* Pacster Post: 3/1/10 – Dinarvets
After doing some more research and discovering updated information on the CBI website, I discovered some disturbing numbers that I believe you should all be aware of.
There has been a lot of talk about the exchange rate and the amount of dinar in circulation
And how they affect each other……A great many people do not understand it and a good many have attempted to confuse the issue for whatever reasons…………..
Some have said nobody really knows how many are in circulation and the numbers are just a smokescreen. Well, I have discovered they were right. It is a smokescreen they really don’t want you to know how many are in circulation, because in reality there are a lot more than these articles have mentioned…………Others have said only Shabs knows how many there are, well I think they were right about that to. So I went directly to the CBI website and discovered what I was looking for………
This is the info many, many people don’t want you to see or understand…….
We’ll consider this Iraqi Dinar monetary policy, lesson….. 102
Perhaps the most controversial information has been the inaccessibility to the true Money supply numbers and more specifically the M0 and M2…………
The first M0 numbers are considered the money base. In Iraq’s case this is the total of foreign and domestic assets combined (currencies and gold) minus liabilities to depositors. The entire money supply is based off of this amounted value.
As of Dec 2009………updated on Feb 3 of 2010.
They have an M0 of 42.6 trillion IQD at an exchange of 1170, they have an M0 of $36.4 billion.
They have an M1 of 37.1 trillion IQD, this number includes printed currency and amounts in savings and checking accounts………..
They have an M2 of 46.1 trillion, this number includes M1 and all deposits, cd’s money markets etc……..electronic funds and deposits……..
In order to change the value of 1 dinar, you have to change the value of every dinar in the M2 money supply. You have to change the value of all 46.1 trillion
In January of 09 the CBI began a managed float at the rate of 1170 which it remains to this date………..Speculators believe the real value has continued to increase and we are not privy to that info……
In order to determine the exchange rate for a currency, you take the money base and divide it by the M2
In this case because we are going to convert it to USD we first have to figure the exchange of the M0. Take the 42.6 dinar and divide it by the managed float of 1170, you then have an M0 of $36.4 billion. Now you take the M0 of $36.4 billion and divide it by the M2 of 46.1 trillion, which gives you the effective exchange rate of .00078. as you can see the exchange is actually lower than the .00086. which means it has actually depreciated and you should be able to buy 1269 dinar for $1 dollar…..They did a managed float and started printing more……………1170 is considered the nominal value and 1269 is the real value………..The market value can fluctuate good or bad,depending on the strength of the market for that currency, but the adjustments are very small and even have a smaller affect when there are more in circulation or in the M2….
In order to have a $3.50 exchange rate, your M0 has to be 3.5x higher than the amount in M2. If Iraq had 10.4 BILLION dinar in circulation with an M0 of $36.4, each dinar would be worth 3.50.
In order for Iraq to RV at 3.50 now with 46.1 trillion in M2, they would have to have an M0 of $161.35 Trillion dollars. They would have to have that much in foreign and domestic assets and they cannot use oil still in the ground as an asset., even if they could use oil reserves an asset, with 115 billion barrels in proven reserves at $100 per barrel that’s only $11.5 trillion. Where does the other $149 trillion come from? Even with an RV of 1 to 1 they would still have to have an M0 of $46.1 trillion………
Fractional reserve banking requires 25% reserve and is also already included in the M2 amount………….They would have to keep $11.5 trillion in bank reserves just to support introducing more into the M1 and M2………….and then have to back every new unit introduced or they all lose value………
We as speculators have helped them increase their M0 and the amount in M2..Catch 22
All of this info clearly explains why they are going to redenominate (lop) 1000 to 1.
They will then have 46.1 billion in their M2 with $36.4 billion in M0………
Once Chapter VII is lifted and the rest of their assets are returned they will have an approx. M0 of $80 billion, I would venture to say there are at least 17 trillion dinar outside the country, including the 7 trillion the IMF has, that will go back to the CBI and be removed…..giving them a new M2 of 29.1 billion, minus the electronic funds that will be eliminated in the exchange, they will have an approx. 25 billion dinar in M2
Now take the new M0 of $80 billion and divide it by the new M2 of 25 billion and you get a new exchange rate of……………………$3.20
We make $3.20 for every $1 dollar we have invested………..May not be what some lead you to believe it was going to be, but it is a 320% return. What’s to complain about?
I know many will see this as negative and claim the CBI’s numbers are false and to some extent I would agree, after all we know our treasury is hiding money from us that isn’t on the books, but I am not expecting the treasury to pay me some of the money they are hiding from me……………..
I have provided the link to the CBI information, please take a look at it yourselves and you will see what I am explaining. All the information is there………….
Here’s the link:
You have my permission to post it.