So Pimple made a comment this week that he’d pay $5000 to anyone who could prove him wrong over what he was saying, I can end that debate quickly. Pimpy in May you stated, “ Iraq was already a member of the World Trade Organization. They are going through the ascension process for a second time.” Wrong! Iraq had and still has OBSERVER status, they are not and haven’t been a member of the WTO. If you’d get off Wikipedia for your sources you’d know that. Feel free to email me and I’ll tell you where to send the cash…. loser.
So let’s look at some of the things happening currently and some of the real issues. First, let me say, I actually purchased some more dinar this week after I had a small surplus coming off of vacation. I looked at several things for investment, crypto, stocks and currency, and decided to buy a little dinar because yes, I believe in it. One of the biggest things running rampant right now is the ATM discussion.
Frank26 stated there were 10 thousand or more ATM’s being implemented in Iraq. Here’s my problem with that; First, there are a total of 920 bank branches in Iraq, 54 banks operate there, of which 7 are state owned and 15 foreign and 11 are specialized in Islamic services. Rafidain Bank is the largest bank in Iraq with 165 branches in Iraq. Secondly, according to the Federal Reserve Economic Data or FRED, there is currently about 2300 ATM’s in Iraq (Hey Pimpy look, facts not gathered on Wiki). So if we’re now saying they installed over 8000 more ATM’s in a couple weeks AND as also stated by Frank26 and others that are loaded and ready with lower denominations. WAIT, haven’t we heard from Frank in the past that these older ATM’s were loaded and ready to dispense lower denoms before? Hmmm, this could be a problem. Why? If they had loaded these notes in machines at ANY TIME now or during the past, we would see real, genuine evidence of them. Pictures, printed media of what to expect when they were in the citizen’s hands. So while it’s nice that they are updating the technology to improve the banking system, which will help, I don’t think the hoopla that some are making is as believable at this time.
Here’s my reasoning for why Iraq can and should revalue their currency. They are an export economy. Let’s face it, oil is king of their economy and drives all the main economic points in their budget. The good news about that is the world needs oil, always will, regardless of what any greenheads might have you believe. Oil is priced in dollars currently, so it’s cheaper to buy oil in USD than dinars, which also means that Iraq makes less money on exporting production. This differs greatly from Vietnam’s economy in that it’s goods vs. services, but I’ll get to that later. Iraq has a bona fide product(s), that it can sell and export for a price based on production. OPEC sets the production which allows the price to be determined by how much production is allowed. Now what people like KaperFoni would have you believe, is that Iraq is too dependent on oil and can’t sustain their economic growth, or hasn’t done the necessary steps to increase economic growth over the last 10 years or so. But if you look at Iraq from an asset-based growth, they have ALL the good necessary for export that doesn’t diminish in value. Natural resources like natural gas, phosphates and sulphur just pour from the desert. We won’t even get into the amounts of bentonite, cement, clay, gypsum, iron oxide, kaolin, limestone, nitrogen, salt, sand and gravel. The point is this, they have concrete assets to export that are needed by other countries, these require production and is part of the economic backbone that has rebuilt the Iraq growth. So let’s look at it this way. You have a barrel of oil, that’s 42 US liquid gallons and let’s round up slightly for today’s price of 78.17 to $80 a barrel. That’s 104,800 dinar per barrel that Iraq would make. They produce roughly 3.4 million barrels per day, as of February statistics. That’s about 356 Billion dinar per day or just over 130 trillion dinar per year. Obviously, selling at a 1 to 1 increases the value of their oil immensely, but you can see where the deficits are coming from. With Iraq only increasing their production per day and new sources of pipeline revenue being designed and built, the opportunity for oil to continue to provide a good basis for revenue is all but assured.
Now let’s discuss Vietnam. Vietnam is a different economy altogether in that they have a large export system based on production of mobile phones (main export) and electronic production. They are a huge import economy relying on importing of intermediate goods such as semi-processed products and capital goods from China and South Korea. Of course, this has produced a large trade deficit with these countries. So why would they want to increase the value of the dong? Well when you’re buying things from other countries, it would benefit you greatly in the import sector particularly in that you have more purchasing power internationally. Now do I expect that they would increase their currency to some of the levels that the gurus would have you believe, $2.00 or more? I’ve never counted on something like that when I purchased dong as an investment. I was looking for somewhere between .05 and .10 as a bonus, on a a great day, maybe somewhere along with China at the .15 range. This would help curve some of the deficiencies they have in their trade imbalance with China, and allow them to improve an economy that operates so heavily on imports.
That’s all I have for today, hope you’re staying cool in this summer heat wave. Catch up soon.
BWM