Tuesday, November 29, 2011

The New 50 Dinar Note

A few days ago there was a story from Baghdad that could very well seal the fate of the IQD. The CBI confirmed that they're going to issue a new 50,000 dinar note marked as a 50. There is no question that this is a re-denomination, and if Iraq pursues this policy the IQD investment is officially a bust.

CBI will issue new denomination bills

BAGHDAD, Nov. 24 (AKnews) – The Iraqi Central Bank (ICB) has confirmed it will issue a new bill with a value of 50,000 IQD ($43 USD) but marked as 50 dinars.
Deputy chairman of the ICB Dr Muzher Saleh said the bank is working to issue this new money in addition to coins in both Arabic and Kurdish in an effort to address the liquidity problem in Iraq.
Economic adviser Abdul Hussein al-Ankabi said last September that this ploy to knock off some zeros will increase the phenomenon of money laundering.
The largest currency in the country is now 25,000 dinars and its purchasing power does not exceed $23 USD.
The new currency will include symbols that reflect the diversity of Iraqi sects and cultures including the Kurdish culture. “Iraq needs to support its economy and its currency through the issuance of a currency similar to foreign ones like the $100 bill,” Saleh added.
The main tasks of the ICB are to maintain price stability, implement monetary policy, manage reserves of foreign currency, issue and manage the currency and regulate the banking sector.
The inflation rate in Iraq stood at 7.3% in September.

The gurus might disagree but to me there is no doubt that Iraq is saying here that they intend to re-denominate rather than do a 1000+ to 1 RV.  You see, these gurus  have told us for a year and a half now that what they're really going to do is remove the bills with three zeros from circulation, revalue their currency, and issue new lower denominations that will coexist with the current denominations with one or two zeros which are the 50, the 250, and the 500.  Okay, there's a problem with that theory now if this story is true.  Iraq stated that they're going to issue a new bill marked as a 50, but they already have one that is marked as a 50.  We were led to believe that they would issue denominations that weren't currently in circulation like 1, 5, 10, 20, and 100 dinar notes.  But now they've said that they're going to introduce a new 50 that has the value of two of their 25K notes which comes to about $43.  The current 50 dinar note is worth less than a nickel.  So they're going to have one 50 worth $43 and another one worth $.043.  Obviously they can't be the same currency with the same mark of "50" on the bill so we're talking about a new currency with a new value and a new symbol and a new everything.  Two completely different currencies, folks.  In other words, an RD.  A lop!  Presumably this would be the first of several denominations of the new currency to be put in circulation while the others like the current 50 note are slowly removed from circulation.  They would likely start with the 50 because it's the least popular of all the bills currently in use.  It would take a thousand of them to purchase what the new 50 will.  This way they will be phasing out the unpopular 50s and pulling in the larger notes at the same time, and slowly building confidence in the new currency among Iraqis in the process.  My guess is that the next new bill would be a 20 to replace two of the current 10K dinar notes.  Since the current 25K is worth more than a new 20 would be it would be a bit more complicated to bring in 25K notes with it, so they start with the simplest first.  Makes sense

However, as this story made the rounds of the dinar forums a contradictory story was also posted stating that this was an old plan which has been discarded.

CBI source denies issuance of a 50,000 IQD

Denied a source in the Iraqi Central Bank Matnaqlth Alketronah some sites about the government’s intention to issue a class of Iraqi currency (50) thousand dinars

The source, who preferred anonymity in an interview (the citizen) that “the Iraqi currency is currently in the process of switching after lifting the three zeroes, and it is not possible to issue a new currency at the present time,” adding, “There was intent in the past to issue the currency of a large class to facilitate the deal, but the idea of ​​lifting the zeros replaced this idea or intention of the Iraqi Central Bank to issue currency of a new category,
“stressing that” the plans on the new version after the lifting of zeros take into account the issue of balance and the actual need for the trading currency (Cache), where there will be no less than 12 categories of including a number of mineral groups in addition to the paper, and certainly the last category will contain a large currency to facilitate the transactions as is the case in all countries of the world. “

Regarding the appointment process will raise the yolk between the “central bank ended a prepared full plans for change was submitted to the concerned authorities note that the issue of changing the currency was assigned to the Central Bank by the government which he is not a proposal or project adopted by the Bank and of course the decision of when to hold the process will be the prerogative of the party that adopts the project of any government. “

This has indicated some of the news sites about the intention of the Iraqi Central Bank to issue a new Iraqi currency of the class (50) thousand dinars

The deputy chairman of the Central Bank of the appearance of Dr. Saleh told the Kurdish news agency (Rn) that “the Iraqi Central Bank is working to issue a new currency, a large class (50) thousand dinars due to the lack of coins in a big country.”

Saleh pointed out that “the largest currency in the country is now (25) thousand dinars and the purchasing power it does not exceed $ 23.”

Saleh added that “the central bank is also working on a version of small coins to the lack of these
categories that facilitate the process of buying and dealing between citizens and the Iraqi market that you need to return to the small metal coins had some dealings with the Central Bank.”

Salih stressed that “the new currency will be in the Kurdish language in addition to Arabic and symbols reflect the civilization of Iraq and the diversity of sects and civilization, including the Kurdish culture.”

And Saleh stressed that “Iraq needs to support its economy and its currency through the issuance of currency, similar to major foreign currencies, including the $ 100 bills.”

Saleh added that “in the cash transactions in the Iraqi market, you need to finance the cash (cash) large and therefore difficult to transfer the money in the form of bags in case of large transactions.”

He cautioned that the “Iraqi banks do not accept deposits, sometimes because of the problems and the account number of the large amounts of money.”

The increased benefit of earlier Iraq was seeking to reduce the monetary mass (Cache) from 25 trillion dinars to 15 billion dinars. “Noting that” the central bank fixes the payments system in Iraq and the policy of the monetary authority. “

Saleh pointed out that “it will soon be through the issuance of new currency and the elimination of three zeros from the new currency.”

Salih stressed that “this action is an important part of the reform of currency management and will facilitate the payments system and the elimination of the vestiges of inflation, the former by treating the mass of a strong monetary and easy,” adding that “instead of have to deal with large amounts of money to buy a small quantity of goods, we will deal in a little money to buy a large quantity of goods. “


So in the first story we have the deputy chairman of the CBI saying this new 50 will be introduced soon and in the second story an anonymous source says no, it's an old plan that was rejected.  As most IQD investors can attest this is common when it comes to the news from Iraq.  So who knows?  But I maintain that the bulk of the evidence supports a re-denomination which is described in the first story.  I suppose that there's still a chance that they're lying to us and actually intend to RV, but if they aren't lying to us the RV is toast, and all of these gurus are gonna have a lotta 'splainin to do.

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