Redenomination reasons and examples of the past.

[deenar]

It is my understanding that a lop occurs after a country goes through hyper-inflation. Iraq has been through this, but is headed back into it(inflation is rising at a very rapid rate). I would like to hear keepm's thoughts on this. Iraq is heading for double digit inflation again.

Edited June 14, 2011 by deenar

[keepmwlknfny]

It is my understanding that a lop occurs after a country goes through hyper-inflation. Iraq has been through this, but is headed back into it(inflation is rising at a very rapid rate). I would like to hear keepm's thoughts on this. Iraq is heading for double digit inflation again.

Well I think it would really depend on how high it goes.....On a positive note you can think of it this way, if the inflation starts growing it could be seen as the demand in the economy for goods growing faster then the economy itself can keep up, so one way the central bank could do this is by raising interest rates...doing this would promote more saving of money rather then spending which the downside of course is lower consumer spending and investing (but wait im getting to the good part) At the same time, they could RAISE THE EXCHANGE RATE to help control growing inflation ( I know thats what everyone wants to hear lol) Thats just one way of handling a gowing inflation problem....there are others, but I like this one the best hahaha

[Kent]

See file for redenom examples and why they took place as well and what actions they took. This should also explain why we are not in the same boat and the lop theory is not valid for Iraq...

The following 2 point conclusion of the report seems to exactly describe Iraq to me:

"Based on the analysis above, the re-denomination of

national currency must be done only when the following

circumstances are being met:

The decrease trend of inflation is consolidated. A

low inflation rate, joined by zero-dropping

operation will improve credibility of the national

currency;

Other significant positive results are obtained,

proving the success of economic reforms and

restructuring (e.g. the real terms increase of the

GDP). It has been proved in the majority of the

countries that put in place a re-denomination

process that this operation is an indicator of the

success in lowering inflation and determination to

keep inflation under controlled margins.

Iraq has ended and stabilized a period of high inflation and effected other positive reforms to keep it from happening again.

[Robertblewis]

So the chart showing they removed zeros, makes me think lop, but the chart showing they had time to switch them out makes me think we'll have time to cash in, and then they move to new currency without all the zeros.....is that correct?

I called Currency Exchange International in Orlando and two people there told me that when the RV happens our dinars that we have will be worth the value of each dinar. As reported the CBI on video this not "A lop" it is just to free up zeros to help the citizens spend more.

For example if you have 3 million dinars and the dinar is RV to 1.00 USD you will receive 3 miliion USD for your 3 million dinars.

If you want to get the truth talk to companies like currency ex international that have the facts. Most of these posters have no idea what they are talking about.

[HopefulTxn]

I called Currency Exchange International in Orlando and two people there told me that when the RV happens our dinars that we have will be worth the value of each dinar. As reported the CBI on video this not "A lop" it is just to free up zeros to help the citizens spend more.

For example if you have 3 million dinars and the dinar is RV to 1.00 USD you will receive 3 miliion USD for your 3 million dinars.

If you want to get the truth talk to companies like currency ex international that have the facts. Most of these posters have no idea what they are talking about.

The people that work in a currency exchange location have no more of an idea of when or how something will happen with a currency than anyone else. When a change occurs they will be notified of what change occurred, and after that they will be able to tell their customers - not before.

It also was not reported on video that there would not be a lop. If you listed to the questions, the first is asking about revaluation, where he states if he knew he could not tell, and the second question asked specifically about a redenomination, but didn't know if that was answered by the first question. Shabibi did not say there would not be a redenomination, he actually discussed the question at pretty good length.

[Buckeye Pilot]

It's time to deal with it people. Iraq is in a prime position for a LOP. Doesn't mean they will but they are in a prime position for one. The example that the US redenominated and never lopped was a joke. The US dollar was never worth 1000 times less than any currency in the world and we never had 27 trillion dollars in circulation. I garantee you if we did we would have lopped. People seem to think that people in the US were walking around with 10,000 dollar bills. Not the case. They were used for bank transfers only. Guess what. People in Iraq are walking around with 10 and 25 thousand dinar notes. Somethings gotta give. Lets just hope they don't go through with it.

You are simply just "Stuck on Stupid"

NO...... They are not.

[HopefulTxn]

It's time to deal with it people. Iraq is in a prime position for a LOP. Doesn't mean they will but they are in a prime position for one. The example that the US redenominated and never lopped was a joke. The US dollar was never worth 1000 times less than any currency in the world and we never had 27 trillion dollars in circulation. I garantee you if we did we would have lopped. People seem to think that people in the US were walking around with 10,000 dollar bills. Not the case. They were used for bank transfers only. Guess what. People in Iraq are walking around with 10 and 25 thousand dinar notes. Somethings gotta give. Lets just hope they don't go through with it.

It's actually rather interesting to see the huge numbers of people that will refuse to believe a redenomination (lop) is the most likely scenario in their present situation. They won't be able to give any sound reasoning why Iraq can't do it that actually holds water, but will refuse to believe they won't become instant millionaires from their dinar purchase. You can point out the lifetime present value of Iraqs natural resources, and that won't matter - you can point out the world monetary values, and they will ignore it, you can point out the regional implications of such an event and they will stick their fingers in their ears and scream 'I can't hear you'. Many will never look past the rumors that they have heard so many times and now regard as fact to see the real picture, they will just tell you that you can't see the big picture - which is really funny when you think about it...

That's not to say there is not a profit to be made with the dinar, its a currency so it's value can appreciate (or depreciate). Many have already seen the value increase of the past several years and would get a healthy return if they exchanged. A profit is a profit, no matter how small it may end up being - hope for the best, but prepare for the worst.

[Mazzz27]

you know whats funny about the last chart? kuwaiti dinar is nowhere to be seen but we do need the war to stop for a revalue IMO because why waste money on infrastructure while theres a war going on?

[zigmeister]

you know whats funny about the last chart? kuwaiti dinar is nowhere to be seen but we do need the war to stop for a revalue IMO because why waste money on infrastructure while theres a war going on?

Feed the people, put shelter over their heads, money to spend and a vision of a country to be proud of, it would be much harder for these groups to infiltrate and try to destroy what is being built. IMO.

[HopefulTxn]

you know whats funny about the last chart? kuwaiti dinar is nowhere to be seen but we do need the war to stop for a revalue IMO because why waste money on infrastructure while theres a war going on?

Well, unfortunately Kuwait cannot be looked upon as an example for what Iraq may do since they never suffered the inflation problems that Iraq did for decades, which was one cause of their monetary system skyrocketing from billions of currency units into the trillions they have now (1,000 times increase).

[Mazzz27]

Well, unfortunately Kuwait cannot be looked upon as an example for what Iraq may do since they never suffered the inflation problems that Iraq did for decades, which was one cause of their monetary system skyrocketing from billions of currency units into the trillions they have now (1,000 times increase).

that's crazy...I'm trying to be optimistic here! LOL

Feed the people, put shelter over their heads, money to spend and a vision of a country to be proud of, it would be much harder for these groups to infiltrate and try to destroy what is being built. IMO.

very true but still if a country is wealthy it would be built up....Iraq has very fertile land...theres soo much farmland its not even funny. South Korea is building 100,000 homes in baghdad, and probably will build more....its a serious gamble to just build up the whole country right now is what i was getting at. those people still hate each other.

Edited August 23, 2011 by Mazzz27

[Dalite]

The linked article was really good at explaning revaluation by lopping. I also understand the processes that need to be in place to make this change effective. But could someone please more clearly explain to me WHY lopping is not logical for Iraq? I'm still not understanding the correlation.

Unfortunately, this is not a LOP, or revaluation by lopping. It is a ReDenomination.

Calling a ReDenomination a LOP is equivalent to referring to the female of the species as wh0res.

It is a term that is so negatively charged that it removes the possibility for non emotion driven discussion.

This is not something that happened by mistake. There is no financial or economic procedure that bears that name.

When you are talking about vaporware, it is very easy to tell someone it won't happen, as it isn't there in the first place.

If parliament approves Shabibi's plan for ReDenomination that has been completed and presented for a vote, it would mean 1000 of the old dinar at 1170 dinars per dollar would be equal in value to 1 dinar at 1.17 dinars per dollar.

It has increased in value, but it has decreased in zeros. The currency is divided by 1000 (3 zeros) and the exchange rate grows by 3 decimal places.

So, it is true the exchange rate gets 1000 times larger, but the currency face value is shifted by 3 decimal places from right to left.

1,000,000 dinar at 1170 (current notes) is equal to 1000 dinar at 1.17 dinar per dollar (new notes)

You can't exchange the old notes at the new exchange rate. Both will coexist until the CBI decides to draw the old notes in.

Here are a few links to give the entire overview of removing zeros (ReDenomination) as an economic tool.

Fundamental Aspects of Currency ReDenomination

Dropping Zeros

I can also post the FAQ for the Turkey ReDenomination that the CBI constantly refers to in the ongoing educational campaign the Iraqi media is currently carrying, but I think these 2 links will explain the process and rational fully.

Before anyone who cannot bring anything to the discussion resorts to name calling, and asking me why I am here, I take this PRE-emptive statement.

RD hasn't happened yet. It may be voted down, the CBI may decide to let the exchange rate slowly rise from 1170:1 ofer a period of decades. Anything can happen; that's why I am here.

That said, it don't feel it is a bad idea to at least understand the procedure.

Upgradeable, this wasn't aimed entirely at you. I have no axe to grind with anyone. However, I believe the links will fully answer your questions.

All, please understand the pumper's victory in teaching you to call a legit economic tool, RD, a term so negative in connotation that it precludes rational conversation. That is why so many here don't have a clue about what the CBI has shown to be their first choice in restructuring the currency...

[estewart]

If I remember correctly redenomimation is done AFTER a period of hyperinflation when things stabilize.....which unfortunately for us is where Iraq is now....hopefully that's not what they are thinking!!!

I WAS going to point that out.

WHENEVER LOPPING occurs without a time of low inflation after a period of major inflation has occurred, then further LOPPINGS must occur, and have.

Iraq is in just the right shape and time for a LOP. I.e., "the raising of three zeros."

[estewart]

ONE of the main problems on this forum is that when some people refer to a LOP they are talking about an RD where there occurs a removal of three zeros. The 1000 Dinar becomes a 1 Dinar, and no value gets changed. What the new 1 Dinar buys the old 1000 used to buy.

BUT there are others who talk about a LOP that is something entirely different. YET. . . they never explain what their idea of a LOP exactly is. It's all left a mystery, but they are emphatically against it. Whatever it is.

[Mazzz27]

I'm telling you if an RD happens first....we all have lost

[estewart]

I'm telling you if an RD happens first....we all have lost

I think you are right.

[Mazzz27]

I think you are right.

this is what im getting from reading EVERYTHING

if it RD's then thats when to buy ....if they RD the dinar, print a new currency, drop the exchange rate to .86....buy then, and hope for their economy to triple

but lets just hope for an RV! :D

Edited August 24, 2011 by Mazzz27

[Darin]

Well I think it would really depend on how high it goes.....On a positive note you can think of it this way, if the inflation starts growing it could be seen as the demand in the economy for goods growing faster then the economy itself can keep up, so one way the central bank could do this is by raising interest rates...doing this would promote more saving of money rather then spending which the downside of course is lower consumer spending and investing (but wait im getting to the good part) At the same time, they could RAISE THE EXCHANGE RATE to help control growing inflation ( I know thats what everyone wants to hear lol) Thats just one way of handling a gowing inflation problem....there are others, but I like this one the best hahaha

2006-2007, the rates were changed frequently. But at the same time, inflation was running rampant...

They are likely not scared to increase the rate to curb inflation. But it seems they have a goal to maintain the rate.

Questions are... Why??

[estewart]

It's one way to maintain the currency stability that they keep saying is important. You just lock the price down and you got it. Never mind that inflation is now starting back up.

[keepmwlknfny]

2006-2007, the rates were changed frequently. But at the same time, inflation was running rampant...

They are likely not scared to increase the rate to curb inflation. But it seems they have a goal to maintain the rate.

Questions are... Why??

Probly simply because they don't have anything to support a higher rate right now otherwise it would and should be considered as a definitive option to keep the inflation from getting out of hand again.....

[MrFnHappy]

It's always an option IF you have the reserves, but Shabibi has other tools, eg; reserve requirements, and interest rates. Either one doesn't "cost" the CBI anything.

Edited August 25, 2011 by MrFnHappy

[matlok12]

You are simply just "Stuck on Stupid"

NO...... They are not.

I've watched and followed this site for a long time, and I have never seen you back up any of your statements about an RV with anything. All you do is call names and talk down to anyone that believes a "lop" can or will happen. Its easy to just lurk around and wait for your chance to jump in and call someone stupid, its hard to actually have an intelligent conversation about something you have no clue about. You said your IQ was genius...why dont you act like it....

[MoneyMoney7]

It's time to deal with it people. Iraq is in a prime position for a LOP. Doesn't mean they will but they are in a prime position for one. The example that the US redenominated and never lopped was a joke. The US dollar was never worth 1000 times less than any currency in the world and we never had 27 trillion dollars in circulation. I garantee you if we did we would have lopped. People seem to think that people in the US were walking around with 10,000 dollar bills. Not the case. They were used for bank transfers only. Guess what. People in Iraq are walking around with 10 and 25 thousand dinar notes. Somethings gotta give. Lets just hope they don't go through with it.

You don't know anything.

[ArmyDog133rd]

Good Post! Enjoyed the read of the PDF attachment.

Go RV!!!!

[luckyone]

If there is a redomination and say the 25000 note turns into a 25 note, will you get 1000 notes at 25 to equal the 25000 dinar you have? I'm having a hard time seeing how this will work and not get screwed. If they only drop the 0's say you have 1,000,000 dinar, that would only be 1000 dinar exchanged at even 1 to 1 would only be $1000 not $1,000,000. So any thoughts on how this will work?