7-15-13 Doc:   The tone of recent articles continues very positive. We have seen no less than 2 dozen talking about deleting the zeros, raising the value of the dinar, international desirability of the IQD, etc. What is most interesting here is when you put all these articles in context a real message is emerging. These articles also use language like as the economy improves, as international investment enters Iraq, in its natural coarse, over a slow amount of time, etc. With this we are very sure the plan is to raise the value over time i.e. managed or free float. The hype about an immediate RV to $3.44 is simply unfounded. This “slow” rise appears to be supported by all concerned in that these articles quote the CBI, Finance Ministry, and other GOI persons.

Many argue a slow rise does nothing for Iraq. Unfortunately these same people ignore the immediate versus longer term economic goals stated in the SIGR and Iraq’s own 5 year plan. One article in particular talked about immediately raising the value from the 1300 level to 1000. Many say this can not be… Suppose you were told all imported goods to the USA would be 30% cheaper tomorrow then they are today. You would be overcome with joy. When you take an internal to Iraq perspective this is what a move from 1300 to 1000 would do for the average citizen. This would solve the immediate need to “help” the average citizen hence the articles stating the purchasing power would increase very soon.

We do concur that longer term Iraq will need to get the rate at or above $1 to dedollarize and have the dinar as their currency of choice.  However to get there infrastructure needs to be in place like chapter 7 (now not an issue), article 140, HCL, etc.  Without this all in place it would be like trying to build a house on a partial foundation.  The house will not stand for long.  The truth is despite the rumors all is not in place and until you see it in the gazette do not believe it.  Until that time all rumors are simply that – rumors.

Now we can see why the articles are using language referring to the rise over time.  Also as we have stated numerous times this is actually the best economic path for Iraq and eliminates the rumored global reset and straight RV theories.  With all that is still not in place we continue to be of the opinion nothing major will be put in place during Ramadan. Yes we do believe work toward that end will continue during Ramadan but the movement to get to $1 or better will take another year or so.  We report, you decide.