I do not believe Iraq would LOP or re-denominate the currency, the IMF certainly has not stated such and Iraq has demonstrated for several years a successful monetary policy including over the last year and a half where they’ve maintained a 2% spread or less. But I also don’t believe they could ever substantially RV/RI the currency because there’s just too much currency in circulation. People doubt the fact that the CBI and IMF have reported in excess of 42 trillion. It’s in print for all to see.

And as I’ve said before they cannot reduce the money supply…because Iraq currently utilizes a currency auction to stabilize the currency and provide a source of foreign exchange for imports. This technique requires a balance… between the dinar and the dollar any shortage of one or the other creates demand and affects the stability. Therefore a reduction of the money supply cannot occur at this time. Once they float the currency and begin international commerce Iraq no longer will need the auctions and can reduce the money supply gradually as the currency appreciates.

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