Special Note:

I shared a Post here from a friend I thought was worth sharing and to open up some interesting discussions on it as well…Not promoting his book but nor am I discounting it either…but the post itself from Facebook is worth a good look at..jp

The Iraq Dinar, where’s the RV?

 This is a commentary using known Fiscal Metrics to evaluate if the Iraqi Dinar Currency could somehow instantly increase in valuation to between $1 – $3 + US and if so, would it be logically and fiscally sound if that were to occur.
The Iraqi Dinar has always been, a currency manipulated through a  “MANAGED FLOAT” not through a “FREE MARKET TRADED FLOAT” Traded on the FOREX. Pre Saddam, Saddam and Post Saddam…the Iraq Dinar has always been a PROGRAMMED RATE that is NOT reflected by the REAL WORLD WORTH or “VALUE” of FOREX Currency Traders that use the FREE MARKET to set the REAL WORTH of a currency based on REAL WORTH Metrics…so, the Iraqi Dinar is not now, nor, do I think ever will be based on REAL WORTH…because, if the IQD were ever to be pegged to a “FREE FLOAT” (Which I do not think it will be) but, using it as an example, then, FOREX Traders would value the IQD in real worth, somewhere between 1 cent to about 10 cents US, based on REAL WORLD VALUATIONS (See Below)…However, I do not think the IQD will be FREE FLOATED, based on HISTORY, that was just to give a Metric based on REAL WORLD VALUE. I see the CBI using a continued MANAGED FLOAT approach to slowly continue the Rate down to 1,000 Dinar per dollar for several months and then, over a Year, continuing to gradually and incrementally add value to the IQD, 100 Dinars every several months, until it is worth a penny in about 18 months or by January 2015, MANAGING or LOCKING it there for a Year or Two and then raising it to 5 cent to 10 cent in a couple years by 2017, and then, slowly and gradually taking it to par with the US Dollar by 2030.

Here are some Metrics to consider…

IRAQ                             vs                              USA

GDP
$110 BILLION                                                $16 TRILLION

 

So, the US Economy is 150 Times the size of Iraq and yet our US Dollar has never been worth $3 +

DEBT to INCOME Ratio
Iraq’s external debt was between $130 to $140 billion in 2003, much of which was settled and forgiven through the 2004 Paris Club agreement, which would have equated to a 1:1.25 Debt to Income Ratio for Iraq, meaning they originally owed $1.25 for every Dollar they generated in GDP…

The USA Debt to income Ration is a mere 1:1. meaning, for every $1 the US owes, the US generates $1 in GDP. Putting that further into perspective, using Blue Chip Publicly Traded S&P 500 Company Debt to Income Ratio.
•IBM— 2:1
•Dupont — 3:1
•United Technologies — 3:1
•Boeing — 4:1
•Caterpillar — 14:1
And get this…
•JP Morgan Chase has a whopping Debt to Income Ratio of 50:1
In other words, IBM borrows twice as much money as it earns annually. Boeing borrows four times more than it earns. And JP Morgan Chase, clearly not too big to borrow, borrows 50 times more than it earns — getting $50 from lenders for every $1 it makes.

Clearly, the USA is NOT in a Fiscal Crisis compared to the Best Blue Chip Companies in America.

Nor, is America or the US Dollar “Doomed” for Bankruptcy, considering our current Debt to Income Ratio is multiple times less then the best Blue Chip Companies in America and far less then the Debt to Income Ratio of the Average US Citizens personal Debt of around 3:1…most families grow through strategic debt, including assuming decades-long mortgages, car payments and student loans on par at around a Debt to Income Ratio of 3:1.

Borrowing today to fund the innovation of tomorrow stimulates our economy and generates revenue growth that pays back the debt. That’s why emerging economies such as Singapore — which is still riding high despite the worldwide economic downturn — carry a Debt to Income that looks more like DuPonts 3:1, borrowing money to keep its economy innovating and growing.

The US has the potential to increase our GDP 20 Times, or, 2000%, just by developing our proven Oil Field Reserves in the Bakkan Region of North Dakota, Montana and Colorado

Recoverable Oil
According to US Energy Information Administration the US has 10 Times the Proven Oil reserves than Iraq has:

Iraq                                                                  USA
300 BILLION                                       3 TRILLION BARRELS
$25 TRILLION                                            $250 TRILLION

 

So, the US has Ten Times as much Oil Wealth than Iraq, and yet, somehow, speculators in the IQD seem to “believe” that the IQD should be “on par” with the almighty US Dollar? Some IQD speculators even believe it will instantly one day RV’d to $3 +…this isn’t logical, nor practical, based on REAL WORLD Metrics.

Population
Iraq                                                              USA
30 Million Citizens                                 300 Million Citizens

So, the US has Ten Times as many workers as Iraq, with Ten times the output and Ten Times as many Business Men and an Intellectual Property Incubators that out number Iraq ten fold, and yet, our Dollar has never been worth $3 +, based on this REAL WORLD metric, it isn’t logical the IQD could even be worth 10 cents US. Yet, there are those who base their IQD Speculative Investment logic on the Historical MANAGED PROGRAM RATE that never has reflected REAL WORLD WORTH or VALUATION that can be quantitatively measured against a STANDARD!

Roads
Iraq                                                                USA
50,000 Miles                                          4 Million Miles

RAIL Roads
Iraq                                                                 USA
1,200 Miles                                                233,000 Miles

Pipelines
Iraq                                                                  USA
2,000 Miles                                              2 . 5 MILLION

Electrical Power Generation
Iraq                                                                  USA
14 Gigawatts                                               1,000 Gigawatts TOTAL
60 Gigawatts WIND
6 Gigawatts Solar PV
100 Gigawatts Hydro Power
4 Gigawatts Geothermal
6 Gigawatts Nuclear

Sea Ports
Iraq                                                                  USA
6                                                                   360

Universities
Iraq                                                                  USA
30                                                                   300 +

In conclusion, based on the above and many other metrics, it is my opinion that the Iraqi Dinar is not now, nor, do I think, ever will be based on REAL WORTH…because, if the IQD were ever to be pegged to a “FREE FLOAT” (Which I do not think it will be) but, using it as an example, then, FOREX Traders would value the IQD in real worth, somewhere between 1 cent to about 10 cents US, based on REAL WORLD VALUATIONS (See Below)…However, I do not think the IQD will be FREE FLOATED, based on HISTORY, that was just to give a Metric based on REAL WORLD VALUE. I see the CBI using a continued MANAGED FLOAT approach to slowly continue the Rate down to 1,000 Dinar per dollar for several months and then, over an 18 month period, continuing to gradually and incrementally add value to the IQD, 100 Dinars every several months, until it is worth a penny in about 18 months or by January 2015, MANAGING or LOCKING it there for a Year or Two and then raising it to 5 cent to 10 cent in a couple years by 2017, and then, slowly and gradually taking it to par with the US Dollar by 2030.

Many IQD speculators are counting on and HOPING the IQD will soon RV or RI and they “Believe” it will do so in the $1 – $3 Range, however, this is not logical based on my premise as outlined above, nor is it economically viable for Iraq to do so, because it would end up costing the Iraqi Central Bank in the general ball park of between $3 Trillion to $9 Trillion to CASH OUT the IQD inside Iraq in the hands of the Iraqi population.

 

The total combined value when converted to USD of the top 38 countries that make up 89.6% of the world’s GDP and 65.1% of the world’s population can total $60 . 2 Trillion USD total world wide. How
can Iraq RV their 30 trillion dinar to equal 30 trillion US dollars, a 1 to 1 ratio?

The answer is of course that Iraq can not and WILL NOT do it. There are 30 Trillion Dinars Total (approximately) Even if their money supply was only 1/10th, at say, 3 Trillion Dinar, they still could not RV 1 IQD to 1 USD. They only have $60 Billion in USD or so in reserves and their GDP is $110 Billion. Even if those figures are off by 2x, it still doesn’t matter. Most countries in the world have an M2 as a percentage of GDP that is below 100% For a few its larger, but no county has an M2 that is remotely close to ~50,000% of GDP which would be the result of a 1:1 RV ( M2 is 72B USD and GDP is 110, so M2 is ~50% of GDP, x 1000 is 50,000%). These are all fundamental metrics to how an economy works.

There are much better Investments out there in the Expanding Global Economy that people can Capitalize on. Below, are two Links you can check out that detail these Investments.

http://www.blogtalkradio.com/kenhoward/2013/05/22/green-roi

http://www.buyacopynow.com/

Best Regards!

Ken Howard

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