Living up to my Lopster name

Thinking cap time - this is some very informative dialog and it's not pro Big RV. I ran across this conversation a while back so i wanted to share on the Lopster pot section...LOL

What was the dinar really worth in 1980?..Will they float or unpeg to the dollar? This information is on the same lines as i was saying the first few times i posted on this site...The dinar has RV'ed many many many times already up till 2011 through the "pip" moments on the CBI actions (over 50 times)..cause i watched it EVERY MORNING...people were getting excited as it changed almost daily...hoping for big pip leaps towards 1 to 1 supposedly.....This was one of their methods of controlling inflation....

**Anyway back to my dialog information below....enjoy

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Question:.......So, if the Iraqis are going to raise the value of the dinar to previous levels, as it mentions in this post, they will have to float or unpeg the dinar from the dollar, and we're on easy street.


Answer:........A peg of 1167 is a transparent guarantee that the CBI owns on it's balance sheet assets valued at $1 for every 1167 dinar liability. What would happen has already happen before. Saddam by decree removed the peg or any guarantee of assets to back dinar and the dinar collapsed from ~$1 to 1 dinar to ~$1 to 3600 dinar which is why there are so many dinar in circulation today. If the peg were removed today and assets not guaranteed, the dinar would quickly collapse in value.

Question: What was the dinar worth in 1980?

In 1980 the official dinar note rate was $3.1 to 1 dinar with 20 billion dinar in circulation and ~ 15% reserve. 3.1 X 20 billion = 62 billion in dinar. Add 15% reserve 1.15 X 62 billion and the dinar value was ~ $71.4 billion.

Today the dinar note rate is $1 to 1167 dinar with 29,757 billion outside banks and 31,365 billion in reserve end of Dec 2012 for a total of 61,125 billion dinar. Divided by the dinar note rate 1167 (61,125 billion / 1167 = ~ $52.4 billion dollars. The dinar value of $71.4 billion in 1980 minus the dinar value of $52.4 billion in 2012 is a difference of $19 billion and at the present growth rate the dinar should reach the dinar value of $71.4 billion in 1980 in the next 1-3 years as the dinar is increasing in value at ~ the same rate as the GDP. The money supply has to be increased as the GDP grows.

The exchange rate by itself has nothing to do with the value of the dinar. It only defines the value of a dinar note against a foreign exchange note.

question: does this speak to a reval in the next 1-3 years?

The rate does not have to change for a currency note to be revalued. The dinar note is pegged to the dollar at a rate of 1167. The dollar is traded on the free market and is constantly being revalued every day.

You can check its value here: http://www.marketwatch.com/investing/index/dxy/charts

Every time the dollar is revalued even the slightest bit so too is the dinar revalued as its rate is pegged to the dollar at 1167 dinar to $1.

Therefore the dinar is being revalued every day. The evidence is the amount of inflation that takes place.

I would think someone would at least say hmmmm.

Just let it do it's thing, whatever that is-

Well thought out -- as far as it goes. However, the 1980 dinar does not necessarily have anything to do with the current dinar. That was pre-sanctions, even before the Iraq-Iran war, when Saddam was still ruling. Same people today, but a different government, different economic factors, different currency, etc. What was it worth in '80? Well you are likely close, but anything is a guess as even according to the CIA World Fact Book numbers from then are a best guess as they were kept secret and no reliable records exist. What we do know is their foreign reserve was somewhere close to 40 billion dollars.

You also need to factor in inflation, so that 1980 dinar (which was closer to 3.40 from what I have seen,) would actually be worth about $6.25 to 6.50 depending on what numbers you use. That would not mean much exchange wise as the USD also inflated, but it would definitely need to be allowed for in calculating equivalent reserves, circulation etc.

Will an RV occur? Personally, I think so. However, if I am wrong, I expect to see a significant rise in the value and in the worse case will still see a nice ROI.

An 1170 rate is the rate set by IMF. All monetary transactions for Iraq between IMF are done at this rate, All "contracts" are currently paid in USD - as the IQD has no value outside the middle east. The rate is slightly adjusted by Iraq in order to watch inflation and their value against the dollar that the 1170 is based against.

Where CBI lists sell 1168 and buy 1164 - on the streets it has been up over 1200 which is NOT good.

It's not every day you run across a definition for the words "Lop" or "Redom"....well... Hope you enjoy ...hope this doesn't happen but we have a great chance that it will eventually.

Its a programed rate not a artificial rate. The dinar is pegged to the dollar at 1170 dinar to $1. That means the exchange is 1/1170 = .0008547 or 1 dinar = .0008547 dollars.
The IMF does not set the dinar rate, the Central Bank of Iraq sets the rate depending on their statistics. In the case of a three zero lop there will be no estimates as it is a mathematical exercise and not a guess. A lop or deletion of three zeros simply means the currency liabilities is divided by 1000 (3 zeros) The amount of currency will be reduced 1000 times. At the moment a 25,000 dinar note X $.0008547 = $21.37 In the case of a lop a 25,000 dinar note will be redenominated as a 25 dinar note Its value will still be $21.37. What changes is the rate and exchange. Because the currency has been reduced a 1000 times with the lop (three zeros)or division (by 1000) what is changed is the rate and exchange value of the dinar notes which has been reduced 1000 times.. The new exchange will be $21.37 / 25 dinar = .8547 dollars to 1 dinar. The rate will be 25 dinar / $21.37 = 1.170. The value of the dinar currency will not change as the dinar currency will remain pegged to the dollar denominated assets. So simply if you have a 25,000 dinar note its worth $21.37. After the lop that 25,000 dinar note will be redenominated to a 25 dinar note with a value of $21.37. Monetary policy relies on financial statistics, not best guesses.