Understanding the LOP & the ZEROS

[Dalite]

G'day Guys

So JMW do you have any believe in where the dinar may be heading, IF it simply RI's which IMO is probably what it may do which to me spells at least a 5 to 10 year wait where is may well reach equalisation of its exchange rate to it's neighboring countries eg Kuwait, Iran,ect or is that also being to optomistic.

Cheers Chilli B)

A RI is a ReInstatement of the former rate.

It would be immediate.

A RD is a redenomination, which strengthens the currency and allows it to gain value without the negative effects of past high inflation.

The RD route would take longer for the currency to build to it's ultimate market value.

[hoopdog]

All bank accounts, contracts, salaries, loans.... All financial transactions and holdings wIll be treated equally.

If you have a Warka account, or own Iraqi securities, you won't be troubled with having to exchange for the new currency, but you will not be immune to a RD,

I can't address what would happen if they LOP, as that is a pumper term that was thrown out there to keep you from learning about the possibility of RD, which the CBI has been telegraphing for years.

You will have to ask the Pumpers what a LOP would entail...

Agree with the LOP terminology and only mentioned that because that was in the heading for the post, however...how can anyone go into an account that you have been saving for years and basically take away your money. I Don't buy into that at all!

Of course I don't buy into it, because I don't understand that part of it. I guess anything can happen, just trying to grasp how that can be accomplished, that's all.

Edited July 12, 2011 by hoopdog

[Dalite]

Agree with the LOP terminology and only mentioned that because that was in the heading for the post, however...how can anyone go into an account that you have been saving for years and basically take away your money. I Don't buy into that at all!

Of course I don't buy into it, because I don't understand that part of it. I guess anything can happen, just trying to grasp how that can be accomplished, that's all.

It is a revenue neutral process.

Not only is your account affected, but prices are also changed.

Everything having to do with money is adjusted equally.

There is no difference in the buying power of what you have in the bank, other than the currency now having true value and potential for growth.

The only ones negatively affected are those that purchased the Dinar, and have no need to spend it in Iraq. They end up with a reduction in the number of Dinar they hold, are forced to exchange it for the new money, and hold on a bit longer.

But, it retains the same value as the purchase price, minus the dealer's spread.

They could have the same buying power after RD, if spent or invested in Iraq.

Years ago, Kleenex had a campaign where they packaged the same amount of tissue in a much lower profile box. The ads stated "We're squeezing the air out of Kleenex"

You got the same amount of tissue in a smaller box.

A RD squeezes the remnants of past hyper inflation from the currency, magnifying true growth potential.

Just like Kleenex; same amount of purchasing power in a smaller note.

[Darin]

I'm sorry, but who ever stated that the prices would not be adjusted on the shelf nearly immediately -- I think your a little mistaken.

The only delay will be the shop-keeper adjusting the prices upon a R/V.... -- Yes, they will be able to import items in cheaper, and therefore, they should adjust their prices accordingly.

Why?? Because, if they didn't, than Iraqis will go and exchange their newly founded valued IQD for USD to purchase same items until the #s decrease.

Plus, what citizen in their right mind, would continue to pay 1,000,000 for something that costs $1,000 USD at a 1:1 R/V

No, upon a R/V, those who recently spent money based upon the old rate will feel slighted. As rumors of a R/V were to circulate, this may put a stop to spending as many would likely wait out a R/V. What would end up happening, it would damage the economy as people are not spending..

If a R/V were to occur, people would likely use USD they currently hold up until the prices change within the markets. USD would be consumed up out of the market. Dollarization, eliminated.

R/D? Not sure why they just didn't print the currency and omit the 3 zeros from the get-go. They could of easily added 100 note down the road for bigger purchases. They had a clean-slate to do so when introduced the currency in 03/04...

[HopefulTxn]

All bank accounts, contracts, salaries, loans.... All financial transactions and holdings wIll be treated equally.

If you have a Warka account, or own Iraqi securities, you won't be troubled with having to exchange for the new currency, but you will not be immune to a RD,

I can't address what would happen if they LOP, as that is a pumper term that was thrown out there to keep you from learning about the possibility of RD, which the CBI has been telegraphing for years.

You will have to ask the Pumpers what a LOP would entail...

Unfortunately the gurus and such have been lying to people telling them that a lop is a devaluation (usually implying it is an acronym), when it is simply slang for redenomination. The term has been used many times, in many articles to reference the action of cutting/removing/slashing the zeros from a currency:

http://www.spokesman.com/stories/2004/dec/31/turkey-will-lop-six-zeros-from-its-currency-at/

http://news.bbc.co.uk/2/hi/7532702.stm

http://www.theindependent.co.zw/business/13791.pdf

http://www.usatoday.com/news/world/2008-09-01-Iran-currency_N.htm

I'm sorry, but who ever stated that the prices would not be adjusted on the shelf nearly immediately -- I think your a little mistaken.

The only delay will be the shop-keeper adjusting the prices upon a R/V.... -- Yes, they will be able to import items in cheaper, and therefore, they should adjust their prices accordingly.

Why?? Because, if they didn't, than Iraqis will go and exchange their newly founded valued IQD for USD to purchase same items until the #s decrease.

Plus, what citizen in their right mind, would continue to pay 1,000,000 for something that costs $1,000 USD at a 1:1 R/V

No, upon a R/V, those who recently spent money based upon the old rate will feel slighted. As rumors of a R/V were to circulate, this may put a stop to spending as many would likely wait out a R/V. What would end up happening, it would damage the economy as people are not spending..

If a R/V were to occur, people would likely use USD they currently hold up until the prices change within the markets. USD would be consumed up out of the market. Dollarization, eliminated.

R/D? Not sure why they just didn't print the currency and omit the 3 zeros from the get-go. They could of easily added 100 note down the road for bigger purchases. They had a clean-slate to do so when introduced the currency in 03/04...

The reason it most likely wasn't done back then was because they were still suffering from serious inflationary problems. The last year of high inflation was in 2007, and as mentioned in the article Dropping the Zeros, Gaining Credibility - redenominations are more likely to be successful and not have to be repeated (like Brazil) when done after the inflation problems have been resolved, and that countries may wait years before performing the action.

[Darin]

Unfortunately the gurus and such have been lying to people telling them that a lop is a devaluation (usually implying it is an acronym), when it is simply slang for redenomination. The term has been used many times, in many articles to reference the action of cutting/removing/slashing the zeros from a currency:

http://www.spokesman.com/stories/2004/dec/31/turkey-will-lop-six-zeros-from-its-currency-at/

http://news.bbc.co.uk/2/hi/7532702.stm

http://www.theindependent.co.zw/business/13791.pdf

http://www.usatoday.com/news/world/2008-09-01-Iran-currency_N.htm

The reason it most likely wasn't done back then was because they were still suffering from serious inflationary problems. The last year of high inflation was in 2007, and as mentioned in the article Dropping the Zeros, Gaining Credibility - redenominations are more likely to be successful and not have to be repeated (like Brazil) when done after the inflation problems have been resolved, and that countries may wait years before performing the action.

Inflationary problems?? They still could of printed the currency omitting the 3 zeros and added notes "if necessary"

Maybe it makes more sense looking back and how basically no larger or smaller denominations were printed.

But in my eyes, they could of simply printed the denominations as follow:

25

10

5

1

.5

.25

.05

And, adjust the exchange rate from 1170 to 1.17 or $0.00086 to $0.86

They still would of printed the same amount of currency, however, the numerical value would be 1,000 times less.

The 000s were added "due to inflation" over a period of time.

They had their slate clean and could of done-so... So why didn't they?

If the value went up, great... The denominations were lower to begin with..

If the value went down, print a bigger bill (I.e., 100-note)

This would of also eliminated dollarization and likely had a better effect for the economy.

[HopefulTxn]

I am not sure you realize that when they introduce the 25,10, etc they will not be called IQD when they first come out. They will have a new currency code assigned to them, which will have a different rate of value (exchange) assigned to it. The electronic side of the dinar will shrink immediately, and the cash block will shrink rather quickly as the notes are exchanged and the 000 currency set notes make it back to the CBI to be destroyed.

And would the rate of $0.86 apply to the 25k notes as well in the scenario you mentioned? If so it would be a process that would cost Iraq trillions more than they have in proven oil and natural gas. Iraq does not have the unlimited resources of cash from oil that some people insinuate. They have about $20 trillion in oil and less than $1 trillion in natural gas. If they were to simply revalue their monetary system without redenomination and increase the value of the dinar to $0.86, they would have a currency system valued at over 3 times the present lifetime value of their predominant resources. Nobody would honor the rate, just like nobody honored the $3.22 rate after Hussein had increased the monetary system to over 2 trillion dinar.

I wish I could see a way in which that made sense, but I just can't. I would love for it to happen - oh how I would love for it to happen. But all they have been stating in many articles, whether it be reducing their cash block to around 25 billion or performing an action like Brazil and Turkey is a redenomination. The gurus and such will try and spin it and say it makes no sense, that Iraq doesn't fit into that model, etc. Ask them what model they are referring to and comparing Iraq to, because no country has ever done a huge revaluation of their currency like they claim Iraq 'has to do'.

[Dalite]

If you believe that, then why hell are you on this site stiring up negative vibes? That is why nothing happens good, because of negative know it all A**H****

So, you're saying to believe the news coming from Iraq is negative, while believing the pumper lies is positive?

Did I get that right?

Thanks so much for clearing that up for every one.

Okie, please make it RV again, and remove some of these negative vibes....

[Darin]

I am not sure you realize that when they introduce the 25,10, etc they will not be called IQD when they first come out. They will have a new currency code assigned to them, which will have a different rate of value (exchange) assigned to it. The electronic side of the dinar will shrink immediately, and the cash block will shrink rather quickly as the notes are exchanged and the 000 currency set notes make it back to the CBI to be destroyed.

And would the rate of $0.86 apply to the 25k notes as well in the scenario you mentioned? If so it would be a process that would cost Iraq trillions more than they have in proven oil and natural gas. Iraq does not have the unlimited resources of cash from oil that some people insinuate. They have about $20 trillion in oil and less than $1 trillion in natural gas. If they were to simply revalue their monetary system without redenomination and increase the value of the dinar to $0.86, they would have a currency system valued at over 3 times the present lifetime value of their predominant resources. Nobody would honor the rate, just like nobody honored the $3.22 rate after Hussein had increased the monetary system to over 2 trillion dinar.

I wish I could see a way in which that made sense, but I just can't. I would love for it to happen - oh how I would love for it to happen. But all they have been stating in many articles, whether it be reducing their cash block to around 25 billion or performing an action like Brazil and Turkey is a redenomination. The gurus and such will try and spin it and say it makes no sense, that Iraq doesn't fit into that model, etc. Ask them what model they are referring to and comparing Iraq to, because no country has ever done a huge revaluation of their currency like they claim Iraq 'has to do'.

One of the things I have been looking for is a new currency code. I believe I heard that it is a requirement by the IMF to properly inform the public of a re-denomination and to provide such things as a new currency code. Until I happen to see a new currency code, I'll believe that they're not considering to R/D (lop) in one swift process. Because, they can't introduce a new currency and let it circulate it around, than consider it part of a different currency code at its own exchange rate. Turkey did a very good job fully describing the process, which is another indicator I am looking for. Opinion articles, quotes, etc do nothing until it is a clearly stated official document. The rest is left for speculation.

So, if you can agree they own $20 trillion in crude, $1 trillion in natural gas, plus a few trillion more in other natural resources. The better question is to compare to what amount is truly in circulation... If we are looking at 6-12 trillion, than it would be easy to back the value.

[BlueOrchid919]

If you believe that, then why hell are you on this site stiring up negative vibes? That is why nothing happens good, because of negative know it all A**H****

You know.... you COULD state your case/cause without resorting to being nasty and foul-mouthed. Why must you use invectives and curse?

[GT5Junkie]

One of the things I have been looking for is a new currency code. I believe I heard that it is a requirement by the IMF to properly inform the public of a re-denomination and to provide such things as a new currency code. Until I happen to see a new currency code, I'll believe that they're not considering to R/D (lop) in one swift process. Because, they can't introduce a new currency and let it circulate it around, than consider it part of a different currency code at its own exchange rate. Turkey did a very good job fully describing the process, which is another indicator I am looking for. Opinion articles, quotes, etc do nothing until it is a clearly stated official document. The rest is left for speculation.

So, if you can agree they own $20 trillion in crude, $1 trillion in natural gas, plus a few trillion more in other natural resources. The better question is to compare to what amount is truly in circulation... If we are looking at 6-12 trillion, than it would be easy to back the value.

You can assume the CBI is lying about their M2, but there isn't any evidence for it that I've seen, so it would seem like thinking they're off by a factor of 10 is mere dreaming. I've seen a lot of people (and I'm seeing it from RVers, not just lobsters) estimating that there are 6 trillion in the hands of currency speculators alone. And that figure wouldn't be surprising.

Even if 6-12 trillion were true, backing it with the ENTIRE known oil reserves? What happens when the oil is, say, half gone? The currency is worth half as much? Monetizing their entire oil supply would provide immense wealth for foreign currency speculators and long term would completely screw Iraq and Iraqis. And I just don't see the world financial markets buying it, even if Iraq were to make such a foolish decision. Backing a currency with oil, much of which won't see the light of day for 25-50 years, just doesn't seem realistic. There's a reason no one else has done it or is doing it.

Imagine what would happen if Saudi did the same thing. Saudi has 700 billion in M2 (187 billion USD * 3.75 exchange rate). They have 264 billion barrels of oil reserves. Using the same ratio of reserves to dollars that you're using (your 20 trillion seems high to me), that gives them 37 trillion in crude. That would make their currency worth $52.85 per unit, instead of the 27 cents that it's currently trading for.

Venezuala would be even worse. They have more oil than Saudi and their currency is worth even less than Iraqs. Why don't they monetize their entire oil reserve and all become overnight millionaires? I'd say they're in a better position than Iraq to do it, simply because they have more oil and less foreign currency speculators.

Iraq doesn't exist in a bubble. Pumpers like to tell you that the situation in Iraq has never happened before in the history of the planet, but it isn't really true. Iraqs currency wasn't forcefully devalued by the IMF overnight, it was devalued over decades by rampant printing of currency and massive inflation, and that happens ALL THE TIME. Even if Iraq really is a completely unique situation, that doesn't mean they're allowed to completely disregard how currency works at its most basic level.

[HopefulTxn]

One of the things I have been looking for is a new currency code. I believe I heard that it is a requirement by the IMF to properly inform the public of a re-denomination and to provide such things as a new currency code. Until I happen to see a new currency code, I'll believe that they're not considering to R/D (lop) in one swift process. Because, they can't introduce a new currency and let it circulate it around, than consider it part of a different currency code at its own exchange rate. Turkey did a very good job fully describing the process, which is another indicator I am looking for. Opinion articles, quotes, etc do nothing until it is a clearly stated official document. The rest is left for speculation.

So, if you can agree they own $20 trillion in crude, $1 trillion in natural gas, plus a few trillion more in other natural resources. The better question is to compare to what amount is truly in circulation... If we are looking at 6-12 trillion, than it would be easy to back the value.

Take a look at the more recent redenominations and you will probably notice the first place it seems the new currency code is released for all to see is in the legislation that is passed by the governments doing the redenominating.

What is it that we are all waiting to the text of? The plan that the CBI/MoF put forward to Maliki and Parliament. Why would you think you would see the code before their government even votes on it? The new currency code will come from Iraq, not the IMF.

Also, I never stated that they have $1 trillion dollars worth of natural gas, I stated they had less than $1 trillion. It is actually closer to about $525 billion dollars worth.

I am not sure why you are wanting to substitute the currency levels claimed by the CBI with such lower quantities, as you have not shown anything that suggests that they are inaccurate or have been manipulated in some manner. Right now, with their state levels, their physical monetary base is about $21.4 billion dollars or 15.1 billion euro. Not an unlikely figure considering the population is around 30 million people.

[Raleighwood]

Inflationary problems?? They still could of printed the currency omitting the 3 zeros and added notes "if necessary"

Maybe it makes more sense looking back and how basically no larger or smaller denominations were printed.

But in my eyes, they could of simply printed the denominations as follow:

25

10

5

1

.5

.25

.05

And, adjust the exchange rate from 1170 to 1.17 or $0.00086 to $0.86

They still would of printed the same amount of currency, however, the numerical value would be 1,000 times less.

The 000s were added "due to inflation" over a period of time.

They had their slate clean and could of done-so... So why didn't they?

If the value went up, great... The denominations were lower to begin with..

If the value went down, print a bigger bill (I.e., 100-note)

This would of also eliminated dollarization and likely had a better effect for the economy.

How could they do that when the currency was already inflated? When there was already too much in circulation to back up a higher value....

Not to mention they only had like 2 denominations before we invaded....I believe it was the 10k and the 250 so the easiest way to do the exchange without the people feeling like they were getting shafted is to add the rest of the denominations to do a 1 to 1 exchange.....so that's another reason why they kept the zeros

Makes sense doesn't it?

[Darin]

How could they do that when the currency was already inflated? When there was already too much in circulation to back up a higher value....

Not to mention they only had like 2 denominations before we invaded....I believe it was the 10k and the 250 so the easiest way to do the exchange without the people feeling like they were getting shafted is to add the rest of the denominations to do a 1 to 1 exchange.....so that's another reason why they kept the zeros

Makes sense doesn't it?

Yup, that would be my argument. Gain trust with the people by offering a 1:1 exchange. It needed to be done quickly and with faith in the new currency

Would of been hard to do that w/ out an education campaign. In this scenario, they didn't have time to do that.

Take a look at the more recent redenominations and you will probably notice the first place it seems the new currency code is released for all to see is in the legislation that is passed by the governments doing the redenominating.

What is it that we are all waiting to the text of? The plan that the CBI/MoF put forward to Maliki and Parliament. Why would you think you would see the code before their government even votes on it? The new currency code will come from Iraq, not the IMF.

Also, I never stated that they have $1 trillion dollars worth of natural gas, I stated they had less than $1 trillion. It is actually closer to about $525 billion dollars worth.

I am not sure why you are wanting to substitute the currency levels claimed by the CBI with such lower quantities, as you have not shown anything that suggests that they are inaccurate or have been manipulated in some manner. Right now, with their state levels, their physical monetary base is about $21.4 billion dollars or 15.1 billion euro. Not an unlikely figure considering the population is around 30 million people.

The figures are likely accurate, but how many of us are accounting for them is likely wrong. I'm still looking for more in-depth on that. You have to look beyond the surface to gain a better understanding.

[dog53]

hahahahahahahahahaa

[rnldtippitt]

Why on earth are you still kicking this horse.... There is no lop.

[Raleighwood]

Why on earth are you still kicking this horse.... There is no lop.

Sure there is but its called a redenomination and its very possible.....if someone told you it can't happen they either lied to you or weren't very educated on the subject

[easyrider]

Sure there is but its called a redenomination and its very possible.....if someone told you it can't happen they either lied to you or weren't very educated on the subject

It is NOt a possibility it will definitely happen at some point it has to but what you need to understand is when will they implement the R/D and to what ways can they increae the Value of the dinar without R/Ding first there are ways im sure me and the rest of this board ARE NOT aware of. Their main focus is on reducing the money supply inside the country within the Iraqis hands NOT accounts. Heres some major downfalls of when a country R/D's kinda scary stuff if you ask me but their are def. pros and cons to everything but this is the downside.

Costs and Risks of Currency Redenomination

1.Cost of printing new notes and minting new coins. In the long-run this cost may be offset by the reduced number of notes that will be printed in future due to the reduction in the amount of notes for transactions.

2.The cost of disposing of the old notes and coins. This is likely to be small but there is a risk that some of the old notes may be re-circulated or round-tripped. It has been reported in some countries that officials who were charged the responsibility of destroying the exchanged (old) notes and coins secretly “smuggle” then back into circulation to be re-exchanged into the new currency. This could result in multiple “round-tripping” of the old currency which can fuel inflation. Therefore, the banking authorities must ensure that notes and coins withdrawn do not find their way into circulation.

3.The cost of public education and advertising the change to citizens. This could be substantial.

4.The cost of exchanging the old currency for the new currency in terms of man-hours lost in waiting in banking halls, changing records and dual accounting in both old and new currencies during the “interim” period.

5.Risk of massive disruption in the pricing mechanism in the economy and short-term inflationary pressure arising from the “announcement effect”. No matter the assurances from the CBN, a major economic policy like currency change is bound to trigger inflationary pressure due to the uncertainty such changes generate. However, the inflationary impact may be curtailed with effective public education and anti-inflationary policies, e.g. ensuring abundant supply of petroleum products and stable prices of petroleum products and government-provided services. In a country with a low level of financial literacy like Nigeria, determining new prices for goods and services could be a challenge for many traders, farmers and operators in the informal sector.

6. It took the European Union about five years from the decision to introduce the Euro currency to its full implementation, i.e. from 1998 to 2002.[v]

7.The uncertainty and instability that is inherent in major changes in economic policies in most developing countries could lead to increased speculation, capital flights, drop in foreign remittances, increased risk aversion, adoption of “wait-and-see” attitude by investors and increased sharp practices.

8.Likely short-term increase in the rate of armed robbery because robbers will flood banking halls and trail those who have exchanged large sums of old money for new ones. There is also a likely increase in other fraudulent activities and financial “scams”. For instance, since the announcement of the redenomination and the introduction into circulation of the new notes and coins in July 2007, several cases fake new Ghanaian cedis have been reported under spectacular headlines in their newspapers ”. You can trust that Nigerian fraudsters are already at work perfecting their strategies to take advantage of the proposed redenomination of the naira.

[yoda69]

Hello peeps,

Yes, this is a repost. I was a little tired the night I wrote this, and my choice of titles, was misleading. That and I didn't proof read before I posted so some of what I posted was a little off. Thanks to Froto for correcting me on my math

I feel this is an explaination that will help others understand the lop better.

I am reposting this with some correction to help make it a little bit clearer, and should help those who don't understand what the LOP is, and it connection to the delete the zeros or remove the zeros articles.

Now, This is a tough subject to really get a grasp on, and it can stir up emotion because the wrong outcome from the removal of the zeros concept and it means lop, which is a Re-Denomination (RD) and we only get dollar for dollar if they were to also re-value the rate at 1 to 1 or we would get three times our investment if they re-value the rate at $3, but not the millions, or billions we had hoped for. Those who are heavily invested will still do well at 3 times investment, and those of us like me who have a measly 750k will get either $750 at 1 to 1 or $2250 at 3 to 1.

I will try to keep this as simple as possible and explain it to the best of my ability, but it does get complicated

There are 2 translations for the zeros articles that we see, one is deletion of the zeros and the other is removal of the zeros, I see these as 2 completely different things, I will explain below

OK, let’s look at what we have today, and understand the currency as it is used now

Let’s just say we have 1 Iraqi dinar

The current rate for the dinar is .00085 or 1,165 iqd per US Dollar, so if you have 1 usd, you can exchange that dollar for 1,165 iqd's

If we compare our 1 iqd to 1 usd, we don’t have diddly, we need another 1,164 of them just to get to the value of 1 measly us dollar. So, our 1 iqd is worth a whole .00085 of 1 usd, not even worth our lowest denomination of 1 penny

OK, back to our 1 iqd, let’s look at where is stands in relation to the current denominations I listed below, it does not exist! At least in physical form, the iqd does not have a 1 dinar denomination, for that matter the lowest denomination is 50, so think of that, a store owner cannot sell anything for less than 50 dinar, because he cannot make change for anything less and it also means that everything must be priced in increments of 50. This works now, because the current rate of the iqd means that bottle of soda costs 1,750 iqd which is equal to about $1.50 usd. The store owner just might let you lick the bottom of his shoes for your 1 dinar, if you had it that is, since it does not exist in a physical form.

Current denominations for the iqd

25,000

10,000

5,000

1,000

500

250

50

OK, for arguments sake, let’s present the first theory and explain why that missing 1 dinar note matters. This is not a remove the zeros, or delete the zeros scenario

We can be pretty sure this not going to happen, but would be perfect and we would all be rich happy, and could care less if we ever hear the words dinar, RV, Iraq etc. ever again

Strait Up RV ,why it won't work, and the reason lower denoms are needed

This is a strait up no strings attached RV, the exchange rate for the iqd RV's at 1 iqd to 1 usd

25,000 dinar note is worth 25,000 usd, 5,000 dinar note is worth 5,000 usd 1,000 dinar note is worth 1,000 usd and so on

Now, let’s look at this from the iqd side of things and get back to that lowest denomination again, now we have a 50 dinar note worth 50 usd, but the bottle of soda is still only worth $1.50 usd, but instead of 1,750 dinars, it only cost 1.50 dinar. But you can't buy it, your lowest bill is a 50 that is worth $50

You could only get one bottle of soda with 1,750 dinar the day before the RV and 1,165 sodas the day after.

The shop owner can't expect to get 50 dinar for one bottle of soda.

Now, we are talking about $1.50 here, what about an item worth 25 cents?

This just does not work; they need lower denominations if they are going to make their currency worth the same a 1 usd.

This is the reason why I said above that we can be pretty sure this will not happen and this is where the deletion of the zeros comes in.

What the CBI has to do...Change the rate from .00085 to 1.0 no new currency, no new lower denominations

DELETE the Zeros or LOP, and why the lower denoms may not be a good thing

Next, we are going to the stinking lop section, bad, evil, how dare I talk of such heresy HAHAHAHA

To better understand this one, we need to look at what Iraq would need to do in order to be able to pay for things like a bottle of soda with physical currency, the easiest and most effective way should be the dreaded lop, but Iraq has problems with this, and I will get to why later.

The lop is a pretty simple concept, you remove three zeros from ALL of the current denominations and also from the exchange rate. You do this by introducing lower denominations equal to the current denominations. This is just changing the denominations and the rate, and does not change the value of the iqd yet.

In this case, the currency is re-denominated, a 25,000 dinar note = 25 dinar note, they are worth the same amount and even in the event of a Re-value of the rate, they will still only be worth 25 dinar. They will be used together till all the large notes are removed or destroyed. Eventually, the new lower denominations will completely replace the larger ones

So, we need to look at the currency and the exchange rate to understand what happens to it

The rate stays .00085 or 1165 for large denominations and changes to .85 or 1.165 for lower denominations.

25,000 dinar note is now = to a 25 dinar note ($21.46 usd at the current rates)

10,000 dinar note is now = to a 10 dinar note ($8.58)

5,000 dinar note is now = to a 5 dinar note ($4.29)

1,000 dinar note is now = to a 1 dinar note ($0.85)

500 dinar note is now either a 1/2 dinar note or a .50 dinar coin (a fifty cent piece basically) ($0.42)

250 dinar note is now either a 1/4 dinar note or a .25 dinar coin (quarter) ($0.21)

50 dinar note is now either a 1/20 dinar note or a .05 dinar coin (nickel) ($0.04)

Now instead of price being based on 50 dinar increments, prices can’t be set at .05 increments

So, if they lop, what happens to the current lower denominations? They are still worth the same as they are now, and you still lop the zeros, 500 is now .500 and the 250 is now .250 and the 50 is now .050 these new lower denominations would have to be introduce as either coins, or paper in denominations of 1/2, 1/4, and 1/20 That seems silly to me and does not make a lot of sense so personally I believe it would have to be coin to do this. However, the usage together during the removal process means that with coin, you would also carry the paper equivalent until all the bills are removed.

The shop owner who is selling the bottle of soda for 1,750 dinar, can now sell it for 1.75 dinar (remember 1.75 x .85 is about $1.50 usd) So, this corrects the problem we had above, in the case of a revalue, so let’s look at that next before we discuss the issues this theory has.

So, they RD'd the currency and now they are going to re-value the exchange rate, we will stick with the simple 1 to 1 math for now, so now 1 Iraqi dinar is worth 1 usd, an increase of simply $0.15 US cents

Now the shop owner simply sells the bottle of soda for 1.50 dinar, pretty easy, and the lower denominations make transactions easier all the way around not to mention the ease of pricing throughout the country. There is whole lesson on the micro economic impact this has on the country, but we are not going to go there.

However, what we do need to look at an issue this theory has and this has a whole slew of issues that I am not going to get into, but I am going to touch on just one that I think matters and is often over looked to understand what else the CBI would have to do in order for the lop to be possible.

First, let’s just go to the opposite end of the currency we were talking about on the low side, because now, after the RD, Iraq’s largest denomination is only 25 dinar.

So, if you want to buy a bigger ticket item, let’s use 1000 dinar, you have to use forty 25 dinar notes to pay for that item.

Without a larger denomination to use, you have to carry a good size bundle of cash to pay for your purchase.

Now, before you start thinking that they have the existing 50, 250 and 500, so why not use them, remember that those have to be lopped too, if a 50, a 250 or a 500 that are all worth less than a 25,000 dinar note were to be used as the larger denominations along with the new lower notes, then they would take on a value much higher than the large denominations, and the numbers are mind boggling to try and post, so I will just say that this is not a possibility in this situation.

HOWEVER, some of you will remember the articles about the introduction by the CBI of a 100,000 dinar note that we had a while back. This would have solved this issue because the 100,000 dinar note would become a 100 dinar note and now your currency is pretty well set from top to bottom

SO, for the lop to happen the CBI has to...

Introduce 4 new lower denomination notes (25, 10, 5, 1) and make the 3 zero notes worth the same as the lower equivalent

Introduce 3 new coins (0, 50, 0.25, and 0.05) or 3 new notes (1/2, 1/4, 1/20) and make the 500, 250 and 50 worth the same as their equivalent

Introduce a new 100 dinar note

Change the exchange rate from .85 to 1.0

Destroy 23 trillion high tech top notch dinars that are less than 10 years old and replace it with 23 billion in new lower denomination dinar, (that just does not make logical sense.)

REMOVE the Zeros, and the lower denoms we want to see

So what is the answer, how does Iraq introduce lower denominations, change the exchange rate, and make us all rich

Well, there is a middle point between the 2 above theories that makes the most sense to me, and I hope is the plan when it comes to the removal of the zeros

This is what the CBI does

Introduce new lower denomination notes and coins as above in addition to the existing notes

RV the exchange rate from .00085 to 1.0

Remove the larger notes from circulation for use in bank to bank and other large transactions leaving the 50, 250, and possibly the 500 as the largest denominations in circulation.

So, the currency will look like this

25,000 dinar note (current in use, removed and destroyed over time, or used for bank to bank and large transaction, but still worth 25,000 dinar)

10,000 dinar note (current in use, removed and destroyed over time, or used for bank to bank and large transaction, but still worth 10,000 dinar)

5,000 dinar note (current in use, removed and destroyed over time, or used for bank to bank and large transaction, but still worth 5,000 dinar)

1,000 dinar note (current in use, removed and destroyed over time, or used for bank to bank and large transaction, but still worth 1,000 dinar)

500 dinar note (could be removed or left in circulation)

250 dinar note (remains in circulation)

50 dinar note (remains in circulation)

25 dinar note (new lower denomination)

10 dinar note (new lower denomination)

5 dinar note (new lower denomination)

1 dinar note (new lower denomination)

0.50 (Coins just make sense to me, if they are going to RV and introduce new lower denominations, they will need lower than the 1 dinar note)

0.25

0.05

*I used 25, 10, 5, 1, .50, .25, .05 but the denominations that are introduced could be in any denomination they choose unlike the lop where they must stick with a match to the existing currency.

Notice that this covers all the issues I pointed out above with both the Strait up RV and the LOP since you have the lower coinage and smaller bills along with using the current 50, 250, and possibly the 500 as the larger denominations.

They would have to RV in this scenario, with the 50 dinar not already only worth 4 cents, anything introduced lower would not even be worth toilet paper

Now, this is what we hope to see, it would mean a big return for us and has none of the issues I had pointed out above with the lop and the strait up RV.

I Hope this helps some people better understand the concept of the lop and the zeros.

RVDinar - this makes the most sense of anything I have read since i invested in this more than three years ago. it is somewhat discouraging, but i hope the powers that be use your last scenario as the blueprint for the RV. r/yoda