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A better veiw of what a lop will mean for you as a Investor


willie
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Im going say first of I did not write all this I did add some and delete some information. So here we go

Ok, in the interest of trying to figure out what is going onwith the IQD investment, all the talk of removing 000s and redenomination bythe end of 2010.

First, the term LOP is redenominated. Redenomination is defined as :

The process whereby a country's currency is recalibrated dueto significant inflation and currency devaluation.

To understand this definition better, we need to know thedefinition of devaluation, so devaluation is defined as:

A deliberate downward adjustment to a country'sofficial exchange rate relative to other currencies.

I think we can ALL agree that the IQD has been devalued. So with the above definitionsin mind, here we go.

The article that brought this topic to the forefront of ourdiscussions over the past couple of weeks stated that, the CBI has announcedtheir plans to redenominate the Iraqi Dinar to ease cash transactions. By the end of 2010, they intend to drop three zeros from the nominal value of banknotes. It should be noted that the actual value of the dinar will remainunchanged. That means that 1,000 IQD (pre-redenomination) and 1 dinar(post-redenomination) will both be worth the same amount in US Dollars.

Ok, to understand this section a little better, lets look atthe “nominal value”, this is defined as:

The stated value of an issued security that remains fixed,as opposed to its market value, whichfluctuates.

If we look at a currency as a issued security, which it is,the nominal value is the “face value” of the currency, ie $1.00 today = $1.00 tomorrow, the market value can change meaning that you may be able to buy more or less with $1.00 on any givenday, however the face value is still $1.00.

So what they are intending to do is change the “face value”without removing the “actual, or market” value of the IQD. So if you get paid 1000 IQD today, and it isworth 0.86 cents USD, then when the “face value” is changed, and you get paid 1dinar, you still make 0.86 USD.

So, how does this apply to the revaluation that we are all waiting for?

The CBI has stated also, “by the end of 2010, new banknotes will be fully introduced while the current banknotes will be gradually removed fromcirculation ( the small notes and the large notes). Both (current and new) denominations will be legal tender in Iraq until the current banknotes are completely withdrawn over a period of time. Economic analyst Hilal al-Tahhan was quoted as saying “the bank’s move is overdue.” He said he expects the currency change to go smoothly because of the decision to allow both the current and new smaller banknotes to coexist during an extended exchange period, leading to less turbulence in the economy.”

Based on the information , we know that they intend the “actual value” to remain the same after the “face value” is altered. We see that for a period of time, they intend to allow both the “current”, or “unaltered” currency to be useable, or traded at the same time as the “newer lower faced” currency. So the conclusion that is drawn here, is that for a time, presumably until the end of this year, the old currency which wehave, will be redeemable for the “face value”, ie 25,000 Dinar note will behonored as 25,000K. After the removal,or the expiration of the coexistence period, (presumablely 60-90 days) the old banknotes will no longerbe honored for their “face value”, but for the new value of 25 Dinars.

This allows both we as investors, and the Iraqi’s themselves to transition into the redenomination without any up heavle by those who do not understand what the actual value of their currency is.

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Willie or anyone who could explain this to me. It always puzzled me. Ok 25000 dinar notes drop "000" becomes 25 dinar and each dinar equals to 1 usd dollar or .86 us. How is that an RV?

Is that what we all started out with $25 usd buys you approximately 25000 dinars? Please explain.... thank you. I asked this question before but didn't get an answer that satisfied me.

Seant

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Willie or anyone who could explain this to me. It always puzzled me. Ok 25000 dinar notes drop "000" becomes 25 dinar and each dinar equals to 1 usd dollar or .86 us. How is that an RV?

Is that what we all started out with $25 usd buys you approximately 25000 dinars? Please explain.... thank you. I asked this question before but didn't get an answer that satisfied me.

Seant

Ok here is were i think you are getting lost, the new 25 dinar and 25,000 dinar note will have the same buying power in iraq. But the 25,000 is still worth 25,000 dinar and if exchange before a given time 60-90 days you will recieve 25,000- 1 dinar notes after the time period (60-90 day) 25,000 note will only recieve 25-1 dinar notes. Its any rv because you will recieve (at 1-1 rate) 25,000- $1 usd bills or 250-$100 usd bills (its still equal to 25,000 usd's) but after a turn in period has ended the note will only be worth $25 usd. This whole process is to encourage the return of the large face bills in and outside the country of iraq.It is also aimed at getting the people of iraq to trust and use the banking system

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Willie,

I can honestly say that was by far the best and simplest explination I have seen out here. Thank you for your thoughts and the explination and not being one of the lopster hunters that like to patrol these waters looking for the unexpecting newbie that is just asking a simple question.

:)

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Willie,

I can honestly say that was by far the best and simplest explination I have seen out here. Thank you for your thoughts and the explination and not being one of the lopster hunters that like to patrol these waters looking for the unexpecting newbie that is just asking a simple question.

:)

Willie,

I agree with this. Well put, and thanks for explaining it in laymans terms.

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Willie, Thank you for this great, simple, down to earth explanation for all to see. I hope that we can continue to post to this thread for some time to come so that it remains near the top of the page, easy to find for all those who constantly hear and fear the term lop.. GREAT JOB!!!!!!!!!!!!!!!!!!!!

Ron

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Im going say first of I did not write all this I did add some and delete some information. So here we go

Ok, in the interest of trying to figure out what is going onwith the IQD investment, all the talk of removing 000s and redenomination bythe end of 2010.

First, the term LOP is redenominated. Redenomination is defined as :

The process whereby a country's currency is recalibrated dueto significant inflation and currency devaluation.

To understand this definition better, we need to know thedefinition of devaluation, so devaluation is defined as:

A deliberate downward adjustment to a country'sofficial exchange rate relative to other currencies.

I think we can ALL agree that the IQD has been devalued. So with the above definitionsin mind, here we go.

The article that brought this topic to the forefront of ourdiscussions over the past couple of weeks stated that, the CBI has announcedtheir plans to redenominate the Iraqi Dinar to ease cash transactions. By the end of 2010, they intend to drop three zeros from the nominal value of banknotes. It should be noted that the actual value of the dinar will remainunchanged. That means that 1,000 IQD (pre-redenomination) and 1 dinar(post-redenomination) will both be worth the same amount in US Dollars.

Ok, to understand this section a little better, lets look atthe “nominal value”, this is defined as:

The stated value of an issued security that remains fixed,as opposed to its market value, whichfluctuates.

If we look at a currency as a issued security, which it is,the nominal value is the “face value” of the currency, ie $1.00 today = $1.00 tomorrow, the market value can change meaning that you may be able to buy more or less with $1.00 on any givenday, however the face value is still $1.00.

So what they are intending to do is change the “face value”without removing the “actual, or market” value of the IQD. So if you get paid 1000 IQD today, and it isworth 0.86 cents USD, then when the “face value” is changed, and you get paid 1dinar, you still make 0.86 USD.

So, how does this apply to the revaluation that we are all waiting for?

The CBI has stated also, “by the end of 2010, new banknotes will be fully introduced while the current banknotes will be gradually removed fromcirculation ( the small notes and the large notes). Both (current and new) denominations will be legal tender in Iraq until the current banknotes are completely withdrawn over a period of time. Economic analyst Hilal al-Tahhan was quoted as saying “the bank’s move is overdue.” He said he expects the currency change to go smoothly because of the decision to allow both the current and new smaller banknotes to coexist during an extended exchange period, leading to less turbulence in the economy.”

Based on the information , we know that they intend the “actual value” to remain the same after the “face value” is altered. We see that for a period of time, they intend to allow both the “current”, or “unaltered” currency to be useable, or traded at the same time as the “newer lower faced” currency. So the conclusion that is drawn here, is that for a time, presumably until the end of this year, the old currency which wehave, will be redeemable for the “face value”, ie 25,000 Dinar note will behonored as 25,000K. After the removal,or the expiration of the coexistence period, (presumablely 60-90 days) the old banknotes will no longerbe honored for their “face value”, but for the new value of 25 Dinars.

This allows both we as investors, and the Iraqi’s themselves to transition into the redenomination without any up heavle by those who do not understand what the actual value of their currency is.

rolleyes.gifThere still will not be a LOP......by your own admission.......60/90 days to turn in 25k's for 25k one dollar bills then you only get 25 one dollar bills after the 60/90 days. THAT is not a LOP if your smart enough to cash in before the 60/90 days are up. That my friend gives us an option. The LOP everyone been talking about in the past gives you no option. This is not a LOP in a practical sense. .........good post willie rolleyes.gif

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rolleyes.gifThere still will not be a LOP......by your own admission.......60/90 days to turn in 25k's for 25k one dollar bills then you only get 25 one dollar bills after the 60/90 days. THAT is not a LOP if your smart enough to cash in before the 60/90 days are up. That my friend gives us an option. The LOP everyone been talking about in the past gives you no option. This is not a LOP in a practical sense. .........good post willie rolleyes.gif

Ok mongo lets look at the lop you way tell me, how this makes sense. If iraq has lets say 17 trillion dollars in circulation that 17,000,000,000,000. Now just cut out 3-000's your going to tell me that iraq only has 17 billion dinars then. Name me one country that would do this to themselves. And if they did this for some reason we know they have alone in NY bank atleast 550 billion us dollars from the oil sales in the past few years, with just that alone they would equal out to each dinar worth 32.35 usd per dinar now does this sound very likely???? Even if Iraq had 25 trillion and did the lop after doing simple math from the ny bank each dinar would be valued at 22.00.

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Hey Willie,

Thanks for the explanation. I was of the same mindset as Sean, so your further explanation really helped.

I also wonder, too, if the reason for the change in currency, is to keep us Americans from becoming rich. I think the rv will come out low, and as we cash in our higher denomination bills, the lower denomination bills will be available to Iraqi's. When they quit accepting the higher denomination bills, then the rv will probably go up to $3.00 per dinar, and then and only then, would we be able to get the smaller denomination bills. They can't be too happy that we are getting rich off of them.

What are your thoughts?

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They will remove the "000"s from their currency by taking in all "000" notes or declaring what is not turned in by the drop dead date worthless. They are removing the "000"s not the "value" of the "000"s. All "000" notes will be toilet paper permanently. No lower value just NO value. No LOP was or is planned for this currency EVER!! The use of this term has no place here but to confuse peeps. The "000" notes will join the "saddam" notes in that worthless currency bucket. Soooo can we PLEASE stop trying to find some small crack to squeeze another LOP theory through? I thought this was a dead horse.

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Ok mongo lets look at the lop you way tell me, how this makes sense. If iraq has lets say 17 trillion dollars in circulation that 17,000,000,000,000. Now just cut out 3-000's your going to tell me that iraq only has 17 billion dinars then. Name me one country that would do this to themselves. And if they did this for some reason we know they have alone in NY bank atleast 550 billion us dollars from the oil sales in the past few years, with just that alone they would equal out to each dinar worth 32.35 usd per dinar now does this sound very likely???? Even if Iraq had 25 trillion and did the lop after doing simple math from the ny bank each dinar would be valued at 22.00.

You started this thread.......were looking at it your way. you said it, 25k's will be 25 note after 60/90 days. I said in a practical sense it's not a LOP.......why because if your practical, you will go ahead an exchange your dinars in the aloted time 60/90 days.........that's all smile.gif

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Hey Willie,

Thanks for the explanation. I was of the same mindset as Sean, so your further explanation really helped.

I also wonder, too, if the reason for the change in currency, is to keep us Americans from becoming rich. I think the rv will come out low, and as we cash in our higher denomination bills, the lower denomination bills will be available to Iraqi's. When they quit accepting the higher denomination bills, then the rv will probably go up to $3.00 per dinar, and then and only then, would we be able to get the smaller denomination bills. They can't be too happy that we are getting rich off of them.

What are your thoughts?

Honestly I dont think they care, because first of all guess what they will be wealthy again. Second we or the US and other countries will slowly give it all back for that black stuff under their feet when we are paying 100 a barrel and it cost them 1.25 a barrell to produce, now who should really be upset. ;)

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Hey Willie,

Thanks for the explanation. I was of the same mindset as Sean, so your further explanation really helped.

I also wonder, too, if the reason for the change in currency, is to keep us Americans from becoming rich. I think the rv will come out low, and as we cash in our higher denomination bills, the lower denomination bills will be available to Iraqi's. When they quit accepting the higher denomination bills, then the rv will probably go up to $3.00 per dinar, and then and only then, would we be able to get the smaller denomination bills. They can't be too happy that we are getting rich off of them.

What are your thoughts?

Dog-amatic I like your version better, I don't like it, but that's what will probably happen sad.gif

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Honestly I dont think they care, because first of all guess what they will be wealthy again. Second we or the US and other countries will slowly give it all back for that black stuff under their feet when we are paying 100 a barrel and it cost them 1.25 a barrell to produce, now who should really be upset. ;)

I totally agree, however, your thoughts are the subtle approach to the "knife in the back", on the other-hand, excluding the worldwide distribution of lower denom bills and raising the rv after the fact would be equal to getting a sledgehammer in the face! It would be just downright mean!

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Willie,

You did a great job explaining things with this LOP. However, for me one thing remains unclear.

It sounds like the redinomination is moving forward especially in Iraq.

Now, what about all of us here in the US that are holding a bag full of the 25's , 1000's & 10,000's. I think I am holding onto nearly 5 million of these Dinar in total.

Where will we be able to exchange these notes if no official RV has been anounced yet by the end of December?

I just don't want to be holding a bag full of wall paper if there is no action by then. Am I missing something here, and please explain.

Thanks

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rolleyes.gifThere still will not be a LOP......by your own admission.......60/90 days to turn in 25k's for 25k one dollar bills then you only get 25 one dollar bills after the 60/90 days. THAT is not a LOP if your smart enough to cash in before the 60/90 days are up. That my friend gives us an option. The LOP everyone been talking about in the past gives you no option. This is not a LOP in a practical sense. .........good post willie rolleyes.gif

Ok mongo lets look at the lop you way tell me, how this makes sense. If iraq has lets say 17 trillion dollars in circulation that 17,000,000,000,000. Now just cut out 3-000's your going to tell me that iraq only has 17 billion dinars then. Name me one country that would do this to themselves. And if they did this for some reason we know they have alone in NY bank atleast 550 billion us dollars from the oil sales in the past few years, with just that alone they would equal out to each dinar worth 32.35 usd per dinar now does this sound very likely???? Even if Iraq had 25 trillion and did the lop after doing simple math from the ny bank each dinar would be valued at 22.00.

First, Thanks Willie for a great post and explanation.

Mongo's statement that your explanation "is not a LOP in a practical sense" might also be stated as "is not a LOP in a TRADITIONAL sense" or as some have tried to explain a "LOP" ... Iraq has also stated via the CBI that they do not intend to devalue their currency (but perhaps increase exchange by 1000, which "removes three zeros from .00086 to make it .86). It's the terminology that is the problem for all of us .. LOP, deleting 3 zeros, etc., When we put aside all our assumptions about terminology that is hindered by language and cultural barriers and look at what Iraq says it is going to do or the outcome thereof, their intent, then the view becomes different.

If I were an Iraqi citizen, I'd be excited about cashing in my 25K dinar for 25K 1 dinars or 1K 25 dinars ... or whatever denomination I want to have in my possession. We saw from the interview with Tant that when they first changed the bills from the Swiss notes and Hussein notes, there was ample on-the-ground, local information disseminated so that the Iraqi people were informed and able to exchange their notes. They made sure that everyone got the message.

Thanks again for such a great explanation. I have a f/u question and will make separate post.

Link to interview with Brig. Gen. Tant

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I totally agree, however, your thoughts are the subtle approach to the "knife in the back", on the other-hand, excluding the worldwide distribution of lower denom bills and raising the rv after the fact would be equal to getting a sledgehammer in the face! It would be just downright mean!

I like this the fact would be equal to getting a sledgehammer in the face! Now think of it this what happened when you were a kid and just hitting high school and you freshmen year and decided to stand up to that senior big dawg and take a swing. It was a first omg I just did that but what soon follows after the shock wears off??? Well thats what would happen to Iraq if they decided to screw over the rest over the world they will have destroyed all confidence in what they have worked towards. And guess what no more aid money no more support and if at worst we will be back to do what we have done once before, kinda of sad to say but its the truth. I believe this is going to be done one time and thats it they dont want the world to come down on them for a act of greed,because we all have bailed them out of the last few years be it a war or aid or forgiving debts.

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You did a great job explaining things with this LOP. However, for me one thing remains unclear.

It sounds like the redinomination is moving forward especially in Iraq.

Now, what about all of us here in the US that are holding a bag full of the 25's , 1000's & 10,000's. I think I am holding onto nearly 5 million of these Dinar in total.

Where will we be able to exchange these notes if no official RV has been anounced yet by the end of December?

I just don't want to be holding a bag full of wall paper if there is no action by then. Am I missing something here, and please explain.

We all knew going into this investment, that the risk in losing our money is possible. I don't want to lose money. But, I will say this, I won't cry for my paltry investment (it certainly won't hurt me), however, If I never made the investment and could have made $10k (or more) off of a thousand dollar investment, then I would have cried!

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