Wednesday, December 16, 2015


Hello Everyone.
Today I need to give you yet more pieces to the puzzle to currency reform and so read this section very carefully. It can get confusing real fast if you don’t read it carefully and clearly.
In the section I review the currency reform exchange process with you but in relation to what is happening in Iraqi banks, the CBI and the citizens and not your exchange. This is important to know as it is how it relates to the overall planning for the ultimate revaluation of the IQD down the road. If you want to know what is taking so long to RV…..well here it is.
Today’s News
Today is Wednesday December 16th and yes we are fully now in the third week of December already and still no RV.
Many events seem to converge on the month of December and recently we heard news of also January being pivotal. How do these events relate to our inevitable RV?
Let’s pay close attention to what is happening these next couple months in this regards. I believe in retrospect we will say this was a very significant time in this ongoing saga.
In my news letter I also told you that it has been suggested to me by my CBI contact to refocus my attention (thus you should also) to mainly the currency reform efforts by the CBI and what is now happening there. So I have been doing this now for the last couple weeks. It is a very good approach and I am glad I did.
Update: Currency Reform
I want to keep all of us focused on currency reform. Right now this is exactly what we should be watching in expectation of the launching of the lower denominations. Many sources have told me the plan of the CBI is to launch the lower denominations soon. Will it occur?
We can only wait and watch. We can all get hyped up and excited about this every day / any minute RV stuff being put out there by these so called intel “gurus”. It is all just foolishness.  I have to tell you once again you will see no RV window up until the time period of mid January / early February 2016. I have positive proof this is the new target date for the CBI.
So now many keep asking me – What is the hold up? Is it really a hold up or just a delay from 2012 effort to RV? All I can say is go back and re-read (or read for the first time) my last 50+ news letters (LINK to Mnt Goat category or posts) and you will see the hold up (if you want to call it that). Also read today’s news letter for it will give you an insight as to why it is not that easy to just “pull the trigger”. Yes – there is a plan and they are moving forward with it very methodically and carefully. The timing and targets may have changed and YES they could change again. I mention these dates not to hype you up for this every day / any day crap but to inform you since this the information given to us directly from the CBI.
So let’s look at where Iraq is now and this new RV target date given to us.
Can I scream it any louder,  again and again watch for ….CURRENCY REFORM…..CURRENCY REFORM !
Pay attention – CURRENCY REFORM !
In my last news letters dated 12/7 (LINK), 12/9 (LINK) and 12/14 (LINK) I  presented to you articles about corruption and issues with the CBI and in particular about the conduct of the MONEY AUCTIONS. These issues were raised by a member of the Finance Committee in Parliament, Majida al-Tamimi. Why am I dwelling so much on the money auctions?
These money auctions now are at the heart of the stress on the Iraqi dinar that is keeping the rate artificially low. Many ask why they don’t just “pull the trigger” on the RV since so much seems to ride on it. To those that make this statement I can see you are very ignorant of the currency reform process and refuse to educate yourself to learn more. I have tried to teach you but yet you resist to learning. If this “pulling the trigger” was so easy don’t you think they would have done it by now?
So we have see in my last three news letters, and now in today’s news, one of the reasons why it is not so easy just to “pull the trigger”. Oh boy – am I tired of hearing this stupid term – “pull the trigger” !
I am presenting the article below so you can see the lost in money each and every day from the CBI reserves. How are they losing this money?
The are losing this money from the high demand for the US dollar vs low demand for the Iraqi dinar.  If you read my last couple news letters you would know this.
Oh – so you think maybe these auctions are worth  studying to see why they are losing all this money?
What could you do with 80 million? Almost every week a new article comes out from the CBI telling us they are in good shape and have 6 months of reserves at hand. Really? Of course they keep adding to the reserves from oil revenues but it will never increase due to two reasons: 1) this constant subtraction of loss of revenue due to these currency auctions 2) low oil prices at $35 a barrel. So Iraq at this rate will never realize their dream of a higher asset backed currency rate unless something serious is done to fix these auctions (stop them).
So let’s take a look at the auctions  as many of the financial experts and economists have done in Iraq. I presented their findings to you.
I quote from the article below – “Said al-Dulaimi told a news conference held by the House of Representatives attended / JD / that “the government should stop the currency auction, because of the large corruption in it,”
So what do you think they will do at the end of December? Will they stop the currency auctions, as they told us months ago or have they changed their minds again?
Article Begins
Committee the economy: central bank pulls the daily $ 80 million from the reserve
BAGHDAD / JD / .. announced member of the committee of economy and investment parliamentary deputy olive-Dulaimi, Sunday, on the sale of daily currency auction $ 200 million, while pointed out that the central bank pulls the daily $ 80 million from the reserve.
Said al-Dulaimi told a news conference held by the House of Representatives attended / JD / that “the government should stop the currency auction, because of the large corruption in it,” indicating that “Iraq’s imports of oil close to $ 120 million, and the auction currency daily selling $ 200 million and this is a disaster real “.
He pointed out that “there are $ 80 million is pulled from the central reserve”.   
Article Ends
Did you read the article above?
If not, go back are read (re-read) it because it is a lead into what I am about to talk about now.
The “program rate” of the dinar is a rate valued determined by sanctions and scarcity of the currency in Iraq.
Between October 15, 2003, and January 15, 2004, the Coalition Provisional Authority issued new Iraqi dinar coins and notes, with the notes printed by De La Rue using modern anti-forgery techniques to “create a single unified currency that is used throughout all of Iraq and will also make money more convenient to use in people’s everyday lives. Since Iraq has few exports other than oil, which is sold in dollars, there is little demand for dinars and they remain in “exotic” status.
However the new currency has sparked a multimillion-dollar industry in selling dinars to speculators. These so-called “money service” companies will sell dinar to speculators at an inflated price and push the idea that the dinar will “RV” or be revalued to greatly increase the exchange rate against the dollar. The dinar is currently pegged to the dollar at a rate of 1166/1164 (sell/buy) dinars per dollar as can be seen on the Central Bank Of Iraq’s home page. The exchange rate reportedly available on the streets of Iraq is around 1,200 dinars per U.S. dollar.
There is considerable confusion (perhaps intentional on the part of dinar sellers) around the role of the International Monetary Fund in Iraq. The IMF as part of the rebuilding of Iraq is monitoring their finances and for this purpose uses a single rate (not a sell/buy) of 1170 dinars per dollar. This “program rate” is used for calculations in the IMF monitoring program and is not a rate imposed on Iraq by the IMF.
So we see this rate fluctuate now to 1,200 but traded in to the CBI for less in exchange for US dollars. This takes place in the money auctions. Why is the dinar exchanged this way?
It gives the banks an incentive to bring in the 3 zero notes to the CBI in exchange for US dollars. Why is the demand for the US dollars so high?
There is now a higher demand for the US dollars but we must go back to the 2012-2013 timeframe to understand why. During this period the CBI , under the direction of the presiding governor Dr Shabibi had created a void in the currency in Iraq. Part of the plan from 2009 – 2013 was to collect nearly 75% of the 3 zero notes and get them out of circulation. The plan then was to fill this void by introducing the newer lower denominations with a value more than the US dollar, thus creating an incentive to hold dinar over US dollar.
Well we all know this plan did not get executed and there was no RV. So this messed up the process.
So the Iraq economy could not continue without a currency for long. They had to fill this currency gap but did not want to have to issue more 3 zero notes since they had collected them already and could not go back to this process. So what could they do?
The decision in 2013 was made to infuse US dollars to fill this gap. So this void is currency had been filled with US dollars not the lower dinars as was planned. Today this continues by these daily auctions where the banks (because of the demand for US dollars due to purchasing power being greater than the 3 zero notes) take in the 3 zero notes from the citizens and buys US dollars from the CBI. But remember there was only 25% of the 3 zero notes remaining in Iraq. So how much longer can they continue this process because soon there will be almost no remaining 3 zero notes to collect and use to buy the US dollars to meet this demand for them? How will they replenish the money supply?
Where does the CBI get all these dollars from? They get them from 1)the US in exchange for the 3 zero notes. The US is not about to just five the CBI FREE money. 2) They also get them from the CBI reserves from oil revenue. Remember oil is still sold from Iraq for US dollars. So this money makes it way to the CBI and form the CBI it is allocated to projects via the budget. So now the CBI is tapping into these reserves of US dollars just to keep currency on the streets, something they never intended to do. Can you see a problem here?
So in the article above the finance committee is telling us there is a dangerous cycle occurring since 2013 where nearly 80 million US dollars is leaving the CBI weekly due to these auctions. Every time the parliamentary finance committee make everyone aware of this, the CBI comes out with articles telling everyone it is okay since they have nearly 60 billion US dollars in the reserves and can last up to 6 months of paying Iraqi debts.
Really? Do you think this is dangerous even to think on running a country on these terms?
Remember there is not much oil revenues now replenishing these reserves since the price of oil keeps dropping. It is now $35 a barrel but takes almost $10 a barrel just to extract and process.  So can you see the  problem the CBI will soon be in (is in)?  How long can they continue the practice of these auctions? The US announced too is now reluctant to fund anymore US dollars to Iraq and so this exacerbates the situation even more since the flow of US dollars is not solely from the oil revenues. Can you see why they desperately need to get off the US dollar and it is killing their economy?
Remember also the CBI reasons that these auctions are beneficial and are taking yet more of the 3 zero notes off the streets, also part of the overall currency reform plan. Remember I said  the banks must buys US dollars from  the CBI using the 3 zero notes.
There is also another issue to consider. The CBI must now stockpile the new lower denominations in their bank vaults in preparation for the conversion someday to the newer lower denominations. There is  no FREE  money from the CBI. So how do the banks get this currency?
The banks must pay for these lower denoms and a new law went into effect in 2013 (remember?) that forces the banks to hold so much of the lower denoms. So how do they pay for them?
The banks pay for these new lower denoms from the CBI using US dollars.
But now most of the banks have their vaults already filled with these new lower denominations. So this process too is completed. Oh- but remember these lower denoms are worthless and the banks can’t do a damned thing with them until they have some real value. Can you see the dilemma ?
If you know anything about banking the banks want to make a profit and that is why they are in existence. So holding all this worthless currency and tying up so much of the US dollars is not very advantageous and caused a serious liquidity problem since they don’t have the US dollars to loan out and use for banking business.
Do you remember we kept hearing about this liquidity problem?  This the major reason why. Money has to circulate through an economy to make it robust. Remember too they are now running the economy mostly on US dollars but the banks just tied up much of their liquidity in these new lower denominations.
So another dilemma- the banks are forced to exchange the 3 zero notes to the CBI for yet more US dollars to fill this liquidity gap as I mentioned above. This is how the auctions are run. Thus the reason why it is so hard to get off the money auctions. They need the US dollars to keep the economy rolling. Businesses need capital, citizens want to buy homes, etc..They get this money from the banks. They need money to loan out.
It was told to me that some banks did begin loaning out some of the new lower denominations in the northern regions of Kurdistan but this was abruptly put to a halt by the CBI. This does not mean much other than to tell us the amount of pressure the banks are under pressure to realize some monetary gain (profit) out of this new money (the new lower denoms) they are holding in their vaults. I know there was wide rumors they are distributing the lower denoms. Really? So let’s put this rumor to rest. Can we? Seems just more rumors that are not verified and investigated buy some of these ignorant intel “gurus”.
So another dilemma – the banks are buying the US dollars at more than the IMF program rate since the demand for US dollars is do high they are willing to pay more for them. This inflates the value of the US dollars to the Iraq dinars. Can you see the problem?
So what do they do?
At some point they MUST STOP THE AUCTIONS since 1) there will not be enough of the 3 zero notes in circulation to pay for the US dollars, so how will they buy them? 2). At some point the cycle must end since the banks will not want to keep all this capital tied up in the lower denominations for forever.
So these problems are recognized and there is a plan.
The CBI has told us they will begin scaling down the amount of US dollars sold in the auctions and then eventually stop the auctions altogether. They told us this event is planned for by the end of December 2015.
If you have been watching the auctions you can see the amounts are have been much less as the scaling process had begun months ago.
How does the launching of the 50k notes in early November fit into all this?
Remember the 50k notes launched already did draw in some of the 3 zero notes and I believe this was intentionally done to quicken the pace of the elimination of the remaining 3 zero notes in anticipation for the December deadline. I believe the plan was to continue to push out the 50k notes but due to administrative and public opinion reasons they discontinued them for now. We have not been given any other reason. I do not know if this really effects their overall plan very much.
So the situation at the end of December will look like this –
-The CBI can not afford to sell off any more of its reserves consisting of US dollars, regardless with what the CBI is telling us.
-The local banks vaults are stuffed with the new lower denominations already.
-There is only a couple more steps to take in the process. One of which is they must launch the new lower denominations but first they must create a demand for them. How do they do this?
-They will create the demand for the new lower denominations by coming to par value 1:1 with the US dollar (actually probably just over 1+ dinar to 1 US dollar). Then the banks will begin taking is the US dollars as they are exchanged for the new lower denominations by the public.
-As the demand increases for the dinar over the US dollars the banks will take the US dollars and requisition yet more of the newer lower denominations from the CBI to meet the demand. Note-this is not to be confused with more money auctions. The auctions will end! Instead this process is to be much like the Federal Reserve and Central banks in USA, Europe and Canada where banks can order money and pay a slight interest on the money to the CBI in order to borrow it. Then they can loan it out at a higher interest rate (to be determined by the Central Bank). Iraq needs to get to this point in their banking system and can only do it by stopping these auctions. It will be modeled off the western banking system.
When this final process begins the demand for the dinar will increase quickly as they will begin to enforce the 2013 law to use dinar over the US dollar. As the rate increases they predict it will take between 7 days to a week to get to the point where the IMF will let them revalue this new currency to it asset backed value.
Note: I DID NOT SAY THEY HAD TO WAIT FOR THE RATE TO RISE TO THE $4.00+ RATE we expect on any kind of a float. Do not mix apples and oranges here. The currency at this point is NOT on the global exchanges. It is not yet in a currency regime such as any kind of an IMF sanctioned / defined float.
Then after it is determined that Iraq can hold the increase in value and have worked out the inflation issue then comes our RV, the currency is reintroduced to the global exchanges and will be placed on a float with a fixed cap. This is really what we have been waiting for so long.
Can you see how there is no Reinstatement?  Did I mention reinstatement? Please don’t put words into my mouth. If you are going to talk about this process I just described and can’t remember it then print this news letter out and read it. You can read? So please let us put this idea of a reinstatement vs revaluation to rest. It’s really a moot point. It is getting very boring arguing over this point.
Can you also see how we can be in the mid to late January for this process to unfold fully to the point of the RV?
I hope these details clarify this process yet more for everyone.  It is not my theory but a summation told to me by the CBI. They also told me they are guiding the citizens through the entire process and so we should be looking and watching for more news on this topic of CURRENCY REFORM. This is where our attention should be right now. Remember these articles out of Iraq are not written so much for us than for the Iraqi citizen. We are just indirect beneficiaries of this information. If you weren’t an investor you would not even care or be paying any attention to these articles.
Update: Needed Laws
So Monday 12/14 came and went and no budget being passed in parliament. Then later on Monday Iraq told us there were still some necessary changes and so they postponed it until Wednesday 12/16. Let’s watch and see if they actually do it this today.
Article Begins
Parliamentary Finance: We will put the finishing touches on the 2016 budget and approval next Wednesday
{Baghdad: Euphrates News} confirmed a member of the parliamentary finance committee pros Hamadoun that the Commission will end today the final touches on the budget in 2016, in preparation for approval in parliament.
She said Hamadoun in a statement received by the agency {Euphrates News}, that “the Finance Committee held a meeting to put the finishing touches on the paragraphs of the federal budget for 2016”, likely approval in the House of Representatives session next Wednesday.
He said a member of the Finance Committee that the meeting will put legal materials and additional to the draft budget order to be approved, and voted on at a meeting Wednesday.
The Congress has revealed that the budget will be approved and passed by the end of this month, and stressed the seriousness of it back to the government, what would cause a delay longer, and thus a direct negative impact on the lives of people in the country.
Article Ends
Update: Fighting ISIS
Coalition forces are moving through regions of Ramadi and clearing them of ISIS. They predict this could be completed by the end of next week.
One more item today:
Let’s not forget to keep praying for the success of THESE IRAQI AND COALITION SOLDIERS. I believe their success is in part some of the acceleration of the process we are now witnessing.
“Lord, protect Abadi and all who stand with him in righteousness, the Iraq and Coalition Soldiers who are fighting the good fight against terrorism, that they would be shielded from the enemy and would be Victorious against them! We ask that the Victory comes swiftly and healing of the Iraqi peoples and all whom have been effected by these evil doers can begin! Amen!
Till next time…. Auf Wiedersehen!
Peace and Luv To Ya All.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.