If the USD lops

[jonjon]

I question a lop as the means of raising the peoples confidence in their currency. If the United States loped their currency to make a $10 bill equal to a penny that would buy anything priced at 1 cent and the $100 bill equal to dime worth 10 cents, It would shake my confidence in the USD.

[Nelg]

I question a lop as the means of raising the peoples confidence in their currency. If the United States loped their currency to make a $10 bill equal to a penny that would buy anything priced at 1 cent and the $100 bill equal to dime worth 10 cents, It would shake my confidence in the USD.

Hi Jonjon,

Most of us here would agree. The LOP is not going to happen.

[truthful1]

I question a lop as the means of raising the peoples confidence in their currency. If the United States loped their currency to make a $10 bill equal to a penny that would buy anything priced at 1 cent and the $100 bill equal to dime worth 10 cents, It would shake my confidence in the USD.

It may shakeyour confidence...but its not like you can go to the store and buy in euros or yen either. kind of stuck...

[20MillionDinar]

It may shakeyour confidence...but its not like you can go to the store and buy in euros or yen either. kind of stuck...

Not sure if you are aware but more and more shops in the USA are accepting foreign currency as payment. There is no actual law stating that a US Federal Reserve Note has to be accepted in exchange for products and/or services.

http://www.reuters.c...655798320080206

http://money.cnn.com...ncies/index.htm

NEW YORK (CNNMoney) -- A growing number of states are seeking shiny new currencies made of silver and gold.

Worried that the Federal Reserve and the U.S. dollar are on the brink of collapse, lawmakers from 13 states, including Minnesota, Tennessee, Iowa, South Carolina and Georgia, are seeking approval from their state governments to either issue their own alternative currency or explore it as an option. Just three years ago, only three states had similar proposals in place.

"In the event of hyperinflation, depression, or other economic calamity related to the breakdown of the Federal Reserve System ... the State's governmental finances and private economy will be thrown into chaos," said North Carolina Republican Representative Glen Bradley in a currency bill he introduced last year.

Unlike individual communities, which are allowed to

create their own currency -- as long as it is easily distinguishable from U.S. dollars -- the Constitution bans states from printing their own paper money or issuing their own currency. But it allows the states to make "gold and silver Coin a Tender in Payment of Debts."

To the state legislators who are proposing state-issued currencies, that means gold and silver are fair game, said Edwin Vieira, an alternative currency proponent and attorney specializing in Constitutional law. And since gold has grown exponentially more valuable, while the U.S. dollar continues to lose ground, the notion has become increasingly appealing to state lawmakers, he said.

The state gold rush: Utah became

the first state to introduce its own alternative currency when Governor Gary Herbert signed a bill into law last March that recognized gold and silver coins issued by the U.S. Mint as an acceptable form of payment. Under the law, the coins -- which include American Gold and Silver Eagles -- are treated the same as U.S. dollars for tax purposes, eliminating capital gains taxes.

Since the face value of some U.S.-minted gold and silver coins -- like the one-ounce, $50 American Gold Eagle coin -- is so much less than the metal value (one ounce of gold is now worth more than $1,700), the new law allows the coins to be exchanged at their market value, based on weight and fineness.

Local currencies: In the U.S., we don't trust

"A Utah citizen, for example, could contract with another to sell his car for 10 one-ounce gold coins (approximately $17,000), or an independent contractor could arrange to be compensated in gold coins," said Rich Danker, a project director at the American Principles Project, a conservative public policy group in Washington, D.C.

South Carolina Republican Representative Mike Pitts proposed a currency system that would allow people to use any kind of silver or gold coin -- whether it's a Philippine Peso or a South African Krugerrand -- based on weight and fineness. Pitts said in the bill, which currently has 12 co-sponsors, that the state is facing "an economic crisis of severe magnitude."

Republican representatives from Washington State followed suit in January, introducing a bill that would also allow any gold and silver coins to be considered legal tender based on metal values. Minnesota, Iowa, Georgia, Idaho and Indiana are also considering similar proposals.

Many of the bills would make it possible for residents to exchange the physical coins for goods and services, so you could use coins to buy anything from groceries to a car as long as the store chooses to accept them.

However, most people aren't going to walk around with such valuable coins in their pockets, said Vieira. Plus, calculating the value of the coins -- especially if they come from different parts of the globe and are of different sizes and shapes -- will get tricky.

[Roadrunner]

I question a lop as the means of raising the peoples confidence in their currency. If the United States loped their currency to make a $10 bill equal to a penny that would buy anything priced at 1 cent and the $100 bill equal to dime worth 10 cents, It would shake my confidence in the USD.

My confidence in the dollar has been shaken for a long time.

Roadrunner

[keepmwlknfny]

I question a lop as the means of raising the peoples confidence in their currency. If the United States loped their currency to make a $10 bill equal to a penny that would buy anything priced at 1 cent and the $100 bill equal to dime worth 10 cents, It would shake my confidence in the USD.

Its a little different then that....

Lets say right now your an Iraqi and it cost 25k dinar for a pair of shoes.....the CBI comes out and says we are issuing a new currency, and now (1) NEW 25 note will also buy you that same pair of shoes. Would you not be more drawn to the NEW 25 note because your now paying less dinar for the same product??

[Frogee]

Its a little different then that....

Lets say right now your an Iraqi and it cost 25k dinar for a pair of shoes.....the CBI comes out and says we are issuing a new currency, and now (1) NEW 25 note will also buy you that same pair of shoes. Would you not be more drawn to the NEW 25 note because your now paying less dinar for the same product??

Keepem, I thought you said that if they dropped the 000,s from the currency they would have to drop the 000,s from the price of goods. Did I miss something in your example?

[20MillionDinar]

Keepem, I thought you said that if they dropped the 000,s from the currency they would have to drop the 000,s from the price of goods. Did I miss something in your example?

Present: 25k Dinar note purchases a pair of shoes that cost 25k Dinar.

Re-denomination / LOP...

Post LOP: 25 Dinar note now purchases a pair of shoes that cost 25 Dinar.

It is really only an illusion. Nothing lost, nothing gained.

The only real benefit I see is simpler accounting especially on a commercial level. Also, they are taking their currency out of a hyper-inflated state.

[Frogee]

Present: 25k Dinar note purchases a pair of shoes that cost 25k Dinar.

Re-denomination / LOP...

Post LOP: 25 Dinar note now purchases a pair of shoes that cost 25 Dinar.

It is really only an illusion. Nothing lost, nothing gained.

The only real benefit I see is simpler accounting especially on a commercial level. Also, they are taking their currency out of a hyper-inflated state.

So they would have to take 000's off of EVERYTHING. Clothes, food, cars, motgages, etc. Right? Because now the shoes are only 25 Dinar not 25,000 Dinar

[20MillionDinar]

So they would have to take 000's off of EVERYTHING. Clothes, food, cars, motgages, etc. Right? Because now the shoes are only 25 Dinar not 25,000 Dinar

Correct, everything would be adjusted accordingly.

Wages, Mortgages, Banking, Currency, Prices, Debt, etc...

Edited April 18, 2012 by 20MillionDinar

[Frogee]

Correct, everything would be adjusted accordingly.

Wages, Mortgages, Banking, Currency, Prices, Debt, etc...

Thanks. I personally think that would cause mass confusion, but I do understand the concept.

[20MillionDinar]

Thanks. I personally think that would cause mass confusion, but I do understand the concept.

Well think about it, if they actually "Rv'd" their currency overnight the same thing would happen...

The most realistic way this is going to happen is gradual increases in the value of the IQD. Not an overnight RV, and HOPEFULLY not an overnight RD!

Edited April 18, 2012 by 20MillionDinar

[Frogee]

Well think about it, if they actually "Rv'd" their currency overnight the same thing would happen...

The most realistic way this is going to happen is gradual increases in the value of the IQD. Not an overnight RV, and HOPEFULLY not an overnight RD!

Agreed. That would be the most logical and simplest on the people, but would not get the kind of "respect" from their neighbors they seem to want.

[20MillionDinar]

Agreed. That would be the most logical and simplest on the people, but would not get the kind of "respect" from their neighbors they seem to want.

What do you mean by respect? Are the Japanese not respected due to the value of the Yen? They are the 3rd largest country in the world in terms of GDP yet the yen is 81:1.

Currency value has nothing to do with "respect" as some would like to put it.

Currency value boils down to a few major factors:

Total Amount in circulation and GDP are the two biggest factors in determining a countries currency, not the want for respect from others.

Also, lower valued currencies are better for EXPORTING nations, just look at China. They keep the value of their currency intentionally low on purpose, due to the fact that they rely heavily on exports. Iraq GDP is 95% from oil exports...

[ijdk]

an exact quote from Ali from dinar trade for what it is worth. This is from a pm we had on my facebook page.

He tries to address this issue to some degree.

"If they take zeros off the currency, they would have to take it off the exchange rate as well. How would they Re-set the entire economic status of the country. They would have to convert all of their bonds, real estate and stocks. That means all the work they've done up to this point to rebuild their economy would be waste. People need to think long term"

"The lop would not help the trillions, because all of the debt is based in dollars. What they need is oil revenues to get the debt off. Think long term." referencing the trillions in currency out there.

Thanks

[umbertino]

Quote

Not sure if you are aware but more and more shops in the USA are accepting foreign currency as payment. There is no actual law stating that a US Federal Reserve Note has to be accepted in exchange for products and/or services.

End Quote

Interesting... I didn't know that... Thanks.

What do you mean by respect? Are the Japanese not respected due to the value of the Yen? They are the 3rd largest country in the world in terms of GDP yet the yen is 81:1.

Currency value has nothing to do with "respect" as some would like to put it.

Currency value boils down to a few major factors:

Total Amount in circulation and GDP are the two biggest factors in determining a countries currency, not the want for respect from others.

Also, lower valued currencies are better for EXPORTING nations, just look at China. They keep the value of their currency intentionally low on purpose, due to the fact that they rely heavily on exports. Iraq GDP is 95% from oil exports...

Agreed.

[Frogee]

What do you mean by respect? Are the Japanese not respected due to the value of the Yen? They are the 3rd largest country in the world in terms of GDP yet the yen is 81:1.

Currency value has nothing to do with "respect" as some would like to put it.

Currency value boils down to a few major factors:

Total Amount in circulation and GDP are the two biggest factors in determining a countries currency, not the want for respect from others.

Also, lower valued currencies are better for EXPORTING nations, just look at China. They keep the value of their currency intentionally low on purpose, due to the fact that they rely heavily on exports. Iraq GDP is 95% from oil exports...

Perhaps, "respect" was the wrong word. I have been led to believe that they want to have equal or greater value of their currency than the rest of the ME. I realize that this is a great range from 0 to $3.46(? Kuwait). But, if the US was not the petrodollar would our currency be worth as much as we say it is.

[20MillionDinar]

Perhaps, "respect" was the wrong word. I have been led to believe that they want to have equal or greater value of their currency than the rest of the ME. I realize that this is a great range from 0 to $3.46(? Kuwait). But, if the US was not the petrodollar would our currency be worth as much as we say it is.

Exactly. If they were to re-denominate then RV their currency to $3 that would give it 3x the purchasing power! This takes them to almost the same exchange rate as Kuwait, which actually has the highest valued currency unit in the world at roughly 3.46 KWD to 1 US Dollar! Talk about a major increase in value of your currency!

The US Dollar is stronger for a few major reasons:

1) We have the largest GDP in the world totaling over $15 trillion - Iraq's is $100 Billion

2) We have a currency backed by the faith of the US govt - Iraq's currency is pegged / has to be backed 100% by foreign reserves

3) The US Dollar is the PetroDollar - Probably not going to change anytime soon considering the fact that part of the reason why we invaded Iraq was because Saddam was going to stop accepting US dollars in exchange for Oil.

As you can see, we are a Power House country in the world, I don't think a war torn country can come right out of the gates with a 100,000% RV and make their currency worth more than EVERY SINGLE COUNTRY's currency in the world combined overnight.

Let me explain real quick:

Iraq M2 of 60 Trillion Dinars

I then compare the 60 trillion to a 1:1 RV which would equal 60 Trillion USD.

M3 Money Supply for Selected Countries

When considering M3, the total money supply (of the world) exceeds US$50.1 trillion! Of this amount, the U.S., Euro-Zone and Japan account for US$33.1 trillion or 66.2% of the total. The following graph shows a cross-country comparison for M3.

http://news.goldseek.../1185894180.php

What I am wondering is how does Iraq, a war torn country, come out of the gate with a newly revalued currency which now equals more than every other country combined? Iraq's currency would now be worth twice of that of the USA, the Eurozone, as well as Japan combined! Even if Iraq has HALF of the stated money supply, it would make Iraq equal to the Eurozone, the USA, and Japan combined.

This is where I find it hard to believe that an overnight 1:1 RV is possible. Even $.50 is pushing it...

However, I do feel that a gradual increase in the IQD is possible! This way they could slowly reduce the amount in circulation while increasing the value of each existing currency unit in circulation. Increase oil exports, build up infrastructure, promote growth in the private sector, which will all help to build their countries' overall GDP. This is how a currency gains value in the real world.

If Iraq is worth 60 Billion but has 30 Trillion dinar in circulation. They could keep that same value ($60 Billion) but make each existing currency unit (IQD) worth more by reducing the overall amount. However, the decrease in currency in circulation needs to be gradual, as well as the increase in the value of the IQD. The reason it needs to be gradual / controlled is so that they maintain inflation. Keeping inflation under control has been one of their biggest priorities during the past 9 years or so, I don't think they want to destroy everything they've worked for just to have a high valued currency overnight.

Edited April 18, 2012 by 20MillionDinar

[jonjon]

This is only my opinion yet I believe it to be valid.

I don’t think the psychological effect of building confidence in the currency can be achieved by the destruction of its value. I look in my wallet at a $20 bill and imagine it is now only 20 cents. The merchant at the store pulls the prices of the $20 dollar shoes down to 35 cents because they were $20 yesterday. There is no way to control the defects of humans’ characters; this would spur the hyperinflation that ends up crippling the whole country. Although I realize that these people could just all play fair and none of them take advantage of the situation they may be like us just plain ole human beings. The merchant went overnight from being worth $1,000,000.00 to only $1,000.00 he might feel the desperation to try and make it up.

[20MillionDinar]

This is only my opinion yet I believe it to be valid.

I don’t think the psychological effect of building confidence in the currency can be achieved by the destruction of its value. I look in my wallet at a $20 bill and imagine it is now only 20 cents. The merchant at the store pulls the prices of the $20 dollar shoes down to 35 cents because they were $20 yesterday. There is no way to control the defects of humans’ characters; this would spur the hyperinflation that ends up crippling the whole country. Although I realize that these people could just all play fair and none of them take advantage of the situation they may be like us just plain ole human beings. The merchant went overnight from being worth $1,000,000.00 to only $1,000.00 he might feel the desperation to try and make it up.

The problem with your example is you are comparing a standard number of $20 taken down to $.20.

They are currently using 25,000 which would then be taken down to 25. Their currency is already in a hyper-inflated state, hence the extra 3 zeroes, and they want to get it away from that state. The US dollar is not hyper-inflated (yet...) therefore the psychological difference cannot be applied to this scenario. It is another case of comparing apples to oranges.

They use to have a regular currency, then Saddam's excessive printing and the War has caused the currency to go into a hyper-inflated state. Now the dust is settling, they are hoping to RETURN it to the former state. Hope that makes sense.

It won't spur hyper-inflation, the inflation is under control and has been for a few years now. That stage is over. If they Revalued their currency 100,000% it would DEFINITELY spur hyper-inflation. It would destroy their country and they would be back to where they started over 10 years ago.

I wish more people on this site understood even the basic principles of economics. Instead, people always prefer to believe in something that has never happened and is extremely unrealistic. I'm not trying to deter anybody away from the Dinar investment, or protect them in any way. Just stating a few facts that shouldn't be denied!

[WTX_Danny]

I question a lop as the means of raising the peoples confidence in their currency. If the United States loped their currency to make a $10 bill equal to a penny that would buy anything priced at 1 cent and the $100 bill equal to dime worth 10 cents, It would shake my confidence in the USD.

You're doing it wrong.

[rmason]

I question a lop as the means of raising the peoples confidence in their currency. If the United States loped their currency to make a $10 bill equal to a penny that would buy anything priced at 1 cent and the $100 bill equal to dime worth 10 cents, It would shake my confidence in the USD.

I want it known I am NOT a lopster. The purpose of a 3 zero lop as in your example is not to lower the value of currency but raise it against the value of other foreign currencies. In your example you would have to add 3 zeros not subtract them. A 3 zero lop of a ten dollar bill (subtracting 3 zeros) would not lessen its value but increase it. A penny as in your example would purchase what a $10 bill used to. Not vise versa. I would also like to point out you would also have to issue new currency to replace the old at the same time as the lop. If Iraq lops 3 zeros and issues new currency you lose nothing. You gain nothing either but they effectively raise the value of the dinar from $0.000857 usd to $0.857 usd. While the old and new currencies coincide in circulation the new 25 dinar note will equal an old 25000 dinar note. I personally hope this doesnt happen and they rv the currency in use.

[jonjon]

I agree with the 100,000% RV’s effect on their economy but I am just as convinced that the economy will suffer the same effects if there is 100,000% lop. The hyperinflation that has happened over there was not an overnight thing. I believe that either course that is taken will have to be very gradual.

[umbertino]

This is only my opinion yet I believe it to be valid.

I don’t think the psychological effect of building confidence in the currency can be achieved by the destruction of its value. I look in my wallet at a $20 bill and imagine it is now only 20 cents. The merchant at the store pulls the prices of the $20 dollar shoes down to 35 cents because they were $20 yesterday. There is no way to control the defects of humans’ characters; this would spur the hyperinflation that ends up crippling the whole country. Although I realize that these people could just all play fair and none of them take advantage of the situation they may be like us just plain ole human beings. The merchant went overnight from being worth $1,000,000.00 to only $1,000.00 he might feel the desperation to try and make it up.

Well... About desperation....More or less the same thing ( as per potential psychological effect) could have happened here in Europe when the Euro was introduced ... On Feb. 1, 2002 everything got priced into Euros ( here in Italy they'd accept the Lira for another 2 or 3 months , if I recall correctly) and on that day or the day before... all you had in your bank account would be converted to Euros... The official exchange rate between Lira and Euro was fixed ( if I recall right) in 1,927.36 Liras = 1EUR...More or less 2,000 liras per 1 EUR...So supposedly if I had , say, 300M in my bank account that day I'd find "only" about 150,000 Euros.....

Now...The bad thing which they did here was that the sellers in the beginning had the obligation to keep the 2 prices of each product for comparison and for helping people in the transition.....So, basically 1 EUR was worth about 2,000 Liras... Then after 2 months they had the choice of removing the price in Liras and gradually they started raising the prices a tad bit every week or every month making It so that in this Country the general mentality would accept a change of 1 EUR= 1,000 Liras and NOT 2,000 like it should be in reality... Obviously wages were converted at the 1EUR= 2,000 Liras etc....

So basicaly, with no real control from State Authorities... Everything doubled in price in a relatively short period of time and People ( the average person at least) got poorer.....

Edited April 18, 2012 by umbertino

[Roadrunner]

Umbertino,

Thanks. In your example the change benefited the banks and eventually the merchants, but did nothing for the general population. I think it would do the same in Iraq or anywhere else.

Roadrunner