It's not enough

[drox]

Clearly... the Iraqi's still prefer the security of the US Dollar versus the Dinar even after some stability has been brought forth to curb inflation. However, Iraq has the difficulty of dealing with Trillions in money supply and ridiculously cheap value for each Dinar (currently at 1170 per $1). Transactions are also tricky because they are dealing with large number denominations... yada yada yada. But is Shabs being honest that an RD is the best solution?

Even if Shabs and the GOI agree to RD the currency, exchange rate, and money supply by removing 3 zeros will it really help dollarization? I say no. It will certainly make using Dinar easier and will give the illusion that they are at par with the Dollar, but it will not keep Iraqi's from using the Dollar, will it?

Why? Because Iraq still does not trust the GOI, the CBI, or the banks. Aside from the cosmetic change that occurs, nothing really will change in the marketplace. There is nothing in it for them. The value against the dollar does not increase so the lipstick on the pig will not change Iraqi's perception of it. They are not stupid. The ONLY thing that will influence Iraqi's to support the use of Dinar is IMPROVING the value of the Dinar against a seemingly DE-VALUATING trend of the US Dollar. Therefore... it would be a complete waste of time, energy, and money for Iraq to RD the currency without first revaluing the exchange rate to a much higher number than 1170. You must have incentive for the Iraqi's to embrace the Dinar. Increasing the rate of Dinar...against a decreasing Dollar will do the trick.

It is my belief the GOI will deny the RD and strongly encourage Shabibi to increase the rate. Therefore, an RD won't occur without a significant bump to the rate. So... Why change the currency denominations before experimenting with a new rate first? I think that is why we will see the new 100k notes. To make transactions easier in the marketplace in the meantime. The RD will be pushed back or eliminated by the GOI and a new rate will emerge soon in lieu of working with the same existing currency. Japan and India operate very successfully at a penny or two to the Dollar. Even at an RV of a penny, your $1000 per million Dinar investment will grow to $10,000 per million. Not too Shabibi!! At a penny, couldn't the CBI consider dropping 2 zeros instead? If it went to .10 (ten cents) you would make $100,000 per Million IQD... could the CBI consider dropping only 1 zero then? We have lots of options here I think.

The illusion is that it must be at par with the Dollar to eliminate dollarization. That is simply not true. It must be a better return irregardless of the nominal number for Iraqi's to choose Dinar over Dollars. Doesn't it? The time is now for Mr. Shabibi to reveal his true cards and unite this nation! We have entered the sweet spot time IMO.

Edited August 21, 2011 by drox

[bamagirl]

I like te way you think!!!

[steveo]

good post drox i sure hope we are at that sweet spot............

[WallyWeaver]

Thanks for the cogent explanation of your perspective drox. +1

It has been my opinion for several months now that we will make a profit on this investment, duh, right? But I think it will be somewhere between tripling (removing 3 zeros and then Rv) or making a 1,000 times our original investment (Rv at .10 cents).

If anyone is being sane about this they would have to admit that that is pretty dang good, at least as far as investing goes! I like your enthusiasm as far as leaning toward the .01 or .10 cents on the dollar, though... I would absolutely love to see that happen!

And this: Not too Shabibi... very funny!

[cottn68]

I gotta thank you drox, for articulating whats been rattling around in my brain for some time.

So along with your general line of thinking, I would like to ask your opinion on something...

say it does pop at .10, I am STILL not seeing the incentive for Iraqis to stray from the dollar at this rate, what is your take on that?

Doesn't it just make sense to be say, .01 or .10 above the dollar?

Interested to hear your thoughts.

[jmw]

Hey Drox...you know I'm a fan and I always appreciate your perspective....and wish it was a possibility, but unfortunately a 1000% increase would still be to large of a jump. It would put their currency at a value of $600 Billion US dollars which they just can't support. I'm not sure they will ever be completely de-dollarized...or if they need to be. IMO their best bet would be to RD to 1000 to 1 and then maintain that rate through a peg to the US dollar for a fairly long period of time which would restore confidence in the dinar locally...that's if it is really that important to them to stop using dollars...I'm still holding out for a RD and then push the rate up as the best opportunity to make any money off of this crazy ride.

[JuryPicker]

Hey Drox...you know I'm a fan and I always appreciate your perspective....and wish it was a possibility, but unfortunately a 1000% increase would still be to large of a jump. It would put their currency at a value of $600 Billion US dollars which they just can't support. I'm not sure they will ever be completely de-dollarized...or if they need to be. IMO their best bet would be to RD to 1000 to 1 and then maintain that rate through a peg to the US dollar for a fairly long period of time which would restore confidence in the dinar locally...that's if it is really that important to them to stop using dollars...I'm still holding out for a RD and then push the rate up as the best opportunity to make any money off of this crazy ride.

If that is all you're really expecting to make……..you really need to be doing something else with your time besides trying to convince all these pie in the sky suckers you are right. Go enjoy life! Embrace every minute, for you will never get it back. Just say to yourself, I'll make about 10K on this investment and move on with your life. You can even give me your phone number and I'll call you when they LOP and/or RD at 1/1000 and let you know. And remember, enjoy your life MR JMW. P.S. If you would, get me Keeps number and I'll call him too while i'm at it. Peace and Happiness to all and to all a very good night!!!!!!! POWER TO THE LOPSTERS AND HAVE NOTS! JP

[jg167]

It is my belief the GOI will deny the RD and strongly encourage Shabibi to increase the rate. Therefore, an RD won't occur without a significant bump to the rate. So... Why change the currency denominations before experimenting with a new rate first?

The two are certainly technically disjoint and could happen before during or after each other, but an RV might be politically good as you say, even if a small one.

I think that is why we will see the new 100k notes. To make transactions easier in the marketplace in the meantime.

Printing 100k notes does seem odd if an RD is imminent. Though I'm hard pressed to understand it even without an RD, is 4x really that much of a hassle to need the bigger bill, but not going to say 500k? Maybe.

The RD will be pushed back or eliminated by the GOI and a new rate will emerge soon in lieu of working with the same existing currency. Japan and India operate very successfully at a penny or two to the Dollar. Even at an RV of a penny, your $1000 per million Dinar investment will grow to $10,000 per million. Not too Shabibi!! At a penny, couldn't the CBI consider dropping 2 zeros instead? If it went to .10 (ten cents) you would make $100,000 per Million IQD... could the CBI consider dropping only 1 zero then? We have lots of options here I think.

I think we can be pretty sure the RD will be a power of 10 since prices etc will be in both for a long time, so that makes it really easy. But sure it could be 1000:1 and a rv of .00086 to .001, or an RD of 100 and an RV to .01 etc.

Adam likes the 0.10 value, I think even 1 penny is very hard to imagine. Its the jump and the exchange cost that is the problem. The value of the money supply and the value of the good and services its chasing after in GDP can't get too far out of sync or you either starve the economy or everyone has so much buying power that demand wildly outstrips supply and prices spiral out of control. I've called that last effect inflation before, but it really isn't. Its just demand driven price increases. If an Iraqi has saved your 25M IQD to buy a $2,500 USD scooter (from japan of course) and now their 25M IQD is wroth $250K USD, isn't that $50K USD BMW going to be looking sweet? With a line around the block and 50 people asking to buy each of his 10 cars, is he going to keep the price the same?

Lets say they plan on GDP being double and half the dinars in the relevant money supply (m2? m1? ..) will be taken out of circulation by folks cashing in, but that's only a power of 4, and would already cost maybe 100B USD (say 10T dinars at a penny each). But that leaves M2 still way over valued, we need a factor of 10 and we only have 4 so far. So even a penny seems hard to reach all at once. A dime or a dollar, no way.

[dog53]

Drox You are the greatest read man. I always enjoy it. You make the people keep the faith. Always good JUJU

+1

[drox]

I gotta thank you drox, for articulating whats been rattling around in my brain for some time.

So along with your general line of thinking, I would like to ask your opinion on something...

say it does pop at .10, I am STILL not seeing the incentive for Iraqis to stray from the dollar at this rate, what is your take on that?

Doesn't it just make sense to be say, .01 or .10 above the dollar?

Interested to hear your thoughts.

Hey cottn...

The way I see it any increase is a step in the right direction. With the concern over the dollar losing value, an increase in the Dinar will have them going in opposite directions. Word on the street will change the negative Dinar perception quickly. It is kind of like an investor in the US that has stock but it isn't moving. Gold starts increasing at an increasing rate vs. stocks. Pretty soon you reach a threshold and say... screw this I am selling stock and buying gold. Even a 100 point bump to the Dinar could be significant indicator in Iraqi's perception. A tipping point will eventually occur where everyone will see it is going in the right direction and has tremendous upside. The best thing would be for the Parliament to increase laws against corruption and start really lending money to the Iraqis at the banks in conjunction with the increase to the rate. Speculators in Iraq are buying Dinar just anticipating a small bump of 15% with the RD talk. Going from 85 cents and RVing to $1 after dropping 3 zeros. Imagine what could happen if they bumped it up considerably more than 15% and not RDing? I am not sure they could go to a penny or ten cents now... but that is where internationally trading becomes intriguing and exciting with the IQD. I do not want it to RD at all. Too much volatility for us in converting ours at the moment and that makes me nervous.

[tandy]

Drox..... Great minds think alike...I just wish I could include mine in that statement. Good post my Friend. More folks should think along those lines and stay focused instead of running off and jumping into some of the cesspools of misinformation. Thanks for the brilliant reasoning and your explanation on a confusing subject to a lot of people....cheers

[Dalite]

Hey cottn...

The way I see it any increase is a step in the right direction. With the concern over the dollar losing value, an increase in the Dinar will have them going in opposite directions. Word on the street will change the negative Dinar perception quickly. It is kind of like an investor in the US that has stock but it isn't moving. Gold starts increasing at an increasing rate vs. stocks. Pretty soon you reach a threshold and say... screw this I am selling stock and buying gold. Even a 100 point bump to the Dinar could be significant indicator in Iraqi's perception. A tipping point will eventually occur where everyone will see it is going in the right direction and has tremendous upside. The best thing would be for the Parliament to increase laws against corruption and start really lending money to the Iraqis at the banks in conjunction with the increase to the rate. Speculators in Iraq are buying Dinar just anticipating a small bump of 15% with the RD talk. Going from 85 cents and RVing to $1 after dropping 3 zeros. Imagine what could happen if they bumped it up considerably more than 15% and not RDing? I am not sure they could go to a penny or ten cents now... but that is where internationally trading becomes intriguing and exciting with the IQD. I do not want it to RD at all. Too much volatility for us in converting ours at the moment and that makes me nervous.

Drox,

As always, I appreciate your ability to look down the road and see another possibility.

Great comparison of a 15% and no RD to RD and 1:1 parity.

With our shared view of Maliki, and his fears of losing power, a small increase in the Dinar against the dollar, with market driven value increase seems like a distinct possibility.

I understand the desire for a RD, as well as the overall benefits, but am not sure that Iraq has yet attained the stability needed for an economic change with the finality of a RD to occur, just yet.

So, let's all keep a positive view of the outcome, and continue to look for another solution that doesn't have the finality of a RD, such as the ideas you put out there.

[Drowning in His Mercy]

Not too Shabibi!! Me liki

[drox]

Hey Drox...you know I'm a fan and I always appreciate your perspective....and wish it was a possibility, but unfortunately a 1000% increase would still be to large of a jump. It would put their currency at a value of $600 Billion US dollars which they just can't support. I'm not sure they will ever be completely de-dollarized...or if they need to be. IMO their best bet would be to RD to 1000 to 1 and then maintain that rate through a peg to the US dollar for a fairly long period of time which would restore confidence in the dinar locally...that's if it is really that important to them to stop using dollars...I'm still holding out for a RD and then push the rate up as the best opportunity to make any money off of this crazy ride.

This is strange territory for us eh JMW?

I think it is possible. I agree that basic accounting rules and central bank money management techniques must be adhered to for the most part... but, this isn't exactly a normal situation. Take the Paris Club debt forgiveness for example. That is not a normal thing to expect either. Pretty much 80% of their debt was wiped off the books. Iraq's situation has certain functions and nuances about it that give the appearance it is in an internationally accepted Do-over mode. When you think about it... Don't you think that 1170 was pretty much an arbitrary rate plucked out of a hat? Sure it reduced inflation tremendously but couldn't that be construed that it was soooo much in the favor of the Central Bank's objective to reduce inflation that it actually hindered growth in the rest of the economy? That it was too low all along? What if they had 30 Trillion Dinar and it was worth a penny right now instead of 1170? Hypothetically speaking... Wouldn't you still be making the argument that they need to drop 3 zeros to RD right now? I mean... would you be considering 4 zeros at that number or just 3 still? I am guessing just 3.

If I was Shabs and I wanted to knock 3 zeros off of 30 Trillion ($26 Billion)... I would start printing money like it was going out of style before it Redenominated. Why not run that up to like 70 Trillion by lending to the people and the GOI and then RD? Spurring more growth in the process. $26 Billion is a relatively small M2 for a country with 31 million people in it...isn't it? The currency must be undervalued if they are still relying on the Dollar. Changing the nominal value isn't enough to sway them. Ease of use is important but it really boils down to trust and strength. That is the money illusion that an RD brings. It isn't stronger at all without bumps to the rate. If the plan is to drop 3 zeros and bring it to .86 cents then how much harder is it to increase the exchange rate at that point? It seems they would be better off using the existing currency, making significant increases to it now, measuring the effects, and then re-denominating later once the bugs are worked out if they want. Or... they can keep what they have and work towards reducing the supply. Perhaps trading it internationally will spread out that obligation across the globe to a certain extent? I doubt the US could cash everyone in the world in if they turned all the Dollars in at one time. Foreign currency flooding into Iraq from international investment will force the exchange rate up extensively anyway. Which will come first... the chicken or the egg?

Drox You are the greatest read man. I always enjoy it. You make the people keep the faith. Always good JUJU

+1

Thanks so much for the compliment. I am liked and hated. Sometimes both in the same threads. haha! I just try to come up with options and make people think and it pushes my education further too. A lot of smart folks on this site!

[Kimberlye]

Drox,

This is probably a dumb question, but one that I am confused and concerned about. If they RD and then raise the value at or above the dollar, wouldn't that have the same effect; de-dollarization? It seems like a waste of time, energy, and money to go through an RD to get, seemingly, the same result, but then they don't have to pay the speculators. Am I thinking right on this? I guess I'm confused on the benefit of a straight up RV versus RD and then revalue.

Thank you so much for taking the time to post your thoughts; I always look forward to them.

Kimberlye

[gsxr600]

makes sence but if this were true why would we keep seeing these glitches on sites like xe.com and yahoo.com all sort of matching each other a a much higher rate. If they were testing the systems why would they not put in a realistic figure? just curious.

[Darin]

Interesting perspective.... Your opinion & theories play well with a potential multiple tier R/V.

Question is, through a multiple tier R/V, does speculation remain strong even upon a R/V @ $0.01 or $0.10.

And how would that benefit Iraq if they foreign speculation held strong at those rates.

- It means a few good things -

1-- They don't have to cash out against those still holding, but even at $0.01 or $0.10 - many will dump

2 -- Others will still buy.... Especially if it becomes easily traded through places like Fx.

We can sit & speculate...... On the #s, but I will argue that many of us do not truly understand the logistics behind how the #s are produced.

I've seen intelligent people, who spend countless hours arrive at different opinions.

We know they prefer the use of hard currency... It is what they've become accustomed to.

They use hard currency as frequently as we use electronic currency.

We know what was initially printed in turn runs about 6.38 trillion (Which about 2T allocated to reserves)

Can we really believe they allowed the #s to expand up to 50-60 trillion?

If speculation was that "high" why not raise the value?

We can all formulate our own opinions on that......

One important factor: a stable rate would eliminate dollarization?

Doesn't seem to really be the effect...Still seems to be an issue...

Okay, so how do you build faith by printing a 3rd new currency?

You now have 3 currencies within a domestic country - which one likely will maintain dominance?

The currencies would be:

USD

IQD

and the Newly printed IQD.

Which one holds the most stability? Which one holds the constant value..? USD - so it may be the preference or choice.

IMO - A reasonable or some-what substantial R/V (even at $0.01-$0.10) - "may" have an influence on the citizens to turn to banks to store their valuable currency.

What are the benefits if a majority use electronic currency? Well they don't have to print as much currency to continuously reprint soiled currencies.

The problem here is a series of many conflicts. Mostly which rely on indecisiveness.

Okay, so we hear of a nearly imminent re-denomination, printing of new currencies & their release, and so forth.

If they happen to continue to push this down the road (kicking the can down the road)

Faith is lost with the CBI, GOI, and even the media (IMO)

Here is a concept to think about:

If the CBI were to view all IQD (whether electronic or hard currency) as a liability. Why would they increase the amount in circulation (in terms of units) as it increases potential liability upon the raised value.

This is another conflict that likely is an issue the CBI has to consider.

Just more points to think about.

[drox]

Drox,

This is probably a dumb question, but one that I am confused and concerned about. If they RD and then raise the value at or above the dollar, wouldn't that have the same effect; de-dollarization? It seems like a waste of time, energy, and money to go through an RD to get, seemingly, the same result, but then they don't have to pay the speculators. Am I thinking right on this? I guess I'm confused on the benefit of a straight up RV versus RD and then revalue.

Thank you so much for taking the time to post your thoughts; I always look forward to them.

Kimberlye

Hey Kimberlye... I certainly don't have the answers but I have my opinions for sure. I think you are saying RD and then RV is a waste of money versus just RVing. My answer is Yes and No. The problem is dealing with such large numbers for everyday transactions. Trillions actually has 12 zeros (I think). Billions have 9 zeros. It is just so much more confusing to use those numbers and most calculators don't even compute Trillions. So that aspect has a lot of strength behind an RD as well as just reducing the money supply numbers to make it look more aesthetically pleasing.

But if the country is struggling and even has had to borrow from the the IMF for huge budget deficits like it has the last couple of years... Is is really worth spending $200-$300 million dollars on Re-denominating and marketing and security for ease of use and esthetics? I say not at this time. So if it was to combat dollarization then maybe... but I think they have to increase the rate to shift the confidence factor in the Dinar's favor. My thought is... they are used to using the currency now, so add the 100k notes for ease of use concerns. Then revalue the rate in a significant chunk... monitor the results... and then RD later or decide to just keep it but either way go international.

[Darin]

Hey Kimberlye... I certainly don't have the answers but I have my opinions for sure. I think you are saying RD and then RV is a waste of money versus just RVing. My answer is Yes and No. The problem is dealing with such large numbers for everyday transactions. Trillions actually has 12 zeros (I think). Billions have 9 zeros. It is just so much more confusing to use those numbers and most calculators don't even compute Trillions. So that aspect has a lot of strength behind an RD as well as just reducing the money supply numbers to make it look more aesthetically pleasing.

But if the country is struggling and even has had to borrow from the the IMF for huge budget deficits like it has the last couple of years... Is is really worth spending $200-$300 million dollars on Re-denominating and marketing and security for ease of use and esthetics? I say not at this time. So if it was to combat dollarization then maybe... but I think they have to increase the rate to shift the confidence factor in the Dinar's favor. My thought is... they are used to using the currency now, so add the 100k notes for ease of use concerns. Then revalue the rate in a significant chunk... monitor the results... and then RD later or decide to just keep it but either way go international.

When we view the annual bulletins that may be found on the CBI website, we find that revenues exceed expenditures.

What I would take away from that is a surplus of funds..

Yet, they have claimed starting with a deficit when they run the new budgets.

Reading, and thinking that, I scratch my head and go Huh?

In other words, it is like we are paid bi-weekly. Prior to getting paid, we are claiming a negative balance yet we have spent less than what our pay-check is. How does that work?

Portions of the revenues, obviously must be going somewhere.

Question(s) are... Where? Why? and.. How?

[drox]

Interesting perspective.... Your opinion & theories play well with a potential multiple tier R/V.

Question is, through a multiple tier R/V, does speculation remain strong even upon a R/V @ $0.01 or $0.10.

And how would that benefit Iraq if they foreign speculation held strong at those rates.

- It means a few good things -

1-- They don't have to cash out against those still holding, but even at $0.01 or $0.10 - many will dump

2 -- Others will still buy.... Especially if it becomes easily traded through places like Fx.

I agree. I think speculation will be strong based on potential growth and known assets. This investment is labeled a scam by some because it isn't internationally traded. That will change dramatically. The big investors will move in for small increases based simply on foreign currency deposits in Iraq and noted improvements. Kind of like how big mutual funds won't trade penny stocks or very start-ups until they have proven themselves. They move on smaller calculated increases. Right now they won't touch it with a 10 ft pole even if right now might be the best time to jump in. All speculation on my part of course and not an endorsement. Opening on interbank sites will ensure there will always be a certain percentage of Dinar in transit and holding IMO that they would not have to cash out. Almost like bank reserves but more a result of circumstance then policy.

We can sit & speculate...... On the #s, but I will argue that many of us do not truly understand the logistics behind how the #s are produced.

I've seen intelligent people, who spend countless hours arrive at different opinions.

We know they prefer the use of hard currency... It is what they've become accustomed to.

They use hard currency as frequently as we use electronic currency.

We know what was initially printed in turn runs about 6.38 trillion (Which about 2T allocated to reserves)

Can we really believe they allowed the #s to expand up to 50-60 trillion?

If speculation was that "high" why not raise the value?

We can all formulate our own opinions on that......

I don't know what to make of the 60 Trillion number that has been mentioned by members here and certainly shows something on the CBI site. Where I get fuzzy on that is every article mentions between 27 Trillion and 30 Trillion. Not 60 Trillion. I am not sure if that additional 30 Trillion is bank reserves or not. The number I look at is 30 Trillion. When The Coalition Authority exchanged Dinar I think they printed 2300 tons worth of Dinar and expected to take in 3000 tons of old Saddam notes and Swiss Dinar. They ended up with 13000 tons!!! My point is... who knows what to expect. I know that the CBI will try to incorporate electronic exchange by offering some kind of banking incentives to increase deposits. Who knows how many tons of Dinar are out their for exchange? Wouldn't it be better to print less new Dinar? I think so. There has to be an incentive to make Iraqi's open new accounts and trust their banks again. Increasing the exchange rate but still keeping large denominations might be just the ticket. They may feel banking is safer for their newly established higher wealth then their wallets and mattresses.

One important factor: a stable rate would eliminate dollarization?

Doesn't seem to really be the effect...Still seems to be an issue...

Not eliminate but maybe start the paradigm shift at least. The dollar isn't so safe if it is potentially decreasing and your home country's currency is improving significantly. They will make that transition very quickly IMO and it won't have to be at par with the $1.

Okay, so how do you build faith by printing a 3rd new currency?

You now have 3 currencies within a domestic country - which one likely will maintain dominance?

The currencies would be:

USD

IQD

and the Newly printed IQD.

Which one holds the most stability? Which one holds the constant value..? USD - so it may be the preference or choice.

IMO - A reasonable or some-what substantial R/V (even at $0.01-$0.10) - "may" have an influence on the citizens to turn to banks to store their valuable currency. Agreed, which will increase lending ability which will increase Iraqi participation in growing Iraq! It will also increase the strength of banks so that International companies might obtain better guarantees and assurances which are critical to foreign investment. Banks are mostly focused on transaction fees for profit now. That will all change as deposits grow and lending applications increase.

What are the benefits if a majority use electronic currency? Well they don't have to print as much currency to continuously reprint soiled currencies.

The problem here is a series of many conflicts. Mostly which rely on indecisiveness.

Okay, so we hear of a nearly imminent re-denomination, printing of new currencies & their release, and so forth.

If they happen to continue to push this down the road (kicking the can down the road)

Faith is lost with the CBI, GOI, and even the media (IMO)

Here is a concept to think about:

If the CBI were to view all IQD (whether electronic or hard currency) as a liability. Why would they increase the amount in circulation (in terms of units) as it increases potential liability upon the raised value.

This is another conflict that likely is an issue the CBI has to consider. Yes... but if the money supply isn't growing neither is the economy. That will just happen and is probably an accepted practice for playing the game. I have a hard time seeing them keep the rate stagnant and expecting a different result though. Good questions!

Just more points to think about.

[Darin]

Drox - the 60 trillion is in reference to M2 figures.

The 30 trillion - that is hard currency.

So the remaining balance is likely, electronic funds, deposits, reserves, etc. etc.

But, I think many can agree that most use hard currency on a daily basis.. 95% is likely a reasonable #.

So, a majority that is considered a liability would be hard currency.

But, what is the ISX valued at? Those stocks are likely paid for by IQD & hold a value.

[Don & Rocio]

Always great to see you here Drox. I can understand both sides (RD vsRV) but I truley believe that they will adjust the rate with a managed float to get Iraqis to use the dinar more and when it gets to a certain point, introduce the lower denominations at the same time removing the 000's. What point do you think they will introduce the lower denoms?

[jmw]

This is strange territory for us eh JMW?

I think it is possible. I agree that basic accounting rules and central bank money management techniques must be adhered to for the most part... but, this isn't exactly a normal situation. Take the Paris Club debt forgiveness for example. That is not a normal thing to expect either. Pretty much 80% of their debt was wiped off the books. Iraq's situation has certain functions and nuances about it that give the appearance it is in an internationally accepted Do-over mode. When you think about it... Don't you think that 1170 was pretty much an arbitrary rate plucked out of a hat? Sure it reduced inflation tremendously but couldn't that be construed that it was soooo much in the favor of the Central Bank's objective to reduce inflation that it actually hindered growth in the rest of the economy? That it was too low all along? What if they had 30 Trillion Dinar and it was worth a penny right now instead of 1170? Hypothetically speaking... Wouldn't you still be making the argument that they need to drop 3 zeros to RD right now? I mean... would you be considering 4 zeros at that number or just 3 still? I am guessing just 3.

Hey D...yes...funny isn't it...but at least you didn't call me negative and ask me why I'm here!

I agree that there are unique things in play....I went back to look at the Marshall Plan as it was pretty unique as well...one of the odd parts of it was that during their redenomination after the war they had two different exchanges...one was one to one old Marks for new and the other was 10 to 1...so they basically dropped a "0" for some items and others were done one to one.

http://en.wikipedia.org/wiki/Deutsche_Mark

Not that I think that will happen in Iraq...but it does lend credence to your thoughts on this having different mechanics. Having said that...it is the size of the jump that I have issue with...not where it ends up. To move a currency that significantly without something to back it up just won't work IMO....it would cause significant ciaos in the market....as all imports would become significantly cheaper than domestic products...if it moved to a penny would they adjust pay, prices and loans based on that size of a move?

It isn't that it can't move forward...it just has to continue doing it the same as it has been for the last 8 years...a little at a time.

[Legolas]

Interesting perspective Drox. I guess it would make more sense to me if they hadn't put out so many articles describing exactly what they plan to do, and the reasons for it. I really believe that if they had any intention at all of doing any type of straight RV, there would have been absolutely no public discussion about it. Logically, something like that would be highly confidential, and simply occur in the middle of the night. Speculation resulting from a leak would undoubtedly be extremely destructive to their economy.

At this point, I'm hoping that they decide to increase the value over and above the 1,000 times it automatically increases with a removal of the three zeros. I think it makes a great deal of sense to do it simultaneously, and they could easily justify a sizable increase. This would reduce the confusion and likely speculation which would occur if they were to do it after the fact. Let's hope.

[MovieMaker]

Thank you for sharing Drox.