ThxPORTAL - My OnlinE InvestmenT ProgresS

I think the market has bottomed out

2012-05-28T08:28:00.000+08:00

"The crash is over", says an economist. "Housing can only go up," says another. "I think the market has bottomed out," says one builder. "It appears we have turned the proverbial corner," says a second.

After hitting a low with stocks in March 2009, U.S. single family building permits rallied in three waves into March 2012. The latest high is more than 65% below the September 2005 peak. A MarketWatch commentary insists, "Permits Push Signals U.S. Housing Boom." These assessments are flooding in even though many home buyers from 2010 and 2011 are already underwater! According to CoreLogic, more than one millions U.S. home buyers who have taken out low-money-down FHA mortgages over the last two years already owe more on their loan than their homes are worth. The FHA's policy of accepting almost no money down is deadly when..... continues in the May issue of EWI's Financial Forecast 10 page report available for FREE.
Download this special issue for free, but fair warning: It's only available until Thursday, May 31.
Here's a quick summary of what you'll find inside:

Europe's debt crisis.
European political crisis.
Charts flashing danger signals.
What U.S. stock investors should know NOW.
Sentiment analysis.
Tech Stock signals for Apple, Google and Amazon
NYSE margin debt signal.
Facebook special.
And much more, including detailed Elliott wave charts and insights on gold,silver, bonds, the U.S. dollar, the economy, inflation vs. deflation and real estate

Learn More and DOWNLOAD EWI's NEW 10-page May 2012 Elliott Wave Financial Forecast here - It's FREE. (requires a valid email address).

About the Publisher, Elliott Wave International Founded in 1979 by Robert R. Prechter Jr., Elliott Wave International (EWI) is the world's largest market forecasting firm. Its staff of full-time analysts provides 24-hour-a-day market analysis to institutional and private around the world.

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A Crazy Idea That Might Just Work: Greece's New Currency, the U.S. Dollar

2012-05-14T10:01:00.001+08:00

There is an undeniable internal logic to the crazy idea that Greece should jettison the euro and accept the U.S. dollar as its national currency.

Before you dismiss my crazy idea out of hand, hear me out. It might not be as crazy as it seems on first blush.

I have a straightforward three-point plan to set Greece on a sustainable, positive pathway. But before we can understand how the plan resolves Greece's no-win situation (yet another Kobayashi Maru scenario), we first need to understand very clearly why the euro currency failed.

I have covered this many times before:

Why The European Union Is Doomed (March 28, 2011)
Why the Eurozone and the Euro Are Both Doomed (June 23, 2011)
Three More Reasons the Eurozone Is Doomed (September 22, 2011)
Yet Another Reason Why the Euro Is Doomed (October 17, 2011)

If we had to distill the dynamic down to a single paragraph, it would be this: By accepting the "strong currency" euro that was supported by promises of fiscal prudence, Greece and the other weaker economies of Europe artificially raised market willingness to lend them money and lowered the interest rate they would pay. At the same time, the euro also lowered the cost of goods from Germany by eliminating the market arbitrage of currencies.

I know this may sound complicated, but we can grasp the core dynamics using household analogies.

The willingness of lenders to lend and the rate of interest they charge is based on economic fundamentals: the balance sheet of assets and liabilities, and cash flow: how much income goes to pay liabilities and how much is left over as surplus to spend or invest.

Households and nations with weak balance sheets (i.e. liabilities exceed assets) and weak cash flow balances (i.e. much of the nation's income is already committed to entitlements and liabilities, so relatively little is left to fund future borrowing) will find it difficult to borrow a lot, and the rate of interest they will pay will be high.

Nations have another mechanism to differentiate between strong and weak balance sheets: national currencies. Countries with weak cash flow and risky balance sheets will have weak currencies, as people price the risk into the currency.

In effect, Greece was like the poorer brother who suddenly got the wealthier sibling's credit card. In this sense, the euro was a scam, because it stripped the market of the pricing mechanism that we call currencies. By pricing all money the same regardless of national balance sheets and cash flows, then weaker countries got the credit card of their stronger brethren.

Predictably, these nations over-borrowed. When presented with the opportunity to borrow huge sums at low rates of interest, it is "rational" to accept the opportunity.

Who benefited from this elimination of market pricing via currencies? Germany and the banks. In pre-euro days, it took a lot of Greek drachmas to buy expensive goods from Germany. After the euro was introduced, German goods became cheaper in terms of hours worked and interest rates paid.

German exports to the rest of Europe have been strong, and these exports within Europe are the backbone of the German economy. (Exports are roughly 40% of the German economy, the highest in the world for major economies. Exports make up about 10% to 15% of the economies of Japan and the U.S.)

The pool of apparently creditworthy borrowers expanded greatly, and the banks promptly began lending vast sums to both the public and private sectors of these fundamentally weaker nations.

You can't fool Mother Nature with artificial games for long, and now reality has trumped artifice: the nations with weak balance sheets and cash flows cannot support the monumental debts they acquired during the decade of the euro-scam.

If you eliminate the market's ability to price risk and credit, the market breaks down. That is the eurozone in a nutshell.

The no-win situation is clear: if it wants to continue using the euro, Greece must pay its debt and interest in euros. Its economy simply isn't large enough or productive enough to do this, so that's simply not possible. Wishing it were possible doesn't make it possible.

As a result, the weaker, over-indebted nations are in death-spirals of higher taxes and higher debt servicing costs. Each bleeds vitality and trust from the economy, driving it deeper into fatal contraction.

These nations are also in political death spirals. I spoke at length with a well-informed young Greek friend who has lived in both Germany and the U.S., so he is well-acquainted with the perspectives of Germans and Americans.

He reports that the Greek people are profoundly divided on the question of whether to stay in the eurozone or risk leaving it. He said that even within the various political parties, there are two camps. In his opinion, the odds of either camp surrendering their deeply held beliefs and fears is very very low. Those who want to stay in the euro are terrified that a return to the drachma would wipe out the nation's savings and further reduce the already diminished incomes of households: in effect, the middle class would be wiped out.

Others see a deeply sinister master plan in all this: pushing Greece back to the drachma would immediately render the nation poorer and make its assets very cheap to foreign Elites, who would rush in and snap up Greek assets at fire-sale prices. Greeks would lose their country.

This is indeed part of the dynamic when nations radically devalue their currency: if a villa in Greece was 300,000 euros before the return to the drachma, it might be only 100,000 euros when the drachma is re-instated. Priced in euros, the whole of Greece would "go on sale".

I hope you can see that there are two parallel no-win situations here, a financial one and a political one. This is the Kobayashi Maru scenario on a national scale, and there is no exit if you stay within the rules of the game: euro or drachma, etc.

Here's my "crazy idea that's so crazy it might just work": Greece should switch to the U.S. dollar as its currency while renouncing all debt denominated in euros. I don't mean a "haircut," I mean billiard-ball bald: 100% of all debt denominated in euros would be renounced. Not one euro will be repaid.

The reason is that the banks (lenders) knew darn well that Greece remained a weak economy, and eliminating the currency arbitrage by accepting the euro did not magically strengthen Greece's financial fundamentals. It was all a scam that the banks exploited, including the European Central Bank, and so they will have to accept the losses now that the scam has collapsed.

Nobody put a gun to the head of lenders who fronted Greece stupendous sums of money at low rates of interest. It was their gamble and they lost. End of story.

Whatever else you can say about the U.S. dollar, it retains global trust as a medium of exchange and a transparent store of value. Your $100 bill is good in Laos, Bolivia, Russia, China and everywhere else. Its value fluctuates because the market is free to set the risk of holding dollars.

Ultimately, all fiat currencies are simply physical measures of trust. People know the U.S. has plentiful problems of its own, but they also know the problems are well-known and transparent to all, so the market can price risk in the dollar. They also know the U.S. isn't going away tomorrow, and that there are enough dollars floating around the globe that there will always be someone who will accept the dollars in trade for tangible goods at a transparent price.

The problem with returning to the drachma is the risk of the transfer is unknown, and so the risk will be transferred to the drachma. By making the process into two steps--exit euro for the dollar, then later, exit the dollar for the drachma--much of the risk and distrust is removed from the initial step of exiting the euro.

Here's the beauty of Greece accepting the dollar: since Greece cannot print dollars, then everyone will know the currency cannot be depreciated by the Greek state. If Greece can print drachmas in unlimited quantities, then the drachma will quickly lose whatever value it begins with. In contrast, regardless of the policies of the state or central bank of Greece, the dollar will still have the same value day to day.

All euros in accounts would convert to dollars.

This will immediately restore trust and trade, both domestically and internationally, as everyone will know the U.S. dollar will retain its value everywhere.

Does Greece need U.S. approval to take the dollar as its interim currency? No--the dollar is ubiquitous and in sufficient quantity that there are enough physical dollars floating around the world to serve as the currency for a small nation such as Greece. It would help if the U.S. accepted Greece's choice, but American acceptance would be optional.

The third critical step in my plan is that Greece must reach a political consensus on taxation and governance. Everyone knows that tax avoidance has undermined the Greek state's finances, and the people of a democracy have to reach a consensus themselves: it cannot be imposed by bureaucrats from afar.

Greece desperately needs a visionary politician to emerge who can clearly state Greece's choices in taxation and governance: the State needs enough income to do what the people want it to do, and so everyone is going to have to pay taxes. Those who evade will have to be shunned/coerced by public opinion into compliance, for the national good. The institutions of taxation will have to restore trust in their fairness and transparency.

Greece must have a transparent national dialog on taxation and governance, and reach a consensus via the democratic process. Without this step, then it won't matter what currency Greece uses, it will slip further into a death-spiral of dysfunction.

So here is the 3-point plan:

1. Renounce all debts denominated in the euro, i.e. a 100% writedown.

2. Accept the U.S. dollar as the national currency of Greece.

3. Engage in a transparent national dialog and reach a consensus about taxation and the role of the state in the Greek society and economy.

We might add a fourth point: renounce scams and kicking problems down the road rather than addressing them directly, sweeping dysfunction under the rug, etc.

There is a compelling internal logic to my crazy plan: when trust in national currencies and institutions is lost, then the black market becomes the trustworthy place to engage in trade. The world's favorite black market currency is of course the U.S. dollar. In this sense, for Greece to officially accept the U.S. dollar as its currency is simply a recognition of the natural progression from a currency that is no longer viable to one that is.

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Secrets of the Spanish Banking System That 99% of Analysts Fail to Grasp

2012-05-01T08:09:00.001+08:00

Spain is a catastrophe on such a level that few analysts even grasp it.
Indeed, to fully understand just why Spain is such a catastrophe, we need to understand Spain in the context of both the EU and the global financial system.

The headline economic data points for Spain are the following:

Spain’s economy (roughly €1 trillion) is the fourth largest in Europe and the 12^th largest in the world.
Spain sports an official Debt to GDP of 68% and a Federal Deficit between 5.3-5.8% (as we’ll soon find out the official number)
Spain’s unemployment is currently 24%: the highest in the industrialized world.
Unemployment for Spanish youth is 50%+: on par with that of Greece

On the surface, Spain’s debt load and deficits aren’t too bad. So we have to ask ourselves, “Why is unemployment so high and why are Spanish ten year bills approaching the dreaded 7%?” (the level at which Greece and Portugal began requesting bailouts).
The answer to these questions lies within the dirty details of Spain’s economic “boom” of the 2000s as well as its banking system.
For starters, the Spanish economic boom was a housing bubble fueled by Spain lowering its interest rates in order to enter the EU, not organic economic growth.
Moreover, Spain’s wasn’t just any old housing bubble; it was a mountain of a property bubble (blue line below) that made the US’s (gray line below) look like a small hill in comparison.

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Myanmar: Not the Burma I used to know

2012-04-14T18:13:00.001+08:00

But the opportunity to right the wrong is here and the reformation needs to be irreversible

A CENTURY ago, Rangoon (now Yangon) was one of Asia's great trading centres and home to a diverse ethnic mix. Its 19th century population of 100,000 has since swelled to about 6 million in greater Yangon, which now suffers from cracking infrastructure, electricity brown-outs, traffic congestion and growing pollution.
I first visited the city in the mid-60s as a young central banker (and have been back often until the 90s), working alongside prominent bankers and economists at the Union Bank of Burma (the central bank).
Its colourful history is reflected in the city's heart, where ancient Buddhist pagodas sit next to churches and cathedrals, Sunni and Shia mosques, Hindu and Parsee temples, and a Jewish synagogue. I well recall at its very centre stands the magnificent Shwedagon Pagoda sitting serenely in gold glittering amid the city skyline.

Naing Oo, a Burmese, breaks rock into gravel in a yard in Yangon, Myanmar. He earns US$5 per day doing hard physical labour. Myanmar faces deep poverty and lack of social infastructure. Fortunately, it is en route to reformation. — EPA

Then, Yangon was the home to hundreds of Victorian and Edwardian-era buildings, including the edifices of Lloyds and HSBC bank, and the all-teak Pegu Chub where Rudyard Kipling stayed.
I am told many have since been demolished to make way for development. But even then, I was glad the Victoria-era Strand Hotel (that once welcomed George Orwell) has been transformed from a run-down budget hotel into an elegant 5-star. Before the make-over, I recall seated at lunch in the sparsely furnished hotel caf and was told that its original 8-page menu (dating back to pre-WWII) now carried only plain sandwiches all else were just not available. Even so, the Yangon of today is nothing like the quaint 60s Rangoon I used to know.

No more Burma

With the combined size of France and Britain, resource rich Myanmar sits strategically between India and China and alongside South-East Asia, with ports on the Indian Ocean and Andaman Sea. As such, it is coveted by China's western provinces as a strategic energy-security asset. Bordering five nations (including Bangladesh, Thailand and Laos) with Malaysia to the South, Myanmar offers multiple avenues for Asian engagement as the United States shifts its focus to the growth axis within the Asia-Pacific region.
Yet poverty is jarringly endemic, especially outside Yangon. While the European Union has started to unwind sanctions, punitive US measures continue to cut deep into the domestic economy. Bear in mind Myanmar was among Asia's most prosperous before the 1962 military coup ushered in the disastrous Burmese Way to Socialism that brought sweeping nationalisation and rapid global isolation.
After 50 years of often brutal military rule, Myanmar is today one of the world's poorest. One-third of its 60 million people live on less than US$1 a day! The International Monetary Fund (IMF) estimated its GDP to be just over US$50bil. Its neighbour Thailand, with 67 million, has a GDP (US$350bil) that is 6 times larger. Similarly, Malaysia's GDP (US$285bil) is nearly 6 times its size but has less than one-half its population.
Years of mismanagement by a corrupt and inept military regime have left Myanmar without a functioning economy. I am told a trip to the country-side can feel like a ride in a time machine back to pre-industrial society oxen drives ploughs where houses are thatched and bamboo is used extensively. Most areas are devoid of sewage, paved roads or cell-phone reception. Residents power light bulbs with car batteries, even though there are few cars in sight.
Myanmar is poised at an important juncture in its often tragic history. Reform, to paraphrase Victor Hugo, is an idea whose time has come. In the 12 months since he became President, U Thien Sein has led his nation down a radical path away from dictatorship to elections, vowing to “root out the evil legacies deeply entrenched in our society.”
By all accounts, the bookish 66-year old leader is no radical reformer I have heard visiting generals refer to him as the Gorbachev of Myanmar, prematurely I think. An advisor to the former president described him as: “Not ambitious; not decisive; not charismatic; but very sincere.”
Despite the nascent signs of change, Aung San Su Kyi sums up the outlook best early this year to a group of visiting Malaysians: “I don't think it's past the point where you can say it's irreversible. But we are going to have to make it irreversible... I think, the (investors) should wait a little.”

IMF optimistic

The IMF's economic report in January 2012 concluded: “The new government is facing a historic opportunity to jump-start the development process and lift living standards. Myanmar has a high growth potential...” It needs to “turn its rich natural resources, young labour force and proximity to some of the most dynamic economies in the world into its advantage.”
Its recent efforts are in the right direction, starting with establishing macro-economic stability, mainly at improving monetary and fiscal management. It has started the process with working plans to unify the exchange rate and to gradually lift exchange restrictions on current international payments and transfers.
Modernising the economy will also involve removing impediments to growth: from enhancing the business and investment climate, to modernising the financial system, to liberalising trade and foreign direct investment (FDI). However, foreign banks are unlikely to be let in before 2015. There is still much to change. Given decades of neglect, “you name it, we need to reform it,” remarked a government advisor. Fortunately, they are open to outside help with the reform process, unusual for a regime that used to regard global institutions with great suspicion.
IMF estimates GDP growth in Myanmar will rise by 5% in FY2011/12 and then by 6% in FY2012/13, stimulated by buoyant commodity exports and fixed investment reflecting improved business confidence. Inflation is expected at 4.2% currently with the recent fall in food prices, but anticipated to rise to 5.8% in FY2012/13 as oil prices rise. The “market” exchange rate had appreciated by about one-third (to 830 in January 2011) since end FY2009/10 following large foreign capital inflows. International reserves rose to US$5.3bil at end FY2010, sufficient to finance seven months of imports.
On the fiscal front, further improvements can be expected. Exchange rate unification should improve revenues, although the losses of state-economic enterprises (SEEs) will become more apparent and transparent. The fiscal deficit had averaged 5%-5% of GDP in the past two years but, should improve mainly due to new gas exports as they come on stream. It is expected that additional revenues will go towards building human capital, health care and infrastructure.
Tax reform would emphasize direct taxation over indirect taxes to protect the poor. The FY2012/13 budget has targeted a lower deficit of 4.6% of GDP. Privatisation of SEEs would boost private-sector led growth. Recent steps to improve competition in key sectors can be expected to reduce informal market activity and reduce prices.

New exchange regime

Reforming the highly complex exchange rate system is top priority, and rightly so. It will remove a constraint on growth. Indeed, its success will help establish a monetary policy framework for price stability. But the Central Bank of Myanmar (CBM) needs to be empowered with operational autonomy and policy independence to meet its mission, including bringing about market determined interest rates to help build efficient financial intermediation, including a stock exchange.
Myanmar is one of only 17 nations with dual exchange rates (i.e. different exchange rates for different purposes). Officially, US$1=6.4 kyats (pegged to the IMF's Special drawing rights since 1977). Unofficially (in the streets' “black market”), it had far exceeded 1,000 (in 2009) and now hovers around 800 kyats. The official rate is used for government revenue and for imports by some SEEs. As a result, state revenue is grossly underestimated.
From April 1 the kyat was allowed to float against the US dollar, managed using an auction system. The CBM will conduct sealed bids for a given amount of US dollar, from 14 authorised domestic bank dealers. In practice, market forces will be allowed to determine the kyat's value, within a trading band of 0.8% on either side of the reference rate set daily by the CBM (at 818 on April 2).
This move also calls for enhanced regulation and supervision of banks. From continuing trials over the next 12 months, interbank currency and money markets are expected to emerge. According to IMF: “Certain exchange restrictions can be removed immediately, for example, by allowing the use of all foreign currency bank account balances for imports, easing import licensing requirements and access to the newly-established foreign exchange retail counters.”
Currency reform is a delicate process and can have far reaching impact on ordinary folks. People still remember 1987 when the cancellation of certain bank notes by the late dictator Ne Win wiped out people's savings, and led to pro-democracy uprising the following year which the military crushed and killed thousands. Poor implementation could easily destabilise the economy.
The business community remains nervous with the latest move: (a) the new rate could become unstable given the narrow market; or worse, (b) strengthen further to the detriment of exports; or (c) prove difficult to maintain stable due to speculative influences. To be successful, the value of the kyat has to be seen as determined by the orderly interplay of market supply and demand.
New investment laws
The new investment laws, while likely to significantly improve Myanmar's business climate, won't solve its massive infrastructure deficit, or answer concerns over its unpredictable legal system, its dysfunctional banking system (ATMs and credit cards are not widely used), and its opaque policy making process. Still, the new laws are keenly awaited.
Foreign investors will be (i) granted a 5-year tax holiday; (ii) free from needing a local partner to start businesses; (iii) free to form joint ventures (with at least 35% foreign capital); (iv) allowed to lease land for up to 30 years, to be extended twice, 15 years each time; (v) required after five years, to employ at least 25% skilled local labour; (vi) exempted to export; (vii) guaranteed against nationalisation; (viii) free to repatriate 100% of profits; and (ix) allowed to import skilled labour.
A new telecommunications law is also expected to create four new phone licences, open to foreigners to bid. Myanmar has only 2-3 million (some estimate much less) mobile phone users today. The number of internet users is even smaller 110,000. The government's target is 50% wireless penetration by 2015.

What, then, are we to do?

The push is on for a really “open door” society. Developments are still evolving. All round support is needed to accelerate and secure political and economic reforms. They have come a long way from where they were a year ago. Today presents a real opportunity for permanent change.
We hear from Aung San Suu Kyi that the President is “sincerely motivated.” He has since moved firmly on both political and economic fronts. The challenge is for the West to recalibrate its response to reciprocate the bold reform initiatives. It would appear there is a new mind set in Myanmar.
The country has been secluded for so long that this time around, people with their new found freedom may understandably, have set their expectations too high to be realistic. Implementation can easily fall short. They have lost everything over the past 50 years. They have nothing more to lose. They want and deserve more in terms of really improving the plight of its impoverished people. They expect much better healthcare and education. Quick reforms in land and agriculture are also badly needed.
All this will require serious political effort by the West commensurate with that made by Myanmar. They urgently want to achieve enough progress to make the process irreversible. For them, there can be no turning back. “People have high hopes (and)... like to see progress on the streets.” I wish them well.
Former banker, Dr Lin is a Harvard educated economist and a British Chartered Scientist who now spends time writing, teaching & promoting the public interest. Feedback is most welcome; email: starbizweek@thestar.com.my

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MYR: Near-Term Weakness, Long-Term Strength

2012-04-11T00:27:00.000+08:00

Malaysia - Exchange Rate Policy - Nov 10 2011

MALAYSIA CURRENCY FORECAST
	Spot	Ave-11	Ave-12
MYR/US$	3.1200	3.1100	3.1800
MYR/EUR	4.2714	4.4500	4.3800
Overnight Policy Rate (%)	3.00	3.00	3.00
Source: BMI, November 10 2011

Short-Term Outlook

We see increasing risks that the Malaysian ringgit could experience further selling pressures over the coming weeks due to resurfacing troubles in the eurozone. Following a sell-off across regional currencies in September, the Malaysian ringgit depreciated by around 7.5% before finding support at MYR3.2048/US$. Further negative developments in the eurozone could see the ringgit retesting its recent low of MYR3.2048. A break below this level would present significant downside risks to our year-end target of MYR3.1500/US$ for the currency.

External Headwinds Remain
Malaysia - Malaysian Ringgit Spot, MYR/US$

Source: Bloomberg, BMI

Core View

Global economic headwinds, including the sovereign debt crisis in the eurozone and growing concerns of a hard-landing in China, should spell further weakness for risk-on currencies including the Malaysian ringgit over the coming months. However, despite these downside risks to the Malaysian ringgit's outlook in the short term, we expect the country's robust current account dynamics to provide support for a steady appreciation in the currency over the medium term. Furthermore, a positive economic outlook should underpin strong foreign direct investment (FDI) inflows and fuel demand for the ringgit over the coming quarters. Nonetheless, we expect further weakness in the currency in H112 before the ringgit resumes its bullish uptrend in H212. This means that the ringgit should average at around MYR3.1800/US$ in 2012 before strengthening to MYR2.8500/US$ by end-2013.

Despite cooling external demand, Malaysian exports have remained resilient in recent months. Trade exports grew 10.8% year-on-year (y-o-y) in August (up from 6.9% y-o-y in July) while outpacing that of imports at 6.8%, resulting in a healthy trade surplus of US$3.7bn. Although we expect the trade balance to narrow over the coming months, a surplus would nonetheless be positive for the ringgit. Meanwhile, FDI inflows are likely to remain strong in 2011 due to a positive response from foreign investors towards the government's ambitious Economic Transformation Plan (ETP). In fact, we have already seen compelling evidence that investor optimism over the ETP has been a key factor behind the surge in capital inflows into Malaysia in 2011. According to a survey conducted by the International Trade and Industry Ministry, local and foreign private sector companies are expected to commit MYR50.6bn (US$16.8) worth of investments in 2011. We are optimistic that these FDI inflows should provide further support for the currency over the coming quarters.

Strong Cushion Of Reserves

Malaysia - Foreign Reserves, US$mn

Source: Bloomberg, BMI

According to figures published by Bank Negara Malaysia (BNM), the recent wave of selling pressure in the foreign exchange market drained the country's foreign reserves by 4.1% from US$134.5bn in August to US$129.1bn by the end of September. However, it is worth noting that the central bank's intervention in the foreign exchange market is largely aimed at limiting short-term volatility in the exchange rate, rather than an attempt to defend against a balance of payments deficit. As the accompanying chart shows, despite the central bank's intervention, the country's foreign reserves remain above its pre-crisis peak. Our view that Malaysia's trade balance will remain in surplus while FDI inflows will continue to grow over the coming quarters means that we should see a continued accumulation of reserves.

We note that movements in the Malaysian ringgit and the Chinese yuan are highly correlated as a result of BNM's conscious efforts to keep Malaysian exports competitive. Given that we expect external demand to remain relatively subdued in 2012, export growth should continue to slow over the coming months. This poses a risk that the BNM may seek to limit any significant gains for the ringgit in order to prop up exports.

Catching Up With The Yuan ?

Asia - Spot MYR/US$ (LHS) & 12-Month CNY/USD NDF outright (RHS)

Source: Bloomberg, BMI

Risk To Outlook

FDI inflows will play a major role in sustaining a steady appreciation in the Malaysian ringgit over the coming quarters. To a great extent, this is heavily dependent on the successful implementation of the government's ETP. We warn that Malaysia's deteriorating fiscal position, which we expect to amount to a deficit of 5.6% of GDP in 2012, represents a significant risk to the government's ability to implement the ETP. Should investor sentiment start to wane on the back of growing concerns that the government could face difficulties in financing the ETP, a slowdown in FDI inflows would mean that the currency could see limited gains in H212.

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Kyat Could See Further Strength

2012-04-11T00:09:00.002+08:00

Myanmar - Economic Activity - Dec 06 2011

BMI View: On the heels of recent surprisingly fast-paced reforms, potential opportunities for Myanmar's economy are perhaps the highest they have been in over five decades. Moving forward, the economy could be set for a boom period in real estate, tourism, construction, and exports, but much will depend on the government's continued push towards reform and the eventual lifting of stifling US and EU sanctions. We see the Myanmar economy growing by 5.0% in 2012 following a 6.0% performance in 2011 even as growth in the rest of the world falls more sharply given the country's unique prospects of economic liberalisation.

One of Asia's best educated and wealthiest states prior to a military coup in 1962, Myanmar is now bereft with a cumbersome dual-rate exchange system, a major infrastructure deficit, and heavy sanctions from the US and EU following almost five decades of failed economic policy. However, on the heels of an election that was widely derided as a rigged handover of power from the military to its own factions in 2010, change may finally be coming in earnest to the beleaguered resource-rich state.

The culmination of recent (and surprisingly strong) reform efforts was US Secretary of State Hillary Clinton's November 30 visit to Myanmar, during which she met with President Thein Sein and political activist Aung San Suu Kyi. The visit represented the first time such a high level official from the US had visited Myanmar since 1955 and heralded a major thaw in relations between the two countries. Following such an extended period in isolation, the recent pace of change has been relatively breakneck and could open up myriad opportunities for Myanmar's struggling economy.

Dependence On China To Wane

Myanmar's sudden shift towards political reform is highly indicative of its intentions to stem its growing reliance on giant neighbour China. Over the past 18 months, Myanmar has received 20% more foreign direct investment inflows than it had over the preceding 20 years combined, with China responsible for 70%. President Thein Sein's September decision to halt the China-backed US$3.6bn Myitsone dam project signalled that the new government is serious about balancing the playing field with China, and to do so, Naypyidaw has now turned towards the West.

Shooting Higher

Myanmar - Stock Of Foreign Direct Investment, US$mn

Source: BMI, UNCTAD, Myanmar CSO

This is not to say that Myanmar's relationship with China is likely to deteriorate precipitously. Given China's thirst for Myanmar's natural gas and copper resources, and Myanmar's continued need for Chinese investment, the two countries' mutual interests promise to keep relations close. Moving forward, China is very likely to remain Myanmar's closest ally and largest investor as was indicated by head of Myanmar's armed forces General Min Aung Hlaing's auspicious visit with putative future Chinese president Xi Jinping just days before Clinton's arrival.

Lifting Of Sanctions Could Usher In New Era

Still, détente with the US in particular could present monumental economic opportunities for Myanmar. Since 1997, the US has forbidden all new investment by American companies into Myanmar as well as most Myanmar exports to the US. While the US has repeatedly stated that Myanmar's government will have to show considerably more progress on the political reform front before it can consider reducing or lifting sanctions, Clinton's visit is a major step forward, indicating that the US is likely to reward Myanmar further if the reform process moves ahead.

The lifting of sanctions by the US and EU would solidify Myanmar's re-emergence into the international economy and could eventually set the stage for the country to build its own economic miracle. Rich in natural gas, timber, gems, metals, and myriad other valuable natural resources, Myanmar could potentially become a resource exporting powerhouse. Furthermore, with a literacy rate near 85% and at least 5mn English speakers nationally (most of whom live in Yangon) out of a total population near 60mn, Myanmar possesses considerable human capital.

Secondary Axis Required

Asia - Annual Exports Of Goods, US$bn (Myanmar RHS)

Source: BMI

Still, it should be noted that corruption remains extremely widespread across Myanmar and will continue to plague its poor business environment for an extended period despite even swift wide-ranging reform. Myanmar's current state is underscored by Transparency International's most recent Corruption Perceptions Index rankings, which place the country second worst in the world, tied with Afghanistan and above only Somalia.

Real Estate, Tourism Set To Boom?

In the short term, Myanmar's real estate and tourism sectors stand to gain immensely from an opening of the economy. In stark contrast to just one year ago, when struggling local hoteliers were converting chronically vacant rooms to office space, room shortages are already cropping up in the country's largest and most economically active city, Yangon, as businessmen and tourists alike are drawn towards the country's rapidly changing atmosphere.

In the real estate sector, even though prices have risen for every year for the past 20 years (according to media and anecdotal reports), the hopes that reform will lead to reduced limitations on foreign ownership should keep already lofty prices underpinned through 2012.

With cash being far too risky for most wealthy Burmese to hold and foreign banking not an option for almost anyone holding a substantial amount of wealth, rich Burmese have plunged their capital into real estate, sending the market surging over the past few years. Prices have been reported as high as US$1,245 per square foot in the most sought after locations in Yangon, with properties in some upscale neighbourhoods hovering around US$375 to US$625.

Still, if and when serious economic reforms take place, foreign demand could lead to massive speculation in the market, driving prices even further skywards over the medium term in what remains an exceedingly underdeveloped market. Furthermore, whereas booming property prices have thus far been restricted to a very limited section of Yangon, they could begin to spread rapidly should economic reforms move ahead as hoped. In such a scenario, a lack of office space in Yangon (where there is only 540,000 square feet of office space, or the equivalent of one New York skyscraper) and across the country is also likely to portend a construction boom.

Kyat Could See Further Strength

Despite having the brightest outlook in nearly six decades, the Myanmar economy still faces major challenges before it can enter the pantheon of South East Asian miracle countries like Vietnam and Thailand. Standing in its way is a dilapidated exchange rate mechanism, where the black market rate of the Myanmar kyat to the US dollar is more than 120 times greater than the official government rate. As the official government rate of MMK6.4355/US$ is rarely (if ever) used to settle transactions, the black market rate, currently at MMK776.00/US$, is the effective exchange rate.

Although the government is working with the IMF in order to move towards a single-rate mechanism, it lacks the ability to control the currency in a meaningful way. In light of the suddenly reform-minded government, as well as historic communication with the US, we now see the possibility of continued strength in the kyat despite it having appreciated more than 20% over the past two years. As the economy opens up, foreign demand for the kyat will surge, underpinning the currency's already strong historical price.

Significant Upside Risks To Growth Forecast

Despite the growing chance of renewed recession in the US and EU, Myanmar's starting position as a nearly completely isolated economy means that it bears little exposure to the global economy's woes. As a result, risks to our growth forecast of 5.0% for 2012 are weighted heavily to the upside. Should either the US or EU ease sanctions considerably, we would consider revising our forecast upwards.

MYANMAR - ECONOMIC ACTIVITY
	2011		2012		2013		2014		2015		2016
Nominal GDP, MMKbn ¹	45,024.2	f	51,648.3	f	59,247.1	f	67,963.8	f	77,963.0	f	89,433.3	f
Nominal GDP, US$bn ¹	55.5	f	60.9	f	67.1	f	74.0	f	81.6	f	90.0	f
Real GDP growth, % change y-o-y ¹	6.0	f	5.0	f	5.0	f	5.0	f	5.0	f	5.0	f
GDP per capita, US$ ¹	890	f	956	f	1,033	f	1,117	f	1,207	f	1,305	f
Population, mn ²	62.4	f	63.7	f	65.0	f	66.3	f	67.6	f	68.9	f
Notes: ^f BMI forecasts. Sources: ¹ Asian Development Bank. ² World Bank/UN/BMI.

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The Iraqi government's goal of reducing its budget deficit by two-thirds by the end of 2014

2012-04-10T23:06:00.000+08:00

Iraq - Fiscal Policy - Nov 10 2011

BMI View: Iraqi Finance Minister Rafi al-Eisawi's plan to reduce the budget deficit by two-thirds, which relies on increasing oil exports and privatising state-owned enterprises, is feasible but will require a significant degree of political will in order to reform the business environment. Given our view that political instability will retard the pace of reforms, we maintain our budget deficit forecasts of 2.7% and 2.6% of GDP in 2012 and 2013 respectively.

The Iraqi government's goal of reducing its budget deficit by two-thirds by the end of 2014 is achievable, though will require a high degree of political will. On October 22, media sources quoted Finance Minister Rafi al-Eisawi as stating that the government planned to reduce the budget shortfall by increasing oil production and privatising state-owned enterprises (SOEs). Given the high degree of political instability in the country, we expect the business environment reforms necessary to attract foreign investment into SOEs will take a significant amount of time to enact (and therefore lead to but a few acquisitions, if any, over the medium term). Therefore, we maintain our budget deficit forecasts of 2.7% and 2.6% of GDP in 2012 and 2013 respectively.

Hydrocarbons Are The Easier Route

Fiscal revenues are set to increase dramatically over the coming years, mostly due to advances in hydrocarbon production that will allow for greater exports. Our Oil and Gas research team projects oil production to rise from an average of 2.8mn barrels per day (b/d) in 2011 to 7.5mn b/d by 2016, with export volumes rising from 2.0mn b/d to 6.6mn b/d over the same period. Although we foresee declining international energy prices over the medium term, from an average OPEC basket price of US$102 per barrel (/bbl) in 2011 to US$99/bbl in 2012 and US$97/bbl in 2013, the effect of rapidly rising oil production, and in turn exports, will cause oil revenues to rise sharply (see accompanying chart).

Hydrocarbon Revenues To Pour In

Iraq - Forecasts For Value Of Petroleum Exports

Source: BMI

Privatisations Entail Greater Complexity

Privatisation is another potential source of revenues, according to Eisawi, but we see several obstacles to successful sales of SOEs. Reforming the economy from a state-centric system to a market-based one is a high priority for the government, and there is certainly a large pool of potential assets available for privatisation (with 177 state-owned firms in the country). Approximately 43% of all Iraqi state-owned firms (a total of 76 enterprises) fall under the authority and supervision of the Ministry of Industry and Minerals (MIM), with ownership of 250 factories. Sectors span the areas of agriculture, transportation, telecommunications, utilities, construction, hydrocarbons, and financial services, among others, and given the high rates of growth that the country is projected to see (see our online service, November 8, 'Double-Digit Growth Ahead'), many of these could be attractive targets for investors.

A Large Pool Of Potential Assets For Sale

Iraq - Breakdown Of Number Of SOEs By Ministry

Source: BMI, Iraq Task Force For Economic Reforms/UN/World Bank

That said, we note that there a number of obstacles to the privatisation plans, and a high degree of political will would be required to ensure that the business environment is attractive enough for investors to bid. The lack of a favourable environment has proven to be a decisive factor in previous failed attempts by the MIM to establish public-private partnerships (PPPs) between SOEs under its authority and investors, according to the US Special Inspector General For Iraq Reconstruction (SIGIR).

A series of laws have yet to be updated in order to address potential legal issues of privatisation, and while an Economic Reform Law is currently being developed, changes also need to be made to the country's Companies Law and Investment Law. Furthermore, investors would need assurances that they would not receive any legal backlash from laying off workers (as many SOEs have excessively large payrolls). However, there are significant concerns regarding political stability in the country, which will slow down the pace of reforms and dampen investor interest (see our online service, October 19, 'Mounting Challenges To Stability').

Success Would Help On P&L

Should Baghdad succeed in spinning off even a few of its SOEs, we would expect to see substantial benefits. First, the government would see a large (albeit temporary) source of new revenue. Second, and more importantly, fiscal expenditures related to maintaining state-owned firms would decrease, boding well for the budget. Many SOEs have suffered heavy damage to their assets, rendering the firms inoperable and therefore unable to earn revenues, yet workers are kept on payrolls and paid from government coffers. Others are able to function but have a bloated workforce. These firms collectively employ over 633,000 workers, and employee compensation expenses took up 41.5% of total fiscal expenditures (US$22.8bn out of total expenses of US$55.0bn) in 2010. Thus, privatisations would have a major impact on both revenues and expenses.

IRAQ - FISCAL POLICY
	2008	2009	2010		2011		2012		2013		2014		2015		2016
Fiscal revenue, IQDbn ²	80,252.0	55,209.0	69,521.0	e	104,192.9	f	139,873.7	f	187,050.4	f	220,897.2	f	258,395.4	f	304,708.9	f
Revenue, % of GDP ²	51.6	43.8	45.0	e	51.2	f	56.8	f	62.5	f	64.7	f	66.7	f	68.8	f
Fiscal expenditure, IQDbn ²	59,403.0	52,567.0	64,351.0	e	104,425.2	f	146,436.1	f	194,760.0	f	228,577.7	f	261,439.3	f	291,748.0	f
Expenditure, % of GDP ²	38.2	41.7	41.7	e	51.3	f	59.5	f	65.1	f	66.9	f	67.4	f	65.9	f
Budget balance, IQDbn ²	20,849.0	2,642.0	5,170.0	e	-232.3	f	-6,562.4	f	-7,709.6	f	-7,680.5	f	-3,043.9	f	12,960.9	f
Budget balance, % of GDP ²	13.4	2.1	3.3	e	-0.1	f	-2.7	f	-2.6	f	-2.2	f	-0.8	f	2.9	f
Primary balance IQDbn ^1,2	21,757.0	3,343.4	5,988.3	e	3,745.7	f	-2,584.4	f	-2,912.6	f	-2,680.5	f	1,956.1	f	17,960.9	f
Primary balance % of GDP ^1,2	14.0	2.7	3.9	e	1.8	f	-1.0	f	-1.0	f	-0.8	f	0.5	f	4.1	f
Notes: ^e BMI estimates. ^f BMI forecasts. ¹ Fiscal balance stripping out interest payments on government debt; Sources: ² CBI/BMI.

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Will Iraq Devalue Dinar ?

2012-04-10T22:47:00.000+08:00

Iraq - Exchange Rate Policy - Nov 10 2011

BMI View: There is a strong case to be made in support of the argument for a devaluation of the Iraqi dinar, including improved fiscal dynamics, greater reserve accumulation, and export competitiveness. However, we believe political and other considerations in support of the current peg of IQD1,170/US$, including inflation and social stability, will prevail over the medium term.

We do not foresee a major change in the country's exchange rate policy going forward (apart from a potential redenomination - see our online service, April 15, 'Redenomination Of Dinar Will Have Negligible Impact). Local media sources reported that the Central Bank of Iraq (CBI) had sold US$205mn on October 31, above the prior week's sale of US$154mn, whilst it had consistently sold similar sums in recent quarters.

This peg, which is being set at an artificially high level, is costing the country billions of dollars per year in foreign exchange and reducing the government's revenues in local terms. However, it appears that Baghdad has continued this policy in order to limit imported inflationary pressures and to promote economic stability in the country, and we believe the policy will continue over the medium term.

The Case For Devaluation

Devaluation of the dinar would bring several benefits, most notably related to fiscal revenues. The government relies heavily on oil exports for its revenues, and a weaker dinar would allow each dollar of hydrocarbon receipts to go further in paying dinar-denominated expenses. Baghdad has been eager to invest in capital projects, particularly those related to electricity, energy, and housing, and also increased current expenditures on items such as subsidies and a larger payroll. A devalued dinar would go a long way towards setting the country on a path towards greater fiscal stability (see accompanying chart).

Depreciation Would Improve Fiscal Accounts Dramatically

Iraq - Budget Balance Under Two Scenarios

Source: BMI

A weaker local currency would also allow the government to accumulate reserves at a faster rate. As stated earlier, the current peg is causing the CBI to sell millions of dollars every week, and those funds could instead be used to build up foreign reserves even more. While Iraq's reserves, which amounted to US$55.2bn at the end of September, are far from being depleted, continued sales of foreign exchange may not be sustainable over the long term.

Cashing In On Higher Energy Prices

Iraq - Net Foreign Reserves, US$bn

Iraq - Net Foreign Reserves, US$bn

Similar to many countries across the Middle East, Iraq is seeking to diversify its economy away from oil, and a devaluation would make its exports more competitive in the global marketplace. With hydrocarbons making up over 90% of all exports and over half of GDP, along with double-digit rates of unemployment, a competitive export sector would facilitate greater investment in sectors other than energy and, in turn, create more employment opportunities.

Sticking With The Status Quo

While the aforementioned arguments suggest strong economic cases for a devaluation, we believe other factors will outweigh them over the medium term. Iraq is a major importer of food items, being among the world's top ten importers of wheat. Food also takes up a large portion of Iraqis' disposable income (as evidenced by the fact that food makes up over 60% of the consumer price basket). Thus, the importance of maintaining low food prices cannot be discounted, particularly at a time when price shocks have sparked large-scale unrest across the region.

Stronger Exchange Rate Has Contributed To Lower Inflation

Iraq - IQD/US$ Exchange Rate (LHS) And Inflation, % chg y-o-y (RHS)

Source: BMI, Bloomberg, COSIT

Higher food prices due to a devaluation would not only have an impact on the country's political risk profile, they would also force higher government spending. Baghdad currently runs a costly Public Distribution System, which provides a ten-item food basket to the large majority of households every month. This programme is intended to limit the impact of food prices rises on the public, and the government has allocated US$3.4bn of its 2011 budget (approximately 6%) to paying for all the goods. Thus, while a devaluation would make every petrodollar more valuable in local currency terms, there may be unintended consequences such as a larger food bill.

Projecting a sense of stability is a major goal of the government, as it would increase investor appetite for foreign direct investment (FDI), and the current peg to the dollar gives the impression of contributing to macroeconomic stability in our view. By relegating monetary policy to the management of the Federal Reserve, Baghdad is allaying investor fears that a mistake in monetary policy could send the economy crashing in the medium term. As a result, while export competitiveness is a major consideration, we believe the aim of building investor sentiment by linking Iraqi monetary policy to that of the US is an even more decisive factor and will continue to be over the medium term.

IRAQ - EXCHANGE RATE
	2008	2009	2010	2011		2012		2013		2014		2015		2016
Exchange rate IQD/US$, ave ¹	1,193.18	1,169.07	1,169.00	1,170.00	f	1,170.00	f	1,170.00	f	1,170.00	f	1,170.00	f	1,170.00	f
IQD/US$, ave % change y-o-y ¹	-4.9	-2.0	-0.0	0.1	f	0.0	f	0.0	f	0.0	f	0.0	f	0.0	f
Exchange rate IQD/EUR, ave ¹	1,746.36	1,638.00	1,551.96	1,673.10	f	1,614.60	f	1,521.00	f	1,462.50	f	1,462.50	f	1,462.50	f
IQD/GBP, ave ¹	2,200.53	1,813.50	1,813.50	1,907.10	f	1,942.20	f	1,989.00	f	2,047.50	f	2,047.50	f	2,047.50	f
IQD/AUD, ave ¹	1,012.37	928.23	1,075.23	1,224.99	f	1,053.00	f	877.50	f	877.50	f	877.50	f	877.50	f
JPY/IQD, ave ¹	0.08	0.08	0.07	0.07	f	0.07	f	0.08	f	0.08	f	0.08	f	0.09	f
IQD/CNY, ave ¹	171.04	171.32	172.31	180.69	f	182.96	f	184.81	f	188.58	f	192.43	f	196.36	f
Notes: ^f BMI forecasts. Sources: ¹ BMI.

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PHB announces income distribution of RM32m

2012-04-10T09:07:00.002+08:00

Pelaburan Hartanah Bhd (PHB), which declared an interim dividend distribution of RM32 million for its Amanah Hartanah Bumiputera (AHB) unit trust fund for the six-month period ended March 31, 2012, plans to expand the size of the fund.

PHB chief executive officer (CEO) and managing director (MD) Datuk Kamalul Arifin Othman said the fund is looking to buy more completed and income-yielding assets, as well as expanding its landbank and venturing into more property development projects.

“To further ensure the PHB’s portfolio remains up-to-date and competitive, sustained initiatives have been executed to actively acquire a more dynamic mix of properties,” said Kamalul Arifin in the press release. Yesterday, it declared the interim dividend distribution which amounts to 3.25 sen per unit.

This is the third income distribution to unit holders by AHB. Last year, a total of RM50 million was paid out — RM19 million on the first income distribution and RM31 million in the second.

AHB income distribution is payable on a six-monthly basis for periods ending March 31 and Sept 30, each year, and is tax-exempt.

One billion AHB units were launched in November 2010, and all were fully subscribed within three months, said PHB, with the highest take up in the Federal Territory (49.67%) followed by Selangor (14.51%).

To date, the fund has invested in eight completed properties in and around the Klang Valley, including the Darul Ehsan Medical Centre Specialist Hospital in Shah Alam, Selangor.

In October, PHB signed an agreement for a property development project with Gleneagles Hospital Kuala Lumpur, involving the extension of the hospital, at a cost of RM138 million.

Gleneagles will be granted a 15-year lease for the extension, with an option to extend the period for another 15 years.

The project is expected to be completed within three years.

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Bank Rakyat Declares 20 Per Cent Record Dividend For 2011 Financial Year

2012-03-28T14:13:00.001+08:00

KUALA LUMPUR, March 26 (Bernama) -- Bank Rakyat Monday declared a record dividend of 20 per cent or RM435 million payout for the 2011 financial year.

The cooperative bank said 15 per cent or a cumulative RM330 million will be paid in cash and the remaining five per cent totalling RM105 million will be offered in the form of bonus share.

The bank also declared 20 per cent dividend in 2008.

In announcing the dividend and the bank's financial performance for last year, Domestic Trade, Cooperatives and Consumerism Minister Datuk Seri Ismail Sabri Yaakob said the higher dividend was made possible by the 17.6 per cent higher pre-tax profit or RM301.9 million to RM2.02 billion, the highest since the bank's inception in 1954.

The pre-tax profit for 2010 was RM1.72 billion.

"The record pre-tax profit was achieved from the bank's focus on financing, mainly personal loans, besides quality asset appreciation despite challenges in the domestic banking industry," he said.

Ismail Sabri said the bank's gross revenue rose by 13.3 per cent to RM5.5 billion from RM4.86 billion in 2010, with personal loans remaining as the main profit contributor besides the marked growth in the Ar-Rahnu Islamic pawnbroking business and investments.

On this year's outlook, Ismail Sabri said Bank Rakyat aims to achieve RM2.1 billion in pre-tax profit, driven by personal loans and Ar-Rahnu revenue.

Going forward, the minister said Bank Rakyat planned to open nine branches, one each in Pahang, Johor, Selangor, Kelantan and Negeri Sembilan and two in Terengganu and Sabah, respectively.

He also said the bank intends to open 10 Islamic panwnbroking franchise outlets, Ar-Rahnu X'change, this year nationwide.

Currently, Ar-Rahnu services are available at 135 branches and there are 38 Ar-Rahnu X'Change outlets.

Ismail Sabri said low non-performing loans at 2.8 per cent and the people's confidence in the bank's services are among the main contributors to the bank's better financial performance this year.

Asked on the bank's long-term prospects. Ismail Sabri said the bank should increase commercial financing to strike a balance on its dependence on personal loans merely.

"We cannot heavily depend on personal loans forever. I believe Bank Rakyat will come up with a plan to increase commercial financing," he said.

Last year, the bank's revenue from financing rose to RM4.46 billion vis-a-vis RM4.04 billion in 2010, 91.4 per cent or RM4.07 billion came from consumer banking and 8.6 per cent or RM385.2 million from commercial banking.

The bank also earned RM92 million from fee-based revenue last year, 75.7 per cent was contributed by will-based revenue, takaful (Islamic insurance) commission and automated teller machine service fee.

-- BERNAMA

Greece Makes Pact With the Devil Over Gold

2012-02-24T08:32:00.003+08:00

The one and only thing that might possibly spare Greece the agony of a completely worthless currency is Greece's small hoard of 111 tons of gold.

Pact With the Devil

Yet, in the fine print in the latest deal, Greece’s lenders will have the right to seize its gold reserves according to the New York Times article Growing Air of Concern in Greece Over New Bailout.

In the fine print of the 400-plus-page document — which Parliament members had a weekend to read and sign — Greece relinquished fundamental parts of its sovereignty to its foreign lenders, the European Commission, the European Central Bank and the International Monetary Fund.

“This is the first time ever that a European and probably an O.E.C.D. state abdicates its rights of immunity over all its assets to its lenders,” said Louka Katseli, an independent member of Parliament who previously represented the Socialist Party, using the abbreviation for the Organization for Economic Cooperation and Development. She was one of several independents who joined 43 lawmakers from the two largest parties in voting against the loan agreement.

Ms. Katseli, an economist who was labor minister in the government of George Papandreou until she left in a cabinet reshuffle last June, was also upset that Greece’s lenders will have the right to seize the gold reserves in the Bank of Greece under the terms of the new deal, and that future bonds issued will be governed by English law and in Luxembourg courts, conditions more favorable to creditors.

Causing a Nightmare Scenario

On Tuesday, Finance Minister Evangelos Venizelos defended the new debt agreement, calling it “the most significant deal in Greece’s postwar history” and asserting that it had “averted a nightmare scenario.”

Today this same puppet of the Troika installed government claims, as he has been for weeks, No Loan Deal Means Absolute Catastrophe

Greece Finance Minister Evangelos Venizelos said Thursday Greece would face an absolute catastrophe if it didn't approve the terms demanded by international creditors in exchange for a second bailout, which includes a EUR107 billion debt write-down plan.

Greece is already in a state of absolute catastrophe. The one thing 100% guaranteed to make matters worse for Greece is if Greece lost its hoard of gold to the thieves and plunderers at the IMF and Troika.

Rather than "averting a nightmare scenario" that pact is going to "cause" a nightmare hyperinflation scenario.

Value of 111 Tons of Gold

One tonne = 1000 kilograms = 32150.746 troy ounces.
At $1780 per troy ounce, the value of that gold is roughly $6.35 billion.

Given an estimated size of the Greek economy at $290 billion or so, that is not a huge hoard.

However, something is better than nothing as Zimbabwe proves. Something is enough to prevent a currency from going completely worthless, although obviously not enough to prevent a massive devaluation.

Still Time

There is still time for Greece to come to its senses and reject the deal. Also recall the conditions of the deal require a constitutional change and that is impossible before 2013.

For details, please see Greece Needs New Constitutional Provision Imposed by the Troika; Slight Problem, Constitutionally It Can't Do it

Biggest Hope for Greece is Germany

In an enormous irony, Germany may be the biggest hope for Greece. Although France and other countries do want this pact to go through, Germany's words and actions prove that Germany does not.

Germany has put up roadblock after roadblock attempting to get Greece to scuttle the deal, only to have fools like Finance Minister Evangelos Venizelos agree to them.

It may be up to Germany to come up with still more ludicrous demands in hope that the Greek finance minister and Greek politicians finally get the message "it's not wise to make a pact with the Troika devil", especially one that requires Greece to relinquish its gold.

By Mike "Mish" Shedlock

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Why Is Global Shipping Slowing Down So Dramatically?

2012-02-10T19:42:00.000+08:00

If the global economy is not heading for a recession, then why is global shipping slowing down so dramatically? Many economists believe that measures of global shipping such as the Baltic Dry Index are leading economic indicators. In other words, they change before the overall economic picture changes. For example, back in early 2008 the Baltic Dry Index began falling dramatically. There were those that warned that such a rapid decline in the Baltic Dry Index meant that a significant recession was coming, and it turned out that they were right. Well, the Baltic Dry Index is falling very rapidly once again. In fact, on February 3rd the Baltic Dry Index reached a low that had not been seen since August 1986. Some economists say that there are unique reasons for this (there are too many ships, etc.), but when you add this to all of the other indicators that Europe is heading into a recession, a very frightening picture emerges. We appear to be staring a global economic slowdown right in the face, and we all need to start getting prepared for that.
If you don't read about economics much, you might not know what the Baltic Dry Index actually is.
Investopedia defines the Baltic Dry Index this way....

A shipping and trade index created by the London-based Baltic Exchange that measures changes in the cost to transport raw materials such as metals, grains and fossil fuels by sea.

When the global economy is booming, the demand for shipping tends to go up. When the global economy is slowing down, the demand for shipping tends to decline.
And right now, global shipping is slowing way, way down.
In fact, recently there have been reports of negative shipping rates.
According to a recent Bloomberg article, one company recently booked a ship at the ridiculous rate of negative $2,000 a day....

Glencore International Plc paid nothing to hire a dry-bulk ship with the vessel’s operator paying $2,000 a day of the trader’s fuel costs after freight rates plunged to all-time lows.
Glencore chartered the vessel, operated by Global Maritime Investments Ltd., a Cyprus-based company with offices in London, Steve Rodley, GMI’s U.K. managing director, said by phone today. The daily payments last the first 60 days of the charter, Rodley said. The vessel will haul a cargo of grains to Europe, putting the carrier in a better position for its next shipment, he said.

So why would anyone agree to ship goods at negative rates?
Well, it beats the alternative.
This was explained in a recent Fox Business article....

“They’re doing this because you can’t just have ships sitting. If they sit too long, then that’s hard on the ships. They have to keep them loaded and moving from port to port,” said Darin Newsom, senior commodities analyst at DTN.

If the owner of a ship can get someone to at least pay for part of the fuel and the journey will get the ship closer to its next destination, then that is better than having the ship just sit there.
But just a few short years ago (before the last recession) negative shipping rates would have been unthinkable.
Asian shipping is really slowing down as well. The following comes from a recent article in the Telegraph....

Shanghai shipping volumes contracted sharply in January as Europe's debt crisis curbed demand for Asian goods, stoking fresh doubts about the strength of the Chinese economy.

Container traffic through the Port of Shanghai in January fell by more than a million tons from a year earlier.
So this is something we are seeing all over the globe.
Another indicator that is troubling economists right now is petroleum usage. It turns out that petroleum usage is really starting to slow down as well.
The following is an excerpt from a recent article posted on Mish's Global Economic Trend Analysis....

As I have been telling you recently, there is some unprecedented data coming out in petroleum distillates, and they slap me in the face and tell me we have some very bad economic trends going on, totally out of line with such things as the hopium market - I mean stock market.
This past week I actually had to reformat my graphs as the drop off peak exceeded my bottom number for reporting off peak - a drop of ALMOST 4,000,000 BARRELS PER DAY off the peak usage in our past for this week of the year.

I would encourage you to go check out the charts that were posted in that article. You can find them right here. Often a picture is worth a thousand words, and those charts are quite frightening.
Over the past few days, I have been trying to make the point that nothing got fixed after the financial crisis of 2008 and that an even bigger crisis is on the way.
Yes, the stock market is flying high right now.
Yes, even "Dr. Doom" Nouriel Roubini is convinced that the stock market will go even higher.
But this rally will not last that much longer.
Wherever you look, global economic activity is slowing down. The UK economy and the German economy both actually shrank a bit in the fourth quarter of 2011. About half of all global trade involves Europe in one form or another. As Europe slows down, it is going to affect the entire planet.
Many thought that the German economy was so strong that it would not be significantly affected by the problems the rest of Europe is having, but that is turning out not to be the case.
In a new article by CBS News entitled "German economic slowdown worse than expected?", we are told that industrial production in Germany is declining even more than anticipated....

German industrial production fell 2.9 percent in December from the month before, according to official data released Tuesday, suggesting the country's economic slowdown could be worse than expected.

So don't believe all the recent hype about an "economic recovery". Europe is heading into a recession, Asia is slowing down and the U.S. will not be immune.
Despite what you hear from the mainstream media, the truth is that the U.S. economy is not improving and incredibly tough times are ahead.
Thankfully, those of us that are aware of what is happening can make preparations for the economic storm that is coming. Others will not be so fortunate.

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IMF Warns of Deepening Debt-Crisis Recession

2012-01-26T10:00:00.005+08:00

The International Monetary Fund cut its forecasts for growth in 2012 on Tuesday and warned of a possible deepening downturn in Europe.

Revising an earlier forecast, the IMF predicted that the global economy will expand 3.3%, this year, down from 3.8% last year and lower than the 4% growth it had forecast last September. “The world recovery, which was weak in the first place, is in danger of stalling,” IMF chief economist Olivier Blanchard said. “But there is an even greater danger, namely that the European crisis intensifies.

In this case, the world could be plunged into another recession,” he said. Oliver Blanchard is spot on in identifying a serious threat to the world economy. His only error is from where he sees the threat coming and how bad it is. On Monday IMF chief Christine Lagarde warned of a worst case scenario in the form of a possible Depression-era collapse in the global economy. If however Europe follows IMF recommendations, she said, the fund expects the euro zone to face a mild recession this year.

Nonetheless, it should be emphasised that this is still a “best case scenario.” Economists are increasingly concerned that Greece will default within weeks. Even worse, the larger economies of Spain and Italy are now under threat, pushing up the cost for Rome and Madrid to borrow to cover the risk of default. The IMF 2012 forecasts that the economies of both countries will contract, with Italy facing a contraction of 2.2% and Spain a fall of 1.7%.

Neither is expected to recover economically until 2014, at least. Meanwhile bigger economies such as the U.S., Japan, the U.K, France and Germany are expected to expand by only 1.5% on average next year, a growth rate too slow to curb rising unemployment levels. Moreover, the IMF forecast of slowing global economic growth is based on the assumption that the world will not see a dramatic rise in the price of oil. If that were to happen then the IMF’s most optimistic forecast would be null and void, making its worst case scenario seem optimistic. Iran’s recent rhetoric about “closing the Straits of Hormuz” seems intended to play on such concerns; with growing fears that a dramatic rise in the oil price could completely undermine prospects for global economic recovery.

Although Tehran’s ambassador to the U.N. may have only been bluffing when he spoke recently about the “option” of closing the Straits, he seems to have hit a raw nerve. Within days Western powers despatched naval vessels to the Straits of Hormuz – assuming, of course, that they had not planned this some time ago and were merely using his threats as an excuse. Either way, as the European Union voted to impose harsher sanctions on Iran’s oil – and Iran responded by suggesting it could close the waterway through which 35% of the world’s oil is shipped – French, British and American warships were all sailing toward the gulf.

In response Iran declared defiantly that sanctions would provide it with an economic stimulous and repeated threats to close the straits. Between claim and counter-claim and trading threats the West and Iran seem to be on a course for a confrontation. If it erupts into armed conflict then the world may not only face a slowdown in growth and financial meltdown.

For both Russia and China have warned that they view the prospect of conflict with Iran with grave concern. In fact Russia has repeated these warnings recently, as if to emphasise how seriously it views the situation. While China signalled a clear rejection of any new sanctions on Iranian oil. We live in dangerous times. They could be about to become even more perilous.
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Hormuz oil spike could spark global recession

2012-01-05T09:00:00.004+08:00

Escalating tensions with Iran have pushed the cost of crude oil higher as fears mount that a 1970s-style jump in the oil price could send both Eastern and Western economies into recession. Iran's threat to cut off access to the Strait of Hormuz – through which 40pc of the world's oil is shipped – has provoked an angry rebuke from the US, which has the Fifth Fleet nearby.

Today, French foreign minister Alain Juppe supported the American hard line with Tehran, and urged European leaders to impose an embargo on Iranian oil exports and freeze Iranian central bank assets by the end of this month. Currently, Italy imports 13.3pc of its oil from Iran, Spain 9.6pc, Greece 34.7pc and France 4.4pc. International strains over Iran's nuclear ambitions were further exacerbated by the country staging three days of war games in the Hormuz area. However, Tehran said that increased sanctions could result in it closing off the strait, which it declared was "easier than drinking a glass of water".

But Iran's own oil supply is only part of the problem - the real threat is that disruption would halt the passage of oil from other Middle Eastern countries such as Saudi Arabia - the world's largest oil producer – and Kuwait. Qatar's liquified natural gas supplies would also be affected. Roy Jordan, of FACTS Global Energy, said: "If supply through the Strait of Hormuz is cut off, just about everybody in the East and West would be in trouble. It would disrupt major proportion of the world's oil and gas at a time when many of the world's economies are very fragile and would not be able to sustain a serious oil spike."

Mr Jordan said that its effect on Asian countries, which are driving world growth, would be devastating. China, Iran's number one customer, imports 10pc of its oil supply from Iran. "All it would take for Iran is a few mines put into sea, and ship owners and insurance companies would not go up there," said Mr Jordan. Brent crude rose $3.74 at $111.12 and Mr Jordan warned that if Iran's threat was fulfilled "there would be an instant escalation of price – we saw $147 in 2008 – and it could definitely reach that level and even higher." In 1974, after the Yom Kippur war and Iran's own embargo of its oil to countries supporting Israel, oil prices increased 400pc in six months.

However, Iranian officials have threatened to close the strait in the past but have not done so. But according to Mr Jordan if sanctions became such that Iran couldn't sell its oil then the country would have nothing to lose in its dealings with the West. "This is a situation we must avoid," he said. If no resolution is found, or hostilities break out, the International Energy Agency would have to force its members to try to make up the shortfall by releasing supplies from their reserves. But alternatives to Hormuz are few and far between. Iraq can already get its production into the Mediterranean through a pipeline across Turkey and a new Abu Dhabi pipeline is being built. This will come on stream early this year with 1m barrels of capacity, compared to the 18m that travel through Hormuz.

However, a recent article in Mashreq News, which is close to the Iranian military circles, pointed out that the new construction was "within range of Iran's missiles". Analysts suggested that while the closure of Hormuz remained a threat a premium was already priced into internationally traded crude that would slowly tick higher and higher. But if the strained supply days of the 1970s were to return, governments – including the UK's – would have to enforce demand restraint, with only essential services like ambulances and police getting access to petrol.

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A Hedge Fund Insider Explains Why Retail Investors Should Flee The Stock Market

2011-12-07T09:21:00.001+08:00

Regular readers know that ever since 2009, well before the confidence destroying flash crash of May 2010, Zero Hedge had been advocating that regular retail investors shun the equity market in its entirety as it is anything but "fair and efficient" in which frontrunning for a select few is legal, in which insider trading is permitted for politicians and is masked as "expert networks" for others, in which the government itself leaks information to a hand-picked elite of the wealthiest investors, in which investment banks send out their "huddle" top picks to "whale" accounts before everyone else gets access, in which hedge funds form "clubs" and collude in moving the market, in which millisecond algorithms make instantaneous decisions which regular investors can never hope to beat, in which daily record volatility triggers sell limits virtually assuring daytrading losses, and where the bid/ask spreads for all but the choicest few make the prospect of breaking even, let alone winning, quite daunting. In short: a rigged casino. What is gratifying is to see that this warning is permeating an ever broader cross-section of the retail population with hundreds of billions in equity fund outflows in the past two years. And yet, some pathological gamblers still return day after day, in hope of striking it rich, despite odds which make a slot machine seem like the proverbial pot of gold at the end of the rainbow. In that regard, we are happy to present another perspective: this time from a hedge fund insider who while advocating his support for the OWS movement, explains, in no uncertain terms, and in a somewhat more detailed and lucid fashion, both how and why the market is not only broken, but rigged, and why it is nothing but a wealth extraction mechanism in which the richest slowly but surely steal the money from everyone else who still trades any public stock equity.

From Reddit: I work in Wall Street and work in hedge fund analysis. I'm the only person in my office who supports OWS
This is a self-post, so I'm not trying to karma-whore or anything. I have a message I want to share with anyone who's interested.
I'm writing this in hopes that the OWS movement can have a better understanding of the hedge fund industry and the financial markets. With OWS being the zeitgeist of current politics, I think it's important to know how exactly the hedge funds, along with the financial markets are destroying the 99%.
Hedge funds. These guys are basically the vehicles of choice for ultra-rich people to get into the financial markets, besides family offices and private wealth managers. What are hedge funds? They are funds that have a 1-5 million deposit minimum, cater to the mega-rich, and can invest in anything without regulatory restrictions, use leverage to pump up their exposure by 15x, and pretty much eat up a vast majority of the industry's profits.
These guys invest in EVERYTHING. Instruments you've heard of - stocks, bonds, forwards, futures, currencies, and instruments that you, me, or anyone else have never even heard of, much less know anything about: commodity future swaptions, FRA/OIS swaps, CLOs, exotic future options, p-notes, index/commodity/equity exposures, and a huge array of OTC (over-the-counter) instruments that no regular investor would ever have access to.
Why I bring this up: the financial markets are rigged. 99% of the investing public has access to services such as basic brokerages, 401k/IRA's, mutual funds, pension plans, etc. Some of these services, especially pension funds, will invest into hedge funds, who take an additional 2 and 20 (meaning 2% of assets plus 20% of capital gains).
What this means is that if you go any of the traditional retail routes, you are utterly screwed facing off against the hedge funds.
First, you are paying exorbitant fees. Commissions on every stock trade. Mutual fund managers taking a cut - an annual % cut, as well as a % per profit cut. If these managers (i.e. pension plans) invest in another fund, that fund is also taking another % cut. You're down 2% the minute you invest your money.
Next, if you're doing the investing yourself, you're paying ridiculous spreads. The bid/ask spread of a stock will cause you to be down another 2-3% the minute you buy the stock. For example, if you're buying a share of company at $4.25, you can sell back at only $4.15.
Furthermore, you have absolutely no chance in terms of access to the best services. Hedge funds have a direct line to investment bank's institutional brokerage teams - these are the guys that spend day and night sucking up to hedge funds, trying to get them the best deals at the cheapest rates. This means that while you're buying stocks and bonds, hedge funds are getting special rights, warrants, sweetheart deals, private placement deals, options, bigger discounts on bonds, and much better bulk commission rates and lower spreads on stocks. If you're paying 4.25$ for a 4.15$ stock, they are paying something like 4.16$. And they are eating alive your profits because when the stock goes up to $4.30, they can activate another warrant to purchase 20m shares at $4.25, diluting the value of your shares.
Next, you lack information and exposure. You have no idea what is going on in the market besides what you see on the news - while hedge funds have analysts working around the clock and a bunch of service providers who give minute-by-minute analysis of their portfolio opportunities and weaknesses in all markets with exposures to nearly everything. Meaning, if there is an opportunity in the real estate market (i.e. legislation), it might take you weeks to get in - hedge funds will have gotten in the minute the legislation was passed. Furthermore, when IPOs come out for companies, hedge funds get top billing on the primary market shares - which means investment banks are selling directly to them. Once the secondary market becomes available, hedge funds are up 15-20% on these investments, sometimes within hours.
Finally, you have no capital compared to these hedge funds. The people who invest in these hedge funds are not just the 1%, they are the 0.1%. These are the guys with 500million dollar bank accounts and the ability to do whatever the fuck they want. Hedge funds know this, and they invest without having to care about whether their clients can pay the rent or send their kids to college. All of that is irrelevant. Their sole purpose is to earn money, not to mitigate risk.
What does this all mean? It means the hedge fund industry is making a gigantic proportion of the profits. The top .1% is earning nearly half of the profits in the industry, through not just hedge funds, but other similar vehicles.
The finance industry is a complete scam, designed to funnel money from the 99% investing public into the hands of the top .1%. Sure, some of you will make good money, but stastically, the rest of us will lose, and who is feeding off us? Hedge funds, and the .1%. You have better odds going to a casino and playing slots, the worst-paying game in the house, but still better than the stock market.
Also, the government is in bed with the financial industry. Tax loopholes give hedge funds and other top players the ability to write off losses and not pay taxes on gains for years at a time. For income they derive from the hedge fund (profits), they pay only 15%, rather than the 35% income tax charged to most people earning 80k and above. Meanwhile, you have to pay taxes for not just your own income but also capital gains.
The worst part by far is that the government "encourages" you to put your money into your 401k through 'tax exemptions', which basically puts your money with the lowest tier of the financial industry - pension funds, retail wealth managers, and retail asset managers. These guys have shit strategies like long-only or domestic equity (which means they only invest in American stocks), and have nowhere near the capability and reach of hedge funds. These guys are even more likely to lose your money than you are, and even worse is they will take a 2.35% cut while doing so. And you get penalized when you try to take your money out early. How f***ed up is that.
In other words, if you aren't in the .1%, you have no access to the derivatives markets, you have no access to the special deals that hedge funds and other wealthy investors get, and you have no access to the resources, information, strategic services, tax exemptions, and capital that the top .1% is getting.
If you have any questions about what some of the concepts above mean, ask and I will try my best to answer. I'm a first-year analyst on wall street, and based on what I see day in and day out, I support the OWS movement 100%.
tl;dr: The finance industry funnels money from the masses to the ultra rich, through vehicles like hedge funds which dominate all of the financial markets.
h/t Scott

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DINAR AND DIRHAM EFFECT ON THE BANKING BUSINESS AND ITS SOLUTION

2011-11-11T11:16:00.001+08:00

Proceedings of the 2002 International Conference on Stable and Just Global Monetary System
International Islamic University Malaysia (2002)

DINAR AND DIRHAM EFFECT ON THE BANKING BUSINESS
AND ITS SOLUTION

1Abdul Halim Abdul Hamid and 2Norizaton Azmin Mohd Nordin
1,2Faculty of Business and Law, Multimedia University,
Jalan Ayer Keroh Lama, 75450 Bukit Beruang, Melaka, Malaysia
E-mail: 1ahalim@mmu.edu.my, 2 azmin@mmu.edu.my

Abstract.

One of the issues that might arise when implementing the use of Dinar and Dirham is how it will affect the banking business. The introduction of Dinar and Dirham will retard the growth of the existing banking business. Banks that exist today are based entirely on the concept of interest-bearing instruments (Bexley, et.al, 2000). At present, a major portion of bank’s income is derived from interest income. Interest income is derived from the loan that was given out to a bank’s customer, from depositor’s funds after deducting the required reserve set by the law (Rose, 2000). Banks will loan out a portion of depositor’s money and charge the borrower with interest. The borrower will then deposits this loan into his account in the same bank or other bank, in which a portion of this money will be loan out to some other customer. This is known as money multiplier or money creation (Fabozzi, et.al, 1998). With the implementation of Dinar and Dirham, such money multiplier activities will be difficult if not impossible to occur. This is because each Dinar and Dirham must be represented with actual money that contains a certain weight of gold and silver. In this case Dinar will have 4.3 grams of gold and Dirham will contain 3.0 grams of pure silver (www.e-dinar.com). Dinar and Dirham can be considered as ‘real money’ or ‘live money’ and it is difficult to simply create or print or controlling its supply and demand. This is due to the fact that gold and silver is limited in supply by natural factors and requires scarce resources to produce (Rose, 2000). Therefore, it is different from fiat money, in which its existence promotes money multiplier and interest charges.

Dinar and Dirham will promote real economy instead of financial economy. Under the Dinar and Dirham system, for every transaction, trades and investments, real physical money do change hands. Thus, we can say Dinar and Dirham can become a threat to the banking business due to the fact that it cannot be simply multiplied. As a result, the interest income derived from the money multiplier activity shall also be diminished. If this is the case, how banks will survive in the Dinar and Dirham system? The current economic and banking system is a system made by non-Muslim. It is time that Muslims of the world design its own economic and financial system (Ahmed, 2000). Banks have to be totally reformed. The present banking system is irrelevant in Dinar and Dirham system. Therefore this paper is to discuss the type of bank that should exist in the Dinar and Dirham system. The information presented is only conceptual, thus further research in different areas of this proposed type of bank is still needed to make it complete.

Introduction.

Let's begin with an issue. The introduction of Dinar and Dirham will retard the growth of the existing banking business. Banks that exist today are based entirely on the concept of interest bearing instruments (Bexley, et.al, 2000). At present, a major portion of bank’s income is derived from interest income. Interest income is derived from the loan that was given out to a bank’s customer, from depositor’s funds after deducting the required reserve set by the law (Rose, 2000). Banks will loan out a portion of depositor’s money and charge the borrower with interest. The borrower will then deposits this loan into his account in the same bank or other bank, in which a portion of this money will be loan out to some other customer. This is known as money multiplier or money creation (Fabozzi, et.al, 1998). A better illustration of money multiplier can be seen from figure 1.

However, with the implementation of Dinar and Dirham, such money multiplier activities will be impossible to occur. This is because each Dinar and Dirham must be represented with actual money that contains a certain weight of gold and silver. In this case Dinar will have 4.3 grams of gold and Dirham will contain 3.0 grams of pure silver (www.e-dinar.com). Dinar and Dirham can be considered as ‘real money’ or ‘live money’ and it is difficult to simply create or print or controlling its supply and demand through the use of interest rate. This is due to the fact that gold and silver is limited in supply by natural factors and requires scarce resources to produce (Rose, 2000). Furthermore, in Dinar and Dirham system, a hundred percent reserve and liquidity requirement is required. Therefore, it is different from fiat money, in which its existence promotes money multiplier and interest charges.

Real economy versus Financial Economy: ‘The Dilemma of Conventional Bank due to Dinar and Dirham’.

There are two types of economy. They are: (1) real economy and (2) financial economy. According to Joel Kurtzman in his book titled “ The Death of Money”, the ‘real economy’ is where products are made, trade is conducted, research is carried out and services are rendered. The real economy is where factory workers toil, doctors tend the sick, and where teachers teach and where roads, bridges, harbours, airports and railway systems are built”. He further mentioned that, “The other economy, the ‘financial economy’, is
somewhere between twenty and fifty times larger than the real economy. It is not the economy of trade but of speculation. Its commerce is in financial instruments. Mostly, it is concerned with the exchange of equities, such as stocks, and securities, such as bonds and other forms of debt. The latest and largest type of debt that the financial economy trades from a technical standpoint is money.”

Unlike fiat money, which promotes ‘financial economy’, Dinar and Dirham will promote ‘real economy’. Under the Dinar and Dirham system, for every transaction, trades and investments, real physical money do change hands. Thus, we can say Dinar and Dirham can become a threat to the banking business due to the fact that it cannot be simply multiplied. As a result, the interest income derived from the money multiplier activity will be diminished. According to Rais Umar Ibrahim Vadillo in his article titled “Islamic Trading in
the Modern World”(www.murabitun.org), he said that based on traditional Islamic practice, banks are not needed. He also urged the Muslim society to get rid of the bank. In the present banking system, banks widened the gap between the riches (the haves) and the poor (the have-nots) through the use of interest (Diagram A). This gap cannot be narrowed by zakat because the fiat money system itself is already a Riba. However, under the Dinar and Dirham system, zakat and other Muamalat activities such as Musyarakah are bridging the riches and the poor. Zakat will be more practicable in the Dinar and Dirham system because Dinar and Dirham is not ‘a promise to pay’ as in the case of fiat money (Diagram B).

If this is the case, how banks will survive in the Dinar and Dirham system? The current economic and banking system is a system made by non-Muslim. Even with the existence of the so-called Islamic banks, Muslims are still skeptical about it operations (M.Jaffar, 2002). Many Muslims are now abandoning the so-called Islamic banks because they have realized that it is still a usurious institution in disguised as Islamic by its name and appearance. (Vadillo, Islamic Trading in the Modern World).

Solution for the Banking Industry.

It is time that Muslims of the world design its own economic and financial system (Ahmed, 2000). Banks have to be totally reformed. The new type of bank shall be called an ‘Entrepreneur Bank’ (En-Bank) (Diagram C). How will this bank operate? First and foremost, it is an entrepreneur by itself in which it will require its own capital to invest. It accepts deposits in terms of Dinar and Dirham and it operates electronically based on Dinar and Dirham. All Dinar and Dirham deposited into an entrepreneur bank is ‘real money’ with a hundred percent reserve requirement. Entrepreneur banks act as a safe keeper for Dinar and Dirham through the concept of Yad Amanah (trustee), therefore none of the deposited Dinar and Dirham shall be loaned out.

Entrepreneur Bank’s Tenet # 1: Allah owns all the wealth in this world and bank only act as trustee or manager.

An entrepreneur bank should be formed based on the above seven tenets (Table 1). First and foremost, banks should remind themselves that they are the trustees for Allah’s wealth in this world. As mentioned in the Al-Quran;

To Him belongs what is in the heavens and on earth, and all between them, and all beneath the soil.
(Taha: 6)

To Allah belongth all that is the heavens and on earth. Whether ye show what is in your minds or conceal it, Allah calleth you to account for it. He forgiveth whom He pleaseth, and punisheth whom He pleaseth. For Allah hath power over all things.
(Al-Baqarah: 284)

It is He who hath made you (His) agents, inheritors of the earth: He has raised you in ranks, some above others: that He may try you in the gifts He hath given you: for thy Lord is quick in punishment: yet He is indeed Oft-Forgiving, Most Merciful.
(Al-An’aam: 165)

If the bank regards Allah as the supreme creator and supreme owner of all the wealth, he must also abide by Allah’s rule. Allah strongly forbid Usury and Riba, as mentioned in the Al-Quran:

Those who devour usury will not stand except as stands one whom the Evil One by his touch hath driven to madness. That is because they say: “Trade is like usury”, but Allah hath permitted trade and forbidden usury. Those who after receiving direction from their Lord, desist, shall be pardoned for the past; their case is for Allah (to judge); but those who repeat (the offence) are companions of the Fire; they will abide therein (forever).
(Al-Baqarah: 275)

Allah further forbid taking extra money out of debt, and He and his messenger declare war to those who commit Riba. In addition, He said without Riba, one will not do injustice to others, neither does others towards him or her. As mentioned in the Al-Quran:

O ye who believe! Fear Allah, and give up what remains of your demand for usury, if ye are indeed believers.
(Al-Baqarah: 278)

If ye do it not, take notice of war from Allah and His Messenger; but if ye turn back, ye shall have your capital sums; deal not unjustly; and ye shall not be dealt with unjustly.
(A-Baqarah: 279)

Entrepreneur Bank’s Tenet # 2: Promote real economy instead of financial economy.

Ideally, banks should promote real economy instead of financial economy. The present banking system are so corrupted that it disguised usury as halal. In real fact, the banking system commits usury everyday, which result in death of thousands of people throughout the world, the starvation of many others, the creation of unemployment situation, the destruction of small business and the general impoverishment of most mankind. In short banks are regard as destructive, parasites, usurious, promote slavery, monopolistic and bloodsucker. (Vadillo, Islamic Trading in the Modern World). Therefore, banks have to be shifted from these negative remarks. They have to leave these traditional roles (refer to Diagram A) and set to become the institution that promote the development of Muslim ummah (refer to Diagram B). One of the objectives of Islamic financial system in the context of tawheed and taqwa is to make the life in this world a happier and prosper place through a financial system that portrays an Islamic socioeconomic values. In an Islamic ethics,
each and every one of us has the obligation to contribute to create a system based on Islamic teachings. Islam gives the rights to its ummah to seek help from one another and help each other according to each ability (Yakcop, 1996). Therefore, an entrepreneur bank has the obligation to help Muslim ummah to develop themselves in order to prosper the society.

Entrepreneur Bank’s Tenet # 3: Discourage debt and encourage Musyarakah or Joint venture profit and loss sharing.

Fundamentally, banks should change its role from becoming a debt provider to a partnership (Musyarakah). Debt should be highly discouraged and should be avoided whenever possible. As mentioned in a hadith narrated by ‘Aisha (r.a), the wife of the Prophet: Allah Apostle used to invoke Allah in the prayer saying “.... O Allah, I seek refuge with You from the sins and from being in debt.” Somebody said to him, “Why do you so frequently seek refuge with Allah from being in debt?” The Prophet replied, “A person in debt tells lies whenever he speaks, and break promises whenever he makes them”. This clearly showed that being in debt should be avoided. How can this be possible for banks? Perhaps, banks should become a trustee and a partner in business, instead of being a guarantor for debts.

Entrepreneur Bank’s Tenet # 4: Be an active partner and provide consultation to its partners.

Here, an entrepreneur bank should become an active partner and able to provide professional consultation to entrepreneurs. If a customer approach the bank for business loan, an entrepreneur bank should treat it as a partnership (Musyarakah Mutanaqisah), in which the bank shall also take part in running the business. Musyarakah Mutanaqisah (Diminishing Partnership) is the sharing of the revenue with progressive dilution of shareholding. An entrepreneur bank shall not merely observe from afar and reaps the profit when the business succeeds and left the business in despair when it fails such as in the present situation. Banks should provide advises and assistance to entrepreneurs on how to improve the performance of their business. This is the most crucial element in an entrepreneur bank because this may become its major source of income replacing the interest income. Initially, the ownership of the business will be divided between the entrepreneur and the bank with the ratio agreed by both parties. The entrepreneur shall buy the shares from the bank through its profit until they owned 100 % of the business. In other words, banks have to release the business to the entrepreneur when they afford to buy back all its shares.

Entrepreneur Bank’s Tenet # 5: Encourage spending on savings not on credit.

An entrepreneur bank should encourage spending on savings instead of spending on credit. If its customers want to buy a car or a house, or planning to go for a vacation, design their financial planning so that they can afford it. Perhaps, customer may opt for Musyarakah Mutanaqisah Home Financing (Lease Purchase with Diminishing Partnership) In a Musharaka Mutanaqisah home financing scheme the customer and financier (Islamic Bank) jointly acquire and own the property. The financier then leases his share of the property to the customer on the basis of Ijara (lease). The customer, as an owner-tenant, promises to acquire periodically the financier's in the property. The customer pays rental to the financier under Ijara, which partially contributes towards increasing their share in the property. (eg. If the bank owns 70% of the property and the customer owns 30%, and the customer's monthly rental is RM1,000 then RM700 goes to bank and RM300 goes to increase the customer’s share of the property.) At the end of the lease term and upon payment of all lease rentals the customer would have acquired all the financier's shares and the partnership will come to an end with the customer being the sole owner of the house (www.ihilal.com). Refering to Diagram D, under the present scenario, banks will receive double interest income, which is x percent from house developer and y percent from homebuyer. Whereas under the entrepreneur banking
system, once the bank received income from investing in the housing project, it will not charge anything from home-buyer for the Musyarakah Mutanaqisah agreement except for the fees incurred (such as legal fees, etc.) to purchase the house.

For smaller expenses, an entrepreneur bank should encourage the used of debit card instead of credit card. Credit card promotes overspending, which means a person spends using money that he or she does not have. This is against Islamic teaching, as mentioned in the Al-Quran:

Those who, when they spend, are not extravagant and not riggardly, but hold a just (balance) between those extremes.
(Al-Furqan: 67)

Allah further stated that overspend makes a person closer to the devil, as mentioned in the Al-Quran:

Verily spendthrifts are brothers of the Evil Ones; and the Evil One is to his Lord (Himself) ungrateful.
(Al-Isra’: 27)

Entrepreneur Bank’s Tenet # 6: Encourage business creation and entrepreneurship.

Next, an entrepreneur bank should encourage Muslims to do business instead of working with others. The Prophet encouraged his ummah to do business. Al Suyuti mentioned in Al Jami` Al Saghir, a Hadith on the authority of Rafi` that: The Prophet (pbuh) was asked: "which are the best forms of income generation?" He (pbuh) replied: "A man's labor, and every legitimate sale". This will give all Muslims an equal opportunity to prosper and at the same time, discourage monopoly business. Those who worked hard enough will earn
a just reward for their effort. As mentioned in the Al-Quran:

And when the Prayer is finished, then may ye dispersed through the land, and seek of the Bounty of Allah: and celebrate the Praises of Allah often (and without stint): that ye may prosper.
(Al-Jumu’a: 10)

Entrepreneur Bank’s Tenet # 7: Educate Muslim ummah on Muamalat matters.

Last but not least, an entrepreneur bank should educate the Muslim ummah about Muamalat matters and help strengthened the ummah faith and belief in Allah. This is because the stronger the faith and belief in Allah, the stronger they will be in adhering to Allah’s command. A research conducted in Kuala Lumpur, Malaysia showed that almost all Muslim’s respondent knew the existence of Islamic banking in Malaysia, however, only half of it used the facilities. Out of this half, only 15 percent able to answer correctly the meaning of each product offered by Islamic banks. This is due to the fact that Muamalat does not being emphasize in the early stage of learning about Islam (Abdul Hamid, 2001). An entrepreneur bank should therefore emphasis the teaching of Muamalat and daily transaction activities to the Muslim ummah.

Conclusion.

Finally, banks should be more innovative, creative, more sophisticated and more professional when dealing with Dinar and Dirham system. The newly designed e-Dinar may take most of banks’ role as the medium for payment (www.e-dinar.com). It is only a matter of times that Dinar and Dirham system becomes a reality. And hopefully, when it’s finally arrived, banks are prepared with the new renaissance of an Islamic monetary system. To fine tune with this ideal ideology, lets contemplate this hadith narrated by Abu Huraira : The Prophet said, “An Israeli man asked another Israeli to lend him one thousand Dinars. The second man required witness. The former replied, “Allah is sufficient as a witness.” The second said, “I want a surety.” The former replied, “Allah is sufficient as a surety.” The second said, “You are right”, and lend him the money for a certain period. The debtor went across the sea. When he finished his job, he searched for a conveyance so that he might reach in time for the repayment of the debt, but he could not find any. So, he took a piece of wood and made a hole in it, inserted in it one thousand Dinars and a letter to the lender and then closed, i.e., sealed the hole tightly. He took the piece of wood to the sea and said, “O Allah! You know well that I took a loan of one thousand Dinars from so and so. He demanded surety from me, but I told
him that Allah’s guarantee was sufficient and he accepted Your guarantee. He then asked for a witness and I told him that Allah was sufficient as a witness, and he accepted you as a witness. No doubt, I tried hard to find a conveyance so that I could pay his money but could not find, so I hand over this money to You.” Saying that, he threw the piece of wood into the sea till it went far into it, and then he went away. Meanwhile he started searching for a conveyance in order to reach the creditor’s country. One day, the lender came out of his house to see whether a ship had arrived bringing his money, and all of a sudden he saw a piece of wood in which his money had been deposited. He took it home to use for fire. When he sawed it, he found his money and the letter inside it. Shortly after that, the debtor came bringing one thousand Dinars to him and said, “By Allah, I had been trying hard to get a boat so that I could bring you your money, but failed to get one before the one I have come by.” The lender asked, “Have you send something to me?” The debtor replied, “I have told you I could not get a boat other than the one I have come by.” The lender said, “Allah has delivered on your behalf the money you sent in the piece of wood. So, you may keep your one thousand Dinars and depart guided on the right path.” This hadith tells us that if weare honest and sincere in our endeavor to create a true Islamic monetary system as well as creating a just and fair banking system, Allah
surely will give us the way.

References

Al_Quran and Hadith.

Abdul Gafoor, A.L.M. (2001), “Mudaraba based Investment and Finance.” New Horizon, Issue no.119, July 2001.

Abdul Hamid, Abdul Halim and Mohd. Nordin, Norizaton A. (2001), “Islamic Banking Education Strategy for the 21st Century-A Malaysian Evidence.” International Journal of Islamic Financial Service, Vol. 2, No. 4, pp 3-12.

Ahmed, Saima A. (2000), “Global Need for a New Economic Concept: Islamic Economics.” International Journal of Islamic Financial Services, Vol.4.

Al-Omar, Fuad and Abdel-Haq, Mohammed (1996), 1st ed. , “Islamic banking: Theory, practice and challenges.”, Zed Books Ltd, U.K.

Ariff, Mohamed (1988), “Islamic Banking.” Asian-Pacific Economic Literature, Vol. 2, No. 2, pp. 48-64.

Astbury, Sid (1996), “Reaping Malaysia’s Islamic riches.” Asian Business, Vol. 32, Issue 8, p. 48.

Anonymous (1998), “Asia: Islamic banking, Chinese style.” The Banker, Vol. 141, Issue 786, p. 57.

Barakat, Munir and Sarver, Eugene (1997), “Western banks taking 1st steps into Islam’s ‘no interest’ world.” American Banker, Vol. 162, Issue 20, pp. 9.

Bexley, James B.; Maniam Balasundram and James, Joe F., (2000), “Perception of Islamic Financial System: Its Obstacles in Application, and Its Market”, Proceedings of the Academy of Accounting and Financial Studies, Volume 5, Number 2.

E-Gamal, Mahmoud A., (2000), “ A basic Guide to Contemporary Islamic Banking and Finance, RiceUniversity.(http://www.witnesspioneer.org/vil/Books/MG_CIBF.chapter2.htm.)

Fabbozi, Frank J.; Modigliani, Franco; Ferri, Michael G, (1998), Foundations of Financial Markets and Institutions, 2nd ed., Prentice Hall, New Jersey.

Gathura, Gatonye (1996), “Banking on Islam.” World Press Review, Vol. 43 Issue 5, p. 35.

Iqbal, Zamir (1997), “Islamic financial systems” Finance & Development, Vol. 34, Issue 2, pp. 42-45.

Kadir, Sharifah H (1998), “Funding Mismatch.” Malaysian Industry, Vol. 6, No. 61, pp. 187-203.(http://www.mmo.com.my/msianindustry/finance.html)

M. Jaffar, Maheran and M. Zain, Shaharir, (2002), Satu Ulasan Terhadap Model-model Matematik Bagi ‘Pinjaman’ Berdasarkan Prinsip Islam, Kolokium Siswazah, Fakulti Sains dan Teknologi, UKM Bangi.

Rose, Peter S. (2000), “Money and Capital Markets: Instruments in a Global Marketplace”, 7th ed., Irwin-McGraw Hill, Boston.

Shaikh, Samir Abid (1997), “Islamic banks and financial institutions: A survey.” Journal of Muslim Minority Affairs, Vol. 17, Issue 1, p.117.

Shaykh, Abdalqadir, (1995), “The Wealth of the Fuqara”, (http://www.geocities.com/Athens/Delphi/6588/dhikr.html)

Shepherd, William G Jr (1996), “Integrating Islamic and Western finance.” Global Finance, Vol. 10, Issue 5, p. 44.

Vadillo, Umar I. (2001), “The Fallacy of the Islamic Bank, (http://www.geocities.com/Athens/Delphi/6588/bfallacy.html)

Visser, Wayne, (1997), “Islam offers a more just banking system”. Money Values, 15 September 1997.

Yakcop, Nor Mohamed, (1996), “Teori, Amalan dan Prospek Sistem Kewangan Islam di Malaysia”, 1st ed., Utusan Publications, KualaLumpur.

Internet references:
http://www.e-dinar.com/net/org
http://www.murabitun.org
http://www.ihilal.com

source here

Apa yang perlu anda tahu tentang pelaburan@peleburan Dinar Iraq...

2011-11-10T20:41:00.000+08:00

Salam,
Secara tiba-tiba, wang fiat Dinar Iraq menjadi popular sejak kebelakangan ini walhal sejak tahun 2006 lagi benda ni dah wujud. Oleh sebab ia menjanjikan pulangan yang amat lumayan (ikut kata agen tersebut) maka saya menjalankan sedikit carian diinternet bagi mendapatkan maklumat lebih lanjut dan bebas dari pakar-pakar ekonomi dan kewangan antarabangsa termasuklah Al-Ustaz Zaharuddin. Berikut adalah senarai website yang menjadi rujukan saya;

Hukum Pelaburan Dinar Iraq
Perbincangan Pro dan Kontra Dinar Iraq di Carigold.com
Jangan Tertipu Dengan Scam Wang Dinar Iraq
Bank Negara Malaysia Official Statement (Dinar Iraq)
Penjelasan BNM Mengenai Dinar Iraq
Amankah Jual-Beli Dinar Iraq Menurut Syariah Islam?
Dinar Iraq Boleh Jadi Jutawan ?
Dinar Iraq & Untung Besar ?
Berita Hangat - Dinar Iraq Baru
Nilai semasa 50000 Dinar Iraq vs USD
Nilai semasa 50000 Dinar Iraq vs Malaysia Ringgit
The Truth About The Iraqi Dinar part 1
Myths and truth about the Iraq dinar
Suspicious Activity Involving the Iraqi Dinar
Top Ten Investment Alerts for 2011
New Investment Scam: Buying the Iraqi Dinar
Investing in the Iraqi Dinar: Expert Opinions
Iraq Said To Be Planning Currency Overhaul, Redenomination
A Fistful of Dinars
Iraqi Dinar Discussion Board (IQD)
The Iraqi Dinar Revaluation in 2011
The National Currency Re-Denomination Experience in Several Countries: A Comparative Analysis
New Dinars for Old
Iraq Currency Exchange Information
http://www.iraqi-dinar.org/
http://www.iraqidinar.org/
FAQ - Pro Dinar Iraq

Saya mengambil beberapa point yang menarik dari Ustaz Zaharuddin.

Pandangan Shariah

Jika pembelian matawang ini melalui internet secara ‘tempahan' dan akan sampai kepada pembeli dalam beberapa hari. Menurut kefahaman saya, pembelian matawang Iraq adalah HARAM. Perlu difahami bahawa Nabi SAW telah meletakkan syarat dalam pembelian jual beli emas, perak termasuk sesama matawang ; pihak penjual mestilah menerima wang belian dan pihak pembeli mestilah menerima matawang yang di ingininya pada masa yang sama atau dalam satu ‘majlis aqad'. (Sila rujuk http://www.zaharuddin.com/ untuk kefahaman lanjut tentang syarat ini).

Bagaimanapun, dalam hal ini, sekiranya anda membeli (menukar) Ringgit Malaysia anda kepada Dinar Iraq itu; apa yang akan berlaku adalah anda akan membayarnya sekarang iaitu melalui kredit kad atau cash dan lain-lain. Kemudian, anda hanya akan menerimanya dalam masa beberapa hari atau jam selepas itu. Tatkala itu, penangguhan yang tidak dibenarkan oleh Islam telah berlaku, ianya termasuk dalam kategori Riba Nasiah.

Walaupun demikian, sekiranya anda boleh membelinya secara tidak bertangguh seperti menukar matawang di Kaunter Pengurup. Ketika itu, pembelian ini adalah sah dan tiada Riba berlaku. Ini agak sukar di gambarkan kerana ibu pejabat syarikat maya yang menjual Dinar Iraq ini berada di USA dan Hong Kong.

Selain isu Riba, satu lagi sudut Shariah yang di pertimbangkan adalah hal spekualsi berlebihan dan judi. Tidak saya nafikan bahawa kebanyakan Majlis Penasihat Bank-Bank Islam di seluruh dunia memfatwakan pembelian matawang oleh pihak Bank-bank islam dan menyimpannya untuk dijual kemudiannya bagi memperolehi untung adalah di haruskan. Mereka menyebut bahawa spekulasi ini tidak samapi ke tahap judi dan masih berada di tahap yang diharuskan. Unsur ‘gharar'nya pula adalah kecil. Unsur perjudian juga tiada, kerana ianya bukannya seratus peratus dibuat atas dasar ‘nasib' tetapi adalah berdasarkan kaji selidik, ilmu yang benar dan analisa terperinci atau secara mudahnya disebut sebagai hasil analisa risiko dan peluang perniagaan.

Walaupun demikian, saya berpandangan :-

Setiap individu yang ingin membeli mestilah juga mengkaji dan mempunyai ilmu tentang peluang, potensi dan risiko pembeliannya bagi memastikan pembeliannya berbeza dengan satu perjudian yang didasari nasib semata-mata.
Jika dilihat menurut ‘Maqasid Shariah' atau objektif Shariah pula. ADALAH TIDAK HARUS untuk seseorang yang kurang berkemampuan untuk membeli set dinar tadi walaupun harganya RM 720 sahaja. Ini kerana dibimbangi ada umat Islam yang terlampau yakin maka, sanggup bergolok gadai dan membahayakan diri bagi membeli Dinar ini sehingga hilang kemampuannya untuk menyara saraan wajib terhadap anak, isteri dan keluarga. Dalam hal ini, hukum 'gharar' (ketidaktentuan) sudah menjadi amat besar dan hukum judi telah jatuh kepada si pembeli. Ini bermakna , hukum 'judi' dalam 'spekulasi' Forex jenis ini bergantung juga kepada kemampuan individu. Bagi sesetengah individu yang berada, membeli RM 720 adalah tidak memberikan apa-apa mudarat kepada tanggungan wajibnya. Maka tika, itu, elemen ‘gharar' akan berkurangan tidak sampai tahap haram. Berbanding seorang yang kurang berkemampuan yang menggadaikan kewajibannya, dengan harapan dinar itu akan naik pada satu masa yang tidak diketahui. Ia sudah jatuh dalam tahap judi. wallahu a'lam.

Beberapa Pertimbangan lain

1) Anda perlu memastikan bahawa anda membeli Duit Iraq yang asli. Di bimbangi andaditipu lalu membeli yang tiruan lalu anda memiliki wang yang tidak laku di mana-mana.

2) Perlulah mendapatkan pandangan undang-undang dari Bank Negara Malaysia atau Suruhanjaya Sekuriti agar anda tidak terjebak dalam sebarang masalah kelak.

3) Dinar Iraq versi lama kerap kali ditukar kepada versi baru. Saya mengingatkan hal ini diambil berat dan di pastikan sendiri oleh pembeli Dinar Iraq ini. Ini kerana, atas kelalaian seseorang sahaja, Dinarnya boleh luput tanpa sebarang ganti. Perlu diingat juga, bagaimana untuk anda yang sibuk bekerja untuk mengetahui bahawa Dinar yang anda miliki sudah di tukar versinya ?.

4) Saya juga difahamkan bahawa ada pihak yang menjualnya menggunakan cara ‘Multi Level Marketing', jika ini benar, maka hukumnya pastinya berlainan dari apa yang disebut di atas. Ini kerana, beberapa pertimbangan lain perlu dinilai semula.

Akhirnya, pastikanlah ianya disahkan oleh undang-undang dan sah juga dari sudut Shariah. Menurut Shariah seseorang harus untuk membeli Dinar ini tetapi dengan syarat mestilah dengan ilmu dan analisa dan terima serahnya dilakukan dalam satu masa. Ini bermakna, anda perlu mendapatkannya di kaunter jualan di Kuala Lumpur atau mana jua untuk membeli set dinar Iraq itu secara ‘by hand'. Tidak dibenarkan membeli menggunakan pos dan apa jua cara yang menjadikan penyerahannya tertangguh.

Perlu dingat juga bahawa lapangan pelaburan FOREX seperti ini adalah luas dan berisiko tinggi, menurut pakar, ‘trend' dan strategi yang berkesan pada satu masa lalu tidak semestinya terpakai dan sesuai dalam keadaan sekarang. Ianya juga amat sukar diramal dengan tepat.

...................................................................................................................................................

Saya telah menyatakan pandangan saya dalam thread Dinar Iraq di Carigold bahawa dinar Iraq ini lebih hampir kepada perjudian berbanding pelaburan kerana tiada analisa teknikal atau fundamental yang boleh dilakukan bagi menentukan trend turun naik matawang ini. Pembeli hanya berharap pada spekulasi dan nasib semata. Namun ramai yang dah terjebak dengan dinar Iraq ini tidak bersetuju dengan pandangan tersebut walaupun mereka tidak dapat menolak hujah yang mereka sememangnya berharap pada nasib. Wallahualam.

Seterusnya, saya paparkan perdebatan panjang lebar antara Brian dengan rakan forummer di sini yang banyak memberikan info yang jelas berkenaan Dinar Iraq ini. Anda nilaikan sendiri hujah-hujah mereka sebelum melabur@melebur. Sila gunakan google translator jika perlu.

Q1) I own several 25,000 dinar bills that I have kept as an investment. What happens to their value if their is a redomination. Will they have a value of 25? I was hoping they would be valued higher against the dollar and I would be able to make a profit on my investment.

Answer :
Hi Bill, yes "redenomination" means they will remove 3 zeroes from notes. So your 25,000 notes will be exchanged for new 25 notes but at a new ratio of say 1.175:1 instead of 1175:1. You won't lose any money (value is retained minus the trading fees), and in the long run you may make some profit if the Dinar appreciates naturally vs the $, but all these "become a millionaire by changing up $1k worth of Dollars for $1k worth of Dinars" "Dinar pumpers" have been lying and scamming people all along with fake invented "intel", etc. A 99,900% profit has never, ever happened in any RV process. Take a look at what the Turkish Lira (6 zeroes removed), Venezuelan Bolivar (went from 2000:1 to 2:1), the pre-Euro (franc, pesetas, deutschemark, etc) to Euro currency changeover went through to understand the process better. Hope this helps.

Q2) Your explanation on "re-denomination" in this case I think is flawed. In my opinion if you take their present total outstanding currency of 29 T Dinars, remove three digits and you get 29 B Dinar. Now spread this over the collective wealth of the country and your Dollar value per Dinar would be in the hundreds it not thousands. The rumored value of 3 to 4 dollars reflects the current outstanding money and to issue smaller bills is only in light of the new reality.

Answer :
No Peter, my explanation of how every single redenomination has worked in history including Iraq's neighbour Turkey isn't "flawed" at all:-

USA : There are $10.2 trillion (last M3 figures) from a country with a population of 310m people. This works out to approx $32,903 printed per American.

Euro : There are €8.5 trillion in existence (ECB M3 figures) from an entire continent with a Euro-using population of 327m people. This works out to approx €26,000 Euro's printed per European.

Iraq : There are 29 trillion Dinar's in existence from a country with a population of 31m (Iraq). This works out to 935,483 Dinar's printed per Iraqi (blatantly obvious hyperinflation).

If you remove 3 digits, yes you get 29bn Dinar but those Dinar will be valued at say 1.17:1 instead of 1,170:1. The dollar value will not change - just as the Iraq Central Bank have openly stated it won't back in April as reported on Iraqi Alsumaria TV. It's only a few vested interested conmen who just happen to sell Dinar who keep pumping the "instant millionaire" nonsense. If holding just $1k worth of Dinar will make you a millionaire, then by extension, you must believe every Iraqi who owns a house / car will be given between $50m-100m each if they sold it and changed the 50m-100m Dinars up at an FX outlet, and that the average $2k-$4k Iraqi income will become $2m-$4m. Um, no. That's not how it works at all.

Just to add, Peter : Countries can't and don't just magic 99,990% more money into thin air through an RD (re-denomination). The "rumored" value of $3-4 you mention was the value of what were known as "Swiss Dinar's" under Saddam Hussein. They got their name from the Swiss printing plates used (which were of much higher standard than the 3rd hand ones Iraq otherwise had), and this was the currency used prior to the 1990 Gulf War (the first one) after which they ceased to be legal tender.

Since the supply of Saddam notes increased while the supply of Swiss Dinar notes remained stagnant (even decreased because of torn / damaged notes without replacement), the Swiss Dinar appreciated against the Saddam Dinar notes (which is exactly what "inflation" is that some pumpers absurdly claim "doesn't affect Iraq and thus makes it 'different'"). In fact, the northern part of Iraq (Kurdish) which continued to use Swiss Dinars partly evaded inflation, which ran rampant throughout the rest of the nation.

The old Dinar was $3.33 against the $ because it WASN'T inflated. The Saddam Dinar fell below 1100:1 against the $ due to inflation during the economic sanctions (if you can't borrow or trade then you can only print). The $3-4:1 from the 1980's also involved Saddam picking an arbitrary value to peg the Dinar to which is also not the case with the market valued NID today. The reason the Dinar is so weak is because it's overprinted. It really is that simple.

Q3) Hi there! Your explanation does make quite a bit of sense, however the iraqi dinar replcaed the Kuwaiti dinar after iraq stole large amounts of banknotes in 1990 when Iraq invaded Kuwait. Later the Kuwaiti dinar was restored once Kuwait's currency and new banknote series was introduced. This resulted in a drastic devaluation of the Kuwaiti dinar at about just a few cents. It wasn't until 2003 when Kuwait finally pegged their currency to an exchange rate of approximately 1 dinar= 3.33745 dollars. Keep in mind that Iraq and Kuwait's situations were a bit different, however the profit of those who invested in the Kuwaiti dinar did in fact become millionaires overnight.

An opportunity like this investment does not come along that often so I would jump on it while you still have the chance, even if you have just an extra $100 you can afford to spend. It's not like your loosing your whole life savings (unless you are one of the gullible ones) on this investment. As long as Iraqi wants to progress, the rate of the currency should revalue. I don't quite get why people believe that Iraq wil just drop the 3 zeros off of their banknotes and just leave the value as is, it would be ludacris to do such a thing. Let's say the United States was faced with this situation and you have a $100 but they decide to drop the 2 zeros (3 zeros in Iraq's case) off of your hundred dollar bill, that would leave you with a one dollar bill, therefore your hundrend dollar bill is now only worth only one dollar because the value of our currency stayed the same. 1 dollar bill= 1 dollar...simple as that.

In Iraq, they are currently carrying around 25,000, 10,000 etc. dinar banknotes. Once Iraq drops the 3 zeros from that 25,000 banknote, it will become a 25 dinar banknote, but they are saying the value will stay the same. That cannot happen, everyone will loose so much money and business that have invested and are currently being ran in Iraq will loose tons and tons of money. Let me make this a little more simpler for those who are new to this investment. Say you have a 50,000 dollar bill (just as an example, I know we don't really have a $50,000 bill) for a new home but the U.S. decided to drop the 3 zeros off of your $50,000 bill making that bill only $50.

What kind of house is fifty bucks going to get you? Nothing. Iraq has to revalue their currency if they not only want to have their money to be worth anything, but also if they want to progress as a country. I don't know if many people know this but, Iraq has the largest oil reserve in the entire world, they will not stand to have such a devalued currency for much longer if they want to make any money at all.

Answer :
Bill, the Iraqi Central Bank have openly stated "re-denomination" multiple times, and "revaluation" not once. Only Dinar salesmen with vested interests are using "RV" over and over whilst the ICB are saying RD (lop) over and over. They do intend to appreciate the Dinar somewhat on top of the RD, yes, but not the 99,000% some people have got confused with (and it won't happen overnight either).

Angela, you're confusing the Kuwaiti Dinar with the Kurdish (Old Iraq) Dinar. They're not the same. You're also seriously misunderstanding how redenomination works. It doesn't take 99% of wealth away from people, but nor does it magic 99,900% of wealth out of nothing. Purchasing power is retained so businesses don't lose anything. What happens when zero's are lopped is that prices are readjusted to match:-

For example, if current 25k Dinar notes are turned into 25 Dinar notes, prices are adjusted by same. So eg, a 75m Dinar house now becomes a 75k Dinar house. A 1,000 Dinar loaf of bread becomes a 1 Dinar loaf of bread, etc. Look at what happened to Turkey to understand the process better - they lopped 6 zeroes off. Of course Turkish bread was not still priced at 1,000,000 Lira when 1m Lira banknotes changed to 1 Lira, it was repriced down to 1 Lira along with the new banknotes. This is the whole point of a redenomination : get prices of thing (in terms of zeros) back to sanity and parity with other countries which boosts confidence in the currency & economy.

Also, not only is your fact on Iraq's oil reserves "being the largest" incorrect...
http://www.nationmaster.com/graph/ene_oil_res-energy-oil-reserves

...but it's also irrelevant to the value of the Dinar because it is just as much a FIAT currency as everyone else's. Just because a nation has a nationalized oil industry doesn't mean its currency is backed by anything (any more than the $ is backed by Chevron or the £ is backed by BP). That's the first mistake first-time Dinar gamblers usually make : confusing nationalized oil with a specie currency. They are not the same thing at all. The Iraqi Dinar is a unbacked FIAT currency (which is precisely why it was so overprinted and devalued in the first place).

What's more, most of the world's oil is purchased in $ not Dinars (hence the origin of the term "petro-dollar"). And on top of that, many of Iraqi's oil fields are part-owned by non-Iraqi's (remember the 2009 oil services contracts?), so even if the Dinar was oil-backed (which it won't be for as long as buying countries are using FIAT currencies of their own), you can't just pick a figure and say "lets print ourselves all that wealth now before we've even dug it up, and then try and earn it all again when we actually do sell it in years to come". That's not how the Forex market works at all.

Q4) Brian, I apologize, you are correct about the oil reserve in means of “what was supposedly proven”, but it is believed that Iraq has much more oil (approximately twice as much than what was previously estimated) than what it was said to have, we will have to wait and find out. However, it is the Kuwaiti Dinar, not the Kurdish dinar that I am referring to. Here is the link so you can see what I am talking about http://en.wikipedia.org/wiki/Kuwaiti_dinar

Also, if prices are just readjusted to match and one Iraqi dinar is still equivalent to approximately $1170, then Iraq will still stay just as poor. You would think that a country with so much oil and potential wealth wouldn't have such a undervalued currency, especially if they plan on progressing anytime soon. In 1959, 1 dinar= $2.8 dollars, then in 1971 and 1973, 1 dinar= 3.3778, later reducing to 1 dinar= $3.2169. After the United Nations put sanctions on Iraq (because of Iraq invading Kuwait) new notes were issued. Finally, in 1995 the Iraqi dinar devalued to $1 = 3,000 dinars. The value did increase a bit throughout the years, but why keep the currency devalued for so long?

Do you believe they will keep their currency at such a low rate for much longer? Back to readjusting their prices to match their currency, what happens if the prices do get readjusted but someone only has a 25,000 note wanting to buy something that is only worth 25 notes? Does that mean the cashier will have to hand back that person 24,975 banknotes in lower denomination notes? They wouldn’t even have nearly that much in their drawer. Not everyone will have a credit card (smart card) just like not everyone uses a credit card in the United States, England, Australia, etc. The bigger denomination notes such as 25,000, 50,000, etc. are still going to be allowed to be used until they are all out of circulation, businesses will not be able to deny a person who wants to purchase items with a larger note.

The Turkish Lira and the New Turkish Lira were both allowed to be used until December 25, 2005 which was the last day the old Lira would be accepted. After this occurred, the value of the Lira was valued at USD $1= 1.51 YTL. The Turkish Lira ended up stabilizing and rose against the U.S. dollar, which means their currency did in fact revalue. This same exact process seems to be happening right now with Iraq and its currency. Wouldn’t you say that once the 3 zeros are taken off the banknotes, then the currency will revalue just as it did with the Turkish Lira?

Answer :
Hi Angela, thanks for your comment. As mentioned previously, the Dinar is "undervalued" because it's overprinted and the cure for that is not a further 1,000x expansion in the money supply (turning a $27bn Dinar supply into a $27tn supply by giving every 1,000x more for their Dinars than they bought) - that will just result in another Zimbabwe (where everyone's a billionaire but the price of a loaf of bread is 1.3m).

I can only repeat what I mentioned earlier : The Dinar is a FIAT currency, and like other FIAT currencies, it's value is derived by how many are printed and traded. What's underground and won't be sold until 2015-2020 is as irrelevant to the current Dinar value as untapped Texan oilfields are to the Federal Reserve $ or undiscovered Canadian "shale oil" is to the CAD. Norway has a lot of oil, and neighboring Denmark hardly has any, yet both currencies (NOK & DKK) are within 5% of each other. Simply finding oil does not magic a currency's value up by x0,000%. That smaller influence occurs when it is actually sold and money changes hands (and only then if it's actually sold in its native currency and not "petro-dollars"). You can't sell the same barrel of oil twice (once to yourself by printing yourself imaginary wealth now, and once again when you actually dig it up and sell it for real in a decades time).

Kathryn's excellent post (UK) correctly addresses the issue : Over 103 other countries on Earth also have oil and / or natural gas reserves in some form. There is absolutely nothing whatsoever unique about Iraq's. Every country on Earth has debt-based money (FIAT currencies) including the Iraqi Dinar. No country has an asset backed anything and hasn't for decades since the world came off the gold standard in the 1970's.

To those who think oil will magically sustain 1,000x more Dinars, here's a Mid-East reality check : There are only 1tn Saudi Riyals (approx $266bn) in circulation for a country that has more than 4x Iraq's oil reserves and more than 5x Iraq's daily oil production. There are also only 985 UAE Dirham's (approx $268bn) in circulation.

$29tn worth of Dinars would also mean that people who claim the Dinar will be "RV'd" to near 1:1 vs the $ are basically saying that a 3rd-world war-torn country smaller than Canada should have a monetary supply that's larger than all US & Canadian Dollars, Euros, Renminbi, Rubles and Yen *combined*, and approx 60% of the entire planets global combined GDP (even though Iraq sells less than 5% of the worlds oil), not to mention a currency that's 116x higher than Saudi Arabia) just because they found a little oil that 100 other countries also have and because they sell slightly more oil than Algeria and less than Mexico or Brazil. It literally defies all common sense, and basic mathematics / economics.

No matter how you "cut the cake", you simply cannot print yourself more wealth because the more you print, the weaker the currency gets. Take a look at Zimbabwe for a nation of "self-declared paper millionaires". Iraq won't stay poor in the long run because they can reinvest oil sales - but the point is that it's the *sale* of oil revenue already sold today not an RV/RD that generates wealth. An RD won't make Iraq wealthier no, but that's not its intention (and nor is it possible for any country to become 1,000x richer just by declaring it), and the only people who have been sucked into believing an RD = "a millionaire for $1,000" are confused amateur first-time Forex gamblers who do not understand the process, have never held any other currency through a similar RD before, and are being "bounced" around from one confused Internet "pumper" to another.

"Back to readjusting their prices to match their currency, what happens if the prices do get readjusted but someone only has a 25,000 note wanting to buy something that is only worth 25 notes? Does that mean the cashier will have to hand back that person 24,975 banknotes in lower denomination notes? "

No, no, no. OK it's clear there's some confusion here, so I'll explain the 3 steps of a redenomination : A redenomination (RD) simply means taking the zeroes out of the economy. Three things are done:-

1. All old banknotes are swapped for new lower denom ones at a fixed ratio (usually 1,000 for ease of exchange) within a fixed time-frame (3 months for prior Iraq banknote swaps). Eg, 25,000 Dinar notes are swapped for 25 Dinars. Iraqi's will change their old for new notes at their banks. The below article explains what happened during Iraq's prior bank-note swap when the "Swiss Dinar" was taken out of circulation in the Kurdish region for good during 2003 and Saddam's face removed from notes. When the time-limit is up, any old notes not exchanged for new are demonetized and become worthless.

It also states in the final two questions : "Q:Can dollars also be exchanged for new Iraqi dinars What will be the conversion rate for dollars?
A:Dollars will not be converted directly into new dinars during the official exchange. Following the exchange, dollars will be convertible directly into new dinars at the market exchange rate" and "Q:Will it be possible to exchange currency outside of Iraq? A:No. The only official currency exchange locations will be located within Iraq":-
http://www.exchangerate.com/iraq_currency_exchange.html

2. The currency is adjusted by the same factor for the *new notes only*. Eg, a 1170 vs the $ becomes 1.170 vs the $. You won't be paid $1m for handing in $1k worth of old notes, you'll just be given the equivalent in new notes (1k Dinars at 1.17 in place of 1m Dinars at 1170). This is what confuses many amateur Dinar speculators the most.

3. Prices in Dinars are also adjusted by the same factor. Eg, a 75m Dinar house becomes a 75k Dinar house. A 1,000 Dinar loaf of bread becomes 1 Dinar. 250,000 Dinar average rent becomes 250 Dinar rent, etc.

This doesn't have to be in multiples of exactly 1,000, it could be anything. But the PP (Purchasing Power) of *current* notes doesn't change the same way some "pumpers" are hyping it. The Iraqi Central Bank have openly stated the Dinar RD will be "based on Turkey". For those who don't remember Turkey's RD / lop, here's the official brochure explaining it:-
http://www.tcmb.gov.tr/ytlkampanya/bro.php

People weren't given $1m in cash just for holding $1 worth of Old Turkish Lira during their 6-zero RD/lop. And likewise, people won't be given $1m in cash just for holding $1,000 worth of Iraqi Dinar during their 3-digit RD/lop. The Dinar may appreciate in time when their oil exports increase in time and demand for Dinar rises, but not by silly 10,000% figures purported by some dishonest Dinar salesmen preying on FX first-timers. Hope this helps.

Q5) Hi again Brian, and thank you for your response as well. I understand what you are saying however, when Turkey dropped the six zeros off of their currency they revalued the new Liras (as well as the old ones until they became worthless at the end of that year) immediately afterwards. This means that whoever was holding the older Turkish Lira before the end of 2005 (when they became worthless) were able to exchange their Liras for U.S. dollars, Euros, etc. at a rate of 1 U.S. dollar= 1.29 Liras. The Lira actually became stable and rose past the U.S. dollar. They didn't exchange their Liras for the new Liras, at least not the ones who purposely invested in the Turkish Lira currency, they exchanged them for U.S. dollars, Euros, and so on. I actually know someone who, not only invested and made a profit off of the Turkish Lira, but also the Kuwaiti Dinar. Iraq does in fact need to have a stabilized currency if they want to be able to progress and be right up there with other stablized countries. I guess only time will tell, we will just have to wait and see how this will all play out.

Answer :
"Hi again Brian, and thank you for your response as well. I understand what you are saying however, when Turkey dropped the six zeros off of their currency they revalued the new Liras (as well as the old ones until they became worthless at the end of that year) immediately afterwards."

Hi Angela. Actually Turkey didn't "RV" - it was a straight RD/lop. On 31st Dec (last day for TRL Old Lira), the value was 1,339,320:1 :-
http://www.xe.com/ict/?basecur=TRL&historical=true&month=12&day=31&year=2004&sort_by=name&image.x=51&image.y=15

And on 3-4 Jan 2005 (first day of TRY New Turkish Lira), the value was 1.347:1. The real value difference was under 1% which is well within the perfectly normal daily fluctuation that happens in all currencies:-
http://www.xe.com/ict/?basecur=TRY&historical=true&month=1&day=3&year=2005&sort_by=name&image.x=31&image.y=18

The 1.29 figure you're using from Wikipedia is the mean average value over the whole of 2005 when it appreciated by around 4% over the first year due to increased trading. But it wasn't part of any "RV" process - it's just due to increased trading demand when the NTL was seen as a more serious currency without all the zeroes. This is also entirely possible with the Iraq Dinar - that it will go up slightly by maybe 5-10% when it loses its zeroes, and maybe appreciate more in the longer run if and when it develops an economy beyond just selling oil for dollars (most oil is priced and traded in $ not Dinars).

But that's not due to an "RV" trying to create money from nothing without inflation, it's due to market demand. And it's certainly not a 99,900% increase some conmen are targeting confused first-time speculators with. Same goes with the Venezuelan Bolivar (another oil economy) RD in 2007 : 2,144:1 to 2.147:1 = No RV. This is normal for the redenomination process.

Q6) Brian, I am so glad you were able to explain all of this to me. Not once, in the past 4 years have I been able to figure out all the possibilies as to what could happen with the Dinar. I think I may have (did) misunderstand much of what I have heard and read about this investment. One of my classmates in college told me that their parents "made money" off of the Lira but maybe they misunderstood their parents, or they just straight up lied for some odd reason (keep in mind that the conversation was about currencies).

Let me just make sure that I understand this correctly, once Iraq drops the three zeros off of their currency, the banknotes I currently hold will not have a change in rate, but the new currency may end up revaluing eventually (yet, it still will not apply to my banknotes). Soon after, my banknotes will become worthless and will no longer be legal tender. However, during this time period both currencies will be legal tender and will both be able to be used for purchasing. The reason why the value will not change on the old banknotes, but will on the new notes is because they will be considered two seperate currencies not one whole currency.

Is that correct? Now that I really put a lot of thought into it, it does make a lot of sense.

In your opinion, do think that the U.S. and Iraq have some sort of deal that was made since the U.S. forgave Iraq of it's debt that was owed? Do you think it is possible for Iraq to revalue it's currency before it drops the 3 zeros for maybe a couple of months until all the larger banknotes are out of circulation so there is no confusion, like there was with the Lira and other currencies that used two seperate currencies at the same time, and then drop the 3 zeros? Maybe that was the plan on how Iraq would be paying the U.S. back the debt they owed them? I am just curious if you think that could be a possibility, or if it would be completly bizzare.

Thanks again for your insight on this, it has really helped clear things up for me, as I hope it has for others as well.

Answer :
Hi Angela, yes that's absolutely how it works. You're not alone in this as there's an obscene amount of fraud and disinformation in the amateur investment community that makes even 2nd hand car dealers look honest!

As far as taking larger banknotes out of circulation are concerned before the RD, some people have got the wrong idea in thinking it means they're being torn up whereas in reality, many are being used for inter-bank transactions instead of public circulation. I don't think any "RV" is likely before a lop because there's simply nothing to RV. A "revaluation" simply means "moving a peg" (like China have revalued the CNY vs the $). The Dinar's low value genuinely does match the huge 29tn worth of currency created, and the only way of bringing that down is an RD. Iraq's 29tn money supply is already 30x higher than Saudi Arabia's whilst their economy is 5.5x smaller. That fact alone is enough to make the Dinar worth 165x less than the Riyal even without taking their 80% destroyed infrastructure and state of near civil war into consideration, or the fact much of their current economy is imported $ driven subsidies and foreign aid rather than Dinar driven exports.

I do believe the Dinar will go up in the long run, but not radically so. Many Forex "newbies" are confused and believe a country's currency should match its resources. This isn't the case anywhere on Earth because a fiat currency is a liquidity measurement (how much money is needed for ongoing trade at any one time) - not a "gold standard" full reserve bank of every potential mineral export for the next millenium up to 3011AD (and supposedly unique only for Iraq!) all squeezed into 2011's money supply valuation! Oil isn't owned by central banks either.

Saudi Arabia has $27tn of proven oil reserves yet only $266bn worth of Riyals in circulation. Kuwait has $11tn of oil but only approx $120bn of Kuwait Dinar in circulation. UAE has over $10.3tn of oil yet only $268bn worth of Dirhams. Russia has $7.8tn of oil yet only $720bn worth of Rubles. Nigeria has $4tn of oil but only $75bn worth of Naira. Venezuela has $10.3tn of oil yet under $175bn worth of Bolivars, etc. People thinking "well Iraq has around $12-15tn of oil sales for the next century therefore it must have $12-29tn worth of currency in circulation today" are seriously misunderstanding how the world works.

Iraq's net export economy would only be $12-15tn if they sold the whole lot at once all in one year without using a single drop for themselves or importing a single thing (which is impossible). And then when it ran out after a year, they'd sink like a stone. Iraq may have $12tn, $15tn or even $20tn worth of oil, but it won't be selling even 1/10th of it at any one time even with restored infrastructure (and won't be exporting it all either). And that's assuming every drop of oil is sold in Dinar's, whereas it's usually sold directly in $. And most of the currency earned is simply sent straight back out again in the form of imports.

Iraq currently exports $49.1bn - but they also import $42.56bn so the net export is only $6.54bn, which isn't much money at all. (To keep things in perspective, Russia's net export is $139bn, oil production is 10m bbd and the Ruble is only 27:1 vs the $). $6.54bn per year is the real trickle rate at which Iraq as a whole is getting richer from oil. Total oil reserves for all countries make little impact on their paper fiat currency valuations. It's total amount of money created (M2/M3 figures) that determine a currency's value relative to another, and at 29 Trillion, Iraq has printed more for its 31m population than USA + Europe + China + India combined have for 3.4bn people which is why it's so weak and devalued.

As for US debt forgiveness, a lot of that has to do with "favors for oil contracts" politics in my opinion. I'd like to thank you too for this great conversation!

Q7) Hi again, Brian, I had one more quick question. Sorry for the hundred questions but, I was just wondering if you understand what this sentence in this article is explaining, or what it really means. I'm not asking you to read the entire article since it is very long, i'm just confused about the part that says "after the balance sheets have been cleaned up, revalue the remaining foreign currency denominated balance sheet items." If you type in "revalue" in the box at the top of the article and press enter, it will bring you to that sentence.

Here is the article link: http://www.imf.org/external/np/loi/2011/irq/030311.pdf

Answer :
Hi Angela. "Balance sheet items" usually refers to debt owed to other countries. Although there's been some voluntary debt write-off by some countries, Iraq's debt is still quite high. The main purpose is to stop the Dinar tanking the day it starts trading (due to countries and other foreign entities all trying to cash in on the debt at once). The wording seems to talk about revaluing Iraq's debt for those countries who haven't written it off.

As said previously, the Dinar will probably appreciate in time as their GDP increases (as long as "growth" isn't just oil sold for $ but goods that are actually priced in Dinars). What is wrong and what I do speak out against is the deliberate fraud committed by some Dinar conmen "pumpers" (named because they're doing a classical "pump and dump" on the outgoing old Dinar notes) who openly and deliberately missell the Dinar as having a 99,900% ROI profit and creating fake "intel" to "support" that when the Iraq Central Bank has repeatedly and clearly stated it will do an RD (lop).

One popular licensed pumper (like many others) sells $85 worth of Dinar's (100,000 Dinars) for $185. That's an insane 115% spread. Normal FX cash spreads are under 5-10% whilst pro-Forex trading is in "pips" (a "pip" is 1/100 of a cent). Even higher denom trades are a total ripoff, ie, selling 1m Dinar's ($854 worth) for $1,220. On top of that, they also charge a minimum $150 per 1m Dinar's ($854) fee when changed back leaving people spending $1,220 and getting back $704. Between 40-80% of the investment would have been swallowed up in outrageous trading spreads & fees. At those fees, the Dinar could "RV" up a whopping 70% and many still wouldn't break even.

This has happened to many folks including elderly people who gambled their pensions on it and have since been evicted from their homes (after people mislead and lied to over how and when it would happen). Needless to say, this popular "Dinar Trade" has since stopped trading Dinars after rumors of a lawsuit being filed by one group of people and "strong" demands (threats) for refunds came from a few others. And that's a licensed one! Unlicensed ones using Dinar's smuggled in from Jordan are illegal, and heading for jail on federal fraud charges:-

"A South Dakota man who banked hundreds of thousands of U.S. dollars by selling Iraqi dinars to investors outside the state has been indicted on federal fraud charges... What dinar dealers don’t say, according to Jim David of South Dakota’s Better Business Bureau, is that *Iraqi currency cannot be exchanged for dollars in the U.S*. "It seems as if people don’t realize that they’d have to take it to Iraq to get anything out of it,""
http://dinarscams.com/?p=1

Q7) Hi Brian, I absolutely agree with you, it's terrible what the pumpers are doing to people and their emotions. I for one have never bought into the lies of any pumper, it would be ridiculous to believe someone when they say every single week that the iraqi dinar is going to revalue on this or that day of the week. It is very much like the story about The Boy Who Cried Wolf. What happened with me was, I was simply misunderstanding my research. You have really cleared everything up for me though and I thank you again for that.

Do you think it may be possible that Iraq will revalue its debt for the countries who have written it off as well, maybe as their way of paying them back? Or do you think it's completely just for the countries who have not written it off? I'm still trying to figure out why one country would forgive Iraq of it's debt owed to them, and the other would not forgive them. Do you think that some countries agree to, as you stated before "favors for oil contracts", and others did not agree to it, which is why Iraq still owes them money and would that mean that Iraq will not give "favors for oil contracts" for those countries that did not forgive the debt owed to them by Iraq? Sorry again for all the questions, i'm just thinking out loud right now :)

I'm going to start letting people know about what you have explained to me so they don't end up blowing all their life savings! Thank you so much, again.

Answer :
Hi Angela, I honestly don't know how / what arrangements are there for clearing Iraq's foreign debt simply because many countries barter over it without cash all time. Eg, back in 2001, Russia offered Austria MIG-29's instead of cash for relief of old Soviet debts to Vienna. A lot of other stuff happens all the time over the world. There was a lot of open speculation the USA and many countries were annulling Iraq's owed debt to be seen as more favorable during the 2009 oil services contract bidding. But much of that stuff is "realpolitik" rather than economic! No problem, and thanks again for a great conversation!

Q8) Brian thanx for keeping it Real..And giving facts about whats to come..But what do u think about people that are holding on the 50.00 Dinar notes without three zeros..??

Answer :
Hi Tony, when low denom notes are RD'd downwards and they end up at the equivalent of $1 or less (fractional values), then often get issued as new coins instead of new notes. Eg, when the 500,000 Lira banknote was redenominated down by Turkey's 6-digit lop to 0.5 New Lira (50 New Kuru's), it became a 50 New Kuru coin (Kuru is the Turkish equivalent of "cent") instead. Basically, this note...
http://upload.wikimedia.org/wikipedia/commons/8/8e/500000_TL_obverse.jpg

...was replaced by this coin (both have the same value):-
http://upload.wikimedia.org/wikipedia/commons/7/7b/50kr_obverse.png

Q9) This all sounds wonderful, but here is my question. If the Iraqi government has a budget of 82b dinar for 2011 (per Reuters) , how will they put themselves in a place where they only have 29b total currency. It just doesn't make sense. How will they be able to improve infrastructure? Heck, how will they be able to pay their people?

Here is the link to the Reuters reference: http://mobile.reuters.com/article/idUSTRE71J1SP20110220?irpc=932

Answer :
How can they spend more money than they have in circulation? Because to a large extent, they're spending $ not Dinars. Much of Iraq's spending income isn't coming from internal taxes collected in Dinar's - it's coming from a combination of foreign aid, the USA war budget / "supplemental spending", and "petro-dollars". Most wages for Iraqi's, etc, is in Dinars, but a lot of the expensive infrastructure projects (which make up the bulk of the budget) is in "petro-dollars" : Iraq sells oil to the US directly for $ (not Dinars) and will then spend much of the same received $ back on employing US reconstruction, industrial & defence contractors without a single Dinar changing hands in the process. Also, that $82.6bn budget includes a $13.4bn deficit.

Same is true of other "petro-dollar" countries. Eg, between 45-75% of Saudi Arabia's government budget is technically $ paid by American oil consumers and not Riyal's coming from domestic Saudi taxation. Only some of these incoming $ are converted to Riyals, the rest are re-spent on imported defence equipment, foodstuffs & agriculture, non-oil related industries, transport & medical equipment, etc. This is how much of the mid-East economic region works. Notice the article said "budget" in dollars (what gets spent) and not "revenue" (where and in whose currency the money actually comes from).

Q10) Brian's comments are not bullet proof. Here's why: The Iraqi government has been removing the notes with 3 zeros from circulation since 2009. If they were to LOP the currency then why remove the notes? LOP only occurs when there is hyperinflation-check out the history. Iraq's inflation is currently 7%. If you are worried about a LOP then open a Warka account. Your money is electronic there-no exchange of notes-just an adjustment to your net worth once the exchange rate becomes "on par" with the USD, which by the way was a stipulation from the IMF to the GOI. This is very real-not a pipe dream.

Answer :
Hi Gary. There's a great deal of misunderstanding with the removal of high-denom notes. The Iraq govt isn't going around stealing them from people and giving nothing in return, they're simply printing more lower denom notes, ie, replacing 1x 25,000 note with 5x 5,000 notes. This doesn't reduce the money supply in the way some pumpers claim it does. Europe has done the same thing by withdrawing the 500 Euro note that was targeted by counterfeiters - but it hasn't made the Euro value go up a ridiculous 99,999%. The vast majority of denomination banknotes printed in any currency are the lower commonly used notes. The highest denominations usually make up just a fraction. As an example of the Euro, there are only 56 million 500 Euro banknotes printed out of 6 billion total banknotes (approx 0.1%). Same is true of Iraq with the 25,000 notes. It simply doesn't make any difference as different denomination banknotes don't get RD'd at different rates. It's one rate for everything in the currency.

You also greatly misunderstand what happens to bank accounts (all bank accounts in IQD currency) - they'll be "lopped" too when the currency changes from IQD to the new currency. ie, if you have an account with 1m IQD Dinar in it, it will be RD'd down to whatever ratio the new currency is to the old (probably 1000:1 if they're lopping 3 digits), so you'll have 1,000 of the new currency in it (but which is worth 1,000x more than the old so it won't lose its $1,000 value). In no way shape or form will you turn $1k of Dinar into $1m just by sticking it into a bank account during a lop no matter who you bank with any more than sticking $1k's worth of Old Turkish Lira into a bank will magically become $1bn after their 6-digit lop.

If that were true, every man, woman and child living in Turkey must all be secret billionaires! Bank deposits are converted at the exchange rate of new for old currencies. They don't keep the same face value (which is precisely why bank notes need to change in the first place - nothing retains its face value after a lop which is the whole point of a lop). There is no "one rule for notes, another for bank accounts". All get lopped at the same rate. This is nothing new - it's happens dozens of times before on every continent on Earth, and the rules for Iraq are no exception just because it has a little oil or some confused / dishonest pumpers say it is.

Also "LOP's only occur during periods of hyperinflation" is another untrue "pumper myth". Most LOP's occur *after* inflation has fallen after a period of chronic / hyper inflation. No-one "lops" during high inflation because it doesn't boost any confidence in the currency if prices continue to rise after the lop. So the fact that inflation is falling in Iraq actually justifies a lop even more.

Q11) Remember two things: Iraq has been removing the notes with 3 zeros from circulation since 2009. If they were going to LOP why worry about the removal of these notes so far in advance? 70% have been removed-reducing the M2.

Also, note through history, including Turkey and the RV of the lira, LOP's or devaluations only occur during times of high inflation. Iraq's inflation has been kept low, typically under 5%-now 7%. That's why a LOP will not occur.

Answer :
"70% have been removed-reducing the M2."

Hi Gary. The above is not true. That claim comes from someone confusing M0/M1 figures (only banknotes in circulation) with M3 (total Dinar in circulation). That claim is openly debunked in paragraph 7 of this article we're commenting on itself : "Saleh said there are currently some 29 trillion dinars in circulation in Iraq, represented by some 6 trillion banknotes of various denominations." That 29t in circulation figure is just one week old. It hasn't gone down at all - someone just compared "total money" to "banknotes" and got confused.

It also says "most of them [banknotes] are quite small" which means removing 25,000 won't make any difference because they make up less than 1% of the 6tn Dinar in circulation.

"Also, note through history, including Turkey and the RV of the lira, LOP's or devaluations only occur during times of high inflation."

Turkey didn't "RV" they redenominated. The two things are completely economically different. A genuine "RV" is a peg adjustment (like China "RV-ing" the Remminbi vs the $). Free floating currencies cannot "RV" they can only appreciate. Iraq's inflation has only recently fallen to 7% yes, but in prior years it was high. It's this past inflation not current inflation, that lops take out.

Q12) First of 3
From the moment I’ve been in this investment even until now, the debate of LOP versus RV has been raging. That very argument is what drove me and thousands of others AWAY from Investors Iraq (IIF), as it appeared it was absolutely overrun by those who felt it was their mission to squash the hopes and dreams of other investors. I am sharing this with the permission of those who have helped bring me this concept to light, from several legitimate economists and very sharp minds, their perspective to help each of you understand this dilemma.
I don’t know about you, but I’ve been told time and again by those who are absolutely in a position to know that this will NOT be a LOP, but will be a straight-up RV, yet I found myself not being able to refute the arguments of those who brought only “part of the truth” forward, using the “numbers” to their advantage through logical focus on that which was clearly understood. This post of mine is dedicated to explaining how an RV will happen.
CONCEPT EXPLAINED:
First off, I’ll use the exchange of a 10,000 IQD note as my example. To help explain the economics of this cash-in example, I will use a 1:1 cash-in ratio between the USD and IQD, that is given a two-tier payout, and a 2% bank spread.
What You Will Receive:
If you were to cash in your 10,000 IQD note with a bank that charges you a 2% spread, you would personally receive a net take-home of $9,800 credited to your bank account.
What Your Bank Will Receive:
Your Bank will receive a $10,000 credit to its Federal Reserve Account. They will also be able to add the $200 profit to their “capital account”.
If you don’t understand the “Fractional Banking“ concept that runs our country, you may want to, as that is what this is based on, and is what is behind this entire concept and plan. To learn more about this concept, I suggest you click HERE, and go to a video post I brought to the forum previously, and posted in my “Tidbits“ section.
Ultimately, the bank wins because they are able to gain $2,000 in lending power under the 10% “Fractional Banking“ model.

What the US Treasury Will Receive:
First off, the US Treasury will receive $3,500 in estimated taxes in the quarter after the exchange, because you are now in the “rich” category and get to enjoy the 35% tax bracket. This lowers the “net cost” of the IQD exchange to the US financial system to $6,500 USD (i.e. $10,000 out – $3,500 in). Furthermore, the US Treasury’s rate is higher than the banking rate (we will use in this example 1.25), thereby further reducing their “net cost” from $6,500 to $4,000.
Oil Now Enters the Picture:
At some point, a Fed-appointed agent orders $12,500 worth of oil from Iraq. Payment will consist of a $12,500 transfer from the Fed’s foreign currency reserve IQD account to the IRAQ Oil payment account at the CBI in a form otherwise known asPetroDollars/PetroDinar. Even though the world spot price of oil is defined in terms of USD, the actual transaction may take place in any internationally recognized currency agreed to by the parties. For example, Iran only accepts Yen from Japan for their oil orders, because they don’t want USD in their foreign currency reserves.
How the CBI “RECAPTURES” the Money:
The $12,500 order is filled with 250 barrels of oil based on the spot price on the date of the sale (for this example we used a $50 USD spot price). What does it cost Iraq to produce the oil to fill this order? Well they have negotiated productions agreements for approximately $1.50 USD/barrel. From that price $.50 USD goes to the national Iraqi oil company who is the partner in the field the oil came from. Out of the remaining $1.00 the other oil field partners have to pay the Iraq government a profit tax of $.35 USD (35%). The net cost to Iraq to produce a barrel of oil used in this scenario is $.65 USD. (i.e. $1.50 – .50 – .35)
What does all that mean? It cost Iraq $162.50 to bring back a 10,000 IQD note! Can they afford that? I think so! So, instead of paying out $12,500 for a 10,000 IQD note, they only pay $162.50! That doesn’t add to the money supply much at all does it! They receive their IQD back and place it in the CBI, or destroy it.
The transaction is completed with the Federal Reserve exchanging foreign reserve credits which are equal to $12,500 USD (which had a net acquisition cost of $4,000 USD for the US) for 250 barrels of oil (which has a TOTAL COST to produce of $162.50 USD for Iraq.
More completely explained, and simply put, it cost Iraq $162.50 USD from their foreign currency reserve accounts to redeem the value of 10,000 IQD, which goes into their operating accounts. At the same time the US got $12,500 worth of oil for a net cost of $4,000. That’s how it was originally planned for Iraq to RV at 1 IQD = 1 USD, with the variable being the political element (i.e. UN Sanctions, GOI actions, IMF actions, World Bank actions etc.)

3rd section
Other Factors that Strengthen Iraq’s Position and Ability to RV:
DFI Funds Returned & Other Assets: $280+ Billion USD, plus other frozen assets (estimated at $100 billion) will be returned back to Iraq and added to their foreign currency reserve, bringing it up to $430+ billion USD.
CBI IQD Reserve Requirement Adjustment: The CBI will change the current fractional IQD reserve requirements from 100% to 15% at the appropriate time. As a result, the the total potential money supply will be raised in value to $2.8 Trillion (430 billion/15), while at the same time, the total physical IQD in circulation will be reduced by removing the large bills with the 3 zeros over a period of 2 years, as they have indicated.
Oil Production Increased: Iraq will also execute the plan they announced to increase oil production from 2+ million barrels/day to 10 million barrels/day with the resulting revenues flowing directly to the Iraq treasury.
Oil Futures & Forex Contracts Added: To further stir the pot, the CBI will continue to use it’s sales window to market oil futures and forex contracts. They have shown they can generate significant cash flow in the private market. Think of their impact in public markets.
There, my friends, is how this plan will be enacted and made possible. Taking NOTHING, and turning it into SOMETHING, then bringing it back to a “manageable and reasonable something” that is accepted and supported by seeming endless supplies of oil. This is how the world’s ENTIRE NEW MONETARY SYSTEM will be regenerated and supported and backed, given, in essence, a re-birth and renewed for most governments and economic regions… even by “Black Gold”.
So, here’s the summary for all the “players” involved, giving ballpark numbers, and not taking into account superfluous costs, fees, and other small details that don’t really affect the larger picture:
Investor’s Net Gain: $10,000 – $200 = $9,800 x .65 = 6,370 for an investment that cost $10
Bank’s Net Gain: $200 added to “capital account”, plus $2,000 they can use to loan out.
US Treasury Net Gain: $2,500 from the .25 spread on top + $3,500 in quarterly taxes = $6,000
CBI/GOI/Iraqi People Net Gain: $12,500 – $162.50 = $12,337.50 + Profits from “Other Factors”
Overall Net Gain for All Involved: $6,370+$200+$6,000+12,337.20 =$24,907.20
This is the wealth that was generated from a single 10,000 IQD note that was given an original value of approxi

Answer :
Hi Parkerro. The Iraq Central Bank have openly and repeatedly stated they will redenominate - NOT "RV". Only pumpers invented a "Dinar RV" rumor-mill. There's really no arguing with their intention anymore after the clear April & June announcements to specifically "redenominate based on Turkey". What's really happening is that some people have been so desperately attached to being a promised millionaire just from changing $1k of dollars into Dinars and back again that they won't even look at what the ICB are saying anymore if it's not what they want to hear because "the dream" (as you openly admit it is) is more important to them than the truth. So they ignore it and cling onto failed pumper conspiracies as to why the "RV hasn't happened yet". It's because there isn't one and never has been outside of some chat rooms run by pumpers who whip people up into an unhealthy state of despair and permanent excited anticipation of a non-event. I understand your upset about "squashing the hopes" of those who like to dream, but there are many mature people out there who are more interested in the truth than just dreaming, and it's morally wrong for dreamers to fool those who do want to know the truth, just because they like to "dream".

As for your posts : The ICB has no "100% fractional reserve requirement". Any reserve at 100% is a full-reserve gold standard that's no longer fractional. Last August Iraq's reserve req. was cut to 15% from 20%. It's not at 100%. To be at 100% reserve for 29 Trillion, Iraq would need 60% of the entire $50tn global GDP. In reality they export just under 3% of the oil market which in turn makes up 6% of the global GDP. 3% of 6% = Iraq has approx 0.18% of the share of global GDP. It's surprising to hear you talk about fractional reserve banking and fiat currencies and then declare oil backs the Dinar. There is no oil backing it. It's weak because it's overprinted. And currencies are not "RV'd" according to oil futures at all. And the US Treasury won't receive any more from taxes because $1k will not magically become $1m due to an RD in the first place.

If anyone is in any doubt as to what will happen, here are two of Iraq's recent announcements in plain English from the people who are in charge of the whole process:-

April 13th 2011 - "Iraq’s Central Bank announced on Tuesday that the project of Iraqi Dinar re-denomination consisting of removing three zeroes is close to completion. The re-denomination project is believed to be a strategic plan that will be passed to the ministerial council and Parliament once complete. Iraqi economists believe the re-denomination of Iraqi Dinar will not have a major influence on the purchasing power of the Iraqi Dinar which the government has hopes high on it."

June 24th 2011 - "Iraq’s Central Bank announced on Thursday that it is planning to delete the zeros from the Iraqi currency. The new currency will be printed after deleting the zeros and will include the Kurdish language in addition to the Arabic language. It will bear as well photos of Iraq’s civilizations and patrimony in addition to symbols of Iraqi intellectuals and figures”, Saleh noted. On June 19, Iraq’s Central Bank Governor Sanan Al Shebeibi affirmed during the meeting of independent commissions with Prime Minister Nuri Al Maliki that the bank is preparing all requirements needed to replace the Iraqi Currency."

You don't get new banknotes from an "RV" (which keeps the same notes), you get it with a redenomination. Those x,000 notes you hold are going to cease being legal tender and replaced with new x notes at a ratio of probably 1000:1. There's really nothing to take out of context on the above very clear announcements. The word "redenomination" (lop) was used no less than 3 times in just the April 13th announcement alone. "RV" has never been used by the ICB. It's only psychological denial and "dreaming" out of fear of the truth that's keeping some people confused.

Q13) http://www.youtube.com/user/iraqidinarnotes
Tell me what you think BRIAN..

Answer :
Hi I watched it. A few points : The problem is that for some people "doing a lot of research and getting to the bottom of it" is often just looking for and agreeing with what they want to hear then twisting it to fit what they think. The "law passed in Iraq saying people cannot say anything bad about Iraq" is pretty silly. Many Arabic language Iraqi newspapers openly criticize Iraq's economy all the time. Outside Iraq, Iraq's laws don't apply. And on the net, they're ignored. There is no real secret "news blackout on criticism". People in Iraq still without reliable electricity after 8 years know what way the wind is blowing with or without a media blackout. As do the 15-20% of unemployed Iraqi's.

As for "after a lop, the value of a 1,000 Dinar bill remains the same but the price of everything is 1,000x lower" - that's total nonsense. A lop means deleting 3 zeroes off everything, both prices - AND currency (both notes & bank accounts). You can't have one without the other as doing so will be no different to printing 99,999% more money overnight (hyperinflation). If the Federal Reserve printed $9.99 quadrillion ($9,990tn) overnight, would America be better or worse? It's the same thing - a 1,000x fold increase in money supply relative to prices. There's nothing new about this - it's been done dozens of times before:-
http://en.wikipedia.org/wiki/Denomination_%28currency%29#List_of_currency_redenominations

A "lop", "cutting zeroes", "lifting zeroes", etc, are all slang for the same thing : a redenomination. If 3 zeroes are cut / lopped, then people will be given 25 Dinar notes for current 25,000 notes, prices will fall by 1,000 (ie, average rent in Iraq will fall from 250,000 to 250), bank accounts adjusted by same 1000:1 factor, and doing so will raise the value of the currency by same rate 1170:1 to 1.170:1. The same multiplier factor is used right across the board, and cannot work any other way. People don't get 1,000x richer from lops, nor can they buy 1,000x more goods afterwards. After the lop, the Dinar may (probably will) appreciate gradually if and when it's Dinar economy (which doesn't include selling oil for $, nor does it include just finding oil which won't be drilled for another 5-10 years).

A lot of these people really need to stop posting confusing videos until they understand what's what. The blow excellent PDF (click the download button) explains the entire lop process in detail (especially the "redenomination history" on the last page):-

"Afghanistan 2002 - 3 zeroes removed : 1,000 Afgani = 1 New Afgani
Turkey 2005 - 6 zeroes removed : 1,000,000 Lira = 1 New Lira"

etc, for over 80 other lop's by over 50 other countries:-

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1347407

Q14) Brian your awesome! I love to read your post do you have a website?

Got a good one for you the puppers are saying if they drop the 3 "0"'s this is one of many FUNNY examples is you go to the store in Iraq with a 25000.00 note to buy something for 25.00 that use to cost 25000. They will give you change on the 25000 yes he said change of 24,975.00 the store keepers would have to have a room stocked of dinar.

I almost fell of my chair when I heard this one sadly enough people believed this?

Answer :
Hi Car (of Canada). Yes I know what you mean! No I don't have a website (though some pumpers do drive me to start considering writing a "plain English" page of what a redenomination is)! There's nothing wrong with buying a small amount of FX currency as a first-time experiment if people treat it as an equivalent of a lottery ticket and they use their common sense as to realistic expected gains, understand what a "fiat" currency is (and why they aren't backed by anything) and just as importantly - "keep it real" regarding how much time / effort they spend monitoring it after they've purchased (enough to understand it but not to being a daily obsession like the Dinar is for many people). What is wrong is when people panic buy hundreds / thousands of dollars of Dinar which have ceased trading on the international market on the back of a promise of being a millionaire from a group of faceless secrecy-addicted chat room strangers who permanently speak & write in a deliberately misleading over-excited style to make it sound "imminent" to put pressure on people to impulse / panic buy.

I personally know one elderly couple who lost their home because of the Dinar ("It'll RV next week, so buy more now! Quick!!! Just $300 dollars will be an extra $300,000 next Monday!!!" - every single day since 2006 from some pumpers). No serious Forex advisor would ever do that. Increasing numbers of others are literally making themselves ill spending all day every day, desperately trawling dozens of Dinar forums being whipped up into a frenzy by pumpers posing as "secret intelligence collectors" who keep followers on an emotional roller-coaster ride cycling between frantic despair and unhealthy almost rapturous anticipation day after day, month after month, year after year (and yet not only can they not get anything right in 5 years despite throwing daily predictions around like confetti but some days are outrightly contradicted by the Iraq Central Bank and have to scrabble around inventing a new "secret" conspiracy to keep the illusion alive, or twist meanings like "a redenomination is not a lop" (and thus contradicting their advice in past months) when they can no longer claim Iraq will not redenominate).

Many, many of these people are just posers and drama queens being paid commission from every Dinar sale they refer (some are also paid commission from offshore financial services for referring and selling offshore accounts to put their "future millions"). Some of them don't even attempt to hide it : if you order your Dinar through Dinar Trade and mention you were referred by Dinar Daddy, you will get a discount. Another long-term Dinar pumper named "Phoenix" also uses the names SekretKey, Ranger77, and Ema266 to pump dinar on many different sites. He also used to pump penny stocks under the Ema266 name. Many people are beginning to understand that these people's profit is not getting rich from *holding* Dinar, it's getting rich from getting rid of them before the RD! Have a good weekend!

Q15) Could someone explain to me what my 25000 note is worth in the U.S. Should I hang on to it or take it to the bank?

Answer :
Hi Tracy, your 25,000 Dinar note is worth about $21.45. Most banks won't change up Dinar at the moment as it isn't being internationally traded. Most Internet Dinar sellers also won't buy them back (and some offer such ripoff rates it isn't worth it). One other option could be to find someone going out to Iraq (in the Armed Forces maybe) and swap it for a $20 note?

Q16) Hello Brian. This is just absolutely false. Although the exchange rate you posted for the 25k note may be close, most of the banks that sold the IQD will also buy it back today.
I have purchased all my notes from my banker. And whatever happens, they have a buy back rate to buy it back today. Yes there is a spread and I will lose a little. But there are others who have had their Dinar longer than me that bought years ago. They could sell today and realize a profit...today. Although some banks don't sell anymore because of difficulty in getting it...they do buy it back.

You obviously have a lot of information about trading the Forex...I don't think you understand fractional banking totally. I wont restate the argument already made...but that's they way IT WILL happen. There are pumpers out there and I agree they have ill motives...but that doesn't make the investment a bogus one.
Your response was not adequate to make me change my opinion of this speculative investment. I understood the risk going in...that's why the possible return is higher. More risk...more return.

Your basic answer to fractional banking and the RV was that Iraq has mention redenom not and not RV. Do you honestly think they will "announce that they will RV?" No they won't! Most people including you and many other currency traders and speculative investors and even foreign Country's around the world would buy as much as possible and wait for the RV.
Before Kuwait Rvd they said as close as the week before they did it that they were not going to Rv. And they did it the same week!

I agree there are pumpers out there but there is a lot more going on that you don't see, such as banks carrying more cash on hand, training tellers on IQD and currency exchange, contractors in Iraq with contract rates of over the 1170 rate posted at CBI signed and waiting for the RV. There is so much more than the facts that you know about. There are other facts on the table such as when Shabbi was in Washington a few weeks ago talking to business men about investing in the future of Iraq. (you tube it) Shabbi was asked when pint blank...when would the Revaluation happen. He said if he knew , he certainly couldn't tell it and laughed it off! If they didn't 't have revaluation in the plans, he would have said so when asked. I just think you are missing too many other details other than the ones you have.

Answer :
The FX rate for the Dinar isn't secret and is openly and visibly 1,168.50:1. So 25,000 Dinar = $21.39:-
http://www.xe.com/ucc/convert/?Amount=25000&From=IQD&To=USD

Pumpers FX rates are far worse (>1400:1) when buying back at market rate (and >1800:1 with rip-off selling spreads). Many Dinar sellers don't buy back, and others have secretive priceless contact forms with "Your submission of this form does not obligate The Currency Vault to purchase your currency notes from you" disclaimers.

Let me clarify : the Iraq Dinar is not being openly traded on the Forex. Some places may buy back sure - many soldiers, contractors, etc heading to Iraq, buy them like that. But they don't *have* to buy them back the same way a FX outlet has to change say Euro's to $ and they can withdraw that at any time. It also doesn't mean they'll be able to do so during the RD if Iraq installs currency controls on money heading in / out of Iraq (which is exactly what they did last time in 2003).

Sure some people bought at 2000:1. The problem is holding it for 9-10 years at mostly 30-70% inflation rates will wipe out most wealth gained in real monetary terms. Here's Iraq's annual inflation rate over the past 7 years : 2003 = 70% / 2004 = 29.3% / 2005 = 25.4% / 2006 = 33% / 2007 = 64.8% / 2008 = 4.7% / 2009 = 6.8% / 2010 = 6.8% / 2011 = 6-7%. You'd have made far money buying gold & silver in 2002 than Dinars. A lot of 3rd world currency FX movements look great if you ignore inflation!

"Do you honestly think they will "announce that they will RV?" No they won't!"

Sorry twash, but all this "secret society" nonsense is getting old. Iraq have already announced they will "RD based on Turkey" and openly described their new banknotes in detail (the banknotes that most "secret society" Dinar pumpers swore blind wouldn't happen because new notes = a lop) and are now scrabbling round like headless chickens trying to invent plausible sounding conspiracies to avoid admitting their deception. The only people who use "RV" are the pumpers who fail miserably at getting *anything* right, week after week, year after year. You cannot reprice everything & every bank account in the nation *and* change all banknotes and related logistics (ATM's, banknote counting machines, etc) in secrecy all in the space of 24hrs. That's complete nonsense that stretches gullibility to the limits. The only reason the pumpers are pumping this secrecy stuff is to create excuses to keep the "RV" illusion alive now that they're being overtly contradicted by the ICB on an almost daily basis. They've switched from plausibility to paranoia & propaganda tactics called "appeal to authority" : "I have secret intel contacts, therefore do not question me because everyone else is wrong" is what 99% of pumpers come out with every day. And it's utter claptrap.

"Most people" aren't buying Dinar at all anymore than they were the Bolivar or Lira. Nor are most countries. "Countries are hoarding Dinars" is yet another lie churned out by the drama queens and posers on Dinar rumor forums with nothing to back it up - and plenty to disprove it. Statistics are widely available on this pumper myth:-
http://www.imf.org/external/np/sta/cofer/eng/cofer.pdf

Also, in his Washington speech, Shabibi's exact words were : "I think, ah… to bring back the Iraqi Dinar, where to actually, the three zeros have to be removed". Again : "remove zeroes" = lop (about the 5th time he's said it now). He also spent most of the speech talking about inflation. He said he didn't know because he doesn't - one prior requisite given was a pre-RD educational programme for Iraqi's on the new currency (which shatters the "it will be done in secret" pumper BS).

Also Kuwait had a pre-existing hard peg. The Iraq Dinar doesn't and geniunely is a lot more like Venezuela & Turkey in terms of being low market priced currency after high inflation. Iraq is in a totally different situation to Kuwait. Thanks.

Q17) Hey Brian take a look/listen to this video for the BH Goup posted on Sunday July 3/11
http://www.breitlingcurrency.blogspot.com/

And for the newbies
Dealers

www.msb.gov
Money services businesses generally are required to register with FinCEN, to establish anti-money laundering programs, and to comply with recordkeeping and reporting requirements under the Bank Secrecy Act. Dinar sales websites frequently claim that their businesses are registered with the Department of the Treasury. These assertions are not always accurate. Further, it may be diffi- cult to discern from the money services business registration list on FinCEN’s website (www.msb.gov) whether the business is in fact registered, particularly if the business is an affiliate of, or a “doing business as” alias for, the business that is registered. Moreover, even if the business is registered with FinCEN, that registration does not guarantee that the business is in compliance with other Bank Secrecy Act requirements or with applicable state law. For these reasons, a financial institution that conducts business with entities selling Iraqi dinars should conduct appropriate due diligence to assure itself of the legitimacy of such entities. All financial institutions that do business with, and potential customers of, such money services businesses, are reminded that registration with FinCEN in no way authenticates either the legitimacy of a business, or the compliance of the business with any federal, state, or local laws.

And to see the legal action that has taken place with these dealers better know as puppers
http://www.iraqidinarmoney.com/dinartrade/comment-page-1/#comment-36

While your on this siteabove you can look up other dealers

Answer :
Hey Car, yes I know about that. A lot of people don't understand that you do have to be licensed to trade in foreign currency beyond just selling on a few unwanted vacation notes on Ebay. EDinarFinancial has also violated that and and on the same day just a few weeks ago, the Arkansas Securities Commission issued a similar Cease and Desist Order:-
http://www.iraqidinarmoney.com/edinarfinancial/

The profits mentioned are also interesting : "From on or about January 1, 2008, through the date of this Order, Dinar Trade has exchanged approximately $4,400,000.00 into Iraqi dinars in approximately 5,000 transactions for residents of the State of Arkansas."

$4.4m just from the state of Arkansas (pop 3m)? That's works out to average $454m total money received for 310m US pop. And people wonder why they pump like they do...

Q18) Brian, the CBI sells this worthless currency to banks, foreign investors, they now have made billions, for their international reserves and are ready to become a stronger country and currency.

This is suppose to be a World wide Historic event, and like your saying about other currencies that go up or down in value and those countries have good resources too, that this iraqi currency is no different. This is where I think you are wrong. Why do so many millionaires, Governments all over the world have so much dinar if it is a worthless investment.

Along with tax attorney's , dinar sites, and all the other people getting a kick back from this investment, they have already made some money. Yes , every investor has been given the tip, " Only invest in what you can afford to lose" then there are the investors who are totally brainwashed, quit their job, 24/7 on computer waiting for big day, sold everything to get more dinar. Hey , those are the ones who would invest in a bunch of other things, if not the dinar. It is so easy to get fooled by people , they make it seem so real.

IMO I think this is 50% about Iraq and 50% to help all the other Governments and their countries around the world. I think we are waiting on some currency tax law world wide or per country. Then Poof , RV of many currencies, but the iraqi dinar will be worth the investment at least revalues to one dollar per dinar as now , not worth a penny, so still one dollar would be a good return, and would be easy to control.

This will be an Historic Event, so that is why this is different. Economically the World needs this. We will have a Great Blessing Brian, and hopefully it will change lives for the better. God Bless you and maybe you should buy a little , just in case making sense , at the end makes no sense at all, and you miss the Big Historic Day. Take care Theresa

Answer :
Theresa, as I posted in my link to the IMF, countries don't have that much Dinar at all. It's a complete myth that they've been buying and hoarding it in vast quantities. If any country can just declare itself 1,000x richer, well, so can all those other countries! Maybe 6 other countries could "RV" after Iraq and you could invest one straight after the other - that way you'll be a Septillionaire! Maybe 150 countries could "RV" and you could be a Quinquagintacentillionaire! All of a sudden, reality starts to implode when you realize claimed "RV" in the way Dinar holders dream of is just printing money and pretending it's "different" because they want it to be! A real "RV" is a peg adjustment and no new banknotes are involved with that.

It's also rather meaningless to say "Iraq won't say they'll RV because it'll be like insider trading" if everyone already apparently "knows" the "super-ultra-secret" that it'll supposedly go up by 99,999% overnight given the amount of Internet pumper-chat-room hype. Do people really believe that Forex pros and much of the educated general public are sitting there scratching their heads not "getting it"? The real reason they've said it won't "RV" is quite simply because it won't - it'll "RD" instead. And I'll repeat it again : You cannot "print yourself richer" with fiat currencies. Not now, not ever.

"IMO I think this is 50% about Iraq and 50% to help all the other Governments and their countries around the world."

Iraq creating 99,999% more money overnight without selling a single drop more oil will *NOT* make either Iraq or the world richer, any more than Zimbabwe or WW2 Germany made it richer, it'll just export chronic inflation. $1,300 loaves of bread? No thanks! The world "saved" by a war-torn country with 15% unemployment, 12hr per day electricity supply and 0.18% of global GDP share? Keep it real people.

Ask yourself these common sense questions:-

1. If everyone ran out tomorrow and bought $1k worth of Dinar with the $10tn of US notes in circulation, where do you think the $10quadrillion would come from to give everyone $1m back other than printing it? Where do you think this 99,999% increased money supply falls into existence from?

2. The average Iraqi earns $2k-4k in Dinars. Do you seriously believe they'll be given $2-4m each year for sweeping the streets, and will be able to sell their old 1990's Toyotas for $5-10m and their 3rd-world houses for $50-75m each after the RD by changing up Dinars for $? Some of this stuff is bordering on insanity.

3. The total global GDP is approx $60tn of which Iraq's share is 0.18%. If that 0.18% is supposedly "magic" enough to sustain a $29tn Iraq money supply whilst the other $30tn is shared by 99.82% of the rest of the planet then by extension, you must also believe everyone else on the planet can magic $16 quadrillion into existence via similar "RV's" including Obama who can magic $4qdrn and will hand out $13m to every American all without inflation?

4. If Iraq's 0.18% is enough to sustain $29tn money, then by extension, the $60tn total global GDP can be substituted for just 0.37% GDP. Or in other words, everyone can just stop working, buying and selling, and constantly "RV" (print) themselves money and no inflation will occur anywhere because everyone on Earth will be a retired millionaire...

The sad truth is, some people are so brainwashed by this "millionaire for nothing" stuff, that when the RD does take place, they won't even understand it then and will just angrily shout at the exchange cashier they've had $999,000 promised money "stolen" by Iraq when they change their original $1k worth of Dinars back into $1k. Seriously people, if you truly believe the more money you print, the more value each note has and that printing enough for $1m each will make everyone rich with no other negative effect, then I have some magic beans to sell you...

Q19) Thank God for you and your ability to explain it in fairly plain terms. I hope people read your comments and actually have the courage to listen to the truth.

Answer :
Thanks very much for your kind comments. Really, Forex is a "zero sum game" - when you buy currency at a rate, someone else has to sell it at same rate - and vice versa : when you sell currency, someone else has to buy it at same rate. All this talk of "everyone's a winner from an RV" really is uneducated nonsense. If the Dinar "RV'd" without any RD / lop, then Iraq would have to monetize $25bn (29 Trillion Dinar at 1170) into $25tn (29 Trillion Dinar at 1.170) worth of overprinted currency - or in other words, it would have magically create $24.975tn overnight from nothing causing massive hyperinflation. Contrary to popular belief, oil reserves don't massively affect currency values at all - it's only oil production sold in native currency that does that. Oil is only worth something on a currency level when you sell it as you can't sell the same oil twice - (once when you find it and once when you actually sell it) any more than other countries can sell the same oil, food, electronics, etc, twice.

My above question has gone not only unanswered here but everywhere else even on the most educated pro-RV Dinar forums : If there are only $10tn US Dollars in circulation and if everyone bought Dinar and magically became 1,000x richer, then where does the other $990tn come from to give them "their" $10qdrn back? Even if as little as $2bn were gambled on the Dinar, a 1,000x increase in value means that even if 309.9m Americans gave the other 100,000 Dinar holding Americans every $ banknote in circulation - there still wouldn't be enough (total USA M1 figure (banknotes in circulation) from March 2011 is only $1.9tn)! This is why the whole "RV" thing the way some use it is mathematically impossible. A true "revaluation" is simply moving a currency peg. China "RV'd" a while ago. That's what a real "RV" is.

Almost every serious site out there is saying the same thing about Iraq will RD / lop. The Iraq Central Bank said it 5 times over (including in Washington). Serious Forex sites are saying it:-

"In 2010, the Central Bank of Iraq announced their plans to redenominate the Iraqi Dinar to ease cash transactions. The intention would be to drop three zeros from the nominal value of bank notes; but the actual value of the dinar would remain unchanged. That would mean that 1,000 IQD (pre-redenomination) and 1 dinar (post-redenomination) would both be worth the same amount in US Dollars. Although the announcement stated that the change would take place by the end of 2010, there has been no redenomination as of January 2011 and no further announcements have been made."
http://www.xe.com/currency/iqd-iraqi-dinar

And serious Iraq investment boards (those looking to long-term invest in Iraqi companies rather than Dinar gambling) are saying it too:-

"At the end of last month, a spokesman for the Central Bank of Iraq (CBI) told reporters that a plan to redenominate the Iraqi dinar will be presented to the Council of Ministers in the near future. The Council is then expected to submit the relevant legislation to Parliament for a vote. If the lawmakers approve the project, all existing banknotes will be replaced with new currency at the rate of 1,000 old dinar for one new over some unspecified period of time."
http://www.iraq-businessnews.com/2011/07/05/new-dinars-for-old/

I can only end my post by saying : To the "RV" crowd, the Dinar is more an emotional investment (like "Tulip Mania") than an economic one. People aren't buying because they've sat down and done the impossible maths - they're buying because others encourage them to "not miss out", who in turn are encouraged by others who say the same thing, all in a chain leading back to the pumpers who make their money not holding Dinar - but from getting rid of them!

Q20) Thanks for your posting. You have really helped to educate a lot of people on the IQD and shut down a lot of rumors. Here is my question to you. Do you believe that it's a good idea to open a bank account in Iraqi and just putting my Dinar in that account? I have been thinking about for some time now. Thanks.

Answer :
Hi Julian. I really don't know what advice to give you. Opening a bank account in Iraq won't make any difference in $ value vs holding the same Dinar in physical notes even after an RD / lop as bank accounts and notes get lopped at the same ratio. It may make it easier to exchange from Dinars back to $ if American outlets do not do so during an RD due to imposed currency controls, but there may still be imposed controls on wired-money out of Iraq during the RD. If you do, then do be careful, as there are a lot of shady "3rd-party proxy" firms who claim to do it for you, who I wouldn't let anywhere near my bank account details!

The real issue there is security : If you look on the CBI's website at the list of "Financial Companies", even many official listed ones are using hotmail, gmail and yahoo accounts for supposedly private email contact which doesn't exactly inspire confidence! Many Iraqi banks also do transactions via wide-open unencrypted email which leaves the door wide open to ID theft. The Internet works by sending packets through a series of nodes and your data could pass through as many as 20 other computers between your end and Iraq's. Personally, I wouldn't as their infrastructure is just too immature at the moment in terms of overall transaction security. In fact, these days I wouldn't even use a domestic US bank which requires you to use unencrypted e-mail for transactions, let alone international accounts.

As for traveling to Iraq, reading both the Travel Advisory and Travel Warning is still required both for security advice (carjackings are rife, avoid crowds, foreigners still targeted by kidnappers, etc) and knowledge of Iraq's many rules and regulations (visa's, currency limits, etc):-
http://travel.state.gov/travel/cis_pa_tw/cis/cis_1144.html
http://travel.state.gov/travel/cis_pa_tw/tw/tw_5429.html

This includes the Special Circumstances : "Iraqi law prohibits adult Iraqis and foreigners from holding and transporting more than 10,000 USD in cash out of Iraq. Iraqi customs personnel are taking action to enforce these laws and may pose related questions to travelers during immigration and customs exit procedures. All U.S. citizens are reminded that it is their duty to respect Iraqi laws, including legal restrictions on the transfer of currency outside Iraq. If you are detained at the airport or at any other point of exit regarding your attempt to transfer currency out of Iraq, you should contact, or ask that Iraqi authorities immediately contact, the U.S. Embassy. Please be aware that large wire transfers may require Central Bank of Iraq approval due to measures in place to combat money laundering."

Q21) The researched information provided by many is well appreciated. I have 1 comment in reference to the IQD's redenomination/revaluation. As Angela mentioned; in order to print lower denomination dinar the value has to increase period. If not, the Iraqi people would have to carry truck loads of money to purchase goods (it was also mentioned prices will go down by the thousands). Does any remember the $1000 notes & $10,000 notes (usd)? When we did away with printing those and they were removed from circulation, did those notes some how become $1 and $10 notes?

Now, if someone has one of those notes laying around, would it not be worth $1000 or $10,000 when deposited into a bank account. The 3 zeros have to go because the IQD will RI or RV and large notes will no longer be needed in the country of Iraq as Angela explained the merchants with truck loads of money to give change. Investors who have purchased 25K notes will have 25K to cash in/out, it will not be 25 dinar; the triple 0 notes will be removed from circulation ~ although the UST will collect those notes for purchasing of oil.

Answer :
Not necessarily. It's entirely possible with a redenomination or "lop", to take a lot of inflation out by deleting zeroes without the relative value of the currency to appreciate / depreciate. That's actually what the Iraq Central Bank want - to get rid of the zeroes and have a stable currency that isn't of a radically higher value because due to being a net exporter (like China), Iraq actually benefit from having a weaker currency.

The high denomination US notes you mention : $500 (William McKinley) / $1,000 (Grover Cleveland) / $5,000 (James Madison) / $10,000 (Salmon P. Chase) and $100,000 (Woodrow Wilson) were for inter-bank transactions back in the pre-electronic gold-age era (before money was "wired" between banks and being more portable for daily / weekly transit than gold). They've long been out of circulation and have been discontinued since July 14 1969. There are only 336 $10k notes still existing - and most of them are owned by numismatists (rare coin & note collectors) traded on their numismatic value rather than $10k face value. The massively printed 10,000 Dinar notes due to inflation aren't the same thing at all and will certainly be demonetized after the new bank-notes were introduced after a set period (3 months during last Iraqi bank note change). US $10k notes didn't become $10 notes because America didn't RD / RI or "lop". These notes were introduced specifically for bank transactions, not for general public circulation in response to the price of a loaf of bread increasing to $1,000 (which is exactly what happened in Iraq...) They were used more like bonds than bank-notes.

"Investors who have purchased 25K notes will have 25K to cash in/out, it will not be 25 dinar; the triple 0 notes will be removed from circulation"

*ALL* current NID banknotes will be completely taken out of circulation and replaced with new designs across the board (dual Arabic & Kurdish writing) - not just the 000 notes but ALL of the lower denoms too due to the new designs which will be universal on all new notes. It's a complete myth that current lower-denoms will be kept "as is" or that they'll leap up 1,000x in value (that's like saying 5 cents and $50 should have the same value!).

The current 1,000, 5,000, 10,000 and 25,000 Dinars will probably be replaced with 1, 5, 10 and 25 (or 20 as in 5x 20 notes for each 4x old 25k). New 50 / 100 Dinar (50k / 100k current note equivalent) notes may be introduced at the new value to fulfill a high-value circulation note gap. And many of the current lower denom notes 50 / 250 / 500 Dinars will probably be replaced with sub-unit coins, ie, the equivalent of 5, 25 (or 20) and 50 cents (as happened in Turkey and 50 other countries who've gone through the same thing).

Q22) Just got word the IRS has opened two offices in Iraq...makes me think some people are going to make some $ and they want their cut...Contrary to what the general outlook on this forum is I believe there is some serious $ to be made with the RD/RV.

Answer :
The "IRS setting up in Iraq" rumor started by "pied piper" King Pumper "Okie" is false. It's just yet another lie told on the back of 1,000 prior ones, including:-

"[OKIE_OIL_MAN] THE 27TH STILL LOOKS LIKE AN OPTIMUM TIME BUT IT MAY OCCUR PREVIOUS TO THAT" - March 22nd 2011

"[OKIE_OIL_MAN] will occur at any time from now thru tomorrow evening our time. no need for further calls–all is settled and done" - Feb 13th 2011

"[OKIE_OIL_MAN] more confirmation coming in from many sources–looks like monday will be a day that will be really busy if your a banker. you guys–screw your heads on straight–monday will probably be the 1st opportunity to cash in—-geeeessssshhhh. its all done–what more is to be said. he filled the positions yesterday. everything done yesterday" - Feb 3rd 2011

"[OKIE_OIL_MAN] Hearing no later than Wednesday or Thursday. signed off on RV yesterday Shabibi ordered to Parliment meeting today we are 48 hrs. oil production goes into affect on Feb 2.. has to happen before then This source is very very good..." - Jan 31st 2011

The same fake, debunked and failed "intel" recycled over and over to keep people hooked into an excitable state of impulse buying "just a few more last minute" Dinars from his salesmen bosses...

Q23) Brian, you're one of the few that make sense....and common sense. A while back, someone posted about the secrecy of purchasing IRD and making it sound like a *religious* venture for a *selected few*. I think the only people that don't want it unknown are the *posers and drama queens* whom I'm beginning to wonder if they're all the same person. Another reason for the secrecy is that scams are simply not promoted. I have to admit that I bought some a while back hoping for an RV.

Now, I believe dropping the 3 zeros will bring it back closer to my intial investment but I plan on leaving it in Dinar and hoping for their economic recovery possibly doubling my money plus intial fees if it gradually becomes worth more towards the 3+ they talk about hopefully within a few years. A friend once said that when he was in the Vietnam war that over night the government declared their currency worthless and printed all new denoms. Everyone lost. Brian, is this possible with the Dinar? Can they or will they just declare it worthless?

Answer :
Hi Rich, I don't think Iraq will just instantly declare their currency worthless. They've already said they'll change old for new notes, the only "sticky" issue for non-Iraqis is whether people will have to travel to Iraq to change them up. This is what happened the last time they changed bank-notes back in 2003 during the 3-month time limit for the changeover (Oct 15 2003 to Jan 15 2004). No-one will become millionaires from a lop, and they'll retain their value overall short-term and probably appreciate slowly long-term, but I do hope people who bought them can change them back / into new post-RD Dinars without getting ripped off by outrageous scamster trading fees (some want up to an eye-watering 40-80% spread!)

As for the "religious venture for a selected few" I agree that's what some people on some forums have turned it into. Some are hugely egotistical, eg, "I won't rub it in too much when I get my 12 Porsche's" and "I'm practicing my 'millionaire look'". Oh, boy!... I've seen one forum where people were hounded, censored and banned simply for posting recent Central Bank of Iraq statements saying "redenomination". A lot of it stems from fear and panic.

As you say, common sense dictates the Iraq Central Bank will inform the Iraqi people openly before it happens, and Shabibi openly stated in his Washington speech that before *anything* happens, and before any "hard date" is set / can be given, there will be a large-scale educational campaign in Iraq for Iraqis. In my opinion, much of this secrecy stuff came about when the pumpers who previously were riding off the back of "it could go either way" (RV vs lop) ambiguous silence were started to be openly contradicted and discredited by Iraqi Central Bank statements when they started affirming "lop", so they invented and try to maintain a paranoid conspiracy where pumpers were secret agents with "secret intel" and anyone who disagreed was "compromised" (basically "shoot the messenger" and "turnspeak" propaganda tactics).

Much of this is blatant nonsense, as all prices, bank accounts, bank notes, ATM's, bank-note counting machines, etc, in the country will have to be adjusted to remove the zeroes which simply can't be done in secret. Anyone who says Iraqis won't be told in advance / will be the last to know is a scamster. Hope things work out for you long-term Rich!

Q24) Hi Brian, Hate to be late to the party but I just found out about this Dinar craze yesterday from a friend who wants me to buy millions of Dinar so I can be a billionaire just like they're going to be. I'm wondering how I could not have known about this? I mean have I been living in a cave? I watch CNBC and read the Wall Street Journal and never heard anything about it. So I started investigating and ran into this thread with your comments. WOW!! What a treatise on economies and currency trading. Incredible stuff!! I'm not saying I would've bought but I was sorely tempted and you lectured me out of it. Thanks!! Is there anyway you can hop over to this dinarvets.com site and chat some sense into these kool-aid drinking dinar wackos? It would be very entertaining to see them wilt before your intellectual prowess.

Answer :
Hi Jack, thanks for your comments! Don't worry, you haven't been living in a cave! The reason the WSJ, CNBC, FT, etc, don't carry it is because the way the pumpers are blatantly mis-selling it is basically fraud. They can get away with it by hiring people to "pump" with anonymous usernames like "OkieOilMan" and "Phoenix" and keeping it small scale, but professional economics publications could face lawsuits if they started mis-selling it in the same way. In short, a lot of pumpers don't want it to make the TV news as there'd be massive calls for an investigation into mis-selling if it did. There's no real difference between what these guys do (sell Dinar on the back of fake intel their pumper friends invent in return for a cut of the sales) and insider trading / stock price fixing / "pump and dump" of the same thing in the stock market.

As for posting on Dinar forums, a lot of people have tried that only to met with censorship both direct (deletion of posts) and indirect (people shouting down / spamming / abusing "dissenters" / closing topic discussions). On the dinarvets forum, it says "Lop talk is not allowed in chat". Given that the Iraq Central Bank are openly talking about redenomination (lop), this results in the absurd situation where no-one can talk about official Iraq Central Bank statements about the Dinar on the dinarvets forum because the truth makes them feel uncomfortable as it openly contradicts what pumpers and scamsters have been shoveling out over the past couple of years! Really, DV is a site for those who can post anything they want on the Dinar - as long as you agree with the pumpers (ie, a "shill site"!)

A lot of people who post there long-term have shut down their minds to anything that doesn't include making them a millionaire just from changing up $1,000 into Dinars and back, and aren't interested in genuine debate - just conformity. Instead I prefer to post the truth on forums like this where people can honestly debate the issue from both sides without the thinly veiled censorship that's rife on many "RV" forums. Thanks for your comments, and thanks also to rferl.org for allowing a much needed honest debate on this issue!

Q24) I have enjoyed reading your comments and have tried to explain many of the same things to my family members. Unfortunately, they have continued to buy the Dinar. As a matter of fact, a couple weeks ago they were told it was close to RV by a 'source' so they have gone out to buy more.

Anyhow, I was doing more ‘research’ to try and show them the errors of their ways when I came across this article from Greg McCoach. In the article he mentions the follow:
- The U.S. Government is the Largest Holder of Iraqi Dinar Outside of Iraq

- Experts speculate the U.S. government received nearly 4 trillion Iraqi dinars at an exchange rate of 4,000 dinar to USD1.

- About two months ago, Iraqi dinars could no longer be purchased; the recent Dodd Frank bill appears to have legislation related to the revaluation of a foreign currency and preventing mass hysteria.

-If this is even close to true — and the UN allows Iraq to revalue their currency up to USD1: one Iraqi dinar — the U.S. government would stand to profit in trillions... as would anyone else who speculated on the dinar over the years.

http://www.wealthdaily.com/articles/the-revaluation-of-the-iraqi-dinar/3145

I don't know much about Greg but he doesn't appear to be a Dinar pumper. He actually seems to be a legitimate source of investment advice in the precious metals arena. I am curious as to your thoughts about his comments.

Answer :
Hi Paul, in response to the article you quoted : First up, "The dinar collapsed after the United States invaded Iraq and toppled Saddam. Prior to U.S. invasion, the Iraqi currency was trading over USD3 to one Iraqi Dinar on the strength of the country's massive oil industry" is factually incorrect. The Dinar collapsed long before the US invaded Iraq due to Saddam printing massive amounts of it under UN sanctions. It was still over 1200:1 even back in May 1997. It wasn't the US invasion that caused it to collapse but rampant chronic self-inflicted 1990's inflation.

The Iraqi Dinar was introduced in 1932 replacing the Indian rupee (used due to British occupation in WW1) at a rate of 1 Dinar per 13.5 rupees. It was pegged par the British £ then the peg was switched to the US$ at a rate of 1 Dinar = $2.8. In the 1970's, the Dinar rose to 1 Dinar = 3.3778 which remained until the Gulf War. This peg value was mostly artificial, evidence of which lies in the fact the black market rate was 6x higher ($1 = 3 Dinars) meaning no-one was willing to pay it's 1:3 *over-valued* arbitrary peg in reality even with Iraq's oil industry in full flow. This value was using what are called "Swiss Dinars" (due to Swiss printing plates used) and they were relatively strong vs the $ because they weren't overprinted.

After sanctions, Swiss printing was no longer available and new inferior quality "Saddam Dinars" were introduced and due to massive printing, they were rapidly devalued to below 1000:1. The sad truth is, most people who use this 1 Dinar = $3 of the old Swiss Dinar as an "RV" benchmark don't even realize that the "RV" old-to-new value correction they're waiting for already took place in 2003 when holders of the old Swiss Dinar changed them up at a rate of 150:1 for the NID (New Iraq Dinar)! ie, they were given 150 New Dinars for each old Swiss Dinar they handed in, whereas the Saddam Dinar were exchanged only for 1:1 for the NID to correct the value discrepancy between the old 3:1 Swiss Dinar (long been demonetized) and the newer never had a 3:1 value NID notes (which everyone owns today).

The over-printed NID (and Saddam Dinars) have never ever had any exchange rate even remotely approaching 3:1. Only the pre-1991 "Swiss Dinars" did, and that 150:1 "RV" already took place back in 2003, long before most modern Dinar speculators even bought NID's post 2003. The only way of getting back to near parity vs the $ is via a lop. There's simply no 3:1 value to "restore" the Dinar to via an RV because the NID's never had that value in the first place.

As for the amount of Dinars held by the US, most of that openly admits it's just wild guessing, and even if they did, it wouldn't matter as Iraq are going to "lop" meaning their value in US $ will not change.

Demikianlah perdebatan yang telah berlangsung pada bulan julai 2011 lalu. Cuba renung makna ayat-ayat dibawah;

I can only end my post by saying : To the "RV" crowd, the Dinar is more an emotional investment (like "Tulip Mania") than an economic one. People aren't buying because they've sat down and done the impossible maths - they're buying because others encourage them to "not miss out", who in turn are encouraged by others who say the same thing, all in a chain leading back to the pumpers who make their money not holding Dinar - but from getting rid of them!

Saya hanya boleh menamatkan post saya dengan berkata: Untuk penyokong "RV", Dinar adalah lebih pelaburan emosi (seperti "Tulip Mania") bukannya ekonomi. Orang ramai tidak membeli kerana mereka telah duduk dan buat matematik yang mustahil - ia membeli kerana orang lain menggalakkan mereka agar "tidak ketinggalan", yang kemudiannya digalakkan oleh orang lain yang mengatakan hal yang sama, semua dalam rantaian utama kembali ke pengepam aka scammer yang membuat wang dengan tidak memegang Dinar - tetapi membuang daripada simpanan mereka!

Kemaskini 11/12/11
Video Iraqi Dinar Scam Part 1

Video Iraqi Dinar Scam Part 2

Kemaskini 14/12/11
Ini antara soalan terkini berkaitan dengan IQD RV dari sebuah forum.

Why a lot of people still selling all their dinar when the withdrawal of all the remaining US soldier will end in this month?don't they believe in Sonny1's prediction by middle of January 2012 or should I say don't we all believe in Sonny1's prediction? I do believe what Sonny1 and Adam say. Does this means that the quickest all the remaining soldier back to the states by this month, the closer we are to the RV. Don't they ( people that are selling their dinar ) want their dinar RV, do they?I am confused why they are still selling when the time get closer.

Antara jawapan yang menarik

I have been doing this for 7 years at in the last 2 years each week there was suppse to be a RV. Pumpers have posted information each and every week about how close the RV is. The only thing that has happened is the dealers making more money each week. Everytime it gets to be November/December there is always a big push on how close we are and leading people to buy more. Don't buy what you can't afford to throw away and you will be fine. I got rid of a big chunk of mine and made some investements that have made money for me. We heard Thanksgiving, then now when the visit from M he will be bringing the RV with him, and then of course March, 2012 is now on some sites. No one knows except certain government officials if/when this will happen. Read the Iraq news and not the Iraq rumor sections.

I hope everyone that did invest does get the chance to make some moeny because we have all have had to deal with the weekly disappointments of no RV after the weekly pumping. Review all the archives and you will see some excellent articles on why it will happen after x, ,x,x, is complete and you will see that it did not actually happen after the events occured. You will see many articles that " it has to happen in order for x to happen" but nothing really has to happen.

Stay grounded and do your own research. When it RV's it will be on the CBI website and you will know.

Sila sambung baca disini

Akhir Zaman: Wang Kertas VS Emas

2011-10-12T00:11:00.000+08:00

Semua orang Islam wajib beriman dengan kemunculan Hari Akhirat. Ia terkandung di dalam rukan Iman dan mana-mana Muslim yang tidak mempercayainya, maka imannya pastilah tidak lengkap. Percaya pada Hari Akhirat adalah rukun Iman ke-5. Dalam menuju ke Hari Akhirat, kita diberi tanda-tanda kecil dan besar hari bagi tujuan persediaan.

Biasa dengar kemunculan Dajjal, turunya Nabi Isa A.S, yang mana akan muncul dahulu. Kerana kedua-dua akan turun ke bumi. Jika diamati, Dajjal akan dibunuh oleh Nabi Isa A.S. di Israel. Jadi Dajjal itulah yang akan turun dahulu. Tetapi apakah kaitannya semua itu dengan wang kertas dan juga emas? Wang kertas dan emas adalah matawang. Hari ini kita guna wang kertas, dahulu guna emas.

Zaman Dahulu

Zaman dahulu, semua negara menggunakan emas. Ramainya manusia menggunakan emas adalah sama seperti mana ramainya manusia menggunakan wang kertas pada hari ini. Emas dipilih kerana ia mempunyai nilai semulajadi. Emas sememangnya disukai oleh semua orang suka di seluruh dunia ini. Cuba lihat sukan SUKMA baru-baru ini di Lembah Klang, atau sukan Olimpik, apakah yang dikejar-kejar oleh para atlit? Pingat apa?

Mengapa mereka tidak dikalungkan dengan kalungan wang kertas? Adakah kita tahu berapa lama sukan Olimpik diadakan? Sukan Olimpik ialah sukan antarabangsa yang diadakan setiap empat tahun. Sukan ini bermula dari Yunani Purba, dihidupkan semula oleh seorang bangsawan Perancis bernama Pierre de Coubertin pada akhir abda ke-19. Asal sukan Olimpik tidak lagi diketahui tetapi banyak lagenda tertulis bersama sama sukan ini. Sambutan pertama Sukan Olimpik yang direkodkan adalah pada 776 SM, walaupun tarikh ini bukanlah kali pertama Sukan Olimpik diadakan. Pada masa itu, hanya satu acara dipertandingkan. Sejak itu, sukan mula menjadi penting dalam Yunani Purba dan mencapai kegemilangannya pada abad ke-6 dan ke-5 sebelum Masihi. Olimpik juga mempunyai kepentingan agama iaitu sebagai penghormatan kepada Zeus (patung besarnya ada di bandar Olympia). Pemenang sukan ini akan dihormati dan dimasukkan ke dalam puisi dan dijadikan patung. Sukan ini semakin hilang kepentingannya dengan penaklukan Rom ke atas Yunani (sekarang dikenali sebagai Greece). Apabila Kristian menjadi agama rasmi Empayar Rom, Sukan Olimpik dilihat festival orang tidak beragama (pagan) dan pada 393, Maharaja Theodosius mengharamkan Olimpik, dan ini menandakan berhentinya sukan Olimpik selama ribuan tahun sehinggalah diadakan semula pada abad ke-19.

Tidak cukup dengan itu, lihat sultan-sultan Melayu hari ini, apakah yang sultan-sultan kita pakai? Emas tidak akan jatuh nilainya, kerana emas tetap emas. Ia memiliki nilai emasnya yang tersendiri yang tidak ada pada kertas. Seperti wang kertas, ia dicipta untuk menjadi wang yang ditentukan nilainya oleh manusia.

Allah S.W.T sebagai jurutera pencipta manusia tentulah tahu apa yang terbaik untuk ciptaannya. Hari ini, kita tolak emas sebagai wang. Kita terima wang kertas. Wang kertas jika dikaji asal-usulnya, ia hanyalah surat hutang yang mewakili jumlah emas. Sejak zaman dahulu sememangnya kerajaan-kerajaan di dunia menggunakan emas sebagai wang. Para penjajah pun menggunakan emas sebagai matawang. Siapakah yang pernah menjajah negara kita?

Portugis, Belanda, British (United Kingdom), Jepun dan Siam (Thailand). Tak kiralah negara mana pun yang menjajah kita dahulu. Mereka semua menggunakan matawang emas.

(Kerajaan Siam)

(Kerajaan Jepun)

(Kerajaan Portugis)

(Kerajaan British)

(Kerajaan Belanda)

(Kerajaan Kelantan)

(Kerajaan Johor)

Tapi mengapa mereka semua bertukar pada wang kertas? Jawapannya ialah kerana kerajaan mereka mengalami masalah kewangan. Mana tidaknya, wang emas itu habis digunakan bagi tujuan berperang. Kepulauan Melayu bergolak dengan penjajahan demi penjajahan. Sehingga tulisan Jawi kita jua dijajah menjadi tulisan Rumi (Roman) seperti yang huruf-huruf yang anda sedang baca sekarang ini. Sehingga juga ada warga veteran yang masih hafal lagu negara Jepun.

Apakah banyak wang terlibat dalam peperangan. Oh! Sudah tentu. Siapa tukang bina kapal? Siapa tukang kimpal? Siapa tukang jahit layar kapal? Siapa jurumudi kapal? Siapa buruh kasar kapal? Siapa jururawat di kapal? Siapa pengawal di kapal? Siapa tukang senjata di kapal? Siapa tukang masak di kapal? Siapa dan siapa? Jadi wang kerajaan sesebuah negara itu habis dek peperangan. Wang ketika itu ialah emas dan perak. Ia tidak boleh diulang-cetak. Ia sangat unik. Hari ini, kerajaan Amerika Syarikat turut mengalami benda yang sama. Mereka kerugian kerana peperangan. Peperangan cara sekarang lebih banyak melibatkan wang. Bom-bom berkuasa hebat, teknologi canggih dan lain-lain.

Taktik Penjajah

Jadi semasa para penjajah kehabisan wang emas dan perak. Jadi penjajah ini mula menggunakan kertas sebagai ganti kepada emas. Rakyat jelata disuruh bekerja atau pun berkhidmat. Tetapi rakyat jelata tadi tidak diberikan emas.

(Lihat perkataan promises to pay the bearer on demand)

Perkataan tersebut jika diterjemahkan, ia bermaksud "janji-janji untuk bayar si penanggung beban atas tuntutan". Katakan anda orang Melayu yang menjual goreng pisang ketika itu, anda dapat kertas ini. Anda kemudiannya boleh menukarkannya kepada wang. Wang ketika itu ialah emas. Jadi kertas ini bersandarkan kepada emas. Hari ini? Tidak lagi. Wang kertas tidak lagi di sandarkan pada emas. Buktinya? Kita akan lihat nilai wang kertas ini semakin menjunam. Ia akan mengalami inflasi dan spekulasi. Manusia boleh mainkan nilai wang kertas itu. Ia tidak sama halnya dengan emas. Kerana emas mempunyai nilai tetap di dalamnya terkandung berat, karat, saiz dan lain-lain.

Berbalik pada cerita penjajah tadi. Apakah kertas tadi boleh diterima oleh rakyat jelata? Apakah mereka tidak marah? Mereka marah dan tak suka orang berhutang dan memberikan selain daripada emas kepada mereka. Maka dari situ British pun mencantikkan kertas mereka seperti yang kita dapat saksikan di bawah ini:-

Dengan kertas ini rakyat jelata boleh mendapatkan emas mereka. Rakyat jelata menjadi tenang apabila terpampang gambar pemimpin British di kertas itu. Kononnya penjajah serius menjaga kebajikan rakyat jelata. Tetapi pada hakikatnya ini semua hanyalah untuk meredakan kemarahan rakyat jelata atas penipuan demi penipuan.

Maka seterusnya penjajah pun saling berperang. Kerajaan Jepun pun mahu kaya. Mereka kata Asia Tenggara ini mereka yang punya. Masih ingat British lawan Jepun di Tanah Melayu? Apabila Jepun menguasai Tanah Melayu, mereka juga turut mengikut jejak langkah British. Dengan hasrat ingin untung sama seperti British untung. Maka Jepun pun mencetak kertas di bawah:-

(Kertas bergambar pokok pisang yang sering diperkatakan warga veteran kita)

Rakyat jelata tentu marah. Mereka mahukan wang sebenar iaitulah emas. Bayangkan seorang peniaga goreng pisang menjual goreng pisang, dia tidak terima langsung sebutir emas dalam setiap jualan goreng pisangnya. Bahkan dia terima pula kertas yang ada gambar pisang di atas. Mesti marah bukan? Tetapi dalam keadaan dijajah begitu, mana nak berani marah-marah?

Jika difikir, penjajah semakin untung, kerana rakyat jelata disuruh bekerja dan berkhidmat dengan hanya diberikan kertas-kertas bernombor. Semasa British digulingkan oleh Jepun, kertas-kertas British masih ada disimpan oleh ramai rakyat jelata. Kerajaan Jepun tak mahu bertanggungjawab dengan kertas-kertas British. Jadi siapa yang rugi? Tentulah rakyat jelata. Mereka kehilangan emas mereka.

Setelah itu, Kerajaan Jepun pula digulingkan oleh British. British kembali berkuasa. Tetapi kali ini mereka datang dengan mencetak kertas yang baru.

Lagi sekali rakyat jelata ditipu. Kertas-kertas terdahulu yang disimpan tidak dapat ditukarkan kepada emas. Malah tidak laku kerana British mengatakan kerajaan terdahulu dan terkemudiannya berbeza. Walau bagaimanapun kertas baru ini masih menjanjikan emas. Setelah British memasukkan Borneo ke dalam Malaya, kertas baru dicetak lagi.

Apakah bezanya dengan kertas baru ini? Kertas ini tidak lagi melibatkan emas. Emas tidak lagi diwajibkan sebagai pertukaran. Ia hanyalah kertas bernombor semata-mata. Gambar Permaisuri Elizabeth digunakan. Pada masa itu, gambar ini sudah cukup seksi untuk meredakan kemarahan rakyat. Rakyat jelata sudah ditipu dari penjajah demi penjajah dan dari penipuan demi penipuan. Ini semua melambangkan tenaga rakyat jelata boleh dikerah, diguna tanpa melibatkan sebutir emas pun. Cukup punya pandai penjajah ini. Kalau penjajah pandai, makanya rakyat jelata?

Kerajaan British amat bijak dalam melakukan persedian bagi menghadapi akibat terburuk. Maka mereka sekali lagi mencetak kertas yang baru.

(Kertas ini ada gambar pemimpin negara kita)

Cerdiknya British, mereka sanggup menggantikan gambar Permaisuri dengan pemimpin negara kita demi menghalalkan kertas ini. Rakyat jelata rata-ratanya hormat akan pemimpin sendiri. Jadi hasilnya tiadalah lagi api kemarahan rakyat. Tetapi tidakkah kita terfikir, bagaimana pemimpin kita boleh mendengar cakap British?

Mengikut sampaian orang-orang veteran, raja-raja Melayu, ulama' dan pemimpin Melayu yang tidak berpihak pada British akan dibunuh dan dibuang ke pulau-pulau kecil. Jadinya kuasa-kuasa istana dan pemimpin di parlimen yang ada pada hari ini berpihak pada siapa? Amalan jelik ini masih diteruskan oleh budak suruhan British hingga ke hari ini. Sekaligus terus-menerus menidakkan hak rakyat jelata untuk mendapatkan kembali emas kepunyaan nenek moyang mereka sejak zaman penjajah dahulu.

Ini semua akhirnya akan menjadikan kita semua, satu negara kita ini meleset dari segi ekonominya, akhlaknya dan lain-lain akibat tempias penggunaan kertas itu tadi. Satu contoh, peperangan yang berbekalkan dana emas akan berakhir apabila emas habis dibelanjakan. Ia tidak mungkin dapat dicetak lagi seperti kertas. Jadinya kezaliman dan keangkuhan pemimpin untuk terus berperang akan terbatas dengan ketiadaan emas. Tetapi hari ini, kertas boleh diulang cetak.

Mengikut kiraan ulama' Sheikh Imran Hosein pada ceramah 2007 beliau, katanya setelah kejatuhan wang dalam bentuk kertas tadi, Dajjal pun akan muncul. Kedatangan Dajjal boleh disaksikan oleh budak-budak yang sedang bersekolah hari ini. Jika kiraan ini tepat, maka Dajjal yang dikatakan lahir dari keluarga Yahudi, berambut kerinting akan memerintah dunia dari negara haram Israel dalam sedikit masa lagi.

Tambah Sheikh Imran Hosein, Dajjal akan menggunakan wang elektronik bagi menggantikan wang dalam bentuk kertas. Satu lagi penipuan secara elektronik bakal mewarnai dunia. Katanya lagi, apa yang umat Islam perlu lakukan ialah melaksanakan apa yang ada di dalam Al-Quran dan Hadith.

Oleh itu, kami menyeru kepada semua para pembaca, agar kita kembali kepada dinar (emas) dan dirham (perak) serta menghayati sistem ekonomi Islam yang popular dengan pengharaman riba'. Tidak seharusnya kita mengaku kalah dengan kedatangan Dajjal. Kerana terdapat juga proses menyambut kedatangan Nabi Isa A.S dalam menewaskan Dajjal di Israel kelak. Jadi tidak mahukah umat Islam turut serta menyambut Nabi Isa A.S?

source

A beginner's guide to investing in gold

2011-10-11T18:42:00.000+08:00

Gold has been sought after for its unique blend of near indestructibility, beauty, rarity and because of its status as a means of exchange and universal currency par excellence for centuries.

Empires and nations have sought to possess gold as a medium of international exchange, as a store of wealth and in order to increase and preserve power. Individuals have used gold as a store of wealth and as insurance against the fluctuations and depreciation of paper money and to protect against other macroeconomic and geopolitical risks.

Throughout history, perhaps no other asset in the world has had the universal appeal of gold and this appeal has increased in recent times due to the very significant macroeconomic, geopolitical, monetary and systemic risk facing our modern global financial system and economy.

Successful investing is about the diversification and management of risk. In layman's terms this means not having all your eggs in one basket. We know from history that markets can and do crash and if you are not properly diversified your nest egg can be severely affected.

So a healthy portfolio will include a wide range of assets including a variety of equities with exposures to different market sectors and regions; a variety of different countries' bonds of different durations; a diversified property portfolio; a cash component and a 5-15% allocation to gold related investments and gold bullion. In these uncertain times, caution and risk consciousness is crucially important and counterparty and systemic risk should be considered.

The key is to determine what amount of each asset class to have and to own assets that will whether the onslaught of inflation, deflation, stagflation and even hyperinflation.

Some exposure to gold should be included in all diversified portfolios. A good rule of thumb would be a minimum allocation of around 10% to gold and related gold-investments.

One's motivation for buying gold is fundamental to deciding in which form you should buy it. Are you a speculator, investor or saver? Do you wish to take a short term speculative position in gold? Are you investing for the short, medium or long term? Or are you diversifying, saving or using gold as a form of financial insurance?

Investing in physical gold

Physical gold should form a part of a properly diversified portfolio. Gold remains a universal finite currency, held by every central bank of note in the world. And central banks are set to become net buyers of gold in 2009 for the first time since 1988. The Indian Central Bank's purchase of 200 tonnes of gold from the IMF in October 2009 ( and a further 200 tonnes is being acquired) is the biggest single central bank purchase in such a short period of time (at least known to the markets) for at least 30 years.

In the same way that the family home should not be regarded as an investment, gold bullion is not an investment per se, rather a form of 'saving for a rainy day' or of financial insurance. It is to be taken possession of or stored with a secure third party and should not be traded. One does not trade an insurance policy and thus as a form of financial insurance, physical gold should not be traded.

Gold is money and is the ultimate safe haven asset and a great way, if not the best way, of ensuring wealth preservation and for passing wealth from one generation to the next. Once the solid base or core holding of gold bullion is achieved in a portfolio then other investments in gold such as mining stocks and mutual funds and other more speculative gold investments can be considered.

Modern bullion coins and bars

Modern bullion coins allow investors to own investment grade gold (between 0.90 and 0.9999 fineness) legal tender coins at a small premium to the spot price of gold as quoted on the markets. The value of bullion coins and bars is determined almost solely by the price of gold and thus follows the bullion price. Larger bars are not generally taken delivery of due to the cost of insured delivery and the security implications of having very large amounts of bullion outside the chain of integrity (say in a private residence). A London Good Delivery Bar weighs 400 troy ounces and costs over $400,000, £270,000 and €300,000 (prices as of 20/11/09) and is prohibitive in terms of cost and thus big bars are normally the preserve of large companies, institutions and central banks.

Gold, silver, and platinum are all available in the form of bullion coins, minted in the UK, the US, in Canada, South Africa, Austria, Australia, China and other countries. Most bullion coins are minted in 1/10oz, 1/4oz, 1/2oz & 1oz form (and some can be bought in 2oz, 10oz & 1 kilo). However, one ounce gold bullion coins such as Krugerrands or Britannias are by far the most popular for both small investors and high net worth individuals who see the advantages of owning legal tender bullion coins, either in their possession or in depositories, and recognise the advantages of the divisibility afforded by them.

Buying investment grade gold bullion for investment is stamp duty free and tax free (VAT exempt) in the UK and EU due to the EU Gold Directive of 2000.

Providers: Goldcore, Gold Investments Ltd, Baird, Chard, ATS Bullion

Semi-numismatic and numismatic gold coins

Numismatic or older and rare coins are bought not solely for their precious metal content but also for their rarity and their historical, aesthetic appeal. They are leveraged to the gold price which means that the price of these coins will generally surpass and increase faster than the gold price in a bull market (due to their historical and aesthetic value and to their rarity) and will decrease by more when gold is in a bear market.

The British Gold Sovereign (originally the one pound coin) is the most widely traded and owned semi-numismatic gold coin in the world. Important is the fact that, unlike the other forms of gold investment, British gold sovereigns are not subject to capital gains tax (CGT). Thus all post-1837 British gold sovereigns – because they are legal tender and have a legal tender face value - are capital gains tax free, which is obviously a significant benefit to investors vis-à-vis other gold investments.

Also highly owned are high-quality pre-1933 gold coins graded MS-65 or better by either the Professional Coin Grading Service or the Numismatic Guaranty Corporation. They are bought by both collectors and investors and most opt to take possession of these older coins unless they have invested in significant quantities.

Insured delivery of bullion and numismatics is usually some 1%-2% of the total value. Insured storage of bullion and numismatic coins in an allocated account will cost some 1% per annum. Investors should choose their storage provider carefully, making sure of a high credit rating and high net worth. This leads some to prefer an offshore bank or specialist depository.

Providers: Goldcore, Gold Investments Ltd, Baird, Chard, ATS Bullion

Gold certificates

The Perth Mint Certificate Programme is the only government backed precious metal certificate programme in the world. It allows investors to own bullion in unallocated or allocated accounts. The Perth Mint retains its AAA credit rating from Standard and Poor's and Moody's and is one of the safest and securest ways to own investment grade gold bullion. There are no initial or ongoing shipping, insurance, holding or custodial fees and thus it is one of the most cost effective ways for investors to own bullion over the long term.

Gold certificates are liquid and can be sold easily (soon investors will be able to buy and sell in real time online). Most investors opt to own their bullion in unallocated accounts as there are no insurance or holding fees on them and there is the flexibility of being able to transfer to an allocated account simply by paying small fabrication fees should the investor deem it necessary. Every gold bar is audited and accounted for and it is thus considered a safe way to own bullion. Bullion in a format of your choosing (coins or bars) can be shipped internationally from an allocated account or from an unallocated account once it has been converted to allocated.

Providers: GoldCore

Allocated accounts

Allocated gold accounts allow an investor to buy gold coins and bars from a bullion brokerage which will transfer or ship the bullion to an individual's account in a depository or bank. Allocated accounts involve ownership of specific gold and the owner has title to the individual coins or bars. Due diligence should be done on allocated gold account providers and the history, security, credit rating and net worth of the provider is of vital importance.

Providers: GoldCore, specialist depositories

Digital gold currency or e-gold

Digital Gold Currency, goldgrammes or e-gold are also increasingly popular. There are no specific financial regulations governing DGC providers, so they operate under self-regulation. DGC providers are not banks and therefore do not need to comply with bank regulations and there are concerns that there are unscrupulous operators operating in this emerging sector.

However, two of the more respected providers who have rightly garnered trust are Bullion Vault and Gold Money. They offer allocated accounts where gold can be instantly bought or sold just like any foreign currency. Every gold bar is audited and accounted for and it is thus considered a safe way to own bullion. Digital gold is primarily used by clients to buy gold for saving or as an investment and/ or as electronic money amongst users.

Providers: Gold Money, Bullion Vault

Gold bullion in SIPPs

UK citizens can as of April 2006 invest in gold bullion through their Self-Invested Personal Pensions (Sipps). US citizens could already do so in their Individual Retirement Accounts (IRA's). Sipps are new types of personal pension scheme that hold investments until you retire and start to draw a pension income. They are designed for people who want to manage their own fund by investing in asset classes of their choice. Investments made in gold bullion are topped up in the form of tax relief, meaning individuals can claim up to 40% back depending on the income tax band they fall in to.

Gold bullion is allowed in a Sipp providing it is investment grade gold which is gold of a purity not less than 995 thousandths or 99.5% pure and which is in the form of a bar, or of a wafer, of a weight accepted by the bullion markets. The bullion must be immoveable and stored with a secure third party. It cannot be taken possession of and used as a "pride in possession" article. Thus ETFs, some digital gold providers, allocated gold accounts and gold certificates are all allowed in the new SIPP.

Providers: GoldCore, Bullion Vault

Investing in paper gold

Mineral exploration, mining and the processes used to mine and produce metals are highly technical. Investors in gold production and exploration company stocks need to equip themselves with a basic understanding of the industry, in order to identify possible pitfalls and the risk-reward relationships of entering this investment sector. Investors should generally not buy just one or two stocks, but rather a basket of unhedged stocks or a mutual fund.

Derivatives, such as ETFs, forwards, futures, options and spread betting are normally short term speculations on the future price of gold and other markets such as commodities, shares or bonds, interest rates, exchange rates, or indices. They are financial instruments which derive their value from or whose price is dependent on the underlying asset. One does not directly own the underlying asset and one does not have a right to take possession of the underlying asset. Leverage or borrowing substantially may increase investment gains but also increases risk as if the price goes against the purchaser they may be subject to a margin call. There is significant leverage involved with derivatives and they are thus considered risky for non professionals as the potential positive or negative outcome is greatly magnified.
pyramid

Gold exchange traded funds (ETFs)

The recently launched ETFs are derivatives that track the price of gold and silver. Two of the more popular are the Streettracks Gold Shares (NYSE:GLD) and in London the Lyxor Gold Bullion Securities (LSE:GBS). They can be bought through stockbrokers.

There is an annual administration fee of between 0.4% and 0.5% per annum. Thus every year the amount of gold or silver backing an ETF share shrinks by that amount. This makes them unattractive as a medium or long term way to invest in gold. They are akin to derivative contracts that track the gold price and one does not own or have title to the underlying asset. Thus they are primarily used by day traders, hedge funds and institutional players going long and short and speculating on short term movements in the gold price.

Providers: Stock Brokers, Online Brokers

Gold stocks

Gold stocks are not gold - rather they are shares in gold mining companies. If the gold price rises, profits of a gold mining company should rise and as a result the share price should rise. There are many factors to take into account and it is not always the case that a share price will rise when the gold price increases. It is important to consider the performance and abilities of the management, auditors and geologists; the conduct of trade unions; a company's gold hedging position; whether it is producing or exploring; its cost basis; how much reserves it has in the ground and whether it is subject to political, economic, nationalisation or environmental risk.

Individual gold shares would be regarded as very volatile and high risk. Gold shares are regarded as more speculative as there is a higher risk-reward scenario. However, the added risk can be compensated for by the leverage which can result in higher returns. Such higher returns would be expected from mid and large-capitalisation un-hedged senior gold mining companies with proven reserves and strong earnings which have strong balance sheets and growth in resources and production and effective company management.

Providers: Stock Brokers, Online Brokers

Gold stock options

Stock options are a contract between two parties that expires at an agreed-upon time in the future. The contract purchaser is buying the right, but not the obligation, to buy a gold mining stock (a 'call' option) or sell (a 'put' option) a gold mining stock (the 'underlying') at a specific price, on or before the agreed-upon date, the date of expiration.

Stock options allow for a lot of leverage as a trader can control a large stock position with only a small outlay. However due to the very short term of the option contracts, they can expire worthless with the entire outlay being lost. Stock options allow speculators to make bets on market movement without having to pick an up or down direction. Because of this, stock options traders are often said to be trading volatility rather than price.

Providers: Online option brokers such as Options Express and E-Trade and certain stockbrokers

Precious metal unit trusts or mutual funds

Instead of personally selecting individual shares, some investors spread their risk by investing in collective investment vehicles specialising in investing in the shares of gold mining companies. These include mutual funds, open-ended investment companies (OEICs), closed-end funds, unit trusts. Two of these funds are the UK-based Blackrock Gold & General Fund and the Canadian Sprott Gold & Precious Minerals Fund by Sprott Asset Management. There are many precious metal funds in the US but investors assume US dollar currency risk when buying them.

Collective investment vehicles are a good way to invest in the precious metal mining sector as an investor's risk is reduced; mutual funds are not dependent on the performance and profits of one or two individual gold mining company and specialists in the field choose a portfolio of gold mining companies.

Providers: Blackrock Gold and General Fund, Sprott Gold & Precious Minerals Fund

Gold futures

Gold futures are traded on exchanges in London, Tokyo, Sydney, Singapore, at the New York Mercantile Comex Exchange (COMEX), the New York Mercantile Exchange (NYMEX) and at the precious metals department of the Chicago Board of Trade (CBOT).

Gold futures contracts are firm commitments to make or take delivery of a specified quantity and quality of gold on a prescribed date at an agreed price. Investors may take or make delivery of the gold underlying the contract on its maturity although, in practice, that is unusual. A benefit for some is that such contracts are traded on margin, so that only a fraction of the value of the contract has to be paid up front. As a result an investment in a futures contract, whether from the long or the short side, tends to be highly geared to the price of bullion and consequently more volatile.

They are normally the preserve of some mining companies, speculators, hedge funds and institutions. The leverage makes them a high risk/high reward investment. Participants are either hedging the gold price or attempting to predict whether the value of gold will rise or fall in the short term. Gold futures contracts are valuable trading tools for commercial producers and users of the metal to hedge their price risk.

Success depends on the price movement of gold during the contract term. Traders in these markets without protective stop-losses can quickly find themselves on the wrong side of a fast moving trade, losing large sums of money. Part of the risk is due to the leverage involved which can result in a speculator losing more than their initial capital outlay. Therefore, futures markets are not for amateurs or novice investors.

Providers: Commodity Brokerages, Online Brokerages such as Internaxx

Gold futures options

All the bullion banks trade in gold options and a list of bullion banks is available from the London Bullion Market Association (LBMA). Another way of trading options is through the COMEX Division of the New York Mercantile Exchange. The third route would be to contact a futures broker. They are often used to contain risk in the trading of futures.

Providers: Commodity Brokerages, Online Brokerages

Spread-betting

An alternative is to use spread betting to gain leveraged exposure to precious metals. Firms such as Cantor Index, CMC Markets and IG Index offer the ability to take a bet on the price of gold through what is known as a spread bet.

No commissions or taxes are levied in the UK on spread betting. The advantages are that any gains are CGT free and one can also take a view on movements in either direction. The downside is that in a spread bet the spread can be high, your exposure is geared up and short term bets are risky as it is extremely difficult to forecast any markets short term movement. One can lose more than the initial capital thus they are for speculators with very short term horizons rather than investors.

You can compare leading spread betting accounts here

The World Gold Council is a good resource for investors looking for established and reputable providers of gold related investments in the UK and internationally.

Assessing your options

One's motivation for investing in gold is fundamental to deciding how to invest. Are you a speculator, investor or saver? Do you wish to take a short term speculative position in gold? Are you investing for the short, medium or long term? Or are you diversifying; saving or using gold as a form of financial insurance (gold's primary role)?

When assessing one's gold investment options one must decide what one's motivation is. Once this is done, the primary considerations which should be looked at are the costs (both upfront and possibly recurring annual fees), proximity to your asset and perhaps most importantly today counter party risk.

In the table below we have looked at the various vehicles for accessing the gold market and graded them with regard to cost, ability to take delivery and, most importantly, proximity to your gold and counter party risk.

Type	Costs		Risks			Delivery	Considerations
Type	Initial	Recurring	Counter party risks	Proximity	Investor suitability	Physical delivery?	Considerations
Gold certificates	Med	V good(none)	Low	Good	Diversifier	Yes	Consider solvency & credit rating. A sovereign AAA credit rating and govt. guarantee is best.
Bullion bars/coins delivered	Med	V good (none)	Low	V good	Diversifier	Yes	Use safety deposit boxes, home or office safes, and insurance.
Bullion bars/coins stored	Med	Med	Low	Good	Diversifier	Yes	Consider the solvency and credit rating of the depository. Safety and security are key.
Gold bullion in SIPPS	Low	Low	Low	Good	Diversifier	No	Make sure you get impartial fee-based asset allocation advice.
Semi numis matics	High	Low	Low	Good	Diversifier/ Speculator	Yes	Premiums can vary. Get reputable and professional advice before purchasing.
Digital gold	Low	Low	Med	Med	Diversifier/ Speculator	Some do	Concerns over dependence on technology (internet, website, servers, etc) which is attendant risks.
Exchange traded funds	Low	High	Med	Poor	Speculator	Large minimum	Suitable for speculators, own shares in a trust and not gold. Annual costs quite high at 0.5% per year.
Precious metal unit trusts	Med	High	Med	Poor	Diversifier/ Speculator	No	High annual charges (funds can have hidden charges). Analyse the prospectus fully.
Gold stocks	Low	Low	High	Poor	Speculator	No	Very volatile. Management, geologist, auditor, trade union, environmental and nationalisation risk. Seek advice.
Gold futures	Low	Med	High	Poor	Speculator	Yes	Only suitable for speculators. High risk, involving leverage. Seek advice.
Spread betting	Med	Med	High	Poor	Speculator	No	Only suitable for speculators. High risk, involving leverage. Need to monitor trading constantly. Seek advice.

In an age of significant systemic risk, proximity to the underlying asset is increasingly important. Investors are increasingly wary of having too many counter parties (brokerages, banks, trustees, custodians, sub-custodians, delegates of sub-custodians etc.) between them and their asset. If storing gold with a third party, it is important that you have a direct relationship with that counterparty and there is not significant intermediation and thus increased risk. Another consideration is the ability to take delivery of gold in the event of a systemic crisis.

Investing in gold: conclusion

As we have seen, there are major differences in the various motivations for buying gold and ways to buy gold – from trading and speculating to investing and saving.

Holding precious metals in a portfolio can provide distinct benefits in the form of speculative gains, investment gains, hedging against macroeconomic and geopolitical risk and / or wealth preservation. Traditional asset allocation theory, as represented by the investment pyramid, advocates higher risk speculations at the top, with lower risk assets at the bottom. Commodity futures contracts, options and exploration junior mining companies should be placed at the top of the pyramid, while cash equivalents and fully allocated or taken delivery of physical bullion should form the foundation or base.

Experienced and knowledgeable investors have long known that gold and gold related investments can be solid investment choices. Gold is stable in times of global geopolitical instability and when there is economic uncertainty, recessions and depressions. It is important that investors look at their portfolios holistically. Used correctly, gold and gold related investments can be highly effective components of a properly diversified investment portfolio.

• This article was written by Mark O'Byrne, executive director of international bullion dealer GoldCore. GoldCore has an international media profile (CNBC, Bloomberg, CNN, BBC, FT, Wall Street Journal, Bloomberg, Dow Jones, Associated Press, Reuters etc.) and takes part in the Reuters Precious Metals Poll and the Bloomberg Gold Survey.

source

PHB And MIM Announce 2nd Income Distribution Of 3.25 Sen For AHB Trust Fund

2011-10-11T09:29:00.000+08:00

KUALA LUMPUR, Oct 7 (Bernama)-- Pelaburan Hartanah Bhd (PHB) and Mayban Investment Management Sdn Bhd (MIM), have announced a second income distribution of 3.25 sen a unit for the Amanah Hartanah Bumiputera (AHB) Unit Trust Fund for the six-month period ended Sept 30, 2011.

AHB is managed by MIM and sponsored by PHB while the trustee is AmanahRaya Trustees Bhd.

"This translates to an annualised income yield of 6.5 per cent which is benchmarked against the 12-month General Investment Account-i of Maybank Islamic Bhd," the companies said in a joint statement today.

The statement also said the total dividend payout to all AHB unit holders for this second income distribution amounts to RM31 million.

"With this, the total income distribution for the first financial year of the ten-month period ended Sept 30, 2011 is 5.42 sen a unit equaling an annualised yield of 6.5 per cent," it added.

The first income distribution of 2.17 sen a unit for the four-month period ended March 31, 2011 was made in April this year.

Meanwhile, the statement said of the total 60,000 unit holders of AHB, almost 40,000 or 67 per cent of them, are small investors investing in a range of RM500 to RM1,000.

"This indicates that the Fund is well received by the low to medium income Bumiputera groups and therefore, augurs well with PHB's objective of reaching the people as a whole," it added.

--BERNAMA

Bank Muamalat Launches Islamic Dual Currency Investment Product

2011-10-11T08:21:00.001+08:00

KUALA LUMPUR, Oct 10 (Bernama) -- Bank Muamalat Malaysia Bhd, a leading full-fledged Islamic financial institution, has launched the Islamic Dual Currency Investment (DCI-i), which will be initially offered in the Malaysian Ringgit, Euro and US Dollars to wholesale customers.

DCI-i is a foreign exchange-based structured investment product under the concept of Wakalah bil Istithmar (an agency for investment) linked to the performance of a pair of foreign currencies, Bank Muamalat said in a statement.

The product essentially allows investors, who have a view on foreign currencies, to enjoy potentially higher returns compared with traditional deposit products.

The DCI-i entails a relatively higher risk profile as it is not capital protected but provides an avenue to generate higher returns from investment in alternative currencies.

Bank Muamalat Chief Executive Officer Datuk Mohd Redza Shah Abdul Wahid was quoted as saying in the statement that the bank continued to expand its range of services and products, encompassing not only traditional Islamic banking products, but also more innovative syariah compliant investment products to cater to increasing levels of customer sophistication.

He, however, reiterated the importance of investor education and protection through proper disclosure and, the need for investors to clearly understand the nature of such products and risks involved.

-- BERNAMA

Silver Has Its Worst Day Since 1987. Gold Has Worst Week Since 1983.

2011-09-25T09:25:00.000+08:00

: FactSet; Silver. Rock climbers call this “extreme verticality.” Click for jumbo chart.

This has been an historically awful day for precious metals.

Here’s just how grim the selloff in silver was today:

The $6.49, 18% decline to $30.05 an ounce (that’s the September contract) was the worst dollar loss since January 22, 1980 and the worst percentage loss since April 27, 1987.

It was the second-biggest dollar loss in history and the fifth-largest percentage loss in history.

Silver has tumbled 26% this week.

Gold had its own very bad, no-good day, too, and its week was actually much worse than silver’s.

Gold lost nearly 10% this week, or $175 an ounce, to $1637.50 (again, that’s the September contract). That was the biggest weekly dollar decline since January 25, 1980, and its biggest weekly percentage loss since February 25, 1983. This was only silver’s worst week since May 2011 — silver’s been pretty volatile this year.

Today’s loss in gold, $101.70, or 6%, was its worst percentage loss since June 2006. It was the third-worst dollar loss for gold in history.

Somebody out there is clearly dumping silver to cover losses, but there are more fundamental reasons for the pounding, too, writes Tatyana Shumsky:

silver is also facing pressure from the darkening economic outlook because it is widely used in manufacturing and industrial applications. Alarms were raised this week when China, long considered the world’s economic engine, showed its manufacturing sector has contracted for the third consecutive month.

“With China’s economy slowing, with our economy going into a recession, with Europe going out the window, the industrial metals are being sold off viciously and silver is caught up in that,” said Frank McGhee, head precious metals dealer at Integrated Brokerage Services in Chicago.

Silver is used as a catalyst in making polyester, a common fiber used in clothes; the precious metal also coats CDs and DVDs and is used in glass for flat-panel TV screens. A sharp decline in economic activity would reduce demand for these products and undercut physical demand for the metal.

Meanwhile, gold has utterly failed as a safe haven this week, as investors have had to sell it to cover losses. The world has also rushed to the dollar for safety, and a stronger dollar is bad news for gold. And a weaker economy is bad for inflation, also bad for gold.

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Malaysia : Economic Statistics

2011-09-22T20:08:00.000+08:00

Total Government Gross Debt (National Currency) for Malaysia in year 2010 is MYR 415.174 Billion. Gross debt consists of all liabilities that require payment or payments of interest and/or principal by the debtor to the creditor at a date or dates in the future. This includes debt liabilities in the form of SDRs, currency and deposits, debt securities, loans, insurance, pensions and standardized guarantee schemes, and other accounts payable. Thus, all liabilities in the GFSM 2001 system are debt, except for equity and investment fund shares and financial derivatives and employee stock options. Debt can be valued at current market, nominal, or face values (GFSM 2001, paragraph 7.110).

Current Account Balance (US Dollars) for Malaysia in year 2010 is US$ 28.119 Billion. Current account is all transactions other than those in financial and capital items. The major classifications are goods and services, income and current transfers. The focus of the BOP is on transactions (between an economy and the rest of the world) in goods, services, and income.

General government total expenditure (National Currency) for Malaysia in year 2010 is MYR 238.079 Billions. Total expenditure consists of total expense and the net acquisition of nonfinancial assets. Note: Apart from being on an accrual basis, total expenditure differs from the GFSM 1986 definition of total expenditure in the sense that it also takes the disposals of nonfinancial assets into account.

Population for Malaysia in year 2010 is 28.251 Million .

Unemployment Rate (% of Labour Force) for Malaysia in year 2010 is 3.3 %.

Inflation (End of Year Change %) for Malaysia in year 2010 is 2.354 %. Data for inflation are end of the period, not annual average data.

Gross National Savings (% of GDP) for Malaysia in year 2010 is 33.113 %. Data are based on individual countries' national accounts statistics. For many countries, the estimates of national saving are built up from national accounts data on gross domestic investment and from balance of payments-based data on net foreign investment.

Investment (% of GDP) for Malaysia in year 2010 is 21.297 %. Data are based on individual countries' national accounts statistics. For many countries, the estimates of national saving are built up from national accounts data on gross domestic investment and from balance of payments-based data on net foreign investment.

GDP (Current Prices, National Currency) for Malaysia in year 2010 is MYR 765.966 Billion. GDP is expressed in billions of national currency units.

GDP Growth (Constant Prices, National Currency) for Malaysia in year 2010 is 7.156 %. Annual percentages of constant price GDP are year-on-year changes; the base year is country-specific.

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What is the US-Europe turmoil's impact on Asia?

2011-09-22T19:05:00.000+08:00

WHY should Asian stock markets react negatively if America does not create any new jobs? This is the question on everybody's lips, especially those who have argued that Asia can stand alone and Asian growth has decoupled from American growth.

But the news on Sept 5 that most Asian stock market indices dropped appreciably because America did not create jobs in August, must in fact mean that Asia cannot stand alone and is not decoupled from the West. The West can still influence what happens in most Asian economies including Singapore, Malaysia, the Philippines and Thailand because these Asian economies are linked to America and Europe through the real and financial economy.

The real economy in many Asian economies are dependent on and in fact compete for greenfield investments in the form of foreign direct investments (FDI) from America and Europe. They are also dependent on America to absorb the manufactured exports from the multinational corporations (MNCs) operating from Asia. Asian stock markets and bond markets are also open to foreign portfolio investments that are managed by foreign hedge funds.

In fact, it has been said the peaks and troughs of Bursa Malaysia are determined by foreign portfolio investments and the floor of the Bursa Malaysia is maintained by government investments in government-linked companies (GLCs) listed on Bursa Malaysia.

A man looking at a stock quotation board outside a brokerage in Tokyo. The Nikkei 225 index added 0.23% to 8 ,741.16 points yesterday. — Reuters

The foreign ownership of stocks in Bursa Malaysia, for example, is quite high and amounts to about 22%. Recently the bond market in Malaysia got a boost because of the large inflow of foreign portfolio investments into the bond market, including the sukuk bond market.

The Asian banking system is also linked to the West as there are numerous branches of foreign banks in Asia and an increasing number of Asian banks are setting up branches in the West to participate in the financing of trade. The financial links are then kept alive by the banks and the capital markets.

If America does not create jobs then it means that the recovery from the recession is slow and this means that incomes will not grow and hence consumption will not grow in America.

Most of the exports of East Asian countries are destined to the USA and Europe although there has been some growth in exports to China. If American consumption does not grow then the demand for manufactured goods from countries like Malaysia will fall. If this happens investor confidence in the Malaysian economy might turn negative. If American jobs do not grow, then American GDP will not grow and may even fall if the recession gets worse.

It has been found that Asian economies are very sensitive to changes in the GDP of the USA. A study by, for instance, Bank of America (BoA) Merrill Lynch found that if the US GDP declines by 1%, it will have the impact of reducing GDP by 1.7% in Singapore; 0.8% in Malaysia; 0.4% in Thailand, 0.3% in the Philippines and Indonesia. It is clear then that the more an economy is dependent on trade as a percentage of its GDP, the more it is affected by an economic crisis in the USA. The sensitivity of GDP growth to changes in the GDP of the USA is then a function of the trade dependence of the Asian countries. Singapore, for example, is more trade dependent than Indonesia and hence its GDP is more sensitive to movements in the GDP of the USA.

If Asian countries are not able to keep up their export momentum, their incomes will drop and their companies may not generate more profits.

In fact profits might fall and this may lead investors to sell the stocks of the companies negatively affected by the fall in exports. If incomes go down as a result of the drop in external demand then savings will drop and the amount of funds available for margin financing of stocks might fall. Tighter loan conditions or credit conditions may persuade investors to move out of the market and this may cause stock prices and the market index to fall.

So American jobs mean an increase in aggregate demand for manufactured goods from Asia and this translates into increased incomes and increased demand for Asian stocks.

If Asian exports decline then the demand for Asian currencies will decline and this will trigger a depreciation of the local Asian currencies, which will mean that foreign portfolio managers will not be attracted by the prospects of an appreciating local currency.

If the money supply declines as a result of the drop in exports, then interest rates will rise and this will cause the price of stocks and bonds to tumble because there is an inverse relation between asset values and interest rates.

The rate of job creation in a crisis economy such as America, which is linked to the real and financial economies of Asia, has therefore a significant effect on the stock market performance of the dependent Asian economies.

In August, for example, foreign investors sold more than RM3.8bil worth of Malaysian stocks because of the fall in the S&P credit rating of America and the European debt crisis because of the expectation that the external demand for Malaysian exports will decline. As a result, the FTSE Bursa Malaysia KLCI Index fell 6.6% in August.

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How Can China Save Europe When It's Defaulting On Its Own Debt?

2011-09-19T10:32:00.000+08:00

About 85% of Liaoning province’s 184 financing companies defaulted on debt service payments in 2010 according to a report from the province’s Audit Office. The report also noted that 120 of these borrowers, de facto government agencies, operated at a loss last year.

Since 1994, provinces and lower-tier governments have not been permitted to issue bonds or borrow from banks. Despite the strict prohibition, their debt has skyrocketed as local officials incurred obligations through LGFVs, local government finance vehicles. The central government’s National Audit Office said these companies, at the end of last year, had taken on 10.7 trillion yuan of debt. No one, however, knows the true amount of LGFV indebtedness, and some have calculated the real amount to be more than double the official figure.

Why the disagreement as to the amount of debt? Local governments have gone out of their way to hide borrowings, perhaps in part because of their doubtful legality. As famed economic journalist Hu Shuli points out, new local officials sometimes do not know the extent of obligations left by their predecessors. There have been a number of stratagems employed, from the issuance of illegal government guarantees to the transfer of funds in roundabout routes.

The case of China Zhongwang Holdings, a giant aluminum producer, illustrates how Liaoning province effectively went into debt in a roundabout manner—and concealed the borrowing. As disclosed in a footnote in its 2009 financial statements, Zhongwang had borrowed 2.3 billion yuan from two Liaoning banks and, as reported by Naomi Rovnick of the South China Morning Post, had “given the money” to a government-owned entity. Zhongwang, based in Liaoning, kept the loan on its books but disclaimed any responsibility for repayment. Apparently, the series of money transfers among Liaoning’s government-owned entities through Zhongwang was intended to facilitate development of the local economy.

The debt problems of northeastern Liaoning may be worse than those of other provinces because it is in the heart of China’s “rust belt,” but LGFVs in other parts of the country are also beginning to experience difficulties. Yunnan Investment Group, the largest financing vehicle of southwestern Yunnan province, has just put restructuring plans on hold after China’s most widely followed rating agency warned of a downgrade in July. Most LGFVs, however, are not rated and so there is virtually no public scrutiny of their activity.

LGFVs can continue to meet existing debt obligations as long as they can borrow new funds. “If the government doesn’t tighten its policy too much, there shouldn’t be any problem,” said Tianjin Vice-Mayor Cui Jindu on Friday. “But if we end up not getting a single new loan, there could be problems.” The problems Cui was referring to, according to the official China Daily, included non-completion of projects. And if projects are not completed, there will be no sources of repayment.

The problem is that Beijing, to control inflation, is in fact putting the brakes on the money supply. The growth of M2 is the slowest it has been in six years—less than half of what it was two years ago—and central government regulators are trying to restrict new loans with periodic increases in bank reserve requirements and direct administrative measures.

As a result, China’s debt-fueled growth is slowing fast, probably faster than official GDP figures indicate. Electricity usage, perhaps the best barometer of economic activity, was essentially flat this summer on a month-to-month basis. Moreover, export and shipbuilding orders are down. The closely watched HSBC purchasing managers’ index, at its record lowest point, is close to negative territory and headed south.

Xu Lin, a senior official at the National Development and Reform Commission, says there is no need to “panic,” but there are plenty of reasons to think that China’s economy is already landing hard. And a hard landing will soon cause LGFV defaults around the country, which will roil banks. Fitch early this month put China’s local-currency debt on downgrade watch due to concerns about bank asset quality and general concerns about financial stability.

Many analysts, thinking Beijing has plenty of cash, don’t worry. Yes, it is sitting on $3.2 trillion in foreign exchange reserves, but for various reasons dollars, euros, and yen are of little use in a local-currency crisis. Of course, the central government can print more renminbi to pay off LGFV creditors, but that, by increasing the money supply, would only aggravate what is China’s most serious economic problem, inflation.

Everyone now wants to know whether Beijing will buy Greek and Italian debt to save Europe. Yet the better question to ask at the moment is this: “Can China save itself?”

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