Great Rate Debate

I know what I'm hoping for, and I understand the veiwpoints on both sides, but my what a wide gap in rate projections still....from $0.86 to $3.68. And, there's still the question of whether the initial rate would rise in the short term and how long might we want to wait to see how that plays out? Any thoughts?

Bill,

The speculation on the rate is a wider gap than you wrote, over time the rates have bounced from .30 to over $10.

But to get real look at the economy and budget if Iraq, because this is Iraq not the world we are talking about. In the past the IMF has stated the lower rates mentioned, .86 to about 1.30, Dr. Shabibi answered whith "I can justify $12.00", the IMF came back with the prewar rate of $3.22 plus 20% for inflation ($3.86), so I'm sure that is where all the rate guessing has come from.

But, back to the Iraqi budget and economy and what has been stated by folks who are in the position to know. CBI statements have said the IQD will be one of the strongest currencies in the Middle East, if not the world, but they know that it can not be two much higher than it's neighbors as they must do business with them and pride and ego are huge in the Middle east, you know mine is bigger than yours. There is a rumor also that Iraq and Kuwait have an agreement on the rate, but that has not been verified that I know of.

so in short, if you are hoping in the range of low 3's to about 4, you should not be unhappy when Dr. Shabibi pulls the trigger.

JMHO
Rantings from just north of sixty

Thanks 1Alaskan. My logical mind agress with you. While I'll be happy just to see the RV above the rate I paid for my Dinar, I can't help but think all the positioning was for naught if a $3.xx rate or higher isn't the end result. I appreciate your commentary.

1alaskan wrote:Bill,

The speculation on the rate is a wider gap than you wrote, over time the rates have bounced from .30 to over $10.

But to get real look at the economy and budget if Iraq, because this is Iraq not the world we are talking about. In the past the IMF has stated the lower rates mentioned, .86 to about 1.30, Dr. Shabibi answered whith "I can justify $12.00", the IMF came back with the prewar rate of $3.22 plus 20% for inflation ($3.86), so I'm sure that is where all the rate guessing has come from.

But, back to the Iraqi budget and economy and what has been stated by folks who are in the position to know. CBI statements have said the IQD will be one of the strongest currencies in the Middle East, if not the world, but they know that it can not be two much higher than it's neighbors as they must do business with them and pride and ego are huge in the Middle east, you know mine is bigger than yours. There is a rumor also that Iraq and Kuwait have an agreement on the rate, but that has not been verified that I know of.

so in short, if you are hoping in the range of low 3's to about 4, you should not be unhappy when Dr. Shabibi pulls the trigger.

JMHO
Rantings from just north of sixty

BillA,
If you ONLY consider the numerous news reports coming out of the CBI and ignore totally any and all rumors and intel (not saying they are right or wrong - for now at least), if we believe what they are saying... in addition to what 1Alaskan's posting, they are telling us that they are coming out low - at least .86 - and at most 1.30 - just like 1Alaskan said. They also are saying that over the next 3 years they will be increasing the value a little at a time until it gets to where they are happy and can justify - whatever that number actually is. Like 1Alaskan has said, the intent as of now is to eventually climb to 3.86 (3.22 pre-war level plus 20%). They will end up right around the value of the Kuwaiti Dinar and perhaps rise right along with it at that time. It may take less than 3 years to get there, but 3 years at most.
The idea behind the numerous statements out of the CBI that tells us the Dinar is the strongest in the world does not have anything to do with the value of the Dinar, but has to do with the stability of the Dinar. Once the lower denoms come out and they become trade-able the Dinar will be one one of the most stable currencies available.
Now if you include, or listen only to, the rumors and intel, you will be led to believe the dinar will revalue at a high rate (current thought is 3.68) right at the start and go up from there. I would not say this is wrong and may indeed be right, but it's not what the CBI is telling us. The trouble with news is that they do not always tell us everything there is, but sometimes only what they need or want us to know.
However, as for the CBI news, Shabbibi is all about informing the Iraqi citizens of what they need to know to maintain a stable economy, so as for the Dinar, I do not believe he is going to tell them anything that's not true. He wants very much for the transition to be as smooth and pain-free as possible.

Give me a dime per dinar and i am happy! LOL!

therealbutterfly wrote:Give me a dime per dinar and i am happy! LOL!

Yep! Im happy with 30 cents. Thats the rate i came in hoping for. People say rates ranging from $0.86-$16 and I just go nuts!

Something else.. today's news article says that the new Iraqi currency will increase in value by 1000; IE: the Lower denoms will come in with a value of .86 up from .00086.
Also says that the entire process of removing the old currency and raising the value will take at most 2 years. This goes right along with my post above.

http://www.shafaaq.com/sh2/news/economy-news/33218-2011-08-30-06-17-37.html

In the same article that I read (which I can't remember) it talked about the IMF, 3.22 + the 20% you mentioned, but it also talked about a deal with Kuwait where it can't be more then 50 cents higher then Kuwait. Shabibbi is pretty smart. I don't see him coming in at the start with a BIG number higher then Kuwait. A little PC, middle eastern style. As you noted 20% on 3.33 = 3.86. With Kuwait around 3.66, I personally don't see it 20 cents higher at 3.86. That is why Okie's 3.68 resonates with me. Not because its Okie but relative to what has been discussed.

Someone else also said that it needed to be 3.41 to meet their budget. I guess, that I don't see the /86 to a dollar except, as a way to get a lot of the big denoms out with the early cash ins.

Do you have any guesses on the date??

The rate is simply wide open speculation... But that is OK!!
I have read people speak of a "par rate"... What is that exactly??

tomb22 wrote:In the same article that I read (which I can't remember) it talked about the IMF, 3.22 + the 20% you mentioned, but it also talked about a deal with Kuwait where it can't be more then 50 cents higher then Kuwait. Shabibbi is pretty smart. I don't see him coming in at the start with a BIG number higher then Kuwait. A little PC, middle eastern style. As you noted 20% on 3.33 = 3.86. With Kuwait around 3.66, I personally don't see it 20 cents higher at 3.86. That is why Okie's 3.68 resonates with me. Not because its Okie but relative to what has been discussed.

Someone else also said that it needed to be 3.41 to meet their budget. I guess, that I don't see the /86 to a dollar except, as a way to get a lot of the big denoms out with the early cash ins.

Do you have any guesses on the date??

Something to consider.
Their current budget is $90B. They have asked for next year's budget to be $115B.
They produce 2.2M barrels of oil/day at a projected rate of $85. That comes to an annual income from oil of just over $65B.
They currently have $30B worth of Dinar plus $250B in DFI funds totaling $280B. Add $280B+65B and you will easily see that they have no need to increase the value of their currency even 1 penny. They have plenty to get them through the next few years even if they increase their budget each year, which they certainly will.
If they produced zero income for the next 2 years from oil, they would still have more than enough funds right now to pay their budget. Now add $65B/year for the next 3 years and you see that they have plenty. They do not need to increase the value of their Dinar at all.
This also goes right along with the idea of a gradual increase in value over the next 2 years.

Now that's interesting....

...by your measure what level of interest does Iraq have to have a Forex currency? by your own admission the metrics dont add up, but yet, the currency still does not trade, commerece implodes, unemployment morphs into rioting, bombings.....civil war, and nothing is accomplished. You'll have to chew a little bit on irrational facts as the norm here...thats not too hard to embrace for this 5000 year old culture who invented the wheel.

Goldmember wrote:...by your measure what level of interest does Iraq have to have a Forex currency? by your own admission the metrics dont add up, but yet, the currency still does not trade, commerece implodes, unemployment morphs into rioting, bombings.....civil war, and nothing is accomplished. You'll have to chew a little bit on irrational facts as the norm here...thats not too hard to embrace for this 5000 year old culture who invented the wheel.

Not sure what you are referring to exactly, but their interest in having a trade-able currency is stability and strength of the dinar for one thing.
Also, it will allow them to trade openly for products and services and give their currency the ability to rise in value. They can become trade-able and at the same time not increase the total value of their currency, that being $30B. But I think we can be certain that it will gain in value once they do begin trading internationally.
I do not know what you mean by "metrics don't add up" so I can't comment on that.

What they need and what they want are two different things....I.e., getting by versus growing into a significant power on the world stage...

Greenlight - I like your numbers on what they have financially. Very cool. From a "business" perspective, it does seem like they could comeout low at first, to get the large denoms out. Personally, I would rather it be higher.

What do you think about the idea that even though they have enough for the budget for a few years, that in the $3 range, they would still have that and also have more funds to help rebuild the infrastructure? It just seems to me, the only benefit to come in low is to get high denoms out. And there is a downside to that. If they come in low, the really big players will use that as a trigger and buy more. I am late to this and don't have a lot but, I might even cash in some low and then buy some more at the low rate, or hold on to the bulk of it and wait it out.

I am not sure that I buy the 15% flat tax and have to cash in in 45 days business. I just can't see our "friendly" government passing up a chance to get the short term capital gains folks for another 20%. And, I believe that the bulk of investors are in the short term capital gains category.

Clermont Thinker - Do you mean par rate or par value? Here is the definition for par rate:
Definition
A reference point for mortgage lenders in which the interest rate is at zero points; there are no positive or negative adjustments to fee.
Read more: http://www.investorwords.com/13651/par_rate.html#ixzz1WdAAbnCb

Par Value is some times related to an initial stock offering. It is a low "assigned" by the creators/promoters of the stock.

Don't know what any would mean in relation to IQD. Good question, does anyone know the answer relative to IQD or currencies?

As I read all the posts in this thread I am poud to be among so many thinkers,

Thank you for thinking, but in the back of my mind I keep getting a nagging feeling, This is the Middle East, yes where egos and pride are huge, but they can be and have been a little off center with somethings over there and I hope that the cooler heads stay in charge before the whole thing goes up in smoke.

JMHO
Rantings from just north of sixty

1alaskan wrote:As I read all the posts in this thread I am poud to be among so many thinkers,

Thank you for thinking, but in the back of my mind I keep getting a nagging feeling, This is the Middle East, yes where egos and pride are huge, but they can be and have been a little off center with somethings over there and I hope that the cooler heads stay in charge before the whole thing goes up in smoke.

JMHO
Rantings from just north of sixty

Yes, most decisions in peoples lives are made from an emotional basis no matter how much we try and tell ourselves that they are logical decisions. Then when you add in the cultural differences, it can be really interesting. I agree with you. Let cooler heads prevail.

greenlight wrote:

tomb22 wrote:In the same article that I read (which I can't remember) it talked about the IMF, 3.22 + the 20% you mentioned, but it also talked about a deal with Kuwait where it can't be more then 50 cents higher then Kuwait. Shabibbi is pretty smart. I don't see him coming in at the start with a BIG number higher then Kuwait. A little PC, middle eastern style. As you noted 20% on 3.33 = 3.86. With Kuwait around 3.66, I personally don't see it 20 cents higher at 3.86. That is why Okie's 3.68 resonates with me. Not because its Okie but relative to what has been discussed.

Someone else also said that it needed to be 3.41 to meet their budget. I guess, that I don't see the /86 to a dollar except, as a way to get a lot of the big denoms out with the early cash ins.

Do you have any guesses on the date??

Something to consider.
Their current budget is $90B. They have asked for next year's budget to be $115B.
They produce 2.2M barrels of oil/day at a projected rate of $85. That comes to an annual income from oil of just over $65B.
They currently have $30B worth of Dinar plus $250B in DFI funds totaling $280B. Add $280B+65B and you will easily see that they have no need to increase the value of their currency even 1 penny. They have plenty to get them through the next few years even if they increase their budget each year, which they certainly will.
If they produced zero income for the next 2 years from oil, they would still have more than enough funds right now to pay their budget. Now add $65B/year for the next 3 years and you see that they have plenty. They do not need to increase the value of their Dinar at all.
This also goes right along with the idea of a gradual increase in value over the next 2 years.

I believe it would be foolhardy to operate a budget from 'cash-on-hand'. Budgets are operated from 'cash flow'.