Has the US Undersecretary already given us the rate???

[DRV1804]

Post by 1atoyo1 - PTR

Has the US Undersecretary already given us the rate???

Notice in this article "Billions over Baghdad" written by former UST Undersecretary John B. Taylor, that he said Iraqi oil coming to the U.S. to pay for the war will be less than $33 per barrel coming to the USA. A couple of sentences later he says "one barrel of oil will cost the US roughly 6 dinar held by the UST." Well there we have the UST's desired RV rate. The UST wants a little less than $5.50 USD per dinar on the RV! ($33 USD oil divided by 6 dinar = $5.50 USD per dinar).

Perhaps the recent rumors of vouchers coming in at a rate of $5.25 aren't too far fetched. And recent rumors over the last 1-2 months of delays in the RV because the UST wanted a higher rate than $3.00 are maybe not so far fetched either. With news of the rumored vouchers at $5.25, maybe the UST has been able to get the rate they always wanted to pay for the war. If the UST owns 3-5 trillion dinar, then that will convert to about $15.75-$27.5 trillion USD. The cost of the Iraq war is estimated at about $3 trillion USD. Looks like the UST will more than pay for the war with their dinar holdings as President Bush promised.

As of May 6, 2011, the total US public debt is about $14.32 trillion USD. Looks like the UST could pay off all the US debt, but do you really think they will do that with the money? Of course not. Those politicians love to spend, spend spend.

I hope the rest of us get this same rate. AWESOME!!!

But I wouldn't be surprised is the UST got some special deal just for the military and the UST.

Here's that portion of the article:

The article below, "Billions over Baghdad," written by John B. Taylor, under secretary of the Treasury from 2001 to 2005, and the author of “Global Financial Warriors,” is a concise explanation of the beginnings of the plan to devalue, print a new dinar currency, then revalue (RV) the Iraqi dinar. It was first conceived by Cheney & Greenspan, et al, and then put into action before the first shot was ever fired in the Iraqi War. It also gives credibility to GW Bush when he expressed many times as to how this war would pay for itself, namely OIL. Iraqi oil at less than $33/barrel coming to the USA.

The 3-5 trillion Iraqi dinar currently held by the US treasury will be returned to Iraq beginning 6 months from now in exchange for oil at the lower price. This, in part, is how Iraq will finance this revaluation. One barrel of oil will cost the US roughly 6 dinar currently held by the US Treasury.

http://www.nytimes.c...n/27taylor.html

http://www.washingto...0090302200.html

[GreenLantern]

Very interesting thoughts you have there. Lets hope you are right! $5.25 sure works for me!

[rnldtippitt]

Very interesting consideration???

[DinarMillionaire]

Thanks DRV, hope you're right. Links aren't working, at least for me.

Edited June 11, 2011 by DinarMillionaire

[Dinarius Rucker]

Post by 1atoyo1 - PTR

Has the US Undersecretary already given us the rate???

Notice in this article "Billions over Baghdad" written by former UST Undersecretary John B. Taylor, that he said Iraqi oil coming to the U.S. to pay for the war will be less than $33 per barrel coming to the USA. A couple of sentences later he says "one barrel of oil will cost the US roughly 6 dinar held by the UST." Well there we have the UST's desired RV rate. The UST wants a little less than $5.50 USD per dinar on the RV! ($33 USD oil divided by 6 dinar = $5.50 USD per dinar).

.

I know that things can change, but that looks like pretty strong evidence for all that like to draw from "real" intel.

Do we dispute John Taylor's article, because it is a little too positive for us to handle?

Or, do we give it the same credibility as the so-called L O P articles we have seen?

[F-16Pilot]

Post by 1atoyo1 - PTR

Notice in this article "Billions over Baghdad" written by former UST Undersecretary John B. Taylor, that he said Iraqi oil coming to the U.S. to pay for the war will be less than $33 per barrel coming to the USA. A couple of sentences later he says "one barrel of oil will cost the US roughly 6 dinar held by the UST." Well there we have the UST's desired RV rate. The UST wants a little less than $5.50 USD per dinar on the RV! ($33 USD oil divided by 6 dinar = $5.50 USD per dinar).

It does say "less than $33 per barrel," so the cost per barrel to the US can be anything up to $33. I believe I read somewhere that it costs the Iraqi's $1.50 to produce a barrel, so I think its safe to say that the US will pay between $1.50 and $33 per barrel which would put the dinar somewhere between .25 cents and $5.25 (assuming 6 dinar per barrel). I wouldn't turn my nose up at either rate, however, the higher cost per barrel seems more realistic, but the rate, on the other hand, not so much. I hope you are right, though, and Mr Taylor let the cat out of the bag by stating the 6 dinar per barrel. That's a big slip up.

[countryroads]

When it comes to rates, I have started to just pass over them. I think this is where the emotional roller coaster has the biggest effect. I have also for the time being stopped planning where I will spend the money. Right now all I can say in all honesty is that I am holding "X" number of dinars. When they do RV I would rather be surprised by a "WOW" than by an "UH OH".

GO RV

Edited June 11, 2011 by countryroads

[LaGrange]

Now that gives me a warm fuzzy feeling!

[palung]

This is very interesting. I like your logic better than reading okie dokie

[Nothing-Ventured]

You must have an Eagle Eye..! Nice find

I read the article Billions Over Baghdad here:

But did not see the part that you mentioned. I can't get either of the links to work in your post, anyone else having trouble with them? ...Does the second link go to the article that you quoted above?

[TonyDownTheShore]

I'd love for this to be true, but I can't see the rv coming out that high, JMO.

[OH_BROTHER]

Very interesting..... I like the logic.

[dinardarius]

Nice catch, keepen your eyes wide open, thanks for the lift. I love this new emoticons! HI Teresa

[wc41]

I also was unable get the links. Thanks for the info!!

[dinardarius]

Did the artical mention a date - Hawk Eyes?

[xxxgator]

good post ! theres many who are still asking the same questions and try to to convince others it's going to be a l[lopp] when there is no such term except in the dinar world.What they refer to as a 'lopp' with there so called expertice in banking & economics 101,is the de-valuation of a currency.Thats what happened to the dinar to start with.Then they shipped in the new Iraqi Dinar .It was traded for old notes and other foreign currancy being used at the time in Iraq .At that point the first stage of Re-valuating the dinar was in gear.It was put on a managed float to bring down the hyper- inflation caused by the Un chapter7 sanctions which had been used to artificially De-value the Dinar while Sadam was in power,from a rate of 3.22 almost zero.the new Iraqi dinar when introduced into circulation had a conversion ratio of 1Usd to 4000+ Iqd[forget the exact number].It's value has increased several times, and has currently been held at the artificial rate of around 1 Usd to 1170 Iqd.It has no where to go but up.I'm not sure if it"ll be instant but it is definately the goal.

Thanks for the reminder! Good post

[keepmwlknfny]

good post ! theres many who are still asking the same questions and try to to convince others it's going to be a l[lopp] when there is no such term except in the dinar world.What they refer to as a 'lopp' with there so called expertice in banking & economics 101,is the de-valuation of a currency.Thats what happened to the dinar to start with.Then they shipped in the new Iraqi Dinar .It was traded for old notes and other foreign currancy being used at the time in Iraq .At that point the first stage of Re-valuating the dinar was in gear.It was put on a managed float to bring down the hyper- inflation caused by the Un chapter7 sanctions which had been used to artificially De-value the Dinar while Sadam was in power,from a rate of 3.22 almost zero.the new Iraqi dinar when introduced into circulation had a conversion ratio of 1Usd to 4000+ Iqd[forget the exact number].It's value has increased several times, and has currently been held at the artificial rate of around 1 Usd to 1170 Iqd.It has no where to go but up.I'm not sure if it"ll be instant but it is definately the goal.

Thanks for the reminder! Good post

The majority of people use the term lop to mean redenomination, basically a slang word for rd and its easier to say and most people understand what you mean when you say they could lop the zeros off the bills aka RD.....now of course we have tons of articles referencing getting the dinar back to previous rates but what they fail to mention is how they get there....which could be done by slowing raising the value or by RD and then raising the value......one thing is for certain and that is the saddam era dinar lost its value to inflation rising and excessive printing of dinar that saddam was doing which is similar to what the money supply is like today (extremely inflated). Its without a doubt something must be done to the money supply to reduce it before the value of the dinar can rise......

[smee2]

Very nice way to start my forum reading for the day ... though I don't believe for a moment the RV can come in that high, I sure would love to be wrong. My list of "people to help" could grow considerably.

Thanks for the good catch, and the post ...

smee2

[Dalite]

...

...

[Double Naught Spy]

I like the possibilities, and the article is a great find, but I did notice that the article was credited to "former UST Undersecretary John B. Taylor". Perhaps he doesn't have the latest info. Anything a buck and up is fantastic for me.

[Metrious]

Okay I am going to break my stream of positive posts.

But the original article written was in the Op/Ed section of the NY times.

This is the actual link:

http://www.nytimes.com/2007/02/27/opinion/27taylor.html?pagewanted=1

The links above were from a website that truncated the links. I may be wrong but there are only two original articles listed in Google called "Billions Over Baghdad", one in the Op/Ed of the NYTimes and the other in Vanity fair.

http://www.vanityfair.com/politics/features/2007/10/iraq_billions200710

The Vanity Fair article is 6 pages long whereas the NYT article is 2 pages. Both address the shipment of US Currency to Iraq and is the article that talks about the 747's delivering the new Iraqi currency. There are no repayment plans listed. Nothing about the UST holding dinar. Also nothing about barrels of oil.

This is back from 2007. In today's age and the internet, this is period of time for legendary tales to develop (stuff to be added and made up that results in the popular belief to be stronger than the original article promotes).

I was hoping this article was indeed a solid news article that would state that the UST did in fact hold dinar. But even that small tidbit is not in there.

I don't blame DRV1804 they seem to be a solid member here... but the flaws are from the post he copied from PTR. A place we know to have propaganda machines in place. Sorry if this is a buzz kill.

If I am wrong please post a link to the actual article that actually has these lines in it.

And for the conspiracy theorists...... yes they could have erased the original article or edited in it in the last 4 years to hide the RV from the public.

This is a post here on DV that has the full text of the same article that I reference above for the NYT.

I cannot find a Washington Post article with that title.

[xxxgator]

KWf

I fully understand how people use the Word {lopp] They use it every time an article comes out with words removing the three zero's and then argue for 20 pages over it's meaning.If it was a real financial term it would have a specific definition, describing the actions of the specific financial mechanisim it was refering to so there would be no need for argument's among bankers and lawyers as to it's purpose or implied purpose.The reason there are argument's here is it has no financial definition and is some one's financialy uneducated explanation of the devaluation of a currancy.All of wich would have to happen long before a currancy being accepted into the world trade organization or imf,or even show up on the forex sites at all.Let alone be upgraded from an exotic currancy.Will it be instantly be 3.22 or 5.22? I cannot say for certain yes,but all the evidence say"s that has been the USA's goal since the beginning as the end game. If the rate changes without going international on the forex it might come out artificially low.Once it hit's the forex though it'll have to start at a fair valuation based on true economic indicators just like any other currancy.After it's ipo on the forex the market will continue to set it's value even on a managed float.The market could drive it's value to 9 dollars given enough time even on a managed float.If they were to determine the actual value at 50 cent's on it's Forex ipo it could still hit 3.00 within a year depending on it's set growth % margin caps.No matter what it trades at iraq should make money on every trade and conversion of foreign currancy's.This is why some say it has to come out with an ipo of 2.00 or better .It would give Iraq the best ability to pay for the rv.with the % made on trades and conversion, not to mention if they control the rate of growth they will be able to invest their own currancy on it's projected rise.

So come over from the Dark side Ktw it's a win win for many player's especially Iraq!

[Metrious]

Oh by the Way the Vanity Fair article is a looking for $9 Billion that was "lost". So you that love a good intrigue should check it out.

Bartlett and Steele - seems to be the Vanity Fair article but is only 4 pages long instead of 6.

http://www.barlettandsteele.com/journalism/vf_billionsover_4.php

[skepticaldinar]

KWf

I fully understand how people use the Word {lopp] They use it every time an article comes out with words removing the three zero's and then argue for 20 pages over it's meaning.If it was a real financial term it would have a specific definition, describing the actions of the specific financial mechanisim it was refering to so there would be no need for argument's among bankers and lawyers as to it's purpose or implied purpose.The reason there are argument's here is it has no financial definition and is some one's financialy uneducated explanation of the devaluation of a currancy.All of wich would have to happen long before a currancy being accepted into the world trade organization or imf,or even show up on the forex sites at all.Let alone be upgraded from an exotic currancy.Will it be instantly be 3.22 or 5.22? I cannot say for certain yes,but all the evidence say"s that has been the USA's goal since the beginning as the end game. If the rate changes without going international on the forex it might come out artificially low.Once it hit's the forex though it'll have to start at a fair valuation based on true economic indicators just like any other currancy.After it's ipo on the forex the market will continue to set it's value even on a managed float.The market could drive it's value to 9 dollars given enough time even on a managed float.If they were to determine the actual value at 50 cent's on it's Forex ipo it could still hit 3.00 within a year depending on it's set growth % margin caps.No matter what it trades at iraq should make money on every trade and conversion of foreign currancy's.This is why some say it has to come out with an ipo of 2.00 or better .It would give Iraq the best ability to pay for the rv.with the % made on trades and conversion, not to mention if they control the rate of growth they will be able to invest their own currancy on it's projected rise.

So come over from the Dark side Ktw it's a win win for many player's especially Iraq!

Personally,I do not care for the term "LOP".However,I do understand what people are referring to using it as a slang term on Dinar forums for the the actual word of REDENOMINATION.You are mistaken in that a Re-denom is not technically the same thing as a devaluation and should probably read more into the subject.If you would like to understand more about what the purposes would be for a redenomination,I will follow with a nice piece to help you understand(not saying that you don't understand,but your reply indicates that you don't have a full grasp on the what is meant).Here is the article on Nigerian currency.It is definitely worth a read by all and one could actually fill in Iraq for Nigeria and it would be just as what we have all been discussing over the years regarding "removing the zeros".

Dr. Emmanuel Ojameruaye

On August 4, 2007, the Governor of the Central Bank Nigeria (CBN) sent a shock wave across the country and the Nigerian Diaspora when he announced that the CBN plans to redenominate the naira in August 2008. According to Governor, “we intend to restructure the entire currency by dropping two zeroes or moving two decimal points to the left from the currency, and issuing more coin denominations. This would entail a total currency exchange and phasing-out of all the existing denominations from August 1, 2008. Effectively, at the current exchange rate, this policy would mean that the Naira/US dollar exchange rate would be around N1.25 to US$1 then. All Naira assets, prices and contracts will be re-denominated by dropping two zeroes or two decimal points to the left with effect from this date”. He enumerated the objectives of the redenomination exercise to include the following:

To restore the value of the Naira (in the short-term) close to what it was in 1985 before the commencement of the Structural Adjustment Programme (SAP) in 1986. To better anchor inflationary expectations. To strengthen public confidence in the Naira. To make for easier conversion to other currencies. To reverse tendency for currency substitution. To eliminate higher denomination notes with lower value. To reduce the cost of production, distribution and processing of currency. To promote the usage of coins and thus a more efficient pricing and payments system.

To lay the foundation for the convertibility of the Naira as well as make it the ‘Reference currency’ in Africa.

1. The Theory of Currency Redenomination

Technically, currency redenomination is defined as the process whereby a country’s currency is recalibrated due to significant inflation and currency devaluation. In general terms, however, it is simply referred to as the “dropping of zeros” from a currency.

For example, in January 2005, Turkey dropped or removed 6 zeros from its currency, the Lira (L), and replaced it with the new Turkish Lira (YTL) with conversion rate of million lira (1,000,000L) = one YTL (1YTL). Also, in July 2005, Romania dropped or “knocked off” four zeros from its currency, the leu (), when it replaced it with the new Romanian leu (RON) with a conversion rate of 10,000ROL = 1RON. In July 2007, the Ghana redenominated its currency, the cedi, by making one new Ghanaian cedi (GHc) equal to 10,000 old cedi ©, i.e. by dropping four zeros. Come August 2008, the CBN plans to convert 100 naira into one new naira, i.e. drop two zeros.

The introduction of a single European currency, the Euro, on January 1, 1999 can be viewed as a redenomination of the national currencies of some of the participating countries that had high “old currency”/Euro or dollar ratios such, as Italy, Portugal, Spain and Belgium because their conversion rates were fixed at 1 Euro = 1,936.27 Italian Lira (ITL) = 200.482 Portuguese Escudo (PTE) = 166.386 Spanish Peseta (ESP) = 40.3399 Belgian Franc (BEF) = 1.18 US Dollar. However, the Euro was physically non-existent until January 1, 2002 (“E-day”).

Currency redenomination is not a new phenomenon. It dates back to the 19th century but the most spectacular one was that of the German currency in the 1920s. According to Layna Mosley, “Among developing and transition nations, currency redenomination was employed on 60 occasions during the 1960-2003 period. These redenominations varied in size, from removing one zero from the currency (14 instances) to removing six zeros (9 instances); the median redenomination was three zeros, dividing the currency by 1000. Nineteen countries have used redenomination on one occasion, while ten countries have redenominated twice (sometimes, with many years in between, as in Bolivia, in 1963 and 1987; in other cases, redenominations follow rather quickly, as in Peru in 1985 and 1991). Argentina (4), the former Yugoslavia/Serbia (5), and Brazil (6) are the most frequent users of redenomination”.

In the ongoing debate about the redenomination of the Nigerian currency, some commentators have been using the terms redenomination and revaluation interchangeably, i.e. to mean the same thing. Technically, this is wrong. Currency redenomination is different from both currency revaluation and currency appreciation. In strict terms, redenomination does not increase the “value” (or strength) of a currency in relation to other currencies per se. What happens when a currency is redenominated is that some zeros are dropped in the official exchange rate at “conversion” date, e.g. one US dollar = 1.25 new Naira (NN) = 125 “old naira” (N) on August 1, 2008 (i.e. NN1.0 = N100.00). On the other hand, currency revaluation is an increase in the value of a currency vis-à-vis other currencies under a fixed exchange rate system, i.e. when the government or monetary authorities arbitrarily fix the exchange rate. For instance, the naira is revalued when the exchange rate is changed from IUS$ =N130 to 1US$ = N125, i.e. increase in the value or strength of the naira because you now need fewer naira to buy a dollar. Devaluation is the opposite of revaluation, i.e. a decrease in the value of a currency via-a-vis other currencies under a fixed exchange rate system, e.g. change from 1US$=N125 to 1US$ to N130, meaning a decrease or fall in the strength or value of the naira because you will need more naira to buy a dollar. The terms currency appreciation and depreciation are used to describe a decrease and increase, respectively, in the value or strength of a currency vis-à-vis other currencies under a floating exchange rate system, i.e. when market forces generate changes in the value of the currency. However, it is possible for currency redenomination to occur (pari passu) with revaluation or appreciation, for instance, if on the day of redenomination in August 2008, the new exchange rate is fixed 1US$=NN1.25 when the exchange rate just before the redenomination was 1US$=N128 (with NN1.0 = N100). Similarly, redenomination can occur with devaluation or depreciation if the exchange rate is fixed at 1US$=NN1.25 when the exchange rate just before the redenomination was 1US$=N123.

It appears that the CBN is aiming for both redenomination and revaluation or appreciation (depending on how they intend to go about it) in August 2008 since the official exchange rate is likely to be above 1US$ =N125 by that time.[ii]

What will push a country to redenominate its currency and risk the costs and uncertainty associated with the exercise? The answer to this question is implicit in the technical definition of redenomination offered above. Most countries redenominate their currencies because of prolonged high inflation (or hyperinflation) coupled with significant devaluation/depreciation of the currency resulting in a situation where hundreds or thousands of their currency is exchanged for a unit of major international currencies.

So, why should a country with moderate inflation rates (say less than 15% p.a.) and/or has a relatively stable currency redenominate its currency? This is the question the CBN must answer because Nigeria’s rate of inflation and exchange rate have been relatively stable over the past five years.[iii] Under these conditions, there is need to exercise caution to ensure that the cost of redenomination does not outweigh the benefit. This is why many countries with exchange rates of less than 200 units of their currency to the US dollar do not deem it necessary to embark on redenomination. For instance, Japan with an exchange rate of 117Yen = 1USdollar has resisted the temptation and pressures to redenominate the Yen. Clearly, there may be other compelling reasons why a country may decide to go ahead to redenominated its currency even when less than 200 units of its currency is exchanging for the dollar. In his speech, the CBN alluded to some of these reasons such as: a) to restore the value of the Naira (in the short-term) close to what it was in 1985 before the commencement of the SAP in 1986; and to lay the foundation for the convertibility of the Naira as well as make it the ‘Reference currency’ in Africa.

To further examine the underlying factors for the proposed redenomination of the naira, it is necessary to examine the applicability of Mosley’s hypotheses to Nigeria.

Hypothesis 1: Both authoritarian and democratic governments may have political reasons for redenomination. Democratic governments are likely to redenominate in response to high inflation. Authoritarian governments may redenominate even without high inflation, particularly in the presence of civil conflict.

Hypothesis 2: Redenomination is more likely following a period of high inflation and a subsequent stabilization. A dramatic downward movement in inflation increases the probability of a redenomination. This is particularly likely in countries that are more open to international capital flows, that are under an IMF adjustment program, and that have politically independent central banks.

.

Hypothesis 3: Redenomination is more likely immediately after an election (or with many years remaining until the next election), less likely immediately before an election, and more likely in more fractionalized political systems.

Hypothesis 4: Redenomination is less likely, all else equal, when left-leaning parties are in office, and more likely when right-leaning politicians hold office.

Hypothesis 5: Redenomination is more likely in nations where it has been used in the past. The total past experiences with redenomination increases the hazard of its use.

This is not true of Nigeria because it has never redenominated any of its currencies (the Nigerian pound and its successor, the naira) since its independence in 1960.

Hypothesis 6: Redenomination is more likely, all else equal, where foreign currency substitution is more prevalent in the domestic economy. This is more likely in nations with high inflation, with high local currency/dollar ratios; and foreign currency substitution is more likely after 1989 (as financial globalization expands) than before.

This is not true of Nigeria because: a) the rate of foreign currency substitution is still relatively low; the rate of inflation is relatively low; and c) the local currency/dollar ratio (currently about 125) is relatively low in comparison to other countries that have redenominated their currencies.

It is clear from the above hypotheses that the decision to redenominate a national currency is influenced by both economic and political factors. What then are the benefits of currency redenomination?

Benefits of Redenomination

The following are some of the standard benefits of currency redenomination.

Generally, redenomination leads to a more efficient local currency by knocking off some zeros. When there are too many zeros, many transactions are conducted in thousands, millions, billions and trillions which make counting and calculation difficult and put stress on book-keepers and electronic calculators. For instance, many traders in Nigeria hire people to count money for them in banking halls. In Ghana, before the recent redenomination, the rent of an average apartment was about 4,950,000 cedi (i.e. US$500) a month or about 59,400,000 cedi ($6,000) a year which landlord usually demanded upfront. Imagine paying almost 100,000,000 (100million) cedis for a Kia Rio sedan car!

Redenomination facilitates business transactions because it leads to the use of smaller units of money. For instance, Ghanaians now pay only 10,000 New Ghanaian Cedi to buy a new car instead of 100,000,000 cedi previously. In Nigeria, we will pay only about 5,000 New Naira to buy a used car instead of 500,000 naira currently. Such a reduction in the unit of money required for transactions will relieve both buyers and sellers of the burden of counting large sums of money.

Redenomination leads to a more portable currency and a significant reduction in the dead weight of the money people carry and the associated risk, e.g. attack by robbers. For instance, before Germany redenominated its currency in 1923, people carried currency (money) in bags to the market and returned home with the items purchased in their pockets. In other words, the money was bulkier than most items purchased. Although Nigeria has not reached that stage, many traders now carry money in the so-called “Ghana-must-go” bags. Most people are afraid to withdraw large sums of money (say N500,000) from the bank because they have to put the bales of money in a bag and whenever they step out of the bank it is clear to people outside that they have withdrawn large sums of money. Robbers are known to have trailed people as soon as they come out of the banks with bags of money. After redenomination, it will be possible to put NN5,000 (=N500,000) in a small wallet or in your breast pocket.

Redenomination reduces the phenomenon of money illusion that people suffer from when there are many zeros. Money illusion tends to generate inflationary pressure.

Redenomination leads to greater confidence in the currency. When there are many zeros, people loss confidence in the local currency and some people, especially the rich, substitute the weak local currency in their portfolios with more stable and internationally traded currencies, such as dollars and euros. When there is a high local currency/dollar ratio, many businesses quote prices in dollars or other international currencies. This leads to an increasing “dollarisation” of the local economy which in turn weakens monetary sovereignty and the effectiveness of monetary policy. After redenomination, businesses and citizens may be more willing to shift their preference to the local currency rather than to an international currency. Hence, the dropping of zeros restores credibility and confidence in the local currency and enables the government and the central bank to reassert their monetary sovereignty. It also enhances the effectiveness of monetary policy because it enables the local currency to better serve as a “true legal tender”. Redenomination can sometimes reduce inflationary tendencies in an economy if the underlying causes of chronic or hyperinflation and low valued local currency are resolved before the redenomination exercise and if the process is well managed. This is why re-denomination should be implemented in the latter stages of an economic stabilization package or reform. Historical evidence suggests that redenomination had been very successful in an environment of macroeconomic stability, declining inflation, stable exchange rates, fiscal restraint and prudence and rational expectations of policy credibility.

>Redenomination is sometimes used to indicate that era of failed economic policies has come to an end and that the economy is poised to start on a new slate. This helps to increase confidence in the economy and sends a signal to both the local community and the international markets that high inflation and general macro-economic instability are a thing of the past. In the case of the Nigeria, the CBN intends to use the redenomination exercise to signal the “burial”(and reversal) of the post 1986 SAP policies.

Multiple zeros complicate statistics and transactions and increase the length of time spent in lines at banking halls. Thus, dropping zeros enhances book-keeping and reduces the drudgery in transactions, record keeping and banking activities.

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.

2. The new currency should be called New Naira (NN) instead of retaining the old name “naira” in order to avoid confusion. Better still, the CBN should adopt a completely different name for the new currency such as Nigerian Dollar (N$) or Nigeria Pound (N#) or any other name such as OKE (O from Owo, K for Kudi and E for Ego, all representing money in three Nigerian main languages) with N100 = I unit of new currency.

4. The old currency should be exchanged to the new ones between Jan. 1 2008 and June 30, 2008 during which period the old currency (naira) will also remain a legal tender. In other words, there will be dual circulation of both currencies until June 30, 2008 when the old naira will cease to be a legal tender.

Endnotes

Layna Mosley, “Dropping Zeros, Gaining Credibility? Currency Redenomination in Developing Nations” www.unc.edu/~lmosley/

[ii] The official exchange rate of the naira (and also the parallel rate) has been appreciating since 2003 from N137.22 at the end of 2003 to N132.86 in 2004, 130.29 in 2005, N128.27 in 2006, and about N124.05 as at August 23, 2007. The exchange rate in the parallel market appreciated also from N150.42 to N138.50, N141.5, N129.50 and N127.50 during the above corresponding period. If this trend continues, we are likely to see redenomination with devaluation/appreciation in August 2008 but the speculative effect of the redenomination is likely to increase the naira/dollar ratio above the expected 125 point in August 2008.

[v] Dual circulation of the Euro and national currencies continued for a maximum of six months. National bills and coins ceased to be legal tender at specific dates.

Edited June 12, 2011 by skepticaldinar

[hoosier1470]

When it comes to rates, I have started to just pass over them. I think this is where the emotional roller coaster has the biggest effect. I have also for the time being stopped planning where I will spend the money. Right now all I can say in all honesty is that I am holding "X" number of dinars. When they do RV I would rather be surprised by a "WOW" than by an "UH OH".

GO RV

And I truely believe that a "WOW" is exactly what you/we are going to get! And I believe that "WOW" is coming very, very, very soon! My prediction is before this week ends! Gods Blessings on all of you and your familys!