Redenomination Question

[Kimberlye]

I am sorry if this has been asked and answered, but I looked and couldn't find it. With all the news out of Iraq seeming to state they are going to delete three zeros, I would just like to be prepared if it does in fact happen.

I'm using round numbers just as an example. Feel free to use the real numbers when responding.

My question is this: Say you have 1,000,000 dinar that you paid $1,100 USD. Now they take off the zeros and you now have 1,000 dinar but still worth $1,100. At the same time that Iraq drops the zeros, they have new currency, lower denominations, that do not have the zeros that are now in circulation. Now say I have that 1,000 dinar in a bank account in Iraq. Can I not now take my $1,100 USD out of Warka and buy another million Iraqi dinar and deposit that back into my Warka account? The price would still be $1,100 for a million. Right?

Again, the above is just an example. I hope it makes sense. It seems to me if this were the case, at that point is when the big dogs would get in and buy up the dinar knowing that it's going to start going up in value from there.

Isn't it possible that, IF there is a redenomination, we could all do the same thing? It would obviously be a long-term investment from there, but worth it in my opinion.

Thanks to anyone who can help me understand this.

Happy Monday,

Kimberlye

[GT5Junkie]

I'm not 100% sure I understand what you're asking, but if you have a Warka account and there was a Redenomination you wouldn't need to do anything at all. Your 1,000,000 dinar worth $855 would become 1,000 dinar worth $855 with no action necessary from you.

After a 3 digit RD, the price would be (without extra charges/spread) $855 per thousand, not $855 per million, and I think you're right, it could be a potentially good (but relatively long term) investment.

[Dalite]

Kimberlye,

The same stroke of the pen that triggers release of the new currency will signal dividing all by 1000.

1000 dinar at 1170 dinar per dollar is worth the same as 1 dinar at 1.17 dinar per dollar.

The removal of 3 zeros on the currency would dictate the same number do decimal shift on the exchange rate.

You would be able to buy back old dinar until they are totally phased out, but they will still be worth what you pay for them, and you would introduce bank spread, which would take some of the value away.

Currently, a million dinar at 1170 dinar per dollar is worth around $860.00.

After a RD, 1000 dinar at 1.17 dinar per dollar would be worth around $860.00

Yes, the currency dealers got us for around $250.00 per million as their cut.

Nothing has happened yet. Maybe there will be another way...

[HopefulTxn]

My question is this: Say you have 1,000,000 dinar that you paid $1,100 USD. Now they take off the zeros and you now have 1,000 dinar but still worth $1,100. At the same time that Iraq drops the zeros, they have new currency, lower denominations, that do not have the zeros that are now in circulation. Now say I have that 1,000 dinar in a bank account in Iraq. Can I not now take my $1,100 USD out of Warka and buy another million Iraqi dinar and deposit that back into my Warka account? The price would still be $1,100 for a million. Right?

Using your numbers you would be able to buy 1 million 'old' dinar with that amount, but not 1 million 'new' dinar. You would gain nothing by withdrawing, repurchasing and redepositing in that scenario.

[BlueOrchid919]

I am sorry if this has been asked and answered, but I looked and couldn't find it. With all the news out of Iraq seeming to state they are going to delete three zeros, I would just like to be prepared if it does in fact happen.

I'm using round numbers just as an example. Feel free to use the real numbers when responding.

My question is this: Say you have 1,000,000 dinar that you paid $1,100 USD. Now they take off the zeros and you now have 1,000 dinar but still worth $1,100. At the same time that Iraq drops the zeros, they have new currency, lower denominations, that do not have the zeros that are now in circulation. Now say I have that 1,000 dinar in a bank account in Iraq. Can I not now take my $1,100 USD out of Warka and buy another million Iraqi dinar and deposit that back into my Warka account? The price would still be $1,100 for a million. Right?

Again, the above is just an example. I hope it makes sense. It seems to me if this were the case, at that point is when the big dogs would get in and buy up the dinar knowing that it's going to start going up in value from there.

Isn't it possible that, IF there is a redenomination, we could all do the same thing? It would obviously be a long-term investment from there, but worth it in my opinion.

Thanks to anyone who can help me understand this.

Happy Monday,

Kimberlye

Based on their stated plans to redenominate and keep their current fixed exchange rate:

Once they drop the zeros and release the new currency, 1,000,000 new dinars will be worth $854,700 USD.

Your original 1,000,000 old dinars (those we now have) becomes 1,000 new dinars and they will be worth $854.70.

This is a redenomination. They have not indicated any intent to increase the value of their IQD. Just simply removing 3 zeros and allowing old currency and new currency to exist at the same time.

Now if they do something different than a traditional RD....that remains to be seen. We should know more in the weeks to come.

[Kimberlye]

Thank you all so much for responding. I just realized what I was wrongly thinking. It won't be 1170 dinar to the dollar after the denomination. Sorry for wasting your time. My brain just needed to wake up I guess.

I was just trying to figure out how to get more dinar before the value starts going up, but I guess that's not going to work. I will just have 1,000 dinar per million when it's all said and done.

Thanks again,

Kimberlye

[WorkerBee]

Thank you all so much for responding. I just realized what I was wrongly thinking. It won't be 1170 dinar to the dollar after the denomination. Sorry for wasting your time. My brain just needed to wake up I guess.

I was just trying to figure out how to get more dinar before the value starts going up, but I guess that's not going to work. I will just have 1,000 dinar per million when it's all said and done.

Thanks again,

Kimberlye

I'm there with you Kimberlye but don't get discouraged. I'm hoping someone will figure out how to pull that rabbit out of the hat! That rabbit is there somewhere!

[GI_Jane]

Kimberly,

No question is a waste of time. I personally thought exactly the same thing you did. Take the money, invest in Warka, and try to figure out the ISX.

[Kimberlye]

I'm there with you Kimberlye but don't get discouraged. I'm hoping someone will figure out how to pull that rabbit out of the hat! That rabbit is there somewhere!

Workerbee,

We can hope 20million is on to something and this question for us will then be moot. You're right, that silly "wabbit" is here somewhere.

Kimberly,

No question is a waste of time. I personally thought exactly the same thing you did. Take the money, invest in Warka, and try to figure out the ISX.

Gi_Jane,

Thank you. After I had my coffee and realized my thinking was all wrong, I figured I'd be getting bashed. I'm so glad we have such understanding people on this site. I guess we'll see what happens. My plan has always been to look into ISX eventually. I do think that could eventually be a good investment as well.

Have a great evening and thank you both for the encouragement.

Kimberlye

[dinarck]

Kimberlye, after the redenomination (if that is the route they choose) the rate for the old currency will remain 1170 unless they decide to bring the rate to 1000 to match the new currencies rate of 1. I know this is confusing so I will try to explain. If the new currency is to replace the dollar in Iraq its rate will need to be at least 1 to 1. I believe if we see a RD the .00085 or .85 new will be no longer and they will come to par with the USD. This has been hinted at in a few articles recently. Also hinted at was the fact that the old and new currency will coexsist meaning the old 000 notes and the new notes will be used at the same time to buy the same items and will have the same worth. This is how it has been done in other countries and in my opinion is what we are being told Iraq wants to do. Under this senerio they would have to give the new dinar a different name or a different symbol or abbreviation. So this is how it might look. IQD....1000 IQD=1 USD /// NIQD....1 NIQD=1 USD. Not saying they will use that abbreviation maybe another but you can see both of these currencies have the same value because the IQD has 000s on the notes canceling out the value lost by the exchange rate. So if an Iraqi wanted to buy a toothbrush that cost 1 dinar he could buy it with an old 1000 note or a new 1 note. Both worth 1 USD which is what the toothbrush is worth.

Hope that makes sense and helps answer your question.

[Kimberlye]

Dinarck,

Thank you, yes, that helps. Are they going to coexist untl such time that they announce the old dinar is no longer a valid currency? If they RV after the RD, then only the new dinar RVs and the three zero notes stay at 1170 indefinitely? I'm a little concerned because my dinar is all in Warka and I'm really torn on what to do at this point.

Sorry for all the questions, but that's why you get paid the big bucks,

Thanks,

Kimberlye

[dinarck]

Dinarck,

Thank you, yes, that helps. Are they going to coexist untl such time that they announce the old dinar is no longer a valid currency? If they RV after the RD, then only the new dinar RVs and the three zero notes stay at 1170 indefinitely? I'm a little concerned because my dinar is all in Warka and I'm really torn on what to do at this point.

Sorry for all the questions, but that's why you get paid the big bucks,

Thanks,

Kimberlye

More than likely the old 000 notes will be removed from circulation inside of Iraq within some time period as they are spent by Iraqis and returned to the CBI. This could be a year or 3 or 5. As far as the 000 notes that we hold that is anyones guess on when those become nil and void. Now the dinar in your Warka account I wouldnt worry too much about if I were you. I personally wish I was in your position and had an account of my own because if it in fact RDs then your dinar will be electronically changed to new dinar I would think. Then over time if the exchange rate climbs you get paid while we are trying to figure out a way to exchange our old to new. Haha. Of course this is if they RD which we dont know for positive but you are in a better position than most if it does.

[Kimberlye]

Dinarck,

Thanks so much for your patience and answers. You're right, nobody knows, I'm just trying to understand all sides of this story just in case.... I've been in it awhile and I do understand the process somewhat, but, I swear, you can't help but get confused when there are 30 people all saying different things mean "blue," if you know what I mean. Thanks for clarifying for me.

Have a great evening,

Kimberlye

[dinarck]

No problem Kimberlye.

[estewart]

Mainly, an elimination of the three zeros is but a cosmetic job. It helps hide the fact that a MAJOR inflation occurred.

[ashtray]

this lop thing is the worst possible scenario in my opinion ,,,, if they do lop off 3 zeros they almost have to rv also .. and im thinking 4 dollars possibly 5 ... bringing your one million worth to 4 to 5 thousand dollars .. 25 to 30 billion dollars worth of currency is not enough when the govt budget alone is around 110 billion dollars ....

the govt budget is supposedly only 20% of the countrys wealth .. i just dont see it happening .. even if we have read stories about it happening .. in my opinion they need a minimum of 750 billion worth of dinars circulating in their country and abroad in foriegn reserves .. they in my opinion actually need 2.5 trillion in new dinars worth a dollar each to finance this expansion ..

they only way they could do that is to only delete one zero .. and bring money suppy from 25 trillion to 2.5 trillion .. thats just my own opinion ..

[Froto]

I am sorry if this has been asked and answered, but I looked and couldn't find it. With all the news out of Iraq seeming to state they are going to delete three zeros, I would just like to be prepared if it does in fact happen.

I'm using round numbers just as an example. Feel free to use the real numbers when responding.

My question is this: Say you have 1,000,000 dinar that you paid $1,100 USD. Now they take off the zeros and you now have 1,000 dinar but still worth $1,100. At the same time that Iraq drops the zeros, they have new currency, lower denominations, that do not have the zeros that are now in circulation. Now say I have that 1,000 dinar in a bank account in Iraq. Can I not now take my $1,100 USD out of Warka and buy another million Iraqi dinar and deposit that back into my Warka account? The price would still be $1,100 for a million. Right?

Again, the above is just an example. I hope it makes sense. It seems to me if this were the case, at that point is when the big dogs would get in and buy up the dinar knowing that it's going to start going up in value from there.

Isn't it possible that, IF there is a redenomination, we could all do the same thing? It would obviously be a long-term investment from there, but worth it in my opinion.

Thanks to anyone who can help me understand this.

Happy Monday,

Kimberlye

The first thing you have to realize is that 1 million dinar is not worth $1100 USD. You paid $1100 USD for $786 worth of dinar. Now do you see what this investment is based on?

You lopsters are some real negative people. Why don't you folks go cash in, and move on to something else since you have all the answers?

Ask me again in five years. Never mind. By that time you will have figured it out for yourself.

,,,, if they do lop off 3 zeros they almost have to rv also ..

You do realize this has never happened in the real world?

Edited August 17, 2011 by Froto

[HopefulTxn]

this lop thing is the worst possible scenario in my opinion ,,,, if they do lop off 3 zeros they almost have to rv also .. and im thinking 4 dollars possibly 5 ... bringing your one million worth to 4 to 5 thousand dollars .. 25 to 30 billion dollars worth of currency is not enough when the govt budget alone is around 110 billion dollars ....

the govt budget is supposedly only 20% of the countrys wealth .. i just dont see it happening .. even if we have read stories about it happening .. in my opinion they need a minimum of 750 billion worth of dinars circulating in their country and abroad in foriegn reserves .. they in my opinion actually need 2.5 trillion in new dinars worth a dollar each to finance this expansion ..

they only way they could do that is to only delete one zero .. and bring money suppy from 25 trillion to 2.5 trillion .. thats just my own opinion ..

A re-denomination in itself is a 'revalue' of sorts. It is just a neutral revalue so that the number of zeros removed from the currency are also removed from the exchange rate to the currency it is valued against, in this case it's the USD. All revaluation means is a change in value per currency unit, which is something that happens when you perform a re-denomination.

The budget and their currency in circulation have absolutely nothing to do with one another. It's not like a dinar can only be used one time and then it's thrown away for one, and another reason is that much of their budget is for infrastructure materials and military rearmament which can easily be paid for in foreign currency (USD, Euro, etc) as it will be coming from sources outside of their borders. I know, some people mention dollarization, but that only occurs when the dollar becomes the currency of choice of its citizens using it for everyday purchases and such inside Iraq because it is easier to use than the local currency - the government (or anyone actually) can spend as much USD (or any other foreign currency) outside of their borders as they wish without the problem occurring.

One question that I have yet to see answered by any guru (or anyone that claims an RV must happen) is how a country, whose currency base is valued at say $80 billion USD, suffers hyperinflation and massive over-printing of currency, is supposed to to have a monetary base valued many times higher just because those items were removed. It has been stated many times that their currency base was 25 billion dinar when it was $3.22, which would equate to about $80.5 billion USD - why, simply because they removed the problems that devalued it, would it suddenly be worth trillions? They are not providing any more financial backing to the currency than they did previously, they are not pumping more oil than they ever have (they have pumped over 3 mbpd before), so why would the value of their monetary system suddenly shoot up several fold just because they removed the problems that put themselves in this predicament in the first place? That's not even using the $3+ rate some people claim, but using just a $0.10 revalue with currently stated monetary levels.

I would love to see the 'get rich quick' thing happen as much as the next person, but based on the information that is out there it just doesn't seem likely.