Groovgal’s Thoughts On Iraq’s Political Situation And The Possible Revalue/LOP of The Iraqi Dinar
It appears as if there has been another agreement to delay the formation of the government. I personally do not believe that there is truly any delay in the formation of the government itself, instead I believe that there has been some road block set in place due to Maliki’s insistence on being placed within the upper three tiers of the governmental seating arrangement.
There have been several articles that have come out today that are very interesting. Most are easily understood while one has even me a tad bit stumped. I especially enjoyed reading Allawi’s interview with CNN saying that it is time for Maliki to go! And, within the article he further says that Maliki’s own political blocs should essentially talk him into giving up his fight for power for the good of the people. I personally couldn’t agree more with Allawi. The entire mess is proving to be insane and even crazier than the Bush/Gore election results.
The article I’m speaking of can be located here: http://www.dinarspeculator.com/showthread.php?20277-CNN-Allawi-says-it%92s-time-for-al-Maliki-to-go&p=46384#post46384
Another article that I found interesting is titled, “Maliki is heading to abandon the prime minister in favor of Hussein al-Shahristani.” This article is merely another example of Maliki losing his composure in the face of losing his power. He is truly showing that he is unfit to lead a country in my opinion.
This article can be found here:
The National Coalition has given The Rule of Law another week to choose another candidate for the PM position, since all have agreed that they do not wish to show support for Maliki. It is amazing to me that it has taken all this time to realize this and I know that I’m not alone in my frustrations. Now, I do believe that Allawi does with to include members from The Rule of Law within the formation of the government in a show of what we would call bipartisanship. He has acknowledged the need to be conclusive and have representation of all political blocs for the people of Iraq. The only problem is that The Rule of Law believes just what the title of their bloc says, in the sense that they should “rule the law of the land.” To me, this is straying away from the democratically written constitution and creed that the global community wished from the future of the Iraqi people. It is extremely disheartening with all certainty.
On the topics of rumors…The rumor that it is to RV within the upcoming days is false. I do not wish to depress anyone but I feel the need to let everyone know that this is simply not true. I’ve also heard that there has been rumor’s of an “in-country revaluation,” this is also not true. History has shown patterns that it is usually that of communistic countries who follow the methodology of “in-country revaluations.” If you hear of this sort of rumor please consider it with extreme caution, as it simply does not coincide with the characteristics and/or patterns of the Iraqi government. I sometimes joke that if there is an “in-country revaluation” it will only last as long as the next time zone banking industry opens its doors. Lol
Another article I found interesting is titled, “Ex-IM Bank Opens Financing for Iraq.” It appears that this “bank” would bridge the gap and lower concerns for foreign U.S. investors. The U.S. has diligently worked to attract foreign U.S. investors to capitalize upon the future growth ability of Iraq, however since the government of Iraq has yet to pass laws allowing foreign investors to own land coupled with the issue of Iraq lacking a internationally recognized currency which is tradable, therefore allowing ease and stress free unilateral business transactions, investors are remaining reluctant to venture into investing within the Iraqi borders. With the development of this ability, investors can find reward in exporting to Iraq and feel somewhat safe doing so, with the “insurance” backed trade option mentioned within the article. While the investors would not build or produce consumer goods within the country of Iraq, the U.S. government has found a way to capitalize off of the situation by finding another way around the legal issue.
Then an article titled, “Financial Control: Delayed Formation of The Government Syotr To Transfer Management of The DFI for Iraqi to Iraq.” The transfer of management of the DFI over to the Iraqi government is a wonderful sign pointing to the final stages of Iraq regaining their status as a sovereign nation. While it has been said that the government of Iraq wishes to keep the DFI accounts in the United States (New York to be exact), it is still a wonderful “sign.” Most of the debt that was incurred with the prior regime has been eliminated and the 5% of oil proceeds to be directed for the Compensation Fund will most likely be used to pay Kuwait for the war reparations.
Even still, while this is wonderful and still developing news, it is most confusing as to why they are not moving forward with the passing of the HCL law. Especially considering the news article posted today in regards to the U.S. Export Bank….
On another note, yesterday I received an email from someone with someone who had some concerns and simply couldn’t wrap their mind around some of the things being said. This person brought up the idea that they found the idea of relying on article to understand what is occurring with the Iraqi government to be somewhat misleading and personally I couldn’t agree with this person more. The articles that come out of Iraq are usually written with a biased opinion. That opinion is largely determined by who is writing the article in the first place as well as the beliefs of the publisher as well. We’ve all seen first hand how we can see conflicting articles printed within an hour’s time. One article will say, “Allawi Has Won!” While another article is saying, “Maliki Is Still Prime Minister.”
The reason I’m mentioning the above is after having read the email I had received I couldn’t help but think that if this person has questions then other most likely have the same questions also.
And, so, I will share this person’s concerns and my thoughts. While I might not delve too deeply on any one topic, I hope that it is able to answer some of the questions and in the least, I hope to spark continued thought on the topics.
This person mentioned concern for the articles printed pertaining the deletion of zero’s. While this is a valid concern for one to have, I personally do not find myself too concerned over the implementation of this policy. The reason is that if one researches the history of this monetary policy you’ll find that it is usually the practice of communistic countries. Countries who do not wish for their people to practice “capitalism” or garner any form of wealth beyond that which the country gives them.
This person who had this concern mentioned that rumors or articles mentioning an Iraqi individual who saw there income shorten by 3 zero’s had indeed experienced a “LOP.” I explained that this is simply not true. While his income had experienced a so-called form of a LOP itself; his bank account had not. I also explained that there is further articles that have been released, which are in the forums and are most likely buried, that explain that while an individuals income my see a decrease or what looks to be a decrease that the individual has not experienced a decrease in pay as it will even itself out. In layman’s terms, while his monthly income might experience a decrease in pay, the individual worth of 1 Dinar will increase therefore it is essential for a company to decrease one’s earnings as the Iraqi currency gains in value. Otherwise, the individual will be overpaid and the company will eventually go broke. The important factor to consider is that the individual’s bank account was not affected (savings). If his savings had experienced a deletion of zero’s with seeing the gain in value of the Iraqi Dinar to offset the difference then that would be a true signal that a LOP had indeed occurred. In which case, this did not happen and therefore NO LOP has occurred or even a form of it.
We must remember that the average Iraqi is indeed very poor and is considered part of the impoverished that live upon this earth. If the GOI were to LOP it would leave the already struggling Iraqi people standing in food lines that do not exist. Since welfare is a limited concept in Iraq and food lines are unheard of the Iraqi people would most likely revolt against the authority of the GOI and demand otherwise! It is my belief that this method of monetary policy will simply not work for the Iraqi government. Yes, anything is possible however, how does this theory support the idea that the UN/US wishes for Iraq to be the next Kuwait? It doesn’t.
So, why do we continue seeing article pertaining to the deletion of zero’s? And, why do the member’s or mainly myself, see this as wonderful news. It is my opinion and my opinion only, that deletion of zero’s is a signal of the following:
A) The Iraqi government is aware of the large investor bills in circulation. The primary and most practiced way of dissolving this issue is to get them out of circulation and destroy them. At which time, once the revaluation takes place, most of the individuals holding the large notes will indeed exchange them for their local currency. Once their local central banks have them in their reserves they will either:
1) Destroy them on behalf of the GOI
2) Hold them as reverse currency
3) Sell them back to the GOI
Once one of the above takes place the GOI has begun to dissolve the issue of liquidity in circulation. It is my guess that majority, if not all, foreign countries will most likely hold the IQD as foreign reserves. This will not only help the countries hold the IQD as a reserve currency but it will also help the country of Iraq strengthen their currency and maintain its value of the IQD as well as its international credit rating with the global community. If you need additional help understanding what I just mentioned it might help to reflect upon the December issue of China threatening to sell the U.S. T-Bills and mass concern of the value of the U.S. Dollar dropping. Of course, as I said then, this was merely a ruse performed by China to bully its way into the spotlight.
B) Since we are seeing continued chatter from Iraqi economist as well as foreign economist about Iraq’s need to follow the mechanism set forth by the IMF, I believe we seeing the garnered pressure we’ve been wishing to see to push this RV in the position of importance that we desire.
C) I believe that the CBI will look to printing lower denominations and this is what is meant when it speaks of deleting the 3 zero’s. Once the investor notes are withdrawn from circulation the GOI/CBI can look to overhauling the pricing of commodities etc. and therefore can delete the 3 zero’s to ease transactions…. You may or may not agree with my frame of thinking and this is more than okay. J
The value of the IQD was due to rise within the months of October – December of 2009. And, it is becoming painfully obvious that people within the borders as well as foreigners across the global are seeing the negative results of such a devastating delay. Anyone who has paid any attention or who has read in-depth studies or articles on Iraq’s situation can easily manage to see that their currency is due to gain in value. The mechanism that was put in place and agreed upon by the IMF/UN hasn’t been closely followed and they’ve yet to move on to the final stage of revaluation. And, I believe that all will easily agree that currency speculation has grown ten fold and it’s rather useless to attempt to deter speculators.
We are on the down hill slide of this investment. If one looks at the articles printed by not only Iraq but that of the UN, IMF, UNAMI, and the most recent WTO… You’ll see that there is one area that Iraq hasn’t wavered or played games with and that is their desire to become a sovereign nation and to join the ranks of the global community. With this being said they’ve also expressed a desire to boost trade both in imports as well as exports, tourism, and relations with other oil producing countries. With this train of thought comes the realization, that Iraq with all of their ambitions will not see the growth they wish to see by not having a globally recognized currency, and one that will be traded on the free market. They must implement the last phase of the mechanism by joining the free market exchange as well as finding themselves released from the restrictions of Chapter 7.