it:-
http://www.tcmb.gov.tr/ytlkampanya/bro.php

People weren't given $1m in cash just for holding $1 worth of Old Turkish Lira during their 6-zero RD/lop. And likewise, people won't be given $1m in cash just for holding $1,000 worth of Iraqi Dinar during their 3-digit RD/lop. The Dinar may appreciate in time when their oil exports increase in time and demand for Dinar rises, but not by silly 10,000% figures purported by some dishonest Dinar salesmen preying on FX first-timers. Hope this helps.

PS: Kathryn, my occupation isn't economic related, but I have and do trade in the Forex market before (both paper and metals). Thanks.
In Response

by: Angela
June 29, 2011 16:46
Hi again Brian, and thank you for your response as well. I understand what you are saying however, when Turkey dropped the six zeros off of their currency they revalued the new Liras (as well as the old ones until they became worthless at the end of that year) immediately afterwards. This means that whoever was holding the older Turkish Lira before the end of 2005 (when they became worthless) were able to exchange their Liras for U.S. dollars, Euros, etc. at a rate of 1 U.S. dollar= 1.29 Liras. The Lira actually became stable and rose past the U.S. dollar. They didn't exchange their Liras for the new Liras, at least not the ones who purposely invested in the Turkish Lira currency, they exchanged them for U.S. dollars, Euros, and so on. I actually know someone who, not only invested and made a profit off of the Turkish Lira, but also the Kuwaiti Dinar. Iraq does in fact need to have a stabilized currency if they want to be able to progress and be right up there with other stablized countries. I guess only time will tell, we will just have to wait and see how this will all play out.

Thanks again for your response! I appreciate any and all insight I can gather from this currency :)
In Response

by: DaveP from: California
June 29, 2011 17:39
Angela
Where did you get the information that people holding old Turkish Lira got the new rate. That’s absolutely false information.
When a redenomination happens a new currency in introduced, the new and old currency exist side by side during the exchange period. But the old currency keeps it’s same old exchange rate. Only the new currency has the new rate. The dinar you hold now will still be worth .00085. If you still have them once the exchange period is over, they become worthless. The new currency will be worth 85 cents. Iraqis will give 1000 old dinars to get 1 new dinar.
Your comparison to Kuwait doesn’t hold water either. You keep claim Kuwaits currency is so much more valuable. Per unit that is correct. But overall value is a sum quanity x unit value.
Kuwait has only 1 Billion dinar in circulation, each worth about $3.50. So Kuwait’s currency is worth $3.5 billion
Iraq has 28.5 Trillion dinar in circulation, each worth $.00085. So Iraq’s currency is worth $23.8 billion.
So Iraq’s currency is worth 6.8 times more than Kuwait’s currency.
Do you think it still needs to be raised 1000 times higher?
In Response

by: Brian
June 29, 2011 19:09
"Hi again Brian, and thank you for your response as well. I understand what you are saying however, when Turkey dropped the six zeros off of their currency they revalued the new Liras (as well as the old ones until they became worthless at the end of that year) immediately afterwards."

Hi Angela. Actually Turkey didn't "RV" - it was a straight RD/lop. On 31st Dec (last day for TRL Old Lira), the value was 1,339,320:1 :-
http://www.xe.com/ict/?basecur=TRL&historical=true&month=12&day=31&year=2004&sort_by=name&image.x=51&image.y=15

And on 3-4 Jan 2005 (first day of TRY New Turkish Lira), the value was 1.347:1. The real value difference was under 1% which is well within the perfectly normal daily fluctuation that happens in all currencies:-
http://www.xe.com/ict/?basecur=TRY&historical=true&month=1&day=3&year=2005&sort_by=name&image.x=31&image.y=18

The 1.29 figure you're using from Wikipedia is the mean average value over the whole of 2005 when it appreciated by around 4% over the first year due to increased trading. But it wasn't part of any "RV" process - it's just due to increased trading demand when the NTL was seen as a more serious currency without all the zeroes. This is also entirely possible with the Iraq Dinar - that it will go up slightly by maybe 5-10% when it loses its zeroes, and maybe appreciate more in the longer run if and when it develops an economy beyond just selling oil for dollars (most oil is priced and traded in $ not Dinars).

But that's not due to an "RV" trying to create money from nothing without inflation, it's due to market demand. And it's certainly not a 99,900% increase some conmen are targeting confused first-time speculators with. Same goes with the Venezuelan Bolivar (another oil economy) RD in 2007 : 2,144:1 to 2.147:1 = No RV. This is normal for the redenomination process. Thanks.
In Response

by: Angela
June 30, 2011 02:06
Brian, I am so glad you were able to explain all of this to me. Not once, in the past 4 years have I been able to figure out all the possibilies as to what could happen with the Dinar. I think I may have (did) misunderstand much of what I have heard and read about this investment. One of my classmates in college told me that their parents "made money" off of the Lira but maybe they misunderstood their parents, or they just straight up lied for some odd reason (keep in mind that the conversation was about currencies).

Let me just make sure that I understand this correctly, once Iraq drops the three zeros off of their currency, the banknotes I currently hold will not have a change in rate, but the new currency may end up revaluing eventually (yet, it still will not apply to my banknotes). Soon after, my banknotes will become worthless and will no longer be legal tender. However, during this time period both currencies will be legal tender and will both be able to be used for purchasing. The reason why the value will not change on the old banknotes, but will on the new notes is because they will be considered two seperate currencies not one whole currency.

Is that correct? Now that I really put a lot of thought into it, it does make a lot of sense.

In your opinion, do think that the U.S. and Iraq have some sort of deal that was made since the U.S. forgave Iraq of it's debt that was owed? Do you think it is possible for Iraq to revalue it's currency before it drops the 3 zeros for maybe a couple of months until all the larger banknotes are out of circulation so there is no confusion, like there was with the Lira and other currencies that used two seperate currencies at the same time, and then drop the 3 zeros? Maybe that was the plan on how Iraq would be paying the U.S. back the debt they owed them? I am just curious if you think that could be a possibility, or if it would be completly bizzare.

Thanks again for your insight on this, it has really helped clear things up for me, as I hope it has for others as well.
In Response

by: Brian
June 30, 2011 10:18
Hi Angela, yes that's absolutely how it works. You're not alone in this as there's an obscene amount of fraud and disinformation in the amateur investment community that makes even 2nd hand car dealers look honest!

As far as taking larger banknotes out of circulation are concerned before the RD, some people have got the wrong idea in thinking it means they're being torn up whereas in reality, many are being used for inter-bank transactions instead of public circulation. I don't think any "RV" is likely before a lop because there's simply nothing to RV. A "revaluation" simply means "moving a peg" (like China have revalued the CNY vs the $). The Dinar's low value genuinely does match the huge 29tn worth of currency created, and the only way of bringing that down is an RD. Iraq's 29tn money supply is already 30x higher than Saudi Arabia's whilst their economy is 5.5x smaller. That fact alone is enough to make the Dinar worth 165x less than the Riyal even without taking their 80% destroyed infrastructure and state of near civil war into consideration, or the fact much of their current economy is imported $ driven subsidies and foreign aid rather than Dinar driven exports.

I do believe the Dinar will go up in the long run, but not radically so. Many Forex "newbies" are confused and believe a country's currency should match its resources. This isn't the case anywhere on Earth because a fiat currency is a liquidity measurement (how much money is needed for ongoing trade at any one time) - not a "gold standard" full reserve bank of every potential mineral export for the next millenium up to 3011AD (and supposedly unique only for Iraq!) all squeezed into 2011's money supply valuation! Oil isn't owned by central banks either.

Saudi Arabia has $27tn of proven oil reserves yet only $266bn worth of Riyals in circulation. Kuwait has $11tn of oil but only approx $120bn of Kuwait Dinar in circulation. UAE has over $10.3tn of oil yet only $268bn worth of Dirhams. Russia has $7.8tn of oil yet only $720bn worth of Rubles. Nigeria has $4tn of oil but only $75bn worth of Naira. Venezuela has $10.3tn of oil yet under $175bn worth of Bolivars, etc. People thinking "well Iraq has around $12-15tn of oil sales for the next century therefore it must have $12-29tn worth of currency in circulation today" are seriously misunderstanding how the world works.

Iraq's net export economy would only be $12-15tn if they sold the whole lot at once all in one year without using a single drop for themselves or importing a single thing (which is impossible). And then when it ran out after a year, they'd sink like a stone. Iraq may have $12tn, $15tn or even $20tn worth of oil, but it won't be selling even 1/10th of it at any one time even with restored infrastructure (and won't be exporting it all either). And that's assuming every drop of oil is sold in Dinar's, whereas it's usually sold directly in $. And most of the currency earned is simply sent straight back out again in the form of imports.

Iraq currently exports $49.1bn - but they also import $42.56bn so the net export is only $6.54bn, which isn't much money at all. (To keep things in perspective, Russia's net export is $139bn, oil production is 10m bbd and the Ruble is only 27:1 vs the $). $6.54bn per year is the real trickle rate at which Iraq as a whole is getting richer from oil. Total oil reserves for all countries make little impact on their paper fiat currency valuations. It's total amount of money created (M2/M3 figures) that determine a currency's value relative to another, and at 29 Trillion, Iraq has printed more for its 31m population than USA + Europe + China + India combined have for 3.4bn people which is why it's so weak and devalued.

As for US debt forgiveness, a lot of that has to do with "favors for oil contracts" politics in my opinion. I'd like to thank you too for this great conversation!
In Response

by: Angela
July 01, 2011 01:08
Hi again, Brian, I had one more quick question. Sorry for the hundred questions but, I was just wondering if you understand what this sentence in this article is explaining, or what it really means. I'm not asking you to read the entire article since it is very long, i'm just confused about the part that says "after the balance sheets have been cleaned up, revalue the remaining foreign currency denominated balance sheet items." If you type in "revalue" in the box at the top of the article and press enter, it will bring you to that sentence.

Here is the article link: http://www.imf.org/external/np/loi/2011/irq/030311.pdf

Thanks again for the great conversation and all your help!
In Response

by: Brian
July 01, 2011 09:21
Hi Angela. "Balance sheet items" usually refers to debt owed to other countries. Although there's been some voluntary debt write-off by some countries, Iraq's debt is still quite high. The main purpose is to stop the Dinar tanking the day it starts trading (due to countries and other foreign entities all trying to cash in on the debt at once). The wording seems to talk about revaluing Iraq's debt for those countries who haven't written it off.

As said previously, the Dinar will probably appreciate in time as their GDP increases (as long as "growth" isn't just oil sold for $ but goods that are actually priced in Dinars). What is wrong and what I do speak out against is the deliberate fraud committed by some Dinar conmen "pumpers" (named because they're doing a classical "pump and dump" on the outgoing old Dinar notes) who openly and deliberately missell the Dinar as having a 99,900% ROI profit and creating fake "intel" to "support" that when the Iraq Central Bank has repeatedly and clearly stated it will do an RD (lop).

One popular licensed pumper (like many others) sells $85 worth of Dinar's (100,000 Dinars) for $185. That's an insane 115% spread. Normal FX cash spreads are under 5-10% whilst pro-Forex trading is in "pips" (a "pip" is 1/100 of a cent). Even higher denom trades are a total ripoff, ie, selling 1m Dinar's ($854 worth) for $1,220. On top of that, they also charge a minimum $150 per 1m Dinar's ($854) fee when changed back leaving people spending $1,220 and getting back $704. Between 40-80% of the investment would have been swallowed up in outrageous trading spreads & fees. At those fees, the Dinar could "RV" up a whopping 70% and many still wouldn't break even.

This has happened to many folks including elderly people who gambled their pensions on it and have since been evicted from their homes (after people mislead and lied to over how and when it would happen). Needless to say, this popular "Dinar Trade" has since stopped trading Dinars after rumors of a lawsuit being filed by one group of people and "strong" demands (threats) for refunds came from a few others. And that's a licensed one! Unlicensed ones using Dinar's smuggled in from Jordan are illegal, and heading for jail on federal fraud charges:-

"A South Dakota man who banked hundreds of thousands of U.S. dollars by selling Iraqi dinars to investors outside the state has been indicted on federal fraud charges... What dinar dealers don’t say, according to Jim David of South Dakota’s Better Business Bureau, is that *Iraqi currency cannot be exchanged for dollars in the U.S*. "It seems as if people don’t realize that they’d have to take it to Iraq to get anything out of it,""
http://dinarscams.com/?p=1
In Response

by: Angela
July 01, 2011 17:26
Hi Brian, I absolutely agree with you, it's terrible what the pumpers are doing to people and their emotions. I for one have never bought into the lies of any pumper, it would be ridiculous to believe someone when they say every single week that the iraqi dinar is going to revalue on this or that day of the week. It is very much like the story about The Boy Who Cried Wolf. What happened with me was, I was simply misunderstanding my research. You have really cleared everything up for me though and I thank you again for that.

Do you think it may be possible that Iraq will revalue its debt for the countries who have written it off as well, maybe as their way of paying them back? Or do you think it's completely just for the countries who have not written it off? I'm still trying to figure out why one country would forgive Iraq of it's debt owed to them, and the other would not forgive them. Do you think that some countries agree to, as you stated before "favors for oil contracts", and others did not agree to it, which is why Iraq still owes them money and would that mean that Iraq will not give "favors for oil contracts" for those countries that did not forgive the debt owed to them by Iraq? Sorry again for all the questions, i'm just thinking out loud right now :)

I'm going to start letting people know about what you have explained to me so they don't end up blowing all their life savings! Thank you so much, again.
In Response

by: Brian
July 01, 2011 20:26
Hi Angela, I honestly don't know how / what arrangements are there for clearing Iraq's foreign debt simply because many countries barter over it without cash all time. Eg, back in 2001, Russia offered Austria MIG-29's instead of cash for relief of old Soviet debts to Vienna. A lot of other stuff happens all the time over the world. There was a lot of open speculation the USA and many countries were annulling Iraq's owed debt to be seen as more favorable during the 2009 oil services contract bidding. But much of that stuff is "realpolitik" rather than economic! No problem, and thanks again for a great conversation!
In Response

by: TONY from: CA
July 02, 2011 05:07
Your anology is wrong..Because currently a 25k note is Iraq is already being used as 25 dollars..So taking off the zeros is just correcting the note..Not hurting the current exchange rate..Trust me i have family in Iraq..1k note is being used as 1 dollar.The notes are already being used as if there were 3 zeros knocked off.There is going to be a Re-Dom/Future Rv,
In Response

by: Angela
July 02, 2011 18:00
Thanks Brian, you've explained EVERYTHING to me that was needed to be explained. I hope more and more people become informed about how this investment will truly play out, which is the way you have explained it will. If it weren't for you, I would still be thinking the same thing I was before you clarified it all for me, which would have just lead to a huge disappointment when this "investment" is all said and done.

Thank you for all your help once again!
In Response

by: Lynn from: victoria, bc
June 29, 2011 16:18
If you think that Iraq can be a world trading partner and pay for all the goods that they will need from other countries, then you will see that a revaluation must occur!!! The fact that the CBI is not talking about a revalue is nothing more than a smoke screen. They can't talk about it publicly as that is tantamount to insider trading since foreign currencies are traded on the open market just like stocks and bonds. In order for all sanctions etc to be lifted, they must have an internationally traded currency which they currently do not have!!!
In Response

by: TONY from: CA
July 02, 2011 05:27
Brian thanx for keeping it Real..And giving facts about whats to come..But what do u think about people that are holding on the 50.00 Dinar notes without three zeros..??
In Response

by: Brian
July 02, 2011 11:04
Hi Tony, when low denom notes are RD'd downwards and they end up at the equivalent of $1 or less (fractional values), then often get issued as new coins instead of new notes. Eg, when the 500,000 Lira banknote was redenominated down by Turkey's 6-digit lop to 0.5 New Lira (50 New Kuru's), it became a 50 New Kuru coin (Kuru is the Turkish equivalent of "cent") instead. Basically, this note...
http://upload.wikimedia.org/wikipedia/commons/8/8e/500000_TL_obverse.jpg

...was replaced by this coin (both have the same value):-
http://upload.wikimedia.org/wikipedia/commons/7/7b/50kr_obverse.png
In Response

by: TONY from: CA
July 02, 2011 18:27
Thanx for you reply Brian...But with the CBI stating they are knocking out large notes..To adjust the true value..And want to Re/Denom with values similar to U.S dollar..Isnt there a slight chance they keep the $50.00 Dinar..Or do you think the lop will effect its already lowest note without three zeros..With all due Respect Iraq is no Turkey..But good expample of what happpens when a lop occurs..In this case as i heard in Arabic translated in English..They want large notes off the market via Re/Denom..And then create lower denoms to replace..And they have stated Rv at some point,.,Do u think there is a window of opp that the 50 Dinar might hold..Or do u think all the Dinar will get affected???
In Response

by: JJ from: NY
July 02, 2011 12:51
Hi Brian, enjoyed reading your posts! One smart guy. As an absolute amateur in all this, my boss thought it might be a fun thing for me to get some dinar. I have approx 750k in dinar in the original notes with all the zeros. If the economy turns around there and they thrive, what happens with these original notes? Thank you!

by: jeanette from: az
June 24, 2011 22:07
if you want to know about the information about the iraqi dinar go type in breitling currency and the todays date example: breitling currency june 24, 2011.
He is the best place for honest information and has audio's to listen to him answering questions.
In Response

by: DaveP from: California
June 27, 2011 17:30
Breitling is one of two thing... and it stands for EVERY dinar guru on the internet. He is either a lying scam artist... or he is amazingly ignorant. Neither is someone you want to listen to for advice,
In Response

by: Ernest Young from: Earth
July 01, 2011 09:12
Dave P. From California.... "Breitling..." You can't be serious.... Have you listen to this guy. I used the name Ernest Young on this blog to flog him. This most learned self professed professional investor calls Ernst and Young, Ernest and Young.. he's quite possibly illiterate or maybe simply and idiot. Has anyone else notice this guys " YOU KNOW " rate of speech. I have tracked and counted this over 2 months worth of audios posted on his site, on average he says
" You Know" 8 to 12 times per 60 seconds of audio... If I had to verbally communicate with other professional investors around the world it would make more sense to be spending money on speech therapy instead of dinar, just an observation an opinion. I find it annoying but interesting as well, I try to predict when he's going to say " You Know " kind of like his windows of opportunity with dinar RVing, you never " Know " when it's going to hit. " You Know??? " Lastly, most parents teach their children that if it looks too good to be true... bla bla bla!!! A 99,999.00 % rate of return, Really!!!! As far as I can research it's never happened once on the face of the earth... ever!!!! Buy silver, or food for your families for Pete sakes, prepare for a possible US. currency collapse.... or donate your hard earned money for a good presidential replacement candidate, your rate of return on donation will far out pass this pumped dinar investment.

Ernest Young here just exercising my 1st amendment right while we still have one... Penny or a worthless .000875 dinar for your thoughts.... Good night all...

by: mark duncan from: U>S>A<
June 25, 2011 01:23
Don't just stand by and cloud your mind with the possibility of legal default. This is the best and biggest opportunity you or anyone else will ever have in a life time. But, you have to be on the right side of the fence. Open up an interest bearing savings account in Iraq, (anyone can simply do it) the bank will purchase the dinars, and deposit them in your account. You are now a legal part of the Iraq landscape, and for less money. When they re-evaluate, and don't ever question that fact. Just open up another account that you can transfer funds when needed to cover a master card to conduct all of your busines where ever you are. Leave your money in Iraq bearing interest, and economical gains. Change your diet, and live longer to enjoy your wealth.

Mark

In Response

by: pjs from: florida
June 25, 2011 14:31
Mark, how would one go about opening such a bank account in Iraq?
In Response

by: dirty from: Iraq
June 25, 2011 20:41
You need to have your dinars in the bank in Iraq my friends everyone with cash sol believe that. im in Baghdad so is my dinars
In Response

by: Dsum47 from: Mechanicsburg PA
June 26, 2011 03:38
Go to DinarBanker.com www.theiraqidinar.com Just Hopin on facebook

by: Anonymous
June 25, 2011 03:56
Looks like the lop is a sure thing. So much for getting rich off dinar.
In Response

by: Mark Duncan from: U.S.A.
June 25, 2011 20:30
The Central Bank of Iraq (cbi) has a website listing of all the banks in Iraq. When the Bank of your choice purchases 0ne (1) million dinars to deposit in your account
you own that million dinars regardless of re-denomination, and in my opinion when they re-evaluate whatever amount, and peg the RV to the US dollar the outcome will be based on your one (1) million dinar purchase. If they don't announce their plans before you open an account, and then confirm your position with your Bank or the Central Bank of Iraq. The government of iraq has been blest, and helped by most every major country in the world. I think they will do the right thing!
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