We are told that Iraq is ready to RV, almost daily, out there in Dinar Land. Yet, when we examine Iraq’s current economic situation, it becomes clear that there is no logical or mathematical process that supports these frequent claims. Let’s take a look at the facts and see where they lead us.
Iraq’s Current Economy (May/June 2023 Reporting)
- GDP: US$264 Billion
- Oil Exports: 100 million barrels/month
- Oil Revenues: US$7 Billion/month
- Current Oil Price: US$70 per barrel
- M2 Money Supply: 173 Trillion IQD
- FX Reserves: 143 Trillion IQD
- Current Exchange Rate: 1310 IQD per 1.00 US dollar
M2 Money Supply is the measure of IQD held inside the country of Iraq including cash on hand and in Iraqi bank account deposits. It is not a measure of IQD held outside of Iraq (the notes we all have).
What if Iraq RV’s their Currency Tomorrow?
Let’s assume that we are all holding 5 Trillion IQD collectively in Dinar Land. If Iraq were to RV the IQD at $1.00 per IQD tomorrow, and we all decided to exchange at that rate, the Central Bank of Iraq (CBI) would need 5 Trillion US dollars (or Euros, GBP, etc.) to cover those exchanges.
5 Trillion IQD x $1.00 = $5 Trillion to cover our exchanges.
Iraq’s entire GDP is only US$264 billion per year and they cannot just print or create other global currencies out of thin air to pay for our exchanges in our local currencies. Even if Iraq came out and declared that one IQD is now worth one US dollar, no Central Bank or Forex Platform in the world would recognize that new rate, much less cover IQD exchanges at that rate for any of us. The economic math doesn’t come close to justifying this newly “declared” exchange rate.
The simple fact is, Iraq’s economy would have to be 20 times larger than it is just to pay for our exchanges, much less cover their national operating expenses. By comparison, the United State’s GDP is over 76 times larger than Iraq’s GDP while the European Union’s GDP is over 64 times larger than Iraq’s.
What if Iraq Re-denominates (drops 3 zeros) the IQD Tomorrow?
If Iraq RD’s tomorrow, it would not be good for us international IQD holders under any scenario.
Let’s assume that Iraq implements a new series of IQD notes without the 3 zeros. This means that the current 25,000 IQD note would be replaced by a new 25 IQD note.
As foreign holders of the old IQD notes, we would all have to trade in our 25,000 IQD notes for the new 25 IQD notes. This assumes that the Iraqi government would even allow foreigners outside of Iraq to trade in their old IQD notes – they most likely would not allow this to happen. But for this example, let’s assume that we are allowed to trade in our old notes at our local banks.
Now that we have the new 25 IQD notes, let’s also assume that the CBI revalues the new IQD notes at one-to-one for the US dollar. This means that we will receive $25.00 for one 25 IQD note.
Furthermore, following the same math as above, the CBI would now only need US$5 Billion to cover our exchanges. This scenario is plausible since Iraq’s economy can afford this exchange rate with the new, lower denomination IQD notes.
5 Trillion in old IQD notes = 5 Billion in new IQD notes (deleting 3 zeros)
5 Billion new IQD x $1.00 = $5 billion in the new exchange rate
Clearly, this is not the IQD RV exchange scenario any of us want.
Bottom Line
Without the off-ledger gold deployed to collateralize and back the IQD (Our GCR), there is no possible way that we will benefit from any non-GCR revaluation or redenomination of the IQD. Without Our GCR fully released globally, Iraq cannot support an RV at $1.00, much less $3.00 or higher.
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10 responses to “Iraq’s Economic Ability to RV their Currency is Impossible Today”
could it be this way?
1300 dinar is 1 usd
so basicaly when iraq will cut 3 zeros from 1 300 dinar that equals then 1.3 dinar=1 usd
aka parity or 1 to 1 we re told sometimes(so parity 1 to 1 (almost is ALREADY with or without zeros)
BUT we were told thag dinar will be 3 usd ,so hows that
Maybe dollar will be 3 times less worth after gold standard
So dinar will not rise but dollar will go down(globaly against all currencies)
Its speculation but we also expect usd to tank so maybe that speculation have some truth in it
It doesn’t work that way. Removing 3 zeros does not change a currency’s exchange rate value against other global currencies. If the IQD re-denominates without the 3 zeros, a new 25 IQD note would lid be worth the same as today’s 25,000 IQD note. Which is about $19.00 US dollars at the current 1310 IQD per Dollar exchange rate.
Clearly you have not done your research on oil credits and the fact that the three zero notes in Iraq will have the value for Iraqis in country of as you mention 25 new Iqd for a 25,000 but these three zero notes are to be used by banks for large transactions. Outside of Iraq they will exchange at the Forex rate but forex doesn’t pay it, The oil credits pay it, in the USA the ust will take the Iqd credit the digital money to accounts, then redeem the Iqd for the oil credit, and makes a profit as do the banks and Iraq pays it off over the next 30 years
Thanks Ken! Interesting.
Can you take me through the math using the oil credits you mentioned? In my example, I only used 5 Trillion IQD held in Dinar Land (outside of Iraq) and an exchange rate of only $1.00.
In reality, Dinar Land is holding 10’s of trillions of IQD outside of Iraq. I personally know people (whales) who own sealed IQD “Boxes” equaling over a trillion IQD.
If Dinar Land rumors are true, and the IQD RV’s over $3.00, along with “contract rates” of over $10.00 per IQD, the amount of dollars and euros, etc. required to pay that out gets into the Quadrillions. There’s not enough oil in Iraq to begin to equal those $ numbers.
My key point is that Iraq cannot RV at these high rates in today’s fiat currency system landscape. We need Our GCR for that – gold backing, gold revaluation, and purchasing price parity among all currency participants.
Spot on!
In your opinion how much will gold revalue?
Gold technically won’t revalue, it’s the fiat currencies that will be devalued against gold before the GCR. Gold’s value is relatively constant.
Tell Saddam that!!! He new something you don’t know. I have to say the earth makes the shit and its pushed up to different areas in the world. I’m sure IRAQ can cover it’s bills. That’s why the LARGEST EMBASSEY WAS BUILT AT THE LOCATION.
If this cannot be true then explain how the IQD prewar was 1 dinar=3+ USD. That is until we destroyed the place.
The IQD was not $3.00+ before the Gulf War with US and Allies. However, It was that high until Saddam Hussein destroyed Iraq’s economy during the Iran-Iraq war.
During the Iran-Iraq war (1980-1988), Iraq experienced significant economic challenges that impacted its currency value, GDP, economic infrastructure, and foreign investment.
Currency Value: The Iraqi Dinar (IQD) faced severe fluctuations during this period. The war and increased military spending strained Iraq’s finances, leading to a decline in the value of the dinar. Inflation and currency devaluation were prevalent due to the strain on the economy.
GDP: The war had a detrimental impact on Iraq’s GDP. Military expenditures and war-related damages diverted resources away from productive sectors and infrastructure development. The GDP growth rate declined, and the economy suffered from reduced productivity and disrupted trade.
Economic Infrastructure: The war caused substantial damage to Iraq’s economic infrastructure. Industries, oil refineries, transportation networks, and communication systems were targeted and damaged by both sides. The destruction of infrastructure hindered economic activities, trade, and investment.
Foreign Investment: The war deterred foreign investment in Iraq. The conflict created an unstable and risky environment, leading to a decline in foreign direct investment (FDI). Investors were reluctant to commit resources due to the uncertain political situation and the risks associated with the war.