Well now we have a good example of how things can change in favour of dinar investors. Shabibi's currency reform plan was always a lop, despite the voluminous and vociferous protestations from the perpetrators of pumpitude. His plan to delete the zeros was from the beginning an event which would result in zero profits for dinar investors. Now that Shabibi has apparently been removed (at least temporarily - I'm not going to speculate on the legitimacy of the allegations or the outcome) some people like BondLady are coming around and saying that this could be a good thing because Shabibi wanted to lop and his replacement is pro-RV. Better late than never I suppose.
The options for Iraq have always been pretty much limited to stagnation (like we've seen since 2009), a lop, or a slow growth scenario toward a penny. One of the reasons I decided to take a break from blogging about the dinar was my belief that nothing significant would happen with the value of the dinar for a year or two with Shabibi and parliament at an impasse. With Shabibi out of the picture that could very well change now. Do I expect my dinar to be worth 1000 times more next week? Absolutely not. 100 times more? No. 10 times more? Again, no I don't. But I do think we could see the dinar's value increase by 10% a year or more. Perhaps much more. That wasn't going to happen with Shabibi in charge because as an economist he was focused on stability. From what I'm able to ascertain his replacement Abdel-Basit Turki is not an economist, but has served as a minister of human rights instead. With him in charge of the CBI I have to believe that Maliki has more control and the potential for an increase in the dinar's value has just gone up exponentially.
That's no guarantee that it will happen, of course. And it could just as easily go down, so the risk factor is still there. But the potential for a proft of any kind is better now than it was a couple of weeks ago, and the likelihood of a lop has decreased proportionately IMO.
With Shabibi at the helm the money supply was growing consistently and the exchange rate was motionless. With Turki in charge that could change. We could start to see the M2 figure retreat from over 70 trillion back to the 60 trillion neighborhood. We could see a reduction in the percentage of backing in foreign currency reserves. Any number of factors could change the landscape for the dinar investor. Despite all of the lying, scamming, and general douchebaggery that this blog has pointed out over the past year or so, the crazy thing is that the potential for profit has always existed and still does. The change in leadership at the CBI could signal a shift in that potential. I'll be keeping an eye on the situation. Meanwhile I'm watching for more developments in the dinar fraud investigation. I'm not a big fan of "intel" but I'm hearing that more arrests are coming. I'll be sure to report anything significant.
Shabibi and Stability
Maliki and the RV
Maliki and the RV II
Deleting the Zeros
.jpg)
LOL, isn’t it interesting now that Shabibi has been removed many Gurus suddenly understand that his plan was to redenominated the dinar, not RV.
ReplyDeleteAs for the value of the dinar going forward, all you say could be true. It could go up in value, but let’s look at what lead to this.
Maliki wanted the CBI to lend them money from the FX reserves about a year ago to help fund budget shortfalls. Shabibi shot him down and said the FX reserves were not to be used like that and where to back up the dinar. Maliki backed off his demand for the money and here we are about a year later and Maliki and his buddies have trumped up charges against the CBI and had Shabibi removed. If this is just his way of getting ahold of the FX reserves to spend on the budget, the dinar will fall in value not grow.
I agree DaveD, the dinar could go down in value if that happens. That's why I mentioned the risk factor. Shabibi stated it very eloquently when he was in DC last year. "The government's the spender and the central bank's the saver." I'm not so sure that the charges were trumped up, however. From what I've read it does appear that some violations occurred at the CBI. That provided Maliki with the opportunity he was looking for. Like I said, I don't want to speculate on the legitimacy of the allegations. I'm just watching to see what happens.
DeleteWe shall see as more details come out I guess.
DeleteFrom my understanding this all seems to stem from when the sanctions got placed on Iran and Syria. The Iraqi currency auctions jumped to new highs and the dinar street value sank to about 1300:1. The thought was that Iran & Syria where taking advantage of the auctions to get dollars. Shabibi and the CBI eventually tightened the rules for the auctions in an attempt to stop Iran and Syria from doing that. Maybe they could say the CBI acted too slowly and didn’t do enough stop it.
Another twist to the story to me is that Maliki has always been looked at with a little suspicion because if his ties to Iran. So you would think he might not have been all that upset Iran used them in that way.
I’m just a little skeptical of Maliki and his crew who have been trying to get influence/control of the CBI for a couple years now… and now this. And let’s not forget that this “Integrity Commission” which brought these charges. The head of that commission resigned a while back because of Gov tampering.
If Shabibi is a crook, and has been for a while, AND
ReplyDeleteIf Maliki gets control of the CBI,
then I say the CBI just lost all remaining credibility outside of Iraq. Which means even if the clowns running the GOI to go 1/$1, nobody in their right minds would honor it outside of the country. Can you say tampering?
Rich
Dave and Rich are right on! Chuckles first prediction. Ha! Anyone promoting the sale of Dinar as an investment will have to pay to defend themselves. Simple as that! The GOI just shot themselves in the foot. The auctions were a free revenue stream. Ok, I will go back to "does anyone out there have a 2011 note or older"? They printed boat loads to keep inflation in check and shipped it out country (just like the US does). This isn't rocket science ,and you don't a professor to explain it!!!!!!
ReplyDeleteGood post Sam. There's nothing wrong with having a dabble on the ISX either if treated as a high-risk investment with money you can afford to lose and a more serious long-term profit expectation. The problem is the pumpers have been suckering desperate people who can't afford to lose anything and know very little about Forex in general, let alone emerging markets. I've known at least 2 marriage breakups over the years as a result of people turning the Dinar from an "investment" into a cult-like obsession following around "Pied Piper Pumpers" who keep people locked in a very unhealthy state of mind constantly cycling between a euphoric "anticipation addiction" and emotional despair when "rumors" (ie, fake intel) fails to materialize. It's good to think positively, and maybe fun to go through a "what if" phase in life, but it's not good at all when "what if" turns into a frenzied 'expectation addiction' that takes over years of your life. Even without marriage breakups, it's made some otherwise normal people become increasingly unpleasant and paranoid to be around (as can be seen with the general tone & attitudes on some pumper forums).
ReplyDeleteSam - "There was never any chance that you could turn $1000 into $1,000,000 and there was always a chance that the dinar would be demonetized with no way for investors to redeem their IQD for USD or the new dinar, meaning that every dollar invested in dinar was at risk."
Indeed, this is still possible. During the last bank-note exchange in Iraq, there was only a 3-month window (Oct 15th 2003 to Jan 15th 2004) before the old notes became demonetized (ie, unexchangeable). Here’s the official archived past Embassy release for it:-
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.usembassy.it/file2003_10/alia/a3101405.htm
This is the "downside" to the Dinar being both protected & tradeable - they can indeed legally implement border currency controls and exchange only Dinar notes inside Iraq, official foreign holdings and maybe extend it to proven Iraqi citizens living outside of Iraq (in Jordan, Syria, etc). Many people don't realize that's exactly what they did back in post-Saddam 2003...
Sam - "But I do think we could see the dinar's value increase by 10% a year or more. Perhaps much more. That wasn't going to happen with Shabibi in charge because as an economist he was focused on stability. From what I'm able to ascertain his replacement Abdel-Basit Turki is not an economist, but has served as a minister of human rights instead. With him in charge of the CBI I have to believe that Maliki has more control and the potential for an increase in the dinar's value has just gone up exponentially."
DaveD beat me to it - Maliki has long been known for eyeing-up Iraq's FX reserves (the only thing supporting the Dinar at 1165-1170 range as it is now) as a cash-cow / "money that hasn't been spent" (which you're not supposed to do with FX reserves precisely because if people start selling Dinar back for $, you need the FX reserves there ($, etc) to buy Dinar back, otherwise the value of the currency will literally plummet as the country runs out of $, €, etc to support the Dinar even at its current value. It's in no-one's interest to see the Dinar's value plummet back to 1500-2000:1 vs the $, yet if Iraq ends up having its foreign currency reserves hijacked & blown on regular government spending, it's entirely possible.
Thanks for the comments, Brian. Here's my take on it. I think Maliki might have tried to snag some of the reserves out of frustration with Shabibi's policy on stability. With Shabibi gone he might not need to spend any of the reserves. He could just convince Turki to raise the value enough to cover any shortfalls in the budget. I'm not saying that it's a good idea. I think what Shabibi was doing was probably the best thing for Iraq's economy. But from what I've seen these guys aren't always focused on doing the right thing. More often than not they seem to look for the convenient course of action, much like our leaders. While that might be bad for their economy it could be good for investors.
DeleteHi Sam. Good stuff, as usual. It's hard for me to understand how Shabbibi's removal will benefit the value of the dinar. Unless the new guy is planning on mopping up trillions of dinar (without using a redenomination), I don't see much that would affect the value. Iraq is still an economy dominated by oil. It is still corrupt. It is still violent. It is still fractious. I know you're only suggesting that it could move perhaps 10% or less but, if it moves at all, I think the direction is more likely to be down. All the dinar clowns like to compare Iraq to Kuwait to pump their ridiculous RV hype. But I think the more accurate comparison might be to Iran. And we know the direction the rial is moving right now.
ReplyDeleteWell with Shabibi in charge the money supply kept growing as their foreign currency reserves grew, and the exchange rate was stuck in the 1166-1170 range. With Turki in charge we could see them back in a crawling peg scenario where instead of printing more money they reflect the growth in their foreign currency reserves with a greater value. I used to belong to the crowd that believed (as WangDang said) that Shabibi is gonna push the happy button and make us all rich. Once I actually got off my backside and did my own research I discovered that they were adding wealth to their country by issuing more currency at the same value rather than reducing the money supply so that they could raise the value as the gurus have been saying.
DeleteAgain, I want to emphasize that I'm not predicting an increase or anything else. I'm simply making an observation. Shabibi was about as predictable a chap as you'd ever want to see. He was focused on maintaining slow, steady growth and stability. With him gone it's anybody's guess what they'll do now.
A RV increases the value of currency that's already in the system, which means it increases the liability. It doesn't benefit the government at all.
DeleteIncreasing the money supply allows the Gov to put the money into the system through gov spending. That is a HUGE benefit.
All I know is the teller at Wells Fargo told me the other day to be ready, this thing could go any time. And I didn't even ask, she just offered the info. Check mate.
ReplyDeletemaliki wanted all a long to steal the money from cbi, shabbs and him have been going at it for 2 years now, maliki wanted money to help the budget, and shabbs said no-way (smart for iraq)
ReplyDeletenow that the extra-conservative shabbs is gone alot of things will change, first off, maliki will probably get extra money towards the budget, and with the extra-conservative shabbs gone, the rate of the dinar will go up in value, the plan (imo) is getting it over 0. getting it on par with the u.s.d was getting it out of the negative (imo). yes, shabbs plan was for a flat out lop, its good if you still hold dinar that he is gone. imo, and i know no-one on here cares about my opinion, is this will rv, probably in the next month or so. this is just my opinion........
lol.
DeleteI want my money to be worth 100,000 times more than it is in real life. You disagree. ok, your fired. Whats more, you are under arrest. I will put my buddy (who agrees with ME) in your place. Now, my money is worth 100,000 times more than it is in real life. MUHAHAHAHAHAHA.
Problem is nobody outside of Iraq or a dinar forum will pay it any attention. They have zero credibility outside of Iraq.
Trust me, the value is going nowhere except perhaps down. In fact I believe the credibility of the IQD is so shot, they will probably end up replacing it again.
New Dinar. Minus the zeros.
I cant believe how quick you guys are to come up with a new prediction any time someone sneezes in Iraq. I predict after your month has passed you will have a new excuse and a new date.
Rich
Really! Shabibi wanted a lop? That's funny considering you've been screaming it will rv for years. *shaking head* and you wonder why no one cares about your opinion.
DeleteSonny1, I have always been fair with you, giving you a chance to be sincere, albeit maybe naive. I unfortunately even need to call you out on this one, because it really seems a bit strange that you seem to know be having an etch-a-sketch moment for yourself here, and saying that you knew that Shabibi wanted "a flat out lop", when it sounded to me as if you have been saying all along prior to these recent events that Iraq would not be redenominating, and that there was so much money to be made in this. It has been explained by a number of people already that if Maliki wanted that money to help the budget, that certainly is not going to aid the strength of the Dinar in anyway, in fact hurting it is the more likely scenario.
DeleteIf we are lucky, Maliki will not do that, but I guess time will only tell, although hoping for any revaluation of the dinar at this point, even a small change in the next month is being very naive. I like your ability to remain positive even in the face of all the facts, but at some point you have to be mature enough to be realistic about what you are investing in.
You know what they say about opinions....
DeleteSonny. There are many many examples of countries blowing FX reserves causing their currency to drop in value. Heck, Iraq in the eighties is the perfect example.
ReplyDeleteCan you give me one example of one country that blew through FX reserves and increased the value of their currency as you seem to be claimng Iraq will do.