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Mechics of a revaluation


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What are the mechanics of a revaluation?...there are great arguments for Iraq not being able to adjust the value of the IQD based on the current money supply and GDP….but there other questions that need to be answered if you think they can increase the value 10000%.

There are three basic areas that need to be addressed…maybe more but these are the three that I think are the most significant. All assumptions are based on a 1 to 1 revalue.

1. Prices….would they need to be adjusted based on the new value of the IQD?

2. Pay…Would salaries and hourly wages need to be adjusted based on the new value?

3. Loans and other forms of credit…would all loans need to be adjusted based on the new value?

1. Prices…for starters, everyone is looking for the lower denoms as a sign of a revalue….and the reason makes enough sense…if something cost 25,000 dinar before the RV and it RV’d to 1 -1, people wouldn’t be paying the equivalent of $25,000 US for what is basically a $25 product.

So that means prices would need to be adjusted for all products at the time of the revalue…

2. Now what about pay?...let’s say someone makes $10,000,000 dinar per year…which is equal to $10k US…after the RV are they still going to make the equivalent of $10 million US dollars per year?...I wouldn’t think so…

So now we have to change all prices and change all pay at the time of the RV.

3. Now…how about loans?....If I bought a car and currently owe $25 million Dinar and it RV’s do I now owe the equivalent of $25 million US?....certainly not if my pay was cut.

So now we have lowered prices in alignment with the new value…we have adjusted pay based on the new value and we have adjusted loans based on the new value….which would basically give Iraqis the same purchasing power that they have today…since all of the gain in value has been removed from the market.

Now, what happens if it starts at a 1 to 1 value and then revalues again to 3 to 1, do you have to adjust everything all over again?

And the kicker is that the exchange value is the only thing that has changed….the dinar is basically only worth more outside of the country or where imports are concerned….so do prices for local products change too?....I don’t’ believe they would. But it would be awkward if they didn't…paying 5 million dinar for a camel (a $5000 dollar camel) but only but paying only 25,000 dinar (based on the new value) for a ford focus… can anyone help me address these….because if we can’t answer them…then they can’t revalue to the degree that everyone would like to see….thanks

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The benefits to the Iraqis is holding a numerical value of dinar at "X amount" and suddenly going to markets and seeing that goods cost 1,000 times less (In my scenario) Imagine if we went to Wal-Mar

A simple way to put this: It is all based upon value The exchange rate will adjust in terms of a re-value, so you pay less per imports. I.e., what normally cost 1,000,000 dinar (RV@1:1) will now ro

What are the mechanics of a revaluation?...there are great arguments for Iraq not being able to adjust the value of the IQD based on the current money supply and GDP….but there other questions that ne

A simple way to put this:

It is all based upon value

The exchange rate will adjust in terms of a re-value, so you pay less per imports.

I.e., what normally cost 1,000,000 dinar (RV@1:1) will now roughly take 1,000 dinar to import. (Keeping figures simple at a rate of 1000:1/0.0001:1)

Your pay would be adjusted based upon value

If you were receiving the equivalent of $1,000 per day USD (pre-R/V = 1,000,000) post R/V your payments would be reduced to 1,000 per day

For loans, same thing....

If you owed 1,000,000 dinar

post R/V = you owe 1,000 dinar

Just because the value of a currency goes up, doesn't mean the value of how much we pay or how much we owe on an item goes up as well.

It directly reflects the market value of the given instance.

This would likely be addressed in the education campaign.

Only variable in change of value is based upon the currency

Value owed in debt remains

Value owed in payments (employment) remains

They'll adjust accordingly

Value in the notes? Goes up... (By a 1,000 times)

Who wins the most? All those holding dinar.... So rumors of a R/V normally push citizens to hold their currency to spend post R/V

Maybe that is why the dollarization problem is so high :P

Check the U.A.E, they had a rumor about the idea of a R/V, citizens held their national currency, and the economy of their nation caused problems. The govt. had to come out and say.. "Hey! Spend your money, this R/V rumor is not true.."

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Go way... Your negative magic will not work here... Any investment is not about the day to day workings of a country. This country needs an adjustment to bring themselves back from 8 years of nothing, and they have the backing of oil to support their desired currency adjustment.

I do not sell dinar and I do not work for any agencies. I am only an investor.

Go DV

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jmw..... I read a great PDF that Dalite posted yesterday. Search his post to find it.

The way Valenzuela did it was list both currencies with all prices and used that until all of the old currency was gone.

Say, you went for pizza. The parlor would have a sign saying "Camel toe and sausage ....... 5000 IQD 5 NID" NID- New Iraqi Dinar

Both would inter mingle. You could use a 10NID and a 10,000 IQD for a 20 NID purchase.

Now personally I hope it DOESN'T do that. I would rather them call in all old notes, pay us in new notes and go that way.

I'm just showing you how other countries did it.

We want a slow steady rise in value and then new currency.

buds

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jmw..... I read a great PDF that Dalite posted yesterday. Search his post to find it.

The way Valenzuela did it was list both currencies with all prices and used that until all of the old currency was gone.

Say, you went for pizza. The parlor would have a sign saying "Camel toe and sausage ....... 5000 IQD 5 NID" NID- New Iraqi Dinar

Both would inter mingle. You could use a 10NID and a 10,000 IQD for a 20 NID purchase.

Now personally I hope it DOESN'T do that. I would rather them call in all old notes, pay us in new notes and go that way.

I'm just showing you how other countries did it.

We want a slow steady rise in value and then new currency.

buds

yes...that is how a re-denomination would work...but I was really looking at a straight RV at 1 to 1 and the challenges associated with it.

Go way... Your negative magic will not work here... Any investment is not about the day to day workings of a country. This country needs an adjustment to bring themselves back from 8 years of nothing, and they have the backing of oil to support their desired currency adjustment.

I do not sell dinar and I do not work for any agencies. I am only an investor.

Go DV

thanks that helps

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What are the mechanics of a revaluation?...there are great arguments for Iraq not being able to adjust the value of the IQD based on the current money supply and GDP….but there other questions that need to be answered if you think they can increase the value 10000%.

There are three basic areas that need to be addressed…maybe more but these are the three that I think are the most significant. All assumptions are based on a 1 to 1 revalue.

1. Prices….would they need to be adjusted based on the new value of the IQD?

2. Pay…Would salaries and hourly wages need to be adjusted based on the new value?

3. Loans and other forms of credit…would all loans need to be adjusted based on the new value?

1. Prices…for starters, everyone is looking for the lower denoms as a sign of a revalue….and the reason makes enough sense…if something cost 25,000 dinar before the RV and it RV’d to 1 -1, people wouldn’t be paying the equivalent of $25,000 US for what is basically a $25 product.

So that means prices would need to be adjusted for all products at the time of the revalue…

2. Now what about pay?...let’s say someone makes $10,000,000 dinar per year…which is equal to $10k US…after the RV are they still going to make the equivalent of $10 million US dollars per year?...I wouldn’t think so…

So now we have to change all prices and change all pay at the time of the RV.

3. Now…how about loans?....If I bought a car and currently owe $25 million Dinar and it RV’s do I now owe the equivalent of $25 million US?....certainly not if my pay was cut.

So now we have lowered prices in alignment with the new value…we have adjusted pay based on the new value and we have adjusted loans based on the new value….which would basically give Iraqis the same purchasing power that they have today…since all of the gain in value has been removed from the market.

Now, what happens if it starts at a 1 to 1 value and then revalues again to 3 to 1, do you have to adjust everything all over again?

And the kicker is that the exchange value is the only thing that has changed….the dinar is basically only worth more outside of the country or where imports are concerned….so do prices for local products change too?....I don’t’ believe they would. But it would be awkward if they didn't…paying 5 million dinar for a camel (a $5000 dollar camel) but only but paying only 25,000 dinar (based on the new value) for a ford focus… can anyone help me address these….because if we can’t answer them…then they can’t revalue to the degree that everyone would like to see….thanks

I myself do not pretend to be as educated as those who lead the country of iraq are. You can be sure they have a plan and are following that plan. Have you read the "restructuring of iraq" document that was recently released by the department of state? This document outlines their plan that has been in place since 2003. So far everything they said they were going to do they have done, so I have no reason not to believe them. I am inclined to believe that these issues you raise will be addressed also, but probably not in a way that makes sense to us because our economy and they way we operate is much different that theirs.

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jmw,,,,,,,,,,,,,,, I really don't know much about all of the math involved here, but I don't think they could pull off a straight 1 on 1 at the drop of a hat.

I could see something along the lines of a DIME to let people sell off while letting others to buy in (like a stock pre-IPO) and the a steady climb up even past 1 to 1.

That to me sounds like it could work. At least common sense wise. That way the country doesn't have to pay for all of the returned money. Other investors would.

buds

chuck

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A simple way to put this:

It is all based upon value

The exchange rate will adjust in terms of a re-value, so you pay less per imports.

I.e., what normally cost 1,000,000 dinar (RV@1:1) will now roughly take 1,000 dinar to import. (Keeping figures simple at a rate of 1000:1/0.0001:1)

Your pay would be adjusted based upon value

If you were receiving the equivalent of $1,000 per day USD (pre-R/V = 1,000,000) post R/V your payments would be reduced to 1,000 per day

For loans, same thing....

If you owed 1,000,000 dinar

post R/V = you owe 1,000 dinar

Just because the value of a currency goes up, doesn't mean the value of how much we pay or how much we owe on an item goes up as well.

It directly reflects the market value of the given instance.

This would likely be addressed in the education campaign.

Only variable in change of value is based upon the currency

Value owed in debt remains

Value owed in payments (employment) remains

They'll adjust accordingly

Value in the notes? Goes up... (By a 1,000 times)

Who wins the most? All those holding dinar.... So rumors of a R/V normally push citizens to hold their currency to spend post R/V

Maybe that is why the dollarization problem is so high :P

Check the U.A.E, they had a rumor about the idea of a R/V, citizens held their national currency, and the economy of their nation caused problems. The govt. had to come out and say.. "Hey! Spend your money, this R/V rumor is not true.."

Thanks Darin and I appreciate the thoughts and input....but if they adjust everything based on an exchange value what would change for Iraqi's?....would it only help those who held lots of cash?...I really struggle with adjusting loans based on a foreign exchange rate...but I would agree that they would have to if they adjust everything else...I'm not sure it is a precedent they would want to establish.....what if they can't maintain the rate...does everything go back?...they really don't improve the purchasing power in your scenario....maybe you can help me better understand it.

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Thanks Darin and I appreciate the thoughts and input....but if they adjust everything based on an exchange value what would change for Iraqi's?....would it only help those who held lots of cash?...I really struggle with adjusting loans based on a foreign exchange rate...but I would agree that they would have to if they adjust everything else...I'm not sure it is a precedent they would want to establish.....what if they can't maintain the rate...does everything go back?...they really don't improve the purchasing power in your scenario....maybe you can help me better understand it.

The benefits to the Iraqis is holding a numerical value of dinar at "X amount" and suddenly going to markets and seeing that goods cost 1,000 times less (In my scenario)

Imagine if we went to Wal-Mart and what we saw that was normally $100.00 suddenly became, $0.10..... Imagine the amount of goods you would be able to buy.

The value of the car you drive would drop

The amount you get paid by your employer would drop

But you would benefit by the amount you of items you could purchase

****************************************************************************

Let's argue the idea of a re-denomination

We basically incur a revenue-neutral event

The Iraqis incur a revenue-neutral event

Iraqi's can't buy more or less than the day prior to a R/D or after a R/D - maintains value

Every dinar holder cashes out.....(Globally - except those that hold due to the idea of a slight increase of value...)

No one re-buys speculatively - demand for their currency drops

Foreign cash reserves takes a huge hit...

It potentially spurs away investors.... (Speculative)

They're concerned about national economy...

And to give an example:

I'm the CEO of MacDonald's and I want to setup a restaurant chain within Iraq to make profits. A R/V and I'm packing my bags trying to get there ASAP, a R/D, I'm thinking - I'll check back in 10 years and see how their economy is doing....Maybe I'll jump in than. No sense in putting up restaurants to try to service people with barley any money.

See the difference on how the speculation would change?

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Thanks Darin and I appreciate the thoughts and input....but if they adjust everything based on an exchange value what would change for Iraqi's?....would it only help those who held lots of cash?...I really struggle with adjusting loans based on a foreign exchange rate...but I would agree that they would have to if they adjust everything else...I'm not sure it is a precedent they would want to establish.....what if they can't maintain the rate...does everything go back?...they really don't improve the purchasing power in your scenario....maybe you can help me better understand it.

Yes it will only help those holding cash. Those who are not holding cash will see no change. It will be there as it is here. The rich get richer and the poor are poor. The exact same thing will happen here as far as the revalue of the IQD goes. Those holding IQD will see a gain and those who are not unfortunately will remain poor so to speak. JMO.

P.S. Those not holding will also be saying something like "But, I thought it was a scam"

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Yes it will only help those holding cash. Those who are not holding cash will see no change. It will be there as it is here. The rich get richer and the poor are poor. The exact same thing will happen here as far as the revalue of the IQD goes. Those holding IQD will see a gain and those who are not unfortunately will remain poor so to speak. JMO.

P.S. Those not holding will also be saying something like "But, I thought it was a scam"

I understand what you are saying. The rich do get richer and the poor..well...stay poor. Thing is an overnight RV to 1 in Iraq would create two classes. Mega rich and mega poor. How would that help Iraq? Sure some Iraqis are holding 50 or 100 thousand dinar but not many. So they spend that in a few years and are making 1000 dinar a month. Still dont see how that would benifit Iraq. Thats not to mention the amount in circulation to contend with.

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I understand what you are saying. The rich do get richer and the poor..well...stay poor. Thing is an overnight RV to 1 in Iraq would create two classes. Mega rich and mega poor. How would that help Iraq? Sure some Iraqis are holding 50 or 100 thousand dinar but not many. So they spend that in a few years and are making 1000 dinar a month. Still dont see how that would benifit Iraq. Thats not to mention the amount in circulation to contend with.

Pretty sure that group will be working.. .Making good money in an improved economy.

As private sectors grow...

Foreign businesses flock to the country and provide goods & services...

They'll need people to run those businesses..

What's so good about being a millionaire on a deserted island if you have no where to spend it?

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The benefits to the Iraqis is holding a numerical value of dinar at "X amount" and suddenly going to markets and seeing that goods cost 1,000 times less (In my scenario)

Imagine if we went to Wal-Mart and what we saw that was normally $100.00 suddenly became, $0.10..... Imagine the amount of goods you would be able to buy.

The value of the car you drive would drop

The amount you get paid by your employer would drop

But you would benefit by the amount you of items you could purchase

****************************************************************************

Okay... the prices go down but so does pay so there is in effect no difference...no additional purchasing power....Iraqi's would be right where they are now...but we would be rich...not sure why they would do that...the other challenge that you didn't address is local verses imports...since it's value only changes in relation to other currencies, what happens to the prices on local items...if local veggies cost 50 Dinar before a RV, why would they change after an RV?...they aren't imported...our prices in the US don't fluctuate based on changes in currency exchanges...unless it is an imported product...why would it be different there?

Let's argue the idea of a re-denomination

We basically incur a revenue-neutral event

The Iraqis incur a revenue-neutral event

Iraqi's can't buy more or less than the day prior to a R/D or after a R/D - maintains value

Every dinar holder cashes out.....(Globally - except those that hold due to the idea of a slight increase of value...)

No one re-buys speculatively - demand for their currency drops

Foreign cash reserves takes a huge hit...

It potentially spurs away investors.... (Speculative)

They're concerned about national economy...

And to give an example:

I'm the CEO of MacDonald's and I want to setup a restaurant chain within Iraq to make profits. A R/V and I'm packing my bags trying to get there ASAP, a R/D, I'm thinking - I'll check back in 10 years and see how their economy is doing....Maybe I'll jump in than. No sense in putting up restaurants to try to service people with barley any money.

See the difference on how the speculation would change?

after the RD the money supply would be decreased enough so that the value of the dinar could increase based on improvements to GDP....the demand for the dinar is unsustainable at it's current level...doesn't matter if it RD's or RV's...come to think of it a RD could add more confidence the currency, thereby increasing demand for it.

It is an interesting dynamic....when you think of the magnitude of daily occurrences...as simple as if it RV's before my electric bill hits it's due day do Iraqis pay whats on the bill or a reduced amount?....and that McD's you want to open....let's say you buy your product and have net 30 days terms to pay the invoice...you owe your supplier 10 million dinar....and you are selling Big Macs at 5,000 dinar each...after selling them for several days it RV's...now you only owe your supplier 10,000 dinar....but you have been selling 500 Big Mac's a day with his product at 5,000 dinar each....for lets say 20 days....can you see the challenges?

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Okay... the prices go down but so does pay so there is in effect no difference...no additional purchasing power....Iraqi's would be right where they are now...but we would be rich...not sure why they would do that...the other challenge that you didn't address is local verses imports...since it's value only changes in relation to other currencies, what happens to the prices on local items...if local veggies cost 50 Dinar before a RV, why would they change after an RV?...they aren't imported...our prices in the US don't fluctuate based on changes in currency exchanges...unless it is an imported product...why would it be different there?

after the RD the money supply would be decreased enough so that the value of the dinar could increase based on improvements to GDP....the demand for the dinar is unsustainable at it's current level...doesn't matter if it RD's or RV's...come to think of it a RD could add more confidence the currency, thereby increasing demand for it.

It is an interesting dynamic....when you think of the magnitude of daily occurrences...as simple as if it RV's before my electric bill hits it's due day do Iraqis pay whats on the bill or a reduced amount?....and that McD's you want to open....let's say you buy your product and have net 30 days terms to pay the invoice...you owe your supplier 10 million dinar....and you are selling Big Macs at 5,000 dinar each...after selling them for several days it RV's...now you only owe your supplier 10,000 dinar....but you have been selling 500 Big Mac's a day with his product at 5,000 dinar each....for lets say 20 days....can you see the challenges?

Exactly what Ive been thinking.....I dont see how prices would be affected overnight, but yet it would gradually change......at least in my mind...because as a supplier your buying your product for a certain price to sell and if you still have a huge stockpile you bought at a pre RV price, your gonna keep selling it after the RV at the same price AT LEAST until you sell all your supplies you bought at a pre rv price.....then once you stock up again with a new value to your money, then your prices will reflect that....

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Okay... the prices go down but so does pay so there is in effect no difference...no additional purchasing power....Iraqi's would be right where they are now...but we would be rich...not sure why they would do that...the other challenge that you didn't address is local verses imports...since it's value only changes in relation to other currencies, what happens to the prices on local items...if local veggies cost 50 Dinar before a RV, why would they change after an RV?...they aren't imported...our prices in the US don't fluctuate based on changes in currency exchanges...unless it is an imported product...why would it be different there?

after the RD the money supply would be decreased enough so that the value of the dinar could increase based on improvements to GDP....the demand for the dinar is unsustainable at it's current level...doesn't matter if it RD's or RV's...come to think of it a RD could add more confidence the currency, thereby increasing demand for it.

It is an interesting dynamic....when you think of the magnitude of daily occurrences...as simple as if it RV's before my electric bill hits it's due day do Iraqis pay whats on the bill or a reduced amount?....and that McD's you want to open....let's say you buy your product and have net 30 days terms to pay the invoice...you owe your supplier 10 million dinar....and you are selling Big Macs at 5,000 dinar each...after selling them for several days it RV's...now you only owe your supplier 10,000 dinar....but you have been selling 500 Big Mac's a day with his product at 5,000 dinar each....for lets say 20 days....can you see the challenges?

Your completely missing the dynamics of it. The value of the currency changes, nothing else. An easy way to think it out: View everything in value in terms of USD. As the value of the dinar rises, you still pay the same in USD value, but you give the merchant less dinar.

The value of the money would be based upon what it exchanges to the dollar. Lets say, 1,000:1 is their current exchange rate, and they R/V 1:1.

If you normally are going to the market-store to buy a sack of vegetables for 5,000 dinar, you would hand them one note of 5,000 dinar($5). If the R/V were to occur, at a1:1, you would now be able to buy 1,000 sacks of vegetables with the same 5,000 note. Because, the note is now valued in terms of $5,000 USD.

Okay, so lets say your making 10,000 dinar an hour ($10/hr USD).. Post R/V, your going to make 10 dinar an hour. (You'll maintain the same USD value in terms of pay).

Let's say you have a line of credit out for 1,000,000 dinar ($1,000 USD). Post R/V, that same line of credit will maintain the $1,000 value, which means only 1,000 dinar will be needed to pay the debt.

Like I was saying, "Those that hold the notes are the ones that reap the benefits.."

Now, if your an Iraqi and you borrow your friend 10,000 dinar right before the R/V to buy some food, than that may lead to problems between the two. Does he return the new value of 10 dinar, or does he demand the 10,000 valued note in return. LOL -- that could cause some personal problems..

And your electric bill example: Like I stated, it benefits those holding dinar at the time of the R/V... When I provided the U.A.E. example, rumors ran rampant regarding a potential revalue of their currency and nobody was spending money. Crippled the economy...... This could also, in theory, be why Iraqis prefer to use USD over IQD (Maybe they wish to sit on their dinar and wait for the Dinar to rise in value).

Your MacDonald's example is bad.... Only based on the idea that they are likely going to be paying for the imported goods which is likely to be paid for with a trade-able currency. Now, if this was through a local lender, my loans example remains the same. (Makes you wonder why banks are reluctant to give out loans over there, huh?).... If you put on credit the "value" of goods, you only pay the balance of that remainder of that value based upon the exchange rate. So you get $1,000 USD worth of goods, pay them 1,000,000 dinar before the R/V, you lost out on that difference. If they paid the balance after the r/v, they would hand them 1,000 dinar. Its value based...

If your global market worth is $10/hr, you'll be paid in equivalent in $10/hr based upon the exchange rate.

Hey, it can be complex to a degree.. So education will be important.. Why do you think a 1:1 rate would make the most sense??

But, if I was a business owner and saw opportunity in Iraq, which occurrence would drive me there faster? RV? RD?

RV - I want there now

RD - I will wait til their economy improves vastly enough to make it so the rewards outweigh the risks.

What are a lot of jobs available now? Well, underpaid oil worker, or likely under paid work in a manufacturing company.

Labor jobs......

We can kick this rock back and forth all day, I just want to show you that there are advantages to a R/V scenario.... You have to view it as a stimulus-like plan so to speak.

Each process will bring forth concerns...... And if dollarization is a threat, they'll have to implement a plan 1 way or another to improve that, and that would likely be done with some sort of a re-value of their currency. Whether before or after a Re-denomination.

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Exactly what Ive been thinking.....I dont see how prices would be affected overnight, but yet it would gradually change......at least in my mind...because as a supplier your buying your product for a certain price to sell and if you still have a huge stockpile you bought at a pre RV price, your gonna keep selling it after the RV at the same price AT LEAST until you sell all your supplies you bought at a pre rv price.....then once you stock up again with a new value to your money, then your prices will reflect that....

No... If that was the case, Iraqis would run to the banks and exchange the value of their newly re-valued dinar and exchange for USD to pay the same price.

(Assuming they also accepted USD prior)

So your comment would be just as silly if they charged 1,000 times more USD post R/V against their product, goods, or services.

You claim a grounded approach, but your views are always so negative you forget to look at other factors. And as my own disclaimer, I'm not omitting the idea of a re-denomination, I am simply explaining the process if a r/v were to occur (in my mind..) which seems to make logical sense to me...

So much is done in USD over there, I am sure a majority of Iraqis sit on dinar with an assumption the value will increase.... Just a matter of when.. Some may claim to do it for stability reasons, other may claim to hold it as they believe it is undervalued and in the future will rise in value.

Also the question of the Iraqi who spends 20 million dinar on camels and the next day the currrency RVs. Poor guy probably commit suicide. Some would say tough shite but that would be hard to swallow.

The same goes for any foreigner outside of Iraq to read into the LOPsters and jump ship, only for it to R/V the next day.......

Long-story short, those that hold dinar would prosper from a R/V, those that sell it off (Lose).

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I think we may all be reading a bit much into this. IMO the value of product and services doesn't change a penny (not that they have any pennies).

We are thinking at this in terms of cash... value isn't truly determined with cash it is IMO trade. We only use cash as a benchmark which floats (i.e. USD vs. Euro).

For Example: Today a Camel Tooth is equal to 5 potatoes... Then tomorrow the IQD RV's to be equal to $1 USD... The Camel Tooth is still worth 5 potatoes.

Nothing changes.

So IMO to answer 1). & 2). Price and Pay.. All they need is a calculator and small denoms.

#3). Is a bit trickier but can be done with some logistical paperwork changes.

As for the second RV to $3.00 I think that will be a gradual climb and they are smart enough to RV a bit undervalued to prevent an issue.

I don't have any empirical evidence... this is just my thought process on all this.

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Your completely missing the dynamics of it. The value of the currency changes, nothing else. An easy way to think it out: View everything in value in terms of USD. As the value of the dinar rises, you still pay the same in USD value, but you give the merchant less dinar.

The value of the money would be based upon what it exchanges to the dollar. Lets say, 1,000:1 is their current exchange rate, and they R/V 1:1.

If you normally are going to the market-store to buy a sack of vegetables for 5,000 dinar, you would hand them one note of 5,000 dinar($5). If the R/V were to occur, at a1:1, you would now be able to buy 1,000 sacks of vegetables with the same 5,000 note. Because, the note is now valued in terms of $5,000 USD.

Okay, so lets say your making 10,000 dinar an hour ($10/hr USD).. Post R/V, your going to make 10 dinar an hour. (You'll maintain the same USD value in terms of pay).

Let's say you have a line of credit out for 1,000,000 dinar ($1,000 USD). Post R/V, that same line of credit will maintain the $1,000 value, which means only 1,000 dinar will be needed to pay the debt.

Like I was saying, "Those that hold the notes are the ones that reap the benefits.."

Now, if your an Iraqi and you borrow your friend 10,000 dinar right before the R/V to buy some food, than that may lead to problems between the two. Does he return the new value of 10 dinar, or does he demand the 10,000 valued note in return. LOL -- that could cause some personal problems..

And your electric bill example: Like I stated, it benefits those holding dinar at the time of the R/V... When I provided the U.A.E. example, rumors ran rampant regarding a potential revalue of their currency and nobody was spending money. Crippled the economy...... This could also, in theory, be why Iraqis prefer to use USD over IQD (Maybe they wish to sit on their dinar and wait for the Dinar to rise in value).

Your MacDonald's example is bad.... Only based on the idea that they are likely going to be paying for the imported goods which is likely to be paid for with a trade-able currency. Now, if this was through a local lender, my loans example remains the same. (Makes you wonder why banks are reluctant to give out loans over there, huh?).... If you put on credit the "value" of goods, you only pay the balance of that remainder of that value based upon the exchange rate. So you get $1,000 USD worth of goods, pay them 1,000,000 dinar before the R/V, you lost out on that difference. If they paid the balance after the r/v, they would hand them 1,000 dinar. Its value based...

If your global market worth is $10/hr, you'll be paid in equivalent in $10/hr based upon the exchange rate.

Hey, it can be complex to a degree.. So education will be important.. Why do you think a 1:1 rate would make the most sense??

But, if I was a business owner and saw opportunity in Iraq, which occurrence would drive me there faster? RV? RD?

RV - I want there now

RD - I will wait til their economy improves vastly enough to make it so the rewards outweigh the risks.

What are a lot of jobs available now? Well, underpaid oil worker, or likely under paid work in a manufacturing company.

Labor jobs......

We can kick this rock back and forth all day, I just want to show you that there are advantages to a R/V scenario.... You have to view it as a stimulus-like plan so to speak.

Each process will bring forth concerns...... And if dollarization is a threat, they'll have to implement a plan 1 way or another to improve that, and that would likely be done with some sort of a re-value of their currency. Whether before or after a Re-denomination.

I get your position...we just differ on the dynamics of it...your scenario is to dollarize the value of everything to make a clean conversion in all areas to the new rate...I get that...it just over simplifies the process...I own two companies and deal with purchasing raw material to produce a product on a daily basis so I tend to view the details on a bigger scale...I'll go back to the your new Mac D's.....you purchased product from a supplier...and paid them 10 million dinar for it...you sold 500 big macs a day for 20 days at 5,000 dinars each....total take...50,000,000 dinar...now it RV's before your 10 million dinar bill is due...so you only have to pay the supplier 1000 dinar....so instead of profiting 40,000,000 dinar (US value of 40,000) you profit 49 million dinar which is equal to 49 million US dollars....the problem is this is repeated across the country at every mom and pop, camel shop, hooka pipe shop etc...when you multiply it out it is staggering.

and if they are tied to the exchange rate...what happens if it suddenly goes down?....do they adjust again?....you said it would gradually go to $3 so it would not be an issue....which is my point...I think it has to gradually get to whatever the price is....or there will be issues.....because if you believe they can jump to $1 why couldn't they jump to $3?

should we go into how the CBI covers the value of 59 trillion dinar that is now worth 59 trillion US dollars?

Lastly....I hope you realize that I enjoy your input and debate...we may differ on the dynamics but I think that is the purpose of these sites....thank you for taking the time to respond Darin...cheers.

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I get your position...we just differ on the dynamics of it...your scenario is to dollarize the value of everything to make a clean conversion in all areas to the new rate...I get that...it just over simplifies the process...I own two companies and deal with purchasing raw material to produce a product on a daily basis so I tend to view the details on a bigger scale...I'll go back to the your new Mac D's.....you purchased product from a supplier...and paid them 10 million dinar for it...you sold 500 big macs a day for 20 days at 5,000 dinars each....total take...50,000,000 dinar...now it RV's before your 10 million dinar bill is due...so you only have to pay the supplier 1000 dinar....so instead of profiting 40,000,000 dinar (US value of 40,000) you profit 49 million dinar which is equal to 49 million US dollars....the problem is this is repeated across the country at every mom and pop, camel shop, hooka pipe shop etc...when you multiply it out it is staggering.

and if they are tied to the exchange rate...what happens if it suddenly goes down?....do they adjust again?....you said it would gradually go to $3 so it would not be an issue....which is my point...I think it has to gradually get to whatever the price is....or there will be issues.....because if you believe they can jump to $1 why couldn't they jump to $3?

should we go into how the CBI covers the value of 59 trillion dinar that is now worth 59 trillion US dollars?

Lastly....I hope you realize that I enjoy your input and debate...we may differ on the dynamics but I think that is the purpose of these sites....thank you for taking the time to respond Darin...cheers.

In my description(s): I never gave a $3 R/V rate, as I have only been providing examples.

The beneficiary is those holding dinar (cash in hand or electronic) upon the exchange of the rate.

In the case of Iraq, they're likely paying suppliers outside the country. They are likely using a trade-able currency for those transactions. I.e., they're exchanging their dinars for USD or any other reserve currency.

If their supplier was within the nation of Iraq, the same concept applies. Those holding at the moment it happens benefit the most.

Now, in your example of net terms, how often do you believe companies lend out supplies based upon credit in term rates within Iraq? And if they did, how many likely do so in terms of using only dinar. If it "was" done, I would have to fully believe it was done within the nation. If company A manufacturers goods and orders supplies from company B based upon net terms, it really depends on on a few details. If company A is located within Iraq and company B is located outside the country, the payments are likely made in a traded currency. Now, if both company A & B are located within the nation, we are talking a different story. This particular lending process is an agreement to pay the same value that was lent to them. Once again, using the idea that if they were to expect the payment in dinars prior to the R/V, they could of just as easily say "No, we will just give you USD than, since they were likely willing to accept USD in the past..." See where I am going with this?

So, if your USD value is $10,000 borrowed with $1,000 down

In Dinar, this would be 10,000,000 borrowed with 1,000,000 down.

Lets say a RV occurs at 1:1 (Assuming 1000:1 was the rate before R/V)

Their balance would be $9,000. The exchange rate would apply, and, they should be able to pay their balance by handing over 9,000 dinar. If they refused, and wanted the pre-R/V rate than apply this logic:

The lender has accepted US cash for payments in the "past", therefore, if you will not accept 9,000 dinar, we will just convert it ourselves and hand you $9,000 US cash... You would of simply allowed this in the past.

I think most lending companies would be fully aware of this... Now, lets applies some articles that we have read regarding banks and their lending..... Do you notice many banks do not seem so eager to lend? I doubt many Iraqis have loans out at the moment... Maybe they know the value will rise, and they're just waiting for the moment to happen to than proceed in lending. Many theories could be developed from this.

But overall, remember, the beneficiaries are those holding dinar at the moment of a R/V (Electronic or cash-in-hand).

Since the information regarding that is likely kept secret... Businesses know they have to continue conducting business as normal to be successful. There-fore, they have to spend and make transactions on a daily level as if the R/V were to never occur to grow their economy. If the people knew of a potential R/V, they would likely stop spending, which would disrupt their local economy. Just another reason the GOI or CBI would not directly say "Hey, we're going to re-value the IQD against foreign currencies which should increase your purchasing power..." Heck, no dinar would be spent until the act occurred. (Not to mention word would leak globally and put a run on the banks...)

So, if your an Iraqi holding 1,000 dinar.... Your not going to benefit as much as an Iraqi holding 1,000,000 or more during the time of an adjustment in the exchange rate.

But this is only how I would see the scenario playing out in my head..

R/V or R/D both process will be complex & confusing.

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Gees, maybe I missed it. I did not see anywhere on this thread how this helps Joe the average guy out.

Joe makes 10,000 Dinar a day, so under your all logic he know makes 10 dollars a day. Are you all sure about this? I believe he is making more than this as everybody's standard of living has greatly increased.

Okay visualize that all of a sudden the US dollar is worth 1,000 times more. You get paid the wage of 1 dollar instead of 1000 dollars a week. I do not really think this is correct as your wage needs to be higher like probably 1.5 dollars a week. The wealth gets spread around. If you now get 1.5 dollars a week that is equivalent to 1500 dollars week before so you get to buy 50% more than you did. Do you not think that wages will go up?

A few people that had savings in Dinar is now rich enough to not work, therefore the amount to hire a worker increases.

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Gees, maybe I missed it. I did not see anywhere on this thread how this helps Joe the average guy out.

Joe makes 10,000 Dinar a day, so under your all logic he know makes 10 dollars a day. Are you all sure about this? I believe he is making more than this as everybody's standard of living has greatly increased.

Okay visualize that all of a sudden the US dollar is worth 1,000 times more. You get paid the wage of 1 dollar instead of 1000 dollars a week. I do not really think this is correct as your wage needs to be higher like probably 1.5 dollars a week. The wealth gets spread around. If you now get 1.5 dollars a week that is equivalent to 1500 dollars week before so you get to buy 50% more than you did. Do you not think that wages will go up?

A few people that had savings in Dinar is now rich enough to not work, therefore the amount to hire a worker increases.

It's all based upon the cash(Iraqi Dinar) amount held by any person.........

Values on how your paid remain the same

Prices of goods & services reflect the new rate.

So guess what, if you held 1,000,000 dinar.... a $1,000 USD-valued item could be purchased 1,000 times post R/V

That is how it helps Average Joe....

Here is an example, your rent is 1,000,000 dinar a month.

You hold 5,000,000 dinar at the current moment of the r/v

You can now pay rent 5,000 times post r/v

You won't maintain the same pay-rate, because, its value-based.. So, how many dinars you make per hour at a job are reduced accordingly. However, if you've been holding dinar waiting for the exchange to go up, you would benefit.

If you were making a 1,000,000 a day in dinar. If the r/v were to match the value of the dinar to the dollar (1:1) do you think they would still pay you 1,000,000 dinar per day? That would mean they're paying 1,000,000$US per day.

No, they would reduce your pay accordingly.

But, the price of goods imported would drop. And so would other prices of goods and services. All because the value of the dinar changed.

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Also the question of the Iraqi who spends 20 million dinar on camels and the next day the currrency RVs. Poor guy probably commit suicide. Some would say tough shite but that would be hard to swallow.

NOW THATS FUNNY !!!!!!!!!!!!laugh.gif

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