If the USD lops

[umbertino]

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

Exactly.. I forgot to state ( it was obvious anyway) that while the average citizen got poorer ( some a lot poorer) .... Merchants ( depending on the category, etc,) got richer and some a lot richer....

In Germany it went differently because there the Gov't worked in a lot more efficient way in order to avoid this very problem of possible out-of-control increase in prices.....

Also .. In Germany the exchange rate between the DeutschMark and the Euro was basically 2=1 ( easier for folks to keep an eye on and avoid shafts) and not 2,000=1...

Edited April 18, 2012 by umbertino

[WorkerBee]

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.

I think it will be a gradual increase whether they LOP or not .Either way I think the dinar will gradually increase based on their exports/output. Which is ok, but it just makes it a long term investment, which is not what I expected when I first got into it. I was expecting immediate wealth Anyhoo, this is still my best chance/luck at leaving a legacy for my children, unless I hit the lottery first.

When I'm in my happy place, which is the bottom of a Bud Lite, they find a way to straight up RV! Go figure!

[Frogee]

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.

Well, you did not mention a RV, just a RD. If they RV'd at 1:1, then I think Inflation would be beyond hyper. Also, what is the ratio to Iraq's GDP to their debt, as compared to the US. I believe that Iraq has a positive 60 billion in reserves, while the US is running a Trillion plus deficat, with how much in reserves? (Not counting the printing presses running 24/7)

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.

[wavggg]

I checked the history of the USD over the past 50 years...

Have to tell ya...

IT HAS LOPPED 10 TIMES ALREADY!

(apx 200 times less value in the past 100 years)

NO BS!

Check yourself...

-gg