***People that believe without a doubt of a RD**

[easyrider]

You know i started to dig a little deeper and found the consequences of an RD to be almost catstrophic. People that believe in the method of them Rding that is fine i think otherwise. They believe we have one tracked minds and only believe in a BIG RV. Let me ask you this why do you dance around the fact redenominations have major consequences for countries trying to get foreign investors to invest and countries that are in major developments.

There are definitely pros and cons to everything and YES even an RD.... If they were def. going to RD why havent they DONE it yet and why are they still in talks about it???

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 Therefore, the banking authorities must ensure that notes and coins withdrawn do not find their way into circulation.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.

Edited July 30, 2011 by easyrider

[dexter]

Thanks for the post! Where you been? You get another job or somthing? Miss your rumor updates, now when I need a fix, I am all over the place, lol----checking your posts was like a buffet---lol, little bit of everything. You've always been a straight up RV guy, so I take it that post was to give reasons against RD? Still believing RV?

Edited July 30, 2011 by dexter

[coldwarvet]

Good post, easy. I agree that the unintended consequences of an RD are substantial, and are most likely why the CBI and GOI have not pursued that course of action. At the same time, they have a tremendous incentive to discourage speculators (like us!) by publishing their intentions to implement an RD.

I have yet to see a post from the forum members who believe an RD is inevitable which discusses these consequences indepth and honestly. It's one thing to point to news articles (of dubious veracity), the current CBI web site, and other nations' prior situations, but quite another to address these important issues.

So I would request that the members of this forum who believe in the RD take their game up a notch and address these issues forthrightly, plus refrain from personal attacks on the advocates of an RV. Name calling only reflects adversely on the name caller.

[dexter]

Don't know why someone hit you with a neg, I would balance that for you, but I am out for the day.... c'mon ppl he was bringing valid reasons here...no need to be mean!

[jmw]

At least post the whole thing so people can make and a decision based on all of the facts...

http://www.gamji.com/article6000/NEWS7367.htm

A Qualitative Cost Benefit Assessment Of The Redenomination Of The Naira

<br style="mso-special-character:line-break"> <br style="mso-special-character:line-break">

By

Dr. Emmanuel Ojameruaye

Phoenix, USA

emmaojameruaye@yahoo.com

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.

1. 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!
2. 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.
3. 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.
4. Redenomination reduces the phenomenon of money illusion that people suffer from when there are many zeros. Money illusion tends to generate inflationary pressure.
5. 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.
6. >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.
7. 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 sp

[easyrider]

At least post the whole thing so people can make and a decision based on all of the facts...

http://www.gamji.com...00/NEWS7367.htm

A Qualitative Cost Benefit Assessment Of The Redenomination Of The Naira

<br style="mso-special-character:line-break"> <br style="mso-special-character:line-break">

By

Dr. Emmanuel Ojameruaye

Phoenix, USA

emmaojameruaye@yahoo.com

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.

1. 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!
2. 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.
3. 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.
4. Redenomination reduces the phenomenon of money illusion that people suffer from when there are many zeros. Money illusion tends to generate inflationary pressure.
5. 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.
6. >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.
7. 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 sp

LOL i knew you would show up just a matter of time why should I hell you guys have covered most of that havent you? yet you have not adressed the ugly side of an RD now tell me why is that????? I am honestly just looking for the people that strongly to believe that an RD is imminent to look at the down side of an RD and what it can do to developing countries that hold a bright future.

[Dalite]

LOL i knew you would show up just a matter of time why should I hell you guys have covered most of that havent you? yet you have not adressed the ugly side of an RD now tell me why is that????? I am honestly just looking for the people that strongly to believe that an RD is imminent to look at the down side of an RD and what it can do to developing countries that hold a bright future.

If you would take the time to both read the entire post that jmw made AND be honest with yourself, you would see the benefits outweigh the negatives.

Being able to see both sides of the equation is considered pragmatic, and also considered to be intellectually honest.

Taking part of a report to reinforce your opinion, when the rest of the report, in it's entirety clearly showed the good outweighs the bad is a blatant example of intellectual dishonesty.

If you can't be honest with yourself, how can you expect others to believe you.

Take a little pride in yourself. You will be amazed how it expands your horizons.

Good post, easy. I agree that the unintended consequences of an RD are substantial, and are most likely why the CBI and GOI have not pursued that course of action. At the same time, they have a tremendous incentive to discourage speculators (like us!) by publishing their intentions to implement an RD.

I have yet to see a post from the forum members who believe an RD is inevitable which discusses these consequences indepth and honestly. It's one thing to point to news articles (of dubious veracity), the current CBI web site, and other nations' prior situations, but quite another to address these important issues.

So I would request that the members of this forum who believe in the RD take their game up a notch and address these issues forthrightly, plus refrain from personal attacks on the advocates of an RV. Name calling only reflects adversely on the name caller.

Read the full report, and decide for yourself.

It's no longer a mystery when you have all the facts.

When you are presented with skewed information, you end up with a skewed interpretation.

Treat yourself to the full report, then take your shot.

Easy gave you a clip full of blanks. That is why you missed the target.

Take another shot, you owe it to yourself.

[easyrider]

If you would take the time to both read the entire post that jmw made AND be honest with yourself, you would see the benefits outweigh the negatives.

Being able to see both sides of the equation is considered pragmatic, and also considered to be intellectually honest.

Taking part of a report to reinforce your opinion, when the rest of the report, in it's entirety clearly showed the good outweighs the bad is a blatant example of intellectual dishonesty.

If you can't be honest with yourself, how can you expect others to believe you.

Take a little pride in yourself. You will be amazed how it expands your horizons.

i am being honest im saying why havent they brought about the risks??? answer me that??? why did i have to point it out? anyways its a never ending battle im looking forward to the dispute between sonny1 and jmw. even then it wont accomplish much because we all have our stance we can only wait and see only reason i posted this is to allow people to see an RD does have risks.

Edited July 30, 2011 by easyrider

[Dalite]

i am being honest im saying why havent they brought about the risks??? answer me that??? why did i have to point it out?

Because you want to believe so bad, you are able to overlook anything that does't meet your desire.

If that is what you want out of life, so be it.

Don't drag others down to your level.

You act like a ReDenomination is as scary as aliens from outer space.

It has been done in the past, it will be done in the future, and it doesn't matter how hard you grunt, it is on the table for for Iraq.

When someone takes the time to publish a full report, and you only take half the information and try obscure the meaning to support your opinion, you let everyone here get a good look at your character.

Take a chance; look at both sides of the coin.

[jmw]

LOL i knew you would show up just a matter of time why should I hell you guys have covered most of that havent you? yet you have not adressed the ugly side of an RD now tell me why is that????? I am honestly just looking for the people that strongly to believe that an RD is imminent to look at the down side of an RD and what it can do to developing countries that hold a bright future.

did you actually read it...it answers your questions....maybe you could get someone to read it to you really slowly.

[Darin]

did you actually read it...it answers your questions....maybe you could get someone to read it to you really slowly.

Wow - I would not think there is a need for childish behavior.

But Easy does have a point... Why are the LOP-believers not mentioning the potential risks of a re-denomination??

There are risks....

There are advantages and disadvantages to both scenarios.

Foreign countries would likely push for a R/V though.

Iraq itself may look to only R/D, because it only benefits them.

Here is a question: Would a R/D benefit anyone outside of Iraq?

..... I would like to hear theories of how a R/D benefits countries outside of Iraq...

The only thing(s) I could think of: surrounding countries that may have uneasy tensions w/ Iraq may not like the idea of their people having wealth... (As it may draw in people to go there to work...)

That is about the only thing I could think of, but, at the same time nearby countries may benefit as well.

[jmw]

Wow - I would not think there is a need for childish behavior.

But Easy does have a point... Why are the LOP-believers not mentioning the potential risks of a re-denomination??

There are risks....

There are advantages and disadvantages to both scenarios.

Foreign countries would likely push for a R/V though.

Iraq itself may look to only R/D, because it only benefits them.

Here is a question: Would a R/D benefit anyone outside of Iraq?

..... I would like to hear theories of how a R/D benefits countries outside of Iraq...

The only thing(s) I could think of: surrounding countries that may have uneasy tensions w/ Iraq may not like the idea of their people having wealth... (As it may draw in people to go there to work...)

That is about the only thing I could think of, but, at the same time nearby countries may benefit as well.

I posted a report that has the reasons as well as the risks...so I think I have tried to show both sides...I have never said they are going to definitely redenominate.....but they keep saying they are going to and they keep using Turkey as an example...how can you not at least acknowledge the possibility that they could?

And no...it won't help anyone outside of Iraq....why would Iraq care about helping others when they can't even take care of their own?

The CBI is has to cover the debt...they don't care if it helps anyone outside of the country if it bankrupts the country.

[RVDinar4MyFamily]

did you actually read it...it answers your questions....maybe you could get someone to read it to you really slowly.

If it goes against the kool aid mindset he both follows and endorses then he will not consider it. Lack of facts distorts ones perception of reality. People on this site have built him up to be someone with great insight, but his rep is actually based on his sharing of BS intel and bogus made up dates and rates from known liars. When he does try to talk like he knows something about this investment, his true lack of understanding shows through. As usual I will be bashed by his loyal following of kool aid drinking dreamers, but sometimes reality bites. There are a lot of reasons why RD does not make sense for Iraq, but it absolutely cannot be ruled out as a possibility.

[AZ Native]

Back and forth, Back and forth, Back and forth.

NOBODY KNOWS WHAT WILL HAPPEN OR WHEN IT WILL HAPPEN !!!!!

Take a chair, SIT DOWN and WAIT with EVERYONE ELSE.

We will ALL find out at the same time......

[easyrider]

If it goes against the kool aid mindset he both follows and endorses then he will not consider it. Lack of facts distorts ones perception of reality. People on this site have built him up to be someone with great insight, but his rep is actually based on his sharing of BS intel and bogus made up dates and rates from known liars. When he does try to talk like he knows something about this investment, his true lack of understanding shows through. As usual I will be bashed by his loyal following of kool aid drinking dreamers, but sometimes reality bites. There are a lot of reasons why RD does not make sense for Iraq, but it absolutely cannot be ruled out as a possibility.

personal attacks really?? well i see i have stirred the pot. Hey i know evryone will not like ME and im ok with that. Honestly you dont know me personally. So why bash me? and i do remember you came off with this lavish rumor about you and the pool boy. I dont see why i must be attacked on a personal level but hey whatever floats your boat youre just a coward to personally bash me in my opinion. I will defend myself. The reason i have brought this to attention is because the Lopsters have never adressed the downside of an Rd and i was wondering why?

Ive brought rumors over so what?? dont read them then.

Edited July 30, 2011 by easyrider

[BlueJeanBaby]

You know i started to dig a little deeper and found the consequences of an RD to be almost catstrophic. People that believe in the method of them Rding that is fine i think otherwise. They believe we have one tracked minds and only believe in a BIG RV. Let me ask you this why do you dance around the fact redenominations have major consequences for countries trying to get foreign investors to invest and countries that are in major developments.

There are definitely pros and cons to everything and YES even an RD.... If they were def. going to RD why havent they DONE it yet and why are they still in talks about it???

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.

Hey easy ... here are my arguments for your points, one by one:

1 - Paper notes need to be replaced anyway, because the average life span of your average paper note is around 18 months. Old bills are taken out of circulation, destroyed and replaced on a regular basis already by every country that uses them, so the cost of simply making new bills is negligible, and is part of the 'cost of doing business' if you will. If it was that expensive, then our own government wouldn't be doing it ... ummm, check that. Seeing as how this current administration seems to have zero economic know-how, that last statement may be a bit of a misnomer, but the fact remains that printing and minting the new currency isn't that costly, and will indeed be offset by the value of the new currency in relation to it's current value.

2 - For the cost factor, see #1. Regarding the concern for old bills to be 'smuggled' etc ... if the old currency is no longer valuable, tradeable or otherwise worth anything, then there's no risk because it's worthless. It's pointless for anyone to try and do anything with the old stuff because it won't be possible - seeing as how there's the new stuff now, because the old is OLD and no longer considered 'legal tender for all debts, public and private' (as it says on our bills.) Once the transition takes place, and the deadline for legally and officially using the old bills has passed, it's o v e r, and the old bills will be wallpaper, or T P or whatever else.

3 - The cost of explaining the new bills should be as much as it costs to run ads on TV and in the newspapers. "Hey folks, this is the old money, which has been worthless for many years now. This (show pictures) ... this is the new money, and it's not worthless anymore. You can now buy stuff with it all over the world because it's now recognized on the FOREX, and by banks everywhere. You can go to your local bank and turn in the old for the new, and then go forth and be happy. Any questions?" It's really NOT THAT COMPLICATED.

4 - Again, for the cost, see #1. Regarding the lost time waiting in the bank ... uhh, gee, well I guess everyone will just have to deal, unless they want to keep their old, worthless wallpaper in their pockets. The best thing they could do is have police or military on hand to do crowd control, and understand that this IS a huge, monumental, ginormous, reallyreally big thing that's happening, and to prepare for it as best as they can (which, in my humble opinion, is one of the reasons this hasn't happened yet ... but I digress.)

5 - That's why the US is there. We will help them with the transitory bumps in the road until they're stable enough to take over, and then our work (for the RV process) will be done. Of course, we will still need to be a presence for security and other reasons for some time to come.

6 - I think we've been in the midst of the 5-year thing for a while now ... but what they did with the Euro is a little different than what's happening with the RV (HUGE understatement.) Using the Euro for comparison with this process is pointless because it's not the same process to begin with. They took a dozen or so different currencies from that many countries and amalgamated it all into one - the IQD is nothing like that.

7 & 8 Again, all we (the US and Iraq) can do is prepare as best as we can for what may come, and take whatever precautions we can against fraud and other sinister stuff from happening. As far as people being followed after they trade in their currency, only a great fool would leave the bank with wads of cash in their pockets ... and as everyone knows, a fool and their money are soon parted. As sad as that sentiment is, it's also true, so if some fool leaves the bank with piles of cash and gets mugged, who's fault is it REALLY? Crime happens. Bad things happen! We have to be responsible, AS PEOPLE, for our stuff, so hopefully, personal responsibility is something that's being discussed, and people will take care to open accounts to put their new money into. In the event that someone is unable or unwilling to do that, I wish them the best.

That's my story and I'm sticking to it.

GO RV !!!

[RVDinar4MyFamily]

personal attacks really?? well i see i have stirred the pot. Hey i know evryone will not like ME and im ok with that. Honestly you dont know me personally. So why bash me? and i do remember you came off with this lavish rumor about you and the pool boy. I dont see why i must be attacked on a personal level but hey whatever floats your boat youre just a coward to personally bash me in my opinion. I will defend myself. The reason i have brought this to attention is because the Lopsters have never adressed the downside of an Rd and i was wondering why?

Ive brought rumors over so what?? dont read them then.

Truth hurts, sorry.

The true investors here would rather debate all the possibilities, then push bs rumors and intel to an ever growing base of under informed new investors. When pumpers and their pets like you falsely give hope of great riches every Monday, these newbies take risks most of them cannot afford. The newbies are being taken advantage of, and everytime you spread these rumors from proven liars, you yourself are contributing to this exploit. You say you will defend yourself, go for it, and I will continue to call you out for what you are, a pumpers pet.

[easyrider]

Truth hurts, sorry.

The true investors here would rather debate all the possibilities, then push bs rumors and intel to an ever growing base of under informed new investors. When pumpers and their pets like you falsely give hope of great riches every Monday, these newbies take risks most of them cannot afford. The newbies are being taken advantage of, and everytime you spread these rumors from proven liars, you yourself are contributing to this exploit. You say you will defend yourself, go for it, and I will continue to call you out for what you are, a pumpers pet.

i only wish i was a pumpers pet and getting paid unfortunately thats so far from the truth i thought my ? was legitimate and has never been answered as of yet so you are looking pretty foolish you personal attack me everytime i post so with that said good luck and have a good evening.

P.S maybe you should call the FBI on me maybe they can raid my house. hahaha.

Edited July 30, 2011 by easyrider

[HopefulTxn]

i am being honest im saying why havent they brought about the risks??? answer me that??? why did i have to point it out? anyways its a never ending battle im looking forward to the dispute between sonny1 and jmw. even then it wont accomplish much because we all have our stance we can only wait and see only reason i posted this is to allow people to see an RD does have risks.

You do realize that if there were some problem that Iraq was to have because of an RD, that problem would be FAR WORSE had they had a significant RV right?

Think about it. If there was an economic problem/crisis after a redenomination, wouldn't that problem be even more pronounced if they had overstated the value of their currency by 100 to 1000 times? Currency is a liability, not an asset, to a central bank. If the central bank were to falter and not be able to support the value of the currency after a redenomination, how could they have ever covered it if it had been valued 100 to 1000 times more?

Redenominations themselves are basically nothing more than pressing reset after high inflation. If a country has not adopted new economic and fiscal policies the RD will most likely fail. Not because they RD'd, but because they hadn't resolved the causes of what led to them to have to RD in the first place. RD's don't cause inflation, they don't reduce inflation, they simply remove the effects of inflation to give an economy room to grow again.

[dinarck]

Because you want to believe so bad, you are able to overlook anything that does't meet your desire.

If that is what you want out of life, so be it.

Don't drag others down to your level.

You act like a ReDenomination is as scary as aliens from outer space.

It has been done in the past, it will be done in the future, and it doesn't matter how hard you grunt, it is on the table for for Iraq.

When someone takes the time to publish a full report, and you only take half the information and try obscure the meaning to support your opinion, you let everyone here get a good look at your character.

Take a chance; look at both sides of the coin.

Well said Dalite.

[RVDinar4MyFamily]

i only wish i was a pumpers pet and getting paid unfortunately thats so far from the truth i thought my ? was legitimate and has never been answered as of yet so you are looking pretty foolish you personal attack me everytime i post so with that said good luck and have a good evening.

P.S maybe you should call the FBI on me maybe they can raid my house. hahaha.

So, you don't get paid, you help them exploit the newbies for free? Yeah, that makes it ok...

Your question was legitimate, but you only want to provide the one side of the arguement that supports your view and not the whole document. Your answer is there if you would open your mind and just read it.

[Chilliherb]

G'Day Bloke's & Sheila's

Wow, everyone is tight as a Dike plug tonight, IMHO this is a game that we the small fry are unfortunately restricted to the side line on.

Guys last few day I have been sitting watching and assessing stuff that is showing up. I do however think the possibility of a straight RV is now a little to ambitious to expect. Notwithstanding this what I do believe will happen is this, I think they will RD and RV at the same time and I am hoping the the RV will be in line with alignment with the Kuwait current rate otherwise they will not have the funds to even feed the Iraqi people.

I think the amount that is held by the various Governments around the globe is sufficient that they will be satisfied with the 300% return on their held reserves. The only downside I think we have to be wary of is if the GOI restricts exchange to be done in country only and that will suck big time.

Now if they float their currency at that new rate then the in country exchange worry is gone. What this actually means is unless the average Joe Bloggs is prepared to sell his soul to the devil and invest to a level of $300,000.00 which if done by anyone then their family should have them certified and locked up.

So the ones with Mega bucks to risk will make money as they will spend the money in the first case. Personally I will be disappointed if it goes down this track, but if it does turn a 300% profit over a twelve month period then like the song say's guys "don't worry be happy"

Easy I have to agree with Bluejean that in the main your reasons for no RD on those reasons would be cost justified and not have a impact on the introduction of a RD.

Having said that what I would invite from JMW & Dinark is their rebuttal of the fact that turkey which had RD'd almost went belly up on the basis of doing the RD having ignored the IMF's advice in management of their RD. Perhaps you guys have something to add on that.

Also if Iraq RD's and its currency increases to the $3 + mark then this does not give them enough capital to rebuild the infrastructure hardware , Roads, Bridges, Power Plants, Pipelines, Water and the list goes on. this will leave them on a road of 10-20 years to even get the country back into the global game.

Iraq has more than oil to offer globally and unless they repair the infrastructure on a fast track program which demands massive funding capital they are not in the race.

I do not espouse to be or have the skills to call how a nation runs its economics but what I do know is the US does not have a lot more to give in dollars to Iraq so they are on their own and far as funding the rebuild is concerned.

I suspect there are factors tied up with the Dinar that is held by the US and other in their Reserve's that based on the amount held will be very worthwhile to acting as a relief valve for those who have currency in crisis such as the US, to those who may have a cruisey ride to nation building with plenty in reserve for adjustments such as China who is not playing fair on the basis of holding the Yeun artificially low for their holding strength in Exporting.

Guys I believe there are further arguments for rapid wealth generation for Iraq on the basis of them getting back to the world stage and I further believe that a Straight RV or Rapid RI is the best way to achieve it.

Most importantly Guys CALM DOWN Sheeeeeezzzzzzz

Cheers Chilli B)

Edited July 30, 2011 by Chilliherb

[Chilliherb]

'

Edited July 30, 2011 by Chilliherb

[jmw]

G'Day Bloke's & Sheila's

Having said that what I would invite from JMW & Dinark is their rebuttal of the fact that turkey which had RD'd almost went belly up on the basis of doing the RD having ignored the IMF's advice in management of their RD. Perhaps you guys have something to add on that.

Most importantly Guys CALM DOWN Sheeeeeezzzzzzz

Cheers Chilli B)

I'm not going to lie...I find myself always reading your posts with an accent...which is kind of fun...so thanks for that.

The problem with the Turkey example is that I can't find anything that shows they almost went belly up...can you provide something for me?....but when Iraq uses Turkey as an example I do not believe they are saying they want to avoid what happened to Turkey...the articles are very clear that they are redenominating the same way Turkey did....thanks for your thoughts.

[caz1104]

i am being honest im saying why havent they brought about the risks??? answer me that??? why did i have to point it out? anyways its a never ending battle im looking forward to the dispute between sonny1 and jmw. even then it wont accomplish much because we all have our stance we can only wait and see only reason i posted this is to allow people to see an RD does have risks.

Good luck with any of the naysayers being honest,they spew there side of the equation and talk down to those who question them."Intellectual Honest" my arse,time will tell and lets just hope its on the side of an RV.