Redenomination

[Weapon X]

REDENOMINATION OF NAIRA

INTRODUCTION:

Redenomination, the latest contending policy issue in Nigerian economy

today, refers to reduction in the par value of a currency, usually by a factor of

ten. In other words, redenomination is the process where a new unit of a

currency replaces the old unit with a certain ration. For instance, Ghana in

July this year decided to implement redenomination policy by replacing the

old 10, 000 cedi with a new 1 Ghana cedi, i.e., four zeros were removed from

the old currency to arrive at the new one.

When implemented, redenomination usually results in the birth of an entirely

new currency, with a new symbol. In the case of Ghana, for instance, the

currency changed from Cedi (¢) to Ghana Cedi (GH¢).

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The contending issues revolving around the redenomination policy are:

What is the rationale for implementing such policy or under what

condition is such policy required in a country?

What would happen to the external value of the domestic currency after

such policy is implemented?

What would be the impact of such policy on the Nigerian markets,

What are the benefits of such policy on the economy as whole?]

RATIONALE FOR REDENOMINATION:

Redenomination, sometimes referred to as currency reform, often serves as

the last resort for monetary authorities of hyper-inflationary economies, where

domestic currencies have lost significant value locally and internationally, to

regain public confidence in the domestic economy and the economic policies

implemented therein. For instance, Angola re-denominated its currency in

1995 when inflation rate was 2672 per cent, while Brazil re-denominated its

currency in 1994 when inflation rate was 2076 per cent.

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Currency redenomination also can be a means by which governments attempt

to reassert monetary sovereignty. If citizens lose confidence in the national

currency, they may begin to use foreign currencies, particularly those with

greater prestige. This may be a psychological and an economic blow to the

government. With widespread foreign currency substitution (or, more

extremely, full dollarization), the central bank no longer controls the money

supply, rendering it unable to provide lender of last resort functions.

Consequently, economic policy is influenced not only by international capital

markets, but also by foreign central banks. Currency redenomination, then, is

a means by which governments can attempt to reverse this currency

substituting behaviour. If citizens are confident that the new local currency

will hold its value, they may be willing to shift from using foreign currencies,

such as euros and dollars, to using the new domestic currency.

While the act of dividing a currency’s value by a factor of ten is somewhat

symbolic, it can also help to convince citizens of a currency’s worth. As a

result, redenomination often occurs after economic crises, as governments

attempt to convince citizens and markets that hyperinflation is a thing of the

past. In some cases, the timing is correct, in that redenomination caps off

4

high levels of inflation. In other cases, governments are not able to curtail

inflation immediately after redenomination, and they may make multiple

efforts at currency reform. Argentina and Brazil during the 1980s and early

1990s exemplify this pattern.

Many nations with high levels of inflation also have relatively low-value local

currencies, making large denomination currencies necessary for basic

transactions in the economy. While it is high or hyperinflation that often

causes this situation, the presence of large-denomination notes may be the

most obvious sign to citizens of a potential need for redenomination.

BENEFITS FROM REDENOMINATION:

It is important to say no economic theory postulates that a country that redenominates

its currency would reap certain economic gains.

Redenomination of currency is a symbolic reform without guaranteed

benefits. It only helps to create impressions that past inflations have been

eliminated. So, it does not necessarily imply that future inflation will be low.

Thus, it is possible for a country to report worse inflationary trends after

redenomination.

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However, there are probable gains that could accrue after redenomination in

an economy. Besides the administrative and personal convenience that would

result from the use of lower units of currency to execute high-value

transactions, implementation of redenomination policy might signal renewed

commitment of the monetary authorities to effectively manage general price

level. It is this “signaling effect” that makes the general public to have

expectation of low inflation in the future.

Since today’s interest rate is set in line with the expected inflation rate, the

“signaling effect” might then cause a decline in general interest rate in the

economy. In addition, the expectation of lower inflation would likely

strengthen the domestic currency in the Foreign Exchange Market.

However, if the post-redenomination inflation turns out to be significantly

higher than the expected inflation, the policy might spark off economic

reactions that could worsen the state of the whole economy. Thus, for there to

be real benefits from redenomination, the post-redenomination inflation

must be within expectations. This therefore implies that the monetary

6

authorities must be actively committed to stabilizing the economy after

implementing redenomination policy.

THE CASE OF NIGERIA:

In view of the foregoing, the proposal of the Central Bank of Nigeria, the

monetary authority in Nigeria, to re-denominate the domestic currency,

Naira, by dividing the existing Naira by 100, may not be economically

justified. This is premised on the fact that present inflation rate in the

economy is within a single-digit value (6-9 per cent), which qualifies Nigerian

economy as a moderately stable economy. Also, public confidence in the

Nigerian economy is quite high as evidenced by growth in domestic and

foreign investments in the country. More so, foreign currencies are not being

used for domestic transactions in the economy, thus there is still much

confidence in Naira as it were.

However, taking into consideration the other targets of the Central Bank of

Nigeria, such as the re-positioning of Naira as a “reference currency” for

transactions across the West African sub region and the making of Nigeria a

financial hub for investors across the whole of Africa, among others, the

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redenomination of Naira could be of high significance to the Nigerian

economy. In this regard, redenomination will allow the Naira to be directly

and easily linked and monitored with the US dollar and hence increase

external confidence in the Naira. To sustain the confidence in Naira and

hence the Nigerian economy, the CBN must ensure that inflation is strictly

controlled. More so, with the full deregulation of exchange rate that would

likely characterize post redenomination era, low level of inflation is essential

to sustaining Naira value relative to foreign currencies. Thus, it is expected

that inflation rate will be the utmost target variable for the monetary authority

during the post-redenomination era. In other words, redenomination is

expected to result in a shift from monetary targeting to inflation rate

targeting, a major policy framework with its own pros and cons.

IMPLICATIONS ON THE NIGERIAN CAPITAL MARKET:

Premised on the signal of renewed commitment of the monetary authorities

to effectively manage general price level and the probable increase in external

confidence in the nation’s economy that redenomination of Naira might

cause, the Nigerian capital market is expected to experience a boost.

8

The signal of more effective management of general price level makes

investors to anticipate lower and stable inflation. Thus, the general level of

interest rate is expected to fall. Such fall in interest rate will in turn boost

investment in the Nigerian capital market.

Also, the probable rise in external confidence in the Nigerian economy will

attract more foreign direct investment into the country, with a positive impact

on the capital market. However, significant fall in interest rate might have a

negative impact on inflow of foreign investments into the economy.

However, upside risk to interest rate is high in the post-redenomination era,

especially in the long run. Where the CBN envisaged that inflation rate will

rise above the target rate, it might decide to raise interest rate as a policy

measure to keep inflation rate within target, as the CBN would probably be

more committed to maintaining inflation rate than maintaining interest rate

in the post-redenomination era. Consequently, this might impact negatively

on domestic investment in the country.

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Thus, while its impact on capital market looks positive in the short run, the

currency reform has uncertain implications for the Nigerian capital market in

the long run. It is all about what happens to the economy as a whole. If the

economy grows we should expect growth in the capital market, and vice versa.

APPENDIX I

ARGENTINA EXPERIENCE:

Prior to 1992, Argentina’s five-year average annual inflation rate was 1207.9

per cent, with the highest of 3079.5 per cent reported in 1989, while five-year

average exchange rate was 3,564 australes to 1 US$. Although the country

witnessed decline in inflation rate to 171.7 per cent in 1991, the country’s

currency further depreciated relative to US$ with 10,028 australes exchanging

for 1 US$. Consequently, the country re-denominated its currency in January

1992 by re-introducing peso to replace the austral at the rate of 1 peso = 10,000

australes, and then pegged its international exchange rate at 1 peso = 1 US$.

After the redenomination, inflation subsided significantly with sharp and

continuous decline in the inflation rate from 171.7 per cent in 1991 to 0.9

per cent in 1998, while exchange rate remained fixed by the Central Bank at 1

peso = 1 US$ till 2001. However, the fixed exchange rate made imports

cheap, producing a constant flight of dollars away from the country and a

progressive loss of Argentina's industrial infrastructure, which led to an

increase in unemployment. The situation, worsened by the country’s huge

foreign debt obligations, culminated into a recession with the country

experiencing a 4 per cent decline in GDP in 1999. Eventually, the country

abandoned the exchange rate peg at the end of 2001. Thereafter, exchange

rate rose significantly from 1 peso/US$ to 3.4 peso/US$ in 2002, translating

to 240 per cent depreciation in the international value of peso within one

year. Consequently, inflation rate climbed significantly from negative level to

25.9 per cent in 2002. However, after this time, average annual inflation rate

has been 9.6 per cent, while international exchange rate hovers around three

pesos/US$. Ever since, the Argentine economy has been on the recovery

path

From the foregoing, it is observed that Argentina slumped into recession in

1999, approximately seven years after its last redenomination. While

redenomination could not be said to be the primary cause of the recession,

other complementary policies such as those highlighted below could be used

to explain the recession.

After redenomination, the Argentine Central Bank pegged the exchange

rate at 1 peso/US$, which implied that peso was relatively overvalued. This

consequently made imports cheaper and then led to the collapse of local

industries, with the ultimate outcome being widespread unemployment.

Also complementary to the redenomination was the policy which gave

depositors the option to withdraw their deposits at banks in US Dollar. This

policy consequently allowed widespread circulation of US dollar in the

Argentine Economy and then facilitated the flight of US dollars to foreign

countries.

[buffalowade1]

NICE!!!

[fastarnie]

For the lopsters, and I wish I had a link, but anyway there was an article that came out some months back that stated the large notes would coexist with the small notes. So who cares if they redenominate. All that does is bring us that much closer to what we all want.

That's my 2 cents

[behaviorkat]

Lots of info........ thanks Weapon X

[speculatorsRIDE]

My 2 cents.

I believe we are looking at a multi-teared RV. This first RV will be done straight up with no RD. On the second RV when they release their new currency that will satisfy their Constitution, the one with the Kurdish and Arabic language that they are discussing printing now, there will also be a re-denomination and the 2 currencies will co-exist together.

[LaGrange]

My 2 cents.

I believe we are looking at a multi-teared RV. This first RV will be done straight up with no RD. On the second RV when they release their new currency that will satisfy their Constitution, the one with the Kurdish and Arabic language that they are discussing printing now, there will also be a re-denomination and the 2 currencies will co-exist together.

I just asked this in another thread-maybe you know-does the uncirculated coinage have Kurdish writing on it?

[TheUnspoken]

Damn I could see someone trying to refute that though...somehow...

[LaGrange]

If the coins have Kurdish writing and they are minted and paid for, doesn't that satisfy the agreement? Just saying.

[Biker]

Great find WeponX thanks for the post, Maybe some folks will learn from it , We Hope.

[Dalite]

Damn I could see someone trying to refute that though...somehow...

The link above shows a view of an RD and was posted by someone without an axe to grind.

Note that it states an RD is executed to offset hyperinflation, only after inflation has been brought under control and maintained.

It really doesn't matter, as time will tell the tale...

[speculatorsRIDE]

I just asked this in another thread-maybe you know-does the uncirculated coinage have Kurdish writing on it?

Not sure but it won't matter. The article in the Constitution says the 2 languages must be on their banknotes.

If the coins have Kurdish writing and they are minted and paid for, doesn't that satisfy the agreement? Just saying.

No sorry it won't.

[phazedoubt]

Being Nigerian and going through the process, i am uniquely aware of what this article is stating. The problem is it matches Iraq. Note that reduction redenominations (because there are addition redenominations where the inflationary zeros are added) occur when economies correct inflation and are trying to step out on the world stage... Sound like a country that we all know? i've seen this before and it will happen again probably in China. Please stay positive, but don't ignore the information that is being offered. It is not being negative to say that we won't all become millionaires overnight, but simply see a tripling of our investment. i mean, that's an institutional investors wet dream!

[keepmwlknfny]

Appreciate you bringing some more info to the table....but like another member mentioned, Iraq is in a similar situation.....and hyperinflation is not the only reason a country redenominates.....to acheive a successful redenomination its done after periods of hyperinflation....sometimes even a decade after this hyperinflation periods.....believe me, I wish I could find something that would totally take the possibility of a RD away, but its yet to be found!!!

[LaGrange]

Not sure but it won't matter. The article in the Constitution says the 2 languages must be on their banknotes.

No sorry it won't.

Why not a temporary fix?

[Dalite]

Why not a temporary fix?

P

Anything they do now will be temporary (100,000 dinar note and kick the can), or taking a five to six month period to complete.

UN Security Council is continuing the funding of meeting CH VII requirements to December. 2011.

They may have to mark time until all the requirements are met ( if they can hold it togetherbthat long).

Sure would like to hear something from Shabibi.....

I guess they could still do something on the 30 th.......

[Farmall]

The reason why most of us (yes I included myself) are "afraid" of these articles is because for the most part, we all bought into the Dinar investment with the dream of BIG money! After I discontinued following the "gurus" and did my own research and reading others observations, I personally believe that what these articles are saying is more than likely exactly what we will see. I sincerely hope I am wrong, and the larger returns are made, I just do not see it happening. I do believe that over time we will see a good return, but it is not going to be millions by Thursday!

[tmcgraw]

The reason why most of us (yes I included myself) are "afraid" of these articles is because for the most part, we all bought into the Dinar investment with the dream of BIG money! After I discontinued following the "gurus" and did my own research and reading others observations, I personally believe that what these articles are saying is more than likely exactly what we will see. I sincerely hope I am wrong, and the larger returns are made, I just do not see it happening. I do believe that over time we will see a good return, but it is not going to be millions by Thursday!

If it sounds to good to be true?

Iraq can accompish their goal of raising the value of the dinar by doing an RD then RV and it won't bankrupt them. Iraq can not afford a straight RV. This is about Iraq not about us. 300% is a great ROI

[Weapon X]

Appreciate you bringing some more info to the table....but like another member mentioned, Iraq is in a similar situation.....and hyperinflation is not the only reason a country redenominates.....to acheive a successful redenomination its done after periods of hyperinflation....sometimes even a decade after this hyperinflation periods.....believe me, I wish I could find something that would totally take the possibility of a RD away, but its yet to be found!!!

YTou can believe all you want keepem more than 10 countries have redenominated in lhe last 20 years, here is a small list with the nation that redenominated when they redenominated and the inflation, look at what they all have in common, HYPERINFLATION.

Angola

1992 (299%), 1993 (1379%), 1994 (949%), 1995 (2672%), 1996 (4145%), 1997-2002 (average, 194%).

Yes, 1995.

Argentina

1975-1982; ave1983.

Argentina

1983 (344%), 1984 (627%), 1985 (672%)

Yes, 1985.

Argentina

1987, 1988, 1989 (3080%), 1990 (2314%), 1991 (172%)

Yes, 1992.

Azerbaijan

1992 (912%), 1993 (1129%), 1994 (1665%), 1995 (412%)

Yes, 1992.

Belarus

1993 (1190%), 1994 (2221%), 1995 (709%)

Yes, 1992.

Belarus

1999 (294%), 2000 (169%)

Yes, 2000.

Bolivia

1981-1986; peaked at 11749% in 1985.

Yes, 1987.

Brazil

1981-1985, average annual rate 151%.

Yes, 1986.

Brazil

1986 (147%), 1987 (228%), 1988 (629%), 1989 (1431%)

Yes, 1989.

Brazil

1990 (2948%), 1991 (433%), 1992 (952%), 1993 (1928%), 1994 (2076%)

Yes, 1993 and 1994.

Bulgaria

1991 (338%), 1996 (122%), 1997 (1058%)

Yes, 1999.

Chile

1973 (362%), 1974 (505%), 1975 (375%), 1976 (212%)

Yes, 1975.

Congo, Dem. Rep.

1979 (101%), 1989 (104%), 1991 (2154%), 1992 (4129%), 1993 (1987%)

Yes, 1993.

Congo, Dem. Rep.

1994 (23773%), 1995 (542%), 1996 (542%), 1997 (176%)

Yes, 1998.

Croatia

1992 (625%), 1993 (1500%), 1994 (107%)

Yes, 1994.

Georgia

1995 (163%)

Yes, 1995.

Israel

1980 (131%), 1981 (117%), 1982 (120%), 1983 (146%), 1984 (374%), 1985 (305%)

Yes, 1980 and 1985.

Latvia

1992 (243%), 1993 (109%)

Yes, 1993.

Lithuania

1993 (410%)

Yes, 1993.

Macedonia

1994 (126%)

Yes, 1993.

Mexico

1983 (102%), 1987 (132%), 1988 (114%)

Yes, 1993.

Nicaragua

1985-1991. Highest in 1989 (4770%), 1990 (7485%) and 1991 (2945%)

Yes, 1998.

rage annual rate 267%

Yes,

You can use the LOP talk to cover the insecurity that you may not get what you thought originally, but the Nigeria and Iraq have nothing in common, Nigeria does not have the resourses and the lack of debt Iraq has and that is just some of the differences/

[keepmwlknfny]

YTou can believe all you want keepem more than 10 countries have redenominated in lhe last 20 years, here is a small list with the nation that redenominated when they redenominated and the inflation, look at what they all have in common, HYPERINFLATION.

Angola

1992 (299%), 1993 (1379%), 1994 (949%), 1995 (2672%), 1996 (4145%), 1997-2002 (average, 194%).

Yes, 1995.

Argentina

1975-1982; ave1983.

Argentina

1983 (344%), 1984 (627%), 1985 (672%)

Yes, 1985.

Argentina

1987, 1988, 1989 (3080%), 1990 (2314%), 1991 (172%)

Yes, 1992.

Azerbaijan

1992 (912%), 1993 (1129%), 1994 (1665%), 1995 (412%)

Yes, 1992.

Belarus

1993 (1190%), 1994 (2221%), 1995 (709%)

Yes, 1992.

Belarus

1999 (294%), 2000 (169%)

Yes, 2000.

Bolivia

1981-1986; peaked at 11749% in 1985.

Yes, 1987.

Brazil

1981-1985, average annual rate 151%.

Yes, 1986.

Brazil

1986 (147%), 1987 (228%), 1988 (629%), 1989 (1431%)

Yes, 1989.

Brazil

1990 (2948%), 1991 (433%), 1992 (952%), 1993 (1928%), 1994 (2076%)

Yes, 1993 and 1994.

Bulgaria

1991 (338%), 1996 (122%), 1997 (1058%)

Yes, 1999.

Chile

1973 (362%), 1974 (505%), 1975 (375%), 1976 (212%)

Yes, 1975.

Congo, Dem. Rep.

1979 (101%), 1989 (104%), 1991 (2154%), 1992 (4129%), 1993 (1987%)

Yes, 1993.

Congo, Dem. Rep.

1994 (23773%), 1995 (542%), 1996 (542%), 1997 (176%)

Yes, 1998.

Croatia

1992 (625%), 1993 (1500%), 1994 (107%)

Yes, 1994.

Georgia

1995 (163%)

Yes, 1995.

Israel

1980 (131%), 1981 (117%), 1982 (120%), 1983 (146%), 1984 (374%), 1985 (305%)

Yes, 1980 and 1985.

Latvia

1992 (243%), 1993 (109%)

Yes, 1993.

Lithuania

1993 (410%)

Yes, 1993.

Macedonia

1994 (126%)

Yes, 1993.

Mexico

1983 (102%), 1987 (132%), 1988 (114%)

Yes, 1993.

Nicaragua

1985-1991. Highest in 1989 (4770%), 1990 (7485%) and 1991 (2945%)

Yes, 1998.

rage annual rate 267%

Yes,

You can use the LOP talk to cover the insecurity that you may not get what you thought originally, but the Nigeria and Iraq have nothing in common, Nigeria does not have the resourses and the lack of debt Iraq has and that is just some of the differences/

You realize that alot of times RD are done after periods of hyperinflation?? They are unsuccessful if they are tried during hyperinflation, just like zimbabwe.....sometimes it can be done after a decade since hyperinflation settled.......Iraqs may not have gotten as high as some of these countries, but thats why Iraq only has 3 zeros at the end of the currency, and some of these countries have even 6!!! There is no insecurity here my dude......calling it how I see it.....and not ignoring the facts.....It doesnt matter what resources you have availible because they dont wipe out years of hyper, and high inflation, not to mention the inflated money supply.....you realize they cannot even back up a dollar RV at this point?? Not even with fractional banking......the reserves are way too low...

You realize that our own USD is in a similar position in regards to being diluted like the dinar?? And heck, we have the largest reserves in the world but it doesnt mean a thing when you cant back up your currency.....

People look too hard at ONLY high inflation as a reason to RD......find that dropping the zeros study done by the professor at UNC, it will give you the other reasons why RD are done besides inflation......and as much as I hate to say it, Iraq falls under TWO of those reasons why countries RD......

[DinarBam]

Unfortunately, by the examples given in the article, RD hasn't worked out too well.

"producing a constant flight of dollars away from the country and a

progressive loss of Argentina's industrial infrastructure, which led to an

increase in unemployment. The situation, worsened by the country’s huge

foreign debt obligations, culminated into a recession with the country

experiencing a 4 per cent decline in GDP"

"it is observed that Argentina slumped into recession in

1999, approximately seven years after its last redenomination. While

redenomination could not be said to be the primary cause of the recession,

other complementary policies...could be used

to explain the recession."

An RD sounds like a pretty desperate act that can have severe consequences as well. I hope Iraq has higher hopes for itself but then again, it is a very unstable country. Guess what though? None of us have any input in their process and it will be whatever it will be regardless of "our" investment in the Dinar so relax and wait till they actually do something. Whatever it is, everyone at that point will have a clearer opportunity to analyze the investment and decide how best to leverage it going forward. Trying to guess what will happen based on the daily "news" will only cause frustration. The only thing that counts is the monetary policy they actually put in place and we will all know for sure when that occurs. No need for Guru's or other speculation. That's just something to keep you occupied while you wait.

[jg1]

If the coins have Kurdish writing and they are minted and paid for, doesn't that satisfy the agreement? Just saying.

I just finished reading an artical saying the money is not printed yet.

“The new currency will be printed after deleting the zeros and will include the Kurdish language in addition to the Arabic language.

[akahornet]

RD is not RV people! how do you expect to become millionaires from RD? show me the math!

[speculatorsRIDE]

Why not a temporary fix?

The temporary fix is the fact that they haven't seated their GOI. Let me explain.

It is true that by article in the Constitution they need to have both languages on their currency.

Article 4:

First: The Arabic language and the Kurdish language are the two official

languages of Iraq. The right of Iraqis to educate their children in their mother

tongue, such as Turkmen, Syriac, and Armenian shall be guaranteed in

government educational institutions in accordance with educational guidelines, or

in any other language in private educational institutions.

Second: The scope of the term “official language” and the means of applying the

provisions of this article shall be defined by a law and shall include:

A. Publication of the Official Gazette, in the two languages;

B. Speech, conversation, and expression in official domains, such as the

Council of Representatives, the Council of Ministers, courts, and official

conferences, in either of the two languages;

C. Recognition and publication of official documents and correspondence in

the two languages;

D. Opening schools that teach the two languages, in accordance with the

educational guidelines;

E. Use of both languages in any matter enjoined by the principle of equality

such as bank notes, passports, and stamps.

Many people wrongly assume that the CBI sets monetary policy. The Constitution gives that power to the government.

Article 110:

The federal government shall have exclusive authorities in the following matters:

First: Formulating foreign policy and diplomatic representation; negotiating,

signing, and ratifying international treaties and agreements; negotiating, signing,

and ratifying debt policies and formulating foreign sovereign economic and trade

policy.

Second: Formulating and executing national security policy, including

establishing and managing armed forces to secure the protection and guarantee

the security of Iraq’s borders and to defend Iraq.

Third: Formulating fiscal and customs policy; issuing currency; regulating

commercial policy across regional and governorate boundaries in Iraq; drawing

up the national budget of the State; formulating monetary policy; and establishing

and administering a central bank.

Many people wrongly assume the government owns the rights to the oil and gas. However:

Article 111:

Oil and gas are owned by all the people of Iraq in all the regions and governorates.

Article 112:

First: The federal government, with the producing governorates and regional

governments, shall undertake the management of oil and gas extracted from

present fields, provided that it distributes its revenues in a fair manner in

proportion to the population distribution in all parts of the country, specifying an

allotment for a specified period for the damaged regions which were unjustly

deprived of them by the former regime, and the regions that were damaged

afterwards in a way that ensures balanced development in different areas of the

country, and this shall be regulated by a law.

Second: The federal government, with the producing regional and governorate

governments, shall together formulate the necessary strategic policies to develop

the oil and gas wealth in a way that achieves the highest benefit to the Iraqi people

using the most advanced techniques of the market principles and encouraging

investment.

However everything you read above is on hold because of this:

Article 144:

This Constitution shall come into force after the approval of the people thereon in a

general referendum, its publication in the Official Gazette, and the seating of the

government that is formed pursuant to this Constitution.

Now we know why the remaining 3 ministers haven't been seated yet. The greedy government officials know that once the ministers are seated, the money from the oil and gas sales will belong to the people of Iraq.

http://www.uniraq.org/documents/iraqi_constitution.pdf

Edited June 28, 2011 by speculatorsRIDE

[LaGrange]

The temporary fix is the fact that they haven't seated their GOI. Let me explain.

It is true that by article in the Constitution they need to have both languages on their currency.

Article 4:

First: The Arabic language and the Kurdish language are the two official

languages of Iraq. The right of Iraqis to educate their children in their mother

tongue, such as Turkmen, Syriac, and Armenian shall be guaranteed in

government educational institutions in accordance with educational guidelines, or

in any other language in private educational institutions.

Second: The scope of the term “official language” and the means of applying the

provisions of this article shall be defined by a law and shall include:

A. Publication of the Official Gazette, in the two languages;

B. Speech, conversation, and expression in official domains, such as the

Council of Representatives, the Council of Ministers, courts, and official

conferences, in either of the two languages;

C. Recognition and publication of official documents and correspondence in

the two languages;

D. Opening schools that teach the two languages, in accordance with the

educational guidelines;

E. Use of both languages in any matter enjoined by the principle of equality

such as bank notes, passports, and stamps.

Many people wrongly assume that the CBI sets monetary policy. The Constitution gives that power to the government.

Article 110:

The federal government shall have exclusive authorities in the following matters:

First: Formulating foreign policy and diplomatic representation; negotiating,

signing, and ratifying international treaties and agreements; negotiating, signing,

and ratifying debt policies and formulating foreign sovereign economic and trade

policy.

Second: Formulating and executing national security policy, including

establishing and managing armed forces to secure the protection and guarantee

the security of Iraq’s borders and to defend Iraq.

Third: Formulating fiscal and customs policy; issuing currency; regulating

commercial policy across regional and governorate boundaries in Iraq; drawing

up the national budget of the State; formulating monetary policy; and establishing

and administering a central bank.

Many people wrongly assume the government owns the rights to the oil and gas. However:

Article 111:

Oil and gas are owned by all the people of Iraq in all the regions and governorates.

Article 112:

First: The federal government, with the producing governorates and regional

governments, shall undertake the management of oil and gas extracted from

present fields, provided that it distributes its revenues in a fair manner in

proportion to the population distribution in all parts of the country, specifying an

allotment for a specified period for the damaged regions which were unjustly

deprived of them by the former regime, and the regions that were damaged

afterwards in a way that ensures balanced development in different areas of the

country, and this shall be regulated by a law.

Second: The federal government, with the producing regional and governorate

governments, shall together formulate the necessary strategic policies to develop

the oil and gas wealth in a way that achieves the highest benefit to the Iraqi people

using the most advanced techniques of the market principles and encouraging

investment.

However everything you read above is on hold because of this:

Article 144:

This Constitution shall come into force after the approval of the people thereon in a

general referendum, its publication in the Official Gazette, and the seating of the

government that is formed pursuant to this Constitution.

Now we know why the remaining 3 ministers haven't been seated yet. The greedy government officials know that once the ministers are seated, the money from the oil and gas sales will belong to the people of Iraq.

http://www.uniraq.org/documents/iraqi_constitution.pdf

Nice post and thanks for the info!!

[wicked93gs]

RATIONALE FOR REDENOMINATION:

Redenomination, sometimes referred to as currency reform, often serves as

the last resort for monetary authorities of hyper-inflationary economies, where

domestic currencies have lost significant value locally and internationally, to

regain public confidence in the domestic economy and the economic policies

implemented therein.

Read more:

hmm, sounds exactly like Iraq to me....what are you people thinking? you have a currency with huge numbers that people conduct large transactions using the USD for convenience...the only way to get rid of the dollarization is to RD, which also has the advantage of reducing the 27 trillion in circulation to 27 billion. IF THEY RV THEY WILL NOT REDUCE THE SUPPLY OF CASH, plain and simple, reduction of that cash is one of their stated goals. A RD meets all their goals quite simply and elegantly, its the only way for them to close the gap between the dollar and the IQD. As much as I would love to see a RV, I just see nothing to convince me it will happen.

P.S. On a different note, dont you find it odd that in all these middle eastern countries like Kuwait and Iraq that the natural resources are owned by the people of the nation...but here in America its companies and the government...wtf? We are being screwed every which way and yet we think of them as the ones with corruption

Edited June 29, 2011 by wicked93gs