A POST RE; HOW CAN IRAQ R.V. ???(Many people are now asking ??sooo let' break it down!!)

In researching Petrodollars on the internet I came across what i thought very interesting and decided to share. This is one persons view, he may be right or he may be wrong. You decide. The post was from the middle of March 2011.

First off, I’ll use the exchange of a 10,000 IQD (Iraqi Dinar) note as my example. To help explain the economics of this cash-in example, I will use a 1:1 cash-in ratio between the USD (US Dollar) and IQD (Iraqi Dinar), that is given a two-tier payout, and a 2% bank spread.

What You Will Receive:
If you were to cash in your 10,000 IQD note with a bank that charges you a 2% spread, you would personally receive a net take-home of $9,800 credited to your bank account.

What Your Bank Will Receive:
Your Bank will receive a $10,000 credit to its Federal Reserve Account. They will also be able to add the $200 profit to their “capital account”.

If you don’t understand the “Fractional Banking“ concept that runs our country, you may want to, as that is what this is based on, and is what is behind this entire concept and plan.

Ultimately, the bank wins because they are able to gain $2,000 in lending power under the 10% “Fractional Banking“ model.

What the US Treasury Will Receive:
First off, the US Treasury will receive $3,500 in estimated taxes in the quarter after the exchange, because you are now in the “rich” category and get to enjoy the 35% tax bracket. This lowers the “net cost” of the IQD exchange to the US financial system to $6,500 USD (i.e. $10,000 out – $3,500 in). Furthermore, the US Treasury’s rate is higher than the banking rate (we will use in this example 1.25), thereby further reducing their “net cost” from $6,500 to $4,000.

Oil Now Enters the Picture:
At some point, a Fed-appointed agent orders $12,500 worth of oil from Iraq. Payment will consist of a $12,500 transfer from the Fed’s foreign currency reserve IQD account to the IRAQ Oil payment account at the CBI (Central Bank of Iraq) in a form otherwise known as PetroDollars/PetroDinar. Even though the world spot price of oil is defined in terms of USD, the actual transaction may take place in any internationally recognized currency agreed to by the parties. For example, Iran only accepts Yen from Japan for their oil orders, because they don’t want USD in their foreign currency reserves.

How the CBI “RECAPTURES” the Money:
The $12,500 order is filled with 250 barrels of oil based on the spot price on the date of the sale (for this example we used a $50 USD spot price). What does it cost Iraq to produce the oil to fill this order? Well they have negotiated productions agreements for approximately $1.50 USD/barrel. From that price $.50 USD goes to the national Iraqi oil company who is the partner in the field the oil came from. Out of the remaining $1.00 the other oil field partners have to pay the Iraq government a profit tax of $.35 USD (35%). The net cost to Iraq to produce a barrel of oil used in this scenario is $.65 USD. (i.e. $1.50 – .50 – .35)

What does all that mean? It cost Iraq $162.50 to bring back a 10,000 IQD note! Can they afford that? I think so! So, instead of paying out $12,500 for a 10,000 IQD note, they only pay $162.50! That doesn’t add to the money supply much at all does it! They receive their IQD back and place it in the CBI, or destroy it.

The transaction is completed with the Federal Reserve exchanging foreign reserve credits which are equal to $12,500 USD (which had a net acquisition cost of $4,000 USD for the US) for 250 barrels of oil (which has a TOTAL COST to produce of $162.50 USD for Iraq.

More completely explained, and simply put, it cost Iraq $162.50 USD from their foreign currency reserve accounts to redeem the value of 10,000 IQD, which goes into their operating accounts. At the same time the US got $12,500 worth of oil for a net cost of $4,000. That’s how it was originally planned for Iraq to RV at 1 IQD = 1 USD, with the variable being the political element (i.e. UN Sanctions, GOI (Government of Iraq) actions, IMF actions, World Bank actions etc.)

Other Factors that Strengthen Iraq’s Position and Ability to RV:
■DFI (Development Fund for Iraq) Funds Returned & Other Assets: $280+ Billion USD, plus other frozen assets (estimated at $100 billion) will be returned back to Iraq and added to their foreign currency reserve, bringing it up to $430+ billion USD.
■CBI IQD Reserve Requirement Adjustment: The CBI will change the current fractional IQD reserve requirements from 100% to 15% at the appropriate time. As a result, the the total potential money supply will be raised in value to $2.8 Trillion (430 billion/15), while at the same time, the total physical IQD in circulation will be reduced by removing the large bills with the 3 zeros over a period of 2 years, as they have indicated.
■Oil Production Increased: Iraq will also execute the plan they announced to increase oil production from 2+ million barrels/day to 10 million barrels/day with the resulting revenues flowing directly to the Iraq treasury.
■Oil Futures & Forex Contracts Added: To further stir the pot, the CBI will continue to use it’s sales window to market oil futures and forex contracts. They have shown they can generate significant cash flow in the private market. Think of their impact in public markets.
There, my friends, is how this plan will be enacted and made possible. Taking NOTHING, and turning it into SOMETHING, then bringing it back to a “manageable and reasonable something” that is accepted and supported by seeming endless supplies of oil. This is how the world’s ENTIRE NEW MONETARY SYSTEM will be regenerated and supported and backed, given, in essence, a re-birth and renewed for most governments and economic regions… even by “Black Gold”.

So, here’s the summary for all the “players” involved, giving ballpark numbers, and not taking into account superfluous costs, fees, and other small details that don’t really affect the larger picture:

■Investor’s Net Gain: $10,000 – $200 = $9,800 x .65 = 6,370 for an investment that cost $10
■Bank’s Net Gain: $200 added to “capital account”, plus $2,000 they can use to loan out.
■US Treasury Net Gain: $2,500 from the .25 spread on top + $3,500 in quarterly taxes = $6,000
■CBI/GOI/Iraqi People Net Gain: $12,500 – $162.50 = $12,337.50 + Profits from “Other Factors”
■Overall Net Gain for All Involved: $6,370+$200+$6,000+12,337.20 = $24,907.20
This is the wealth that was generated from a single 10,000 IQD note that was given an original value of approximately $10! Is that amazing or what?! You tell me… can Iraq afford NOT to RV?!!! Will the IMF allow them to NOT RV their currency, but simply replace their large denoms for smaller ones?!!!

THIS WAS ONE OF MY POSTS FROM LASY YEAR, SOME PEOPLE WILL NOT AGREE, BUT IT IS THE EASY AND BEST WAY TO EXPLAIN HOW THIS MIGHT WORK !!! I BELEIVE THE DINARS THAT ARE CASHED IN IN OTHER COUNTRYS MAY NEVER REACH THE SAND AGAIN IN IRAQ!!! JUST MY THOUGHTS !!! OK FIRE AWAY !!! GO FOR IT BASH AWAY !!!!!

I like it. Now, if we can just get them to push the button......

Well done and a great explanation! I have one flaw to point out, however: UST will not receive 35% from the exchange in taxes. 15% is the rate for gains of this nature.

Good post. The question of how much we will have to pay in taxes based on what type of tax it is --- is still being talked about. In the below article, the author says the holding of physical dinar and cashed in will be taxed at ordinary gains.



Is The Iraqi Dinar Worthless Paper Or Maker Of Millionaires?
Robert A. Green, CPA Robert A. Green, CPA, Contributor



Dozens of people have signed up for tax consultations with me over the years looking for a windfall profit on the U.S. government revaluation of the Iraqi dinars back into U.S. dollars. In other words, these were people holding dinars who were hoping they could exchange them for dollars again.

Most dinar investors are current and ex-military, warzone contractors and now speculators. A cottage industry of promoters has sprung up on the Internet promising dinar “get rich” schemes. Many have invested, say, $5,000 and they hope to make millions. I’ve always thought it was a scam, as it sounded too good to be true.

These people ask me about their potential large tax bills. Most hope for long-term capital gains tax rates, currently up to 15 percent. I have to give them the bad news: holding physical currency is considered ordinary gain or loss in Section 988 (foreign currency transactions). Unlike forex traders, who don’t hold physical currency and don’t take or make delivery, they can’t file a capital gains election to opt out of Section 988 and into short- and long-term capital gains treatment.

That means no lower 60/40 futures tax rate either (Section 1256). At least, it’s not considered a personal loss which otherwise can’t be deducted, as is the case when a person returns from a vacation and exchanges his left over currency from that trip. Investors in dinars can deduct ordinary losses in Section 988, but few expect a loss.

Lords of Finance: The Bankers Who Broke the World by Liaquat Ahamed is about how the four leading central bankers from the U.S., U.K., France and Germany navigated in and out of WWI and financed recoveries and German reparations. These central bankers went off and on the gold and new dollar standards by manipulating their exchange and interest rates and much more. This is how money and power (military and otherwise) go hand in hand.

Our current situation begs the question: Did the Bush administration plan on, and is the Obama administration still considering, paying for part or all of the Iraq war by collecting taxes from the revaluation of the dinar?

Special Offer: Safety In High-Yield. Three of Richard Lehmann’s fixed-income portfolios yield more than 7.1%. Click here for to gain access to his portfolios in Forbes/Lehmann Income Securities Investor.

If this scheme has any resemblance of reality, it could be an interesting revenue raiser for the government, and I know the government is hunting for revenue raisers and closing of tax loopholes.

Maybe the story here is just that it’s a scam. But, if rumors in the marketplace are true, and the dinar does revalue and allow conversion for most to pre-war levels, what are the ramifications for the government, Iraq, the military, investors and taxpayers? Also, what’s holding up the revaluation? Can Iraq handle it?

It does sound like a happy ending which makes me suspicious. How much tax revenue do U.S., state and local governments stand to collect? How many former and current military personnel and contractors stand to become millionaires overnight?

http://www.forbes.com/sites/greatspeculations/2011/07/27/is-the-iraqi-dinar-worthless-paper-or-maker-of-millionaires/

Peabody12- And you did purchase dinar, right or wrong?? :o :shock:

terbo56:
Peabody12- And you did purchase dinar, right or wrong?? Surprised Shocked


What is the point of your question?

If we had not thought that we would receive a decent payout 4 our blessing, then why did anyone purchase the dinar? It's just like any other investment- We all take our chances-Was it an impulse, or was it something we thought was going to be a good idea at the time? It will happen, sooner or later- In any event, I am very hopeful- It just sounded to me that we made a mistake doing this, however,I don't feel that is the case,because if it was, nobody would have invested in it to begin with-

Ok, I see you misunderstood my post. The point got lost in the authors opinion of whether this is a good or bad investment

The point of my post is: what kind of tax rate will we have to pay 15% or 35% as applied to the type of tax category. I stated before the article begins "In the below article, the author says the holding of physical dinar and cashed in will be taxed at ordinary gains."

Don't worry, this is a great investment --- IT WILL HAPPEN. The author himself gives reasons why this is a great investment. He is just the type of person that no matter what facts are presented, he will not see it. He is just like your neighbor, friend or family member whom you spoke to about the IQD. They think: sounds good to me, but it is not for me --- I don't believe it.

And that my fellow dinarian is what makes the world go round.


GO RV!!!!!!!!!!!!!!!!!!!!!!!!!

Peabody12- I do apologize for the confusion, I did misunderstand what you were trying to explain-I stand corrected- No harm, no foul on your part- Again, I apologize for the confusion- No worries-:cheers:

I will know the taxes due when I am sitting with my tax adviser after RV,and he tells me.
Prior to that,it is all speculative.
Enlist professional help when the time comes. :cheers:

Exactly ... no one knows ... if you ask 5 different CPA's you will get five different opinions ... and if you ask 5 different IRS "experts" you will get 10,000 words that don't say a thing.

....and will it REALLY matter to you if your $3,000,000 is taxed at 35% and you only get to keep a measly little 1,950,000 for the $1200 investment that you made?

I would wrap it in nice paper with a big bow and present it formally on the steps of the IRS building in DC.

Happy freakin' birthday to me!!!!

bigdaddytim wrote:....and will it REALLY matter to you if your $3,000,000 is taxed at 35% and you only get to keep a measly little 1,950,000 for the $1200 investment that you made?

I would wrap it in nice paper with a big bow and present it formally on the steps of the IRS building in DC.

Happy freakin' birthday to me!!!!

How true Bigdaddytim!!!!!!! I'll take it.

bigdaddytim wrote:....and will it REALLY matter to you if your $3,000,000 is taxed at 35% and you only get to keep a measly little 1,950,000 for the $1200 investment that you made?

I would wrap it in nice paper with a big bow and present it formally on the steps of the IRS building in DC.

Happy freakin' birthday to me!!!!

Very nice read...Just Da Truth. This does make it more simple to understand why Iraq NEEDS to RV. It makes so much since. As we say here in Missouri..... If it makes dollars it make SENCE ( cents ) !!!!!!! I hope the Lopsters read this and understand why Iraq would be foolish not to RV their currency.

GO RV

If I knew my money was about to be worth more I would print more of it if I could.

AT this point, any and all talk about what the taxes will or might be, is moot, right now I have have no tax liaablity on our purchase of a foreign currency won't untill we exchange it,

That is the 15% o 35% question in this, and untill we see a certifed rulling from the IRS, even the IRS agent you talk to, can not guarantee any rate.

M2 is not just currency, but currency and all time-related deposits, savings deposits, and non-institutional money-market funds. M1 is cash only. Maybe one of our resident economics grads can give a solid explanation of the significance of the numbers.

Kevind53 wrote:M2 is not just currency, but currency and all time-related deposits, savings deposits, and non-institutional money-market funds. M1 is cash only. Maybe one of our resident economics grads can give a solid explanation of the significance of the numbers.

http://cbi.iq/documents/financial_statement2010_f.pdf

If you look at the stats on page 6, you see that the currency issued is over 27 trillion (back in 2010) and then the other liabilites such as Tbills, etc and that makes the actual liability close to 65 trillion. BUT their assets are a little more than 65 trillion so its not bad overall. LOL This is the certified audit from 2010 and its on the CBI site so thats the only info I can go by since its SUPPOSED to be accurate.....