Hand Writing On The Wall

While there are still some who speculate on the dinar, its fate could not be more certain. I came to my conclusion a few years back. I stopped following the dinar because of other things going on in my life. I devoted a lot of time to my music. I developed a brand new website and I am getting ready to release an album. I wrote all the music for this album and all the guitar parts are done only using nylon string guitars. I also wrote a book about music that will be available soon. So as you can see I have been busy.

It has been a while since I looked at the dinar. I have been out of touch for a while, but yesterday I had a little time on my hands. I began to poke around to see if there was anything new going on. I went to the CBI website and pulled the numbers. I looked at a few other things. I was not aware of everything that is going on with this currency, but the few hours I spent looking into it yesterday was enlightening to say the least.

For starters the central bank is pulling all 50 dinar notes out of circulation and declaring them invalid. Everyone has 2 months to exchange their notes. The trade in period starts on March 1st 2015 and goes until into April 30th 2015. After that time period expires the notes are invalid. These notes are only worth about 4 cents each. There are many people who got lower denominations here in the United States because they were told by the gurus that they would be more secure and more valuable than the larger notes after the RV.

Is this a prelude for what is to come? Even if all dinar dealers were to offer a way to trade in the notes that are higher in value, (which I highly doubt) what guarantees are there that they could provide this service during the allotted trade in period?  If you want to trade in all your 50 dinar notes then gather them together and head over to Iraq. You now got less than 2 months to get this done. After you accomplish this I hope you enjoy your new-found ummm……wealth?……

I hope that people now begin to see the absurdity of the revalue. I hope that through the removal of the 50 dinar notes they begin to see how hard it would be to exchange these notes. I have said this all along. Check the link for more info.

http://wkrn.membercenter.worldnow.com/story/28249986/central-bank-of-iraq-to-remove-50-dinar-banknotes-from-circulation-on-april-30-2015

In other Dinar related news Sam I am is closing up shop. He is moving on to bigger and better things. Dinar Douchebags is closing down. Sam was always a straight shooter and I am sad to see what has become probably the best dinar site on the internet close down. I understand the need to move on with life. So I wish Sam the very best in his new adventures and I want to thank him for his relentless pursuit of truth.

One of the great things about Sam’s site was not only the articles that he posted but also the people who commented on his site. There were many educated readers that also backed Sam and provided even more proof for the things he uncovered. People like Brian and JRG always had a way to cut through the bull and present a logical case. I have always had the greatest respect for the people over there.

So hats off to Dinar Douchebags and their readers and a toast to all of you for your relentless pursuit of truth!

What’s Going On?

Well with all this new found information I decided to do a little digging. The first thing I did was to get the latest numbers from the CBI. I downloaded the statistics document and gave it a quick look. It was very revealing. I am about to show you something using the CBI’s own numbers. This is what I found,

According to line 79 (the money outside of banks in circulation) there has been some drastic changes! take a look,

Oct 35,381           Nov 34,682           Dec 35,378          Jan 35,623

The numbers above are in trillions. So for October the CBI had 35 trillion 381 billion outside of the bank in circulation. This is a time period from October of 2014 to Jan of 2015. Now look at November. That is roughly a 700 billion dinar reduction. I have been following the dinar since 2010 and there is only one other time when I have seen a drastic reduction like this. And that is when Maliki tried to take over the CBI and the whole thing resulted in Shabibi leaving the CBI. That was back in 2012. What is going on over there? It gets better,

Look at these numbers from 2014. All numbers are in trillions.

Line 86 M1 money supply  Oct 71,179       Nov 70,182          Dec 72,651

Line 87 M2 money supply  Oct 88,964       Nov 88,007          Dec 91,704

It seems that there was a drastic and sudden reduction in the dinar in November of 2014. Their M1 was reduced by almost 1 trillion dinar! What would cause such an event?

Here is another piece to the puzzle. The CBI’s reserves are shrinking! Check out this IMF document for proof.

http://www.imf.org/external/np/vc/2015/011115.htm

I am going to quote from this document

“The recent collapse in world oil prices has added to the tensions caused by the ISIS insurgency and is complicating efforts to deal with it. With oil export revenues accounting for more than 90 percent of total government revenues, Iraq has always been highly vulnerable to oil price volatility. Falling oil prices are already reducing government revenues”

Here is another quote

“international reserves have fallen from over $77 billion at end-2013 to about $67 billion at end-November due to the combination of lower oil revenues and relatively high imports, particularly by the government. These figures exclude the Development Fund for Iraq (DFI) which was created in 2003 mainly to funnel Iraq’s oil revenues and serve the function of a fiscal buffer. The DFI was already down to $6.5 billion at end-2013, and declined further to about $4 billion in November.”

Analysis

The combination of falling oil prices and ISIS has hit Iraq hard. So much so that Iraq is now tapping into their currency reserves. The impact of falling oil prices and ISIS has forced Iraq’s hand. They are now spending some of the reserve money used to back their currency! Their reserves have about a 10 billion dollar reduction!

I knew that falling oil prices were having a global impact. Russia, Iran, ISIS, and Iraq were all affected. Now I am looking at the evidence. Iraq is having money problems. Their revenues have decreased due to falling oil prices. They had to cut their budget and rethink some things. I suspect that things came to head in November of 2014 and some adjustments were made.

Moving on

As I continued digging around I found that there are several rumors that Iraq is still going to go ahead with the 50,000 dinar note. I could not find any proof to verify this. This was mainly rumors that circulated in forums. We all know how reliable those are!

I also found a lot of people saying that there is a dinar shortage of sorts. It is hard to get dinar from the dealers and there is a waiting period. Once again, we all know how reliable rumors are!

So I did a quick search on eBay and I found over 9,000 auctions all from individuals selling dinar. I remember the days when there were a few hundred auctions selling dinar. Now people are trying to unload the stuff. I found one auction that was even trying to sell the 50 dinar notes. The guy wanted 69 cents for each note. This guy was going to get his RV one way or another!

Final Conclusion

If the dinar is truly hard to get from the dealers then that means that the dealers are not buying back large quantities and they don’t want to hold a large supply of dinar. They only want enough to meet current sale demands. If this is even true you got to ask yourself what do the dealers know that we don’t know? Once again this could all be just rumors

This part is fact. Right now money is tight in Iraq. They are suffering from a shortage of US dollars due to the falling oil prices. Now they are tapping into their reserves. (check the IMF link) They have a policy of covering the dinar 100 percent with U.S. reserves, but now according to some sources there seems to be a shortage of reserves by about as much as 10 billion! I am not so sure the number is that high but there is a significant reduction.

This means one of two things. First they are going to change their policy and not cover the dinar with reserves 100 percent, or second they are going to go ahead with a redenomination sometime this year. My guess would be in the middle of summer or by the end of September.

If Iraq does release a 50,000 dinar note like some of the rumors say then there won’t be a redenomination and they are going to change their policy to reflect the reduction of reserves. If I were to place a bet then my money would be on the redenomination. This course of action would help Iraq strengthen their currency which is something they desperately need at the moment. The truth is no one knows for sure what Iraq is going to do.

If Iraq does redenominate then expect a short trade in period. There may be a few dealers that will try to cash in on this, but in the end there are no guarantees! Could this be the reason dealers are not buying as much dinar back as they use to? Could this be the reason there are over 9,000 dinar auctions on eBay? No one knows

This whole dinar ride may be over soon. It may all end by the end of the year! Yes my conclusions does have a lot of speculation based on some of the rumors. Only one thing is for certain. This dinar ride has made me sick! It is time for me to go throw up now. If you have a sick feeling in the pit of your stomach don’t ignore it! There still may be time to get out.

9 thoughts on “Hand Writing On The Wall

  1. I’d say its different due to the fact that when importers exchange IQD to get USD both the reserves go down (from USD going out) and the money supply goes down (from IQD coming into the CBi). The same would be true for the government, unless they spend the USD without exchanging it (i.e. just keep some oil revenue) but then that would never go into the reserves in the first place. Its also possible the IMF doc and the CBI stats are not synced in time. The reserves dropping to 67B USD does seem like a big drop. At one time I thought it was at 80B USD. But if the the total reserves are now less than fully backing M2 that is an issue, but perhaps not an unmanageable one. Kuwait for example does not fully back M2. Last time I checked (which was more than a year ago) their reserves are about half way between M1 and M2. Since the difference between M1 and M2 are non-demand deposits, its less of a risk, though still not good. If the reserves were to go below 100% of M1 that I think would be really serious.

    The government is going to have to sell some bonds to finance their budget deficit, so who buys them will also be something to watch out for. If its the CBI, who will just print IQD, then the money supply will grow by that amount without the reserves growing to match and that’s trouble (that would be in essence just spending the reserves). Maybe that’s already happened and is part of this problem, I don’t know. The less they back M2, or especially M1 if it comes to that, the more folks will start to want to exchange and that will drive the street price for dollars higher and higher. That sort of thing can really get out of hand in a hurry.

    If GOI can sell bonds to private entities instead of the CBI thats less pressure on the money supply, but can they and what interest rate would they have to offer to attract such buyers. If oil prices tay low that could be just kicking the problem down the road. One thing for sure, its not a happy time in Iraq.

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    • Looking back I seem to remember that a 100 percent reserve to strengthen the currency was shabibi’s policy. I agree with you that 100 percent is not really needed, but It is worthy of observation. I am just really wondering if they hammered out any guidelines to shabibi’s old policy.

      Thanks for the clarification on exchanging USD for IQD. I don’t know how synced up the IMF document is to the CBI stats. but the drop of a trillion IQD back in November seems to back up your points. That can account for 1 billion of the 10 billion and imports could very well be a factor.

      Will the GOI be able to sell bonds to private entities given the current condition of the country? That would be something to watch for. You are right, that is just prolonging the problem if oil prices stay low. I have a feeling oil prices will be low for sometime. Unless drilling here in the states is somehow reduced, then I suspect oil prices will remain low, The saudi’s don’t help with the supply and demand issues with all the oil they are flooding the market with,

      All this seems to translate to a slow recovery in Iraq if there is one at all. That is why I suspect that some currency reforms may be on the table. but who knows for sure? This is really anyones guess.

      I do appreciate your insights!

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  2. Hey Marcus, good job as usual, but I think you are slightly misinterpreting the IMF statement. When the IMF says ““international reserves have fallen from over $77 billion at end-2013 to about $67 billion at end-November due to the combination of lower oil revenues and relatively high imports, particularly by the government.” I do not think they mean to say that the Iraqi government is just spending the CBI’s reserves as you seem to be saying with “They are now spending some of the reserve money used to back their currency! “.

    Its just that their usual high trade surplus is either gone or or at least greatly reduced In 2013 they sold about 70B USD of oil, which the government exchanges with the CBI to get IQD to spend. That causes the money supply to go up by 81T IQD and the reserves to go up by an exactly proportional amount, the 70B USD (not all at once of course as this is ongoing throughout the year). In that same year Iraq imported about 60B USD worth of stuff and exchanged 69T IQD to do that, which causes the money supply and reserves to both fall by that amount. Thus in 2013 they had a trade surplus and both the money supply and the reserves went up by about 10B USD worth compared to 2012.

    But now with ISIS causing loss of oil production, the huge drop in oil prices, their GDP shrinking (loss of tax base) and additional expenses to fight ISIS, the equation has reversed and both the money supply and the reserves are going down (it of course will vary month to monty as oil sales and imports vary). So while its defiantly not a good thing its not as bad as just spending the reserves ala Saddam.

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    • John,

      As Always, you make valid points, and the points you made I have not fully considered. This is why I value your input. You and Brian always add so much more insight.

      That being said, The IMF document does say that the there is currently 67 Trillion in Iraq’s reserves. According to the key financial statistics document they have 90,536,000,000,000 dinar in their M2! Given the current pegged value rate of 00086 this means that the dinar needs 77 to 78 Trillion to back it 100 percent.

      The actual main point I am trying to make is that according to this IMF document they only have 67 Trillion in reserves which means that the dinar is no longer covered 100 percent! So what are they going to do? Is the CBI going to change their policy about covering the dinar 100 percent, or are they going to find some way to make up the 10 billion that is apparently missing? At one time they had 77 billion U.S. dollars to back it? So whether or not we agree on how the reserves were lowered, what is their policy regarding currency backing?

      The document that brian posted showed that Iraq needs at least 102.00 per barrel of oil to break even. This means that they must make up the shortfall from somewhere. When we consider the international reserves we see that the DFI fund is also a lot lower. There is 4 billion left in that fund. This is down from 6.5 billion. This is money that is supposed to go to fund the rebuilding of iraq but instead it is being used to fund the budget and the government.

      To be fair I don’t know what portion of the budget is geared to rebuilding projects, but I am willing to bet there are cutbacks due to the loss in oil revenue. I need to research this a bit more.

      maybe I don’t understand, but how is converting USD to IQD to purchase imports different from spending Their reserves? How does converting IQD to USD reduce the Money Supply? Are you saying they are not spending their reserves of USD, they are just exchanging IQD for them?

      Regardless of the semantics their U.S. reserves are now shy by 10 billion which in the end means their currency is not covered by 100 percent. This is the main point I was trying to make. I did not mean to say that they are spending the reserves like Saddam did regarding military build up and the like.

      In the end all I really know for sure is that 10 billion in reserves are gone. What happened to it is anyone’s guess.

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    • Wow thank you Brian! What an incredible document. Thanks for sharing this. It will take a while for me to go through this. A break even oil price of 102 dollars per barrel? “To build up fiscal buffers, the authorities rely on the DFI as a de facto oil stabilization fund”

      incredible link. No Guru will point that out! Looks like they have been using all their reserves for a de facto oil buffer. Thanks again for sharing.

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  3. What I love about truth and honesty are the sources. Dinar Douchebags…!….OK……..Great way to establish goodwill and comradery of readers…..in a name. Has one source {one contributor] from this stale tampon …DD..disclosed their credentials other then Marcus? Realizing that Mr. Curtis is an artist in musical writing, guitar lessons and professional performance…his new expertise in currency adaptation is astounding to many…. butt questionable to lifelong bankers, brokers and traders. Then again..much can be soaked up with a bit of reading. Nowadays you accomplish great things at The University of Phoenix and a computer.
    Sorry dude butt can’t buy your strings……….

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    • POKE – “Has one source {one contributor] from this stale tampon …DD..disclosed their credentials other then Marcus?”

      I think you’ll find the whole point of DD was to forcibly disclose the endless fake credentials of the so called “RV guru’s”:-

      – Like James “Adam Montana” Wolf’s non-existent Harvard degree (of which a search for former Alumni at the university turned up zero). Same goes with his fake “Series 65 licensed investment adviser” ‘qualification’.

      – Like Regner Capener (Eagle1) whose “senior international bank president” ‘credentials’ turned out to be him quitting during managerial training whilst working as a teller at a small-town Alaskan branch and “struggling to pay the bills” (his own words on a religious non-Dinar blog).

      – Like the completely made-up “Dr. Todd” persona and his imaginary “Magic Marshall Plan”?

      – Like Steve “Enorrste” Norris who claimed to be a professional Forex trader (yet had to ask what a trading pip was and keeps getting all his maths wrong by a factor of 1,000x)?

      – Like the dozen or so guru’s who’ve been caught lying about their fabricated “military” careers?

      – Or why half the “RV” guru’s have a history of pre-Dinar-pumping of other scams (Tony Renfrow (aka TonyTNT) = 14Dailyplus.com, “Eagle1” = Omega Trust Fund (that led to its founder Clyde D. Hood being jailed for 14 years), “Phoenix” = CMKX (that led to prosecutions), etc), HYIP schemes, pyramid schemes, failed tax evasion schemes, etc. The other half who aren’t involved in pushing prior scams often have a history in “viral networking” / online marketing and know exactly what “emotional buttons” to push to whip followers up into a frenzy with weekly cycles of manufactured excitement and fabricated “intel”.

      – Or the value of the credentials of the guru’s previously pumping the “lower denom note RV will make you even richer!” (inc Breitling) which are now being demonetized and made worthless – the biggest “red flag” of all to anyone still sucked into this scam this late in the day…

      You’re demanding the “naysayers” give you their “real” credentials (a completely backwards sense of burden of proof since it isn’t the “naysayers” who are asking for your money at any stage), when you really should be asking the endless stream of “RV” guru posers to start being honest about their own made-up fantasy backgrounds and lame attempts to portray themselves as “secret agents with secret contacts” after their 3,769th failed prediction in a row…

      At the very least Marcus is honest about his own name. 95% of Dinar guru’s (and amateurish guru wannabes who “confirm” everything daily no matter how wrong it is to seek peer approval and guru lapdog status) still can’t even step over that low-bar after 5-8 years of “any minute now”, “I’m hearing good news this weekend!”, “It is done!”, etc, pumping behind anonymous avatar’s and fake credentials.

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    • I will match my credentials to any Guru wannabe economist! As Brian pointed out, a lot of their so-called credentials are made up! There are more bankers, brokers, and traders that agree with my assessment than you know! Even Forbes has called this so-called dinar investment a scam.

      I have read through forums where certain people are questioning my credentials and this does not bother me. It is much more easier for these people to attack me then to provide answers to the questions that stump them. So I become the focus not the data I present.

      I will make this easy, I am just some guy using a search engine to find this stuff. Forget my past 4 years of economic studies and forget everything I know! These things are not important because in the end I was like every investor out there. I am just looking for the truth.

      Truth is based on facts not sources. Don’t look to me as a source of truth because I will be the first one to turn you away. But I am willing to look at the facts.

      Fact: currencies don’t revalue at 100,000 percent or even a 1,000 percent like gurus claim. The burden of proof is on them not me.

      Fact: there is over 35 trillion dinar outside of the banks in Iraq and over 91 trillion dinar in their M2. which is well over 7 times America’s M2.

      Fact: Considering their M2, A revalue of 1.00 would be larger than the global economy itself.

      Fact: Iraq’s reserves are being raided to makeup for the loss of oil revenues! Check the links in this post and read through the link that Brian provided.

      These are indisputable facts. You can talk about my qualifications and credentials all you want. Just address these facts that fly in the face of any revalue and I will be happy.

      I would say don’t buy my strings and save your money because once Iraq redenominates your going to need it.

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