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Iraqi Dinar Buzz Updates

Rudolph Coenen Position on RV Rate
2011-03-28 10:19:44

“I looked at a lot of reports last year and the month of February. The UN Development Group had a report in conjunction with the IMF – they came up with a nominal value of $1.14. That was before they realized they had discovered an extra 150 million barrels of extra reserve in oil in one of the fields.

If we look at Iraq and look at all of the sectors that are going to have profitable growth – mfg, agriculture, its oil fields. Only 38% of Iraq has been explored. 62% of the country has not been explored. And once the oil companies that bought contracts start going out into areas of Iraq that have not been explored, I think we’ll find that Iraq will be the number one oil reserve in the world.

We know now that they have the #3 reserve in natural gas. And the oil in Iraq is very easy to get to and it’s a very sweet crude, very easy to refine. So once we see all of this occurring….I have to say I think the rate is going to be anywhere between 1.75 and $2.12.

There are 4 ways of looking at this:

1) There are a group of people out there that say it can’t be any higher than .86. Well if Iraq came out at .86, they would be illiquified immediately. They would lose the country. It would fall into foreign investment hands, 90% of the country would be owned by foreign investors. Iraq is not going to do that and the US is not going to allow it.

That is not the form of democracy that we want to set an example. We want them to grow internally as a democracy and set an example in the ME. We don’t want it to seem like foreign investors came in and purchased the whole country. So .86 is out of the question.

2) When you look at $1.14, that was a nominal value. There is two things – an intl currency value and a nominal value. The NV is basically saying it can’t be any less than $1.14.

3) If we look at the high range, and this has been thrown around a lot – $3.22, $3.50 – I don’t think it is going to come in at that price. It would scare investors. There would be a very small profit % on the daily transaction of the currency.

It would consume investors equity. It would take a lot longer to gain a profitable margin, a good lipor scale (??) of investment coming out of it – lipor scale is how we measure investment – either 15%, 16%, 17% on a 3 year, 5 year, 10 year basis. So when we look at these lipor scales, an investor isn’t going to go in there at 3.22 and drop 500 million dollars and have to wait 18 months to get a 10% return.

He could probably do that by diversifying his portfolio and investing in more conservative areas and gaining an 11-12% return in a 6 month period. And he has to report back to his stockholders.

4) But if we look at 1.75 to 2.12, its not a low scale but its not a high scale. But it gives investors a profitable margin and it allows the country to control the growth of their currency. If they were to RV, I think it would be somewhere between these two numbers.