AmericaInc

New(ish) theory on currency changeover

21 posts in this topic

I have been in this since '08 so I am not a newbie. I would like to float this idea. Perhaps it has been discussed before - I have not seen it. I am hoping others well versed on electronic vs physical currency can answer this...(Dontlop?)

 

When the changeover happened from Saddam's dinar to the Bremmers we now hold, why would the US have continued the hyperinflation of the past by making the new IQD (Bremmers) just as worthless as the Saddam Swiss dinar? Wasn't that changeover the best opportunity Washington had to wipe out past inflation and start with a new slate? Isn't that why currency changes are usually made? Yes, it was wartime, but that consideration must have been thought through at the time.

 

What is the relationship between the electronic currency (M2/1?) and physical dinar in this case? Could it be much of it was (and is still counted today) as electronic to cloak the real value of the new IQD, while keeping the physical amount of dinar much smaller? The low program rate of 1166 may also be part of this cloaking.

 

It just doesn't make sense that the currency change to the IQD would continue the hyperinflation mistakes of the past.  I think there is a good chance this "zeros" thing is a ruse to prevent the obvious market problems that would arise, and they will raise the dinar's rate, by decree, float or whatever, when they get their international parameters (banking, Qi cards, UN chapter requirements, WTO, etc) in a row.

 

Just a thought.

 

 

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Good Question!

I think the decision was political.. The CPA did not want to be in a position to look like they were taking money away from the Iraqi citizens. They needed to be sure there was no reason not to turn in Sadam dinars.

I hindsight  they should have made the dinar worth at least 1 cent.  But that would have needed more classes of notes.

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Hyperinflation was ongoing at the time.  Iraq was a war zone and the value was still declining.  It took five years to get inflation under control.  They could have lopped off the zeros then but at the time the immediate need was to produce a currency without Saddam's image to signal the end of his regime.  Removing the zeros would need to wait until things stabilized.  Also keep in mind that a 1:1 exchange is much easier to do from the standpoint of security.  A 1000:1 exchange requires an educational period and increased security because of the potential from troublemakers.

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Wtf ? I Tried Decoding This Fancy Cursive That's Written In Lemon Juice ! :blink:

And Now I've Dripped Hot Candle Wax All Over My Keyboard ! :o

:D:D:D

Edited by DinarThug
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They needed a low valued dinar for rebuilding purposes

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Here try this

http://useconomy.about.com/od/monetarypolicy/p/Bretton-Woods-International-Monetary-System-And-1944-Agreement.htm

The Bretton Woods Agreement:

Under the Bretton Woods agreement, countries promised that their central banks would maintain fixed exchange rates between their currencies and the dollar. How exactly would they do this? If their currency's value became too low relative to the dollar, they would buy up their currency in foreign exchange markets. This would decrease the supply, which would automatically raise the price. If their currency became too high, they'd print more of their currency, increasing the supply and automatically lowering its price.

Members of the Bretton Woods system also agreed to avoid any trade warfare, such as lowering their currencies strictly to increase trade. However, they could regulate their currencies if foreign direct investment began to stream into their countries in such a way to destabilize their economies. They could also adjust their currency values to rebuild after a war.

Adjusting for fundamental disequilibrium

http://www.britannica.com/EBchecked/topic/291176/international-payment-and-exchange/61766/Adjusting-for-fundamental-disequilibrium

http://www.britannica.com/EBchecked/topic/291176/international-payment-and-exchange/61770/Incomes-policy

CHANGES IN EXCHANGE RATES

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When the changeover happened from Saddam's dinar to the Bremmers we now hold, why would the US have continued the hyperinflation of the past by making the new IQD (Bremmers) just as worthless as the Saddam Swiss dinar? Wasn't that changeover the best opportunity Washington had to wipe out past inflation and start with a new slate? Isn't that why currency changes are usually made? Yes, it was wartime, but that consideration must have been thought through at the time.

 

If your talking currency change, normally they change bills every once in a while to keep the counterfeiters on their toes, if they are redenominating, or in this case, to signify a new beginning. Or of course if the govt etc wants a new design like how Iraq wanted three languages. You cant just change the currency and erase inflation. The high inflation rates were still there during the 03 exchange. Unfortunately it just carries over. Shabs worked long and hard to get it under control through the auctions.  

 

What is the relationship between the electronic currency (M2/1?) and physical dinar in this case? Could it be much of it was (and is still counted today) as electronic to cloak the real value of the new IQD, while keeping the physical amount of dinar much smaller? The low program rate of 1166 may also be part of this cloaking.

 

Relationship between M1 and M2?   Well M2 does in fact include the physical amount in circulation, but you can find the numbers on the physical amount as well. The numbers are audited not only by the CBI, but also by international accounting agencies held accountable and to international standards. It would be nice if the numbers were wrong, but it would have to be off by TRILLIONS to make a difference at this point. 35+ trillion is a lot to deal with......

 

It just doesn't make sense that the currency change to the IQD would continue the hyperinflation mistakes of the past.  I think there is a good chance this "zeros" thing is a ruse to prevent the obvious market problems that would arise, and they will raise the dinar's rate, by decree, float or whatever, when they get their international parameters (banking, Qi cards, UN chapter requirements, WTO, etc) in a row.

 

 

No one wants to hear it, but most countries, in order to erase the past affects of hyperinflation (such as low currency value, inflated money supply) choose to redenominate or remove zeros off the currency.  That would be taking the easy way out and would not be profitable to us, but thats usually the route countries take. Now they have stated they can support the value 2.5 times its current, but they dont seem in any rush to make that happen even. Looks like they would rather keep it stable for now vs moving away from the program rate and showing a value based off what they hold in the reserves.

 

Just a thought.

Edited by keepmwlknfny
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How long after a war do they have to wait?



They could also adjust their currency values to rebuild after a war.

Read more: http://dinarvets.com/forums/index.php?/topic/164966-newish-theory-on-currency-changeover/#ixzz2jirBteBG



 

 

 

When the changeover happened from Saddam's dinar to the Bremmers we now hold, why would the US have continued the hyperinflation of the past by making the new IQD (Bremmers) just as worthless as the Saddam Swiss dinar? Wasn't that changeover the best opportunity Washington had to wipe out past inflation and start with a new slate? Isn't that why currency changes are usually made? Yes, it was wartime, but that consideration must have been thought through at the time.

 

If your talking currency change, normally they change bills every once in a while to keep the counterfeiters on their toes, if they are redenominating, or in this case, to signify a new beginning. Or of course if the govt etc wants a new design like how Iraq wanted three languages. You cant just change the currency and erase inflation. The high inflation rates were still there during the 03 exchange. Unfortunately it just carries over. Shabs worked long and hard to get it under control through the auctions.  

 

What is the relationship between the electronic currency (M2/1?) and physical dinar in this case? Could it be much of it was (and is still counted today) as electronic to cloak the real value of the new IQD, while keeping the physical amount of dinar much smaller? The low program rate of 1166 may also be part of this cloaking.

 

Relationship between M1 and M2?   Well M2 does in fact include the physical amount in circulation, but you can find the numbers on the physical amount as well. The numbers are audited not only by the CBI, but also by international accounting agencies held accountable and to international standards. It would be nice if the numbers were wrong, but it would have to be off by TRILLIONS to make a difference at this point. 35+ trillion is a lot to deal with......

 

It just doesn't make sense that the currency change to the IQD would continue the hyperinflation mistakes of the past.  I think there is a good chance this "zeros" thing is a ruse to prevent the obvious market problems that would arise, and they will raise the dinar's rate, by decree, float or whatever, when they get their international parameters (banking, Qi cards, UN chapter requirements, WTO, etc) in a row.

 

 

No one wants to hear it, but most countries, in order to erase the past affects of hyperinflation (such as low currency value, inflated money supply) choose to redenominate or remove zeros off the currency.  That would be taking the easy way out and would not be profitable to us, but thats usually the route countries take. Now they have stated they can support the value 2.5 times its current, but they dont seem in any rush to make that happen even. Looks like they would rather keep it stable for now vs moving away from the program rate and showing a value based off what they hold in the reserves.

 

Just a thought.

 

 

Nice Keep...Thanks

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Please elaborate.  How does a low valued currency help them to rebuild?

Try google

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Figures 12 and 13 says it all...  :wacko:

Help me out here. My thinking cap is not working tonight.

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Without reading that pdf from start to finish it looks like he's making the argument that an undervalued currency is better for economic growth than an overvalued currency, and I wouldn't argue with that.  But he's not making the argument that you seem to be making that a currency valued at 1/10 of a penny is better for rebuilding than a currency at or near parity with the USD.  A currency can be overvalued at 1/10 of a penny or undervalued at $1 (or 16 cents as China's is).  The issue isn't whether it's high or low, but whether it's overvalued or undervalued.

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  The issue isn't whether it's high or low, but whether it's overvalued or undervalued.

 

Without trying to dissect the complicated theorem of the PDF the simple way to look at it, is this:  An undervalued currency is better for the possible growth of a currency (added value) than an overvalued currency where the value has already been lost.  Ultimately, the possibility of real value being added to a currency drives commerce to expand whereas an overvalued currency leads to stagnation.

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Does anyone have any Newish jokes?

blonde-password.gif

See the girl above …. know what she’s reading? She’s going cross-eyed, reading the world’s longest password. Her password is

“MickeyMinniePlutoHueyLouieDeweyDonaldGoofySacramento“, and when asked why she had chosen such a long password, one which uses mainly the names of cartoon characters, she reportedly said “DUH, it said I needed to make it at least 8 characters long and include at least one capital!“

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Without trying to dissect the complicated theorem of the PDF the simple way to look at it, is this:  An undervalued currency is better for the possible growth of a currency (added value) than an overvalued currency where the value has already been lost.  Ultimately, the possibility of real value being added to a currency drives commerce to expand whereas an overvalued currency leads to stagnation.

Yes George I believe that's what its saying too

I can't copy and paste off this link for some reason

The second full paragraph on page two explains why they would want a low valued currency for rebuilding

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