raising purchasing power-rv

[Special K]

I am ASTOUNDED how peeps are saying, "great news."

This is BAD NEWS!

IF an RV occurs BEFORE the LOP (RD) occurs we can make a few million.

If an RV occurs AFTER the LOP (RD) we can ONLY make a few thousand. And that's it.

Fact of REALITY!

Those existing zeros, for us, are incredibly beautiful. IF they disappear so will our possible gain.

FACT.

So, good news? No. Horrible news.

Get with the program!

Why would Iraq give their citizens lower denoms worth 1/10th of a penny. Let me ask you. If you were an Iraqi citizen, they ask you to exchange your 25k for a 25 note at the same value. Would you do it? I wouldn't. They are deleting the zeroes. This just mean there will be no longer note circulation with 000 on them because you won't need them. WHY? Because your currency is worth at least 1 US dollar now. They want the citizens to stop using the US dollar. So they have to raise the value to that level to get cooperation.

[Realdinar]

I am ASTOUNDED how peeps are saying, "great news."

This is BAD NEWS!

IF an RV occurs BEFORE the LOP (RD) occurs we can make a few million.

If an RV occurs AFTER the LOP (RD) we can ONLY make a few thousand. And that's it.

Fact of REALITY!

Those existing zeros, for us, are incredibly beautiful. IF they disappear so will our possible gain.

FACT.

So, good news? No. Horrible news.

Get with the program!

I was commenting on sonnys post in reference to the increase in purchasing power. You cant have an increase in purchasing power with an rd...its a neutral event...pay attention skippy...

[smitty1929]

special k, i really enjoy your optimism about the RV. I really don't think it will happen that way though, If you look at my post on the last page, I think that is what realistically will happen. Having them just drop the zero's off and giving us a whole lot of money just doesn't seem to realistic. loosing the 3 on both sides, RV'ing to a little over a dollar. that is understandable. That is a win win for all involved. If you had invested 100k, then you would have a good return, if you invested 1k (like me) you will of had fun, and could possibly justify all the hours at your computer by looking at your little profit, as if you were getting paid to sit at the computer and look at this stuff. I am kinda happy that this is ending because I have spent more time a t the computer that the profit i will make.

[Sirius]

I was commenting on sonnys post in reference to the increase in purchasing power. You cant have an increase in purchasing power with an rd...its a neutral event...pay attention skippy...

I'm not sure how, but I read that with Spock's alternates voice in my head. I like it.

We can go to the bank after it RV's to 1:1 and they will still be outside the bank

holding their signs saying LOP!!

[Uncle Barkie]

I have to laugh because from a great deal of peoples posts it's apparent that many have not fully understood this "speculative" investment before investing. Whether we make several thousand or several million, I myself really don't care ... there is a profit to be made period. That is the only thing that is important in this investment (will we make money , not how much will we make). If you are at ease with that,then all of the random B.S. that some are most passionate about suddenly don't matter . So be at peace and be happy that you've had the chance to be part of this grand adventure in your journey through life.

Uncle Barkie

[Alex38]

I am ASTOUNDED how peeps are saying, "great news."

This is BAD NEWS!

IF an RV occurs BEFORE the LOP (RD) occurs we can make a few million.

If an RV occurs AFTER the LOP (RD) we can ONLY make a few thousand. And that's it.

Fact of REALITY!

Those existing zeros, for us, are incredibly beautiful. IF they disappear so will our possible gain.

FACT.

So, good news? No. Horrible news.

Get with the program!

This is how it's going to go down. They ARE going to RV. THEN they will RD. It's going to be fun. Watch

I'm not sure how, but I read that with Spock's alternates voice in my head. I like it.

We can go to the bank after it RV's to 1:1 and they will still be outside the bank

holding their signs saying LOP!!

RV. Then RD. It smells soooooooo goooood

[Darin]

Lets play with some numbers, shall we?

We read & hear that 31 Trillion IQD is in circulation.

Lets say 50% of that (likely much more) is outside of the country/region.

This puts roughly 15.5 T within their local economy.

15.5T at the current exchange rate = roughly 13.33 billion.

This basically leaves about.... $444 per citizen..... (Or 516 IQD, $0.86, ** assuming LOP)

13.33 Billion USD value in circulation of a local economy.

In 1988, they held $80 billion of value of currnecy.

Account for inflation

Account for population increases

Account for costs of living

Etc. Etc.

Now, we could argue that they would receive an additional 13.3 Billion upon a LOP as holders cash-in...

But, that would also have to be met with foreign liquid assets such as USD, Euros, Francs, etc.

This would cripple their Foreign Cash reserves.

But, they could maybe draw in the USD off the streets, and replenish their reserves...

If, and only if, the LOP was successful with defeating dollarization.

But we need to add incentive(s) to get the people to use the IQD over the USD. A higher rate? Well any adjustment in the rate would equally be effected upon Speculative holders who cash-in. Sort of a catch-22 issue here... If you don't give enough incentive, the whole project could create numerous draw-backs... And the need for the CBI or GOI to ask for financial assistance.

I would like to find a report on how much USD is in their streets being used daily. And how much the USD is king over the IQD. I think that information would be a great read.

[HopefulTxn]

on one of your links on page 2, it says some countries rd, but only after they have reigned in inflation.

Sir, check Turkey. Not the case at all.

You advised sonny to provide more accurate information?

What do you mean? Turkey started working with the IMF and their programs and by the time the lira was redenominated in 2005 the inflation rate in Turkey was down to about 10% or less. That would probably qualify for reigning in their inflation.

http://www.indexmundi.com/g/g.aspx?c=tu&v=71

http://www.tradingeconomics.com/turkey/inflation-cpi (change start year to 2002 or prior)

An RD doesn't require that inflation to be reigned in, Brazil for example preferred to redenominate before they reigned in their inflation problems and were required to do it a total of 4 times in about 8 years. A country simply has a better chance of not having to repeat the process if they deal with the causes of inflation first, then deal with the effects it produces.

Edited August 30, 2011 by HopefulTxn

[estewart]

This is how it's going to go down. They ARE going to RV. THEN they will RD. It's going to be fun. Watch

RV. Then RD. It smells soooooooo goooood

Right.

While the RD, a removal of zeros and reduction of amount of currency in existence is needed, an increase in VALUE is absolutely needed. True value. And while having a considerably reduction of the amount of currency in existence from a LOP (RD) is good for the Dinar, it's not good enough. The best way for Iraq to go (in my view) is to do an RV then a LOP right after. Unfortunately, if both of these two situations occur in quick succession it may allow us but a very narrow window in time to get cashed out after the RV before a possible RD occurs.

[zigmeister]

Right.

While the RD, a removal of zeros and reduction of amount of currency in existence is needed, an increase in VALUE is absolutely needed. True value. And while having a considerably reduction of the amount of currency in existence from a LOP (RD) is good for the Dinar, it's not good enough. The best way for Iraq to go (in my view) is to do an RV then a LOP right after. Unfortunately, if both of these two situations occur in quick succession it may allow us but a very narrow window in time to get cashed out after the RV before a possible RD occurs.

You might be right. It might be a very short window.

[Alex38]

Right.

While the RD, a removal of zeros and reduction of amount of currency in existence is needed, an increase in VALUE is absolutely needed. True value. And while having a considerably reduction of the amount of currency in existence from a LOP (RD) is good for the Dinar, it's not good enough. The best way for Iraq to go (in my view) is to do an RV then a LOP right after. Unfortunately, if both of these two situations occur in quick succession it may allow us but a very narrow window in time to get cashed out after the RV before a possible RD occurs.

I need 2 and 1/2 minutes. You think we'll have that?

[zigmeister]

I need 2 and 1/2 minutes. You think we'll have that?

I think it would be more than that. I hope!

[estewart]

I think it would be more than that. I hope!

It will be a rush-hour, for sure.

I, myself, would have to use an online merchant. And ship my Dinars at the UPS store.

[Dalite]

on one of your links on page 2, it says some countries rd, but only after they have reigned in inflation.

Sir, check Turkey. Not the case at all.

You advised sonny to provide more accurate information?

If you are questioning the research paper, there is an email address provided by the author.

If you are looking at the chart on page 4, it is a list of countries that dropped zeros AND their years of highest inflation.

Turkey's examples were from 1980 and 1994, and they Redenominated in 2005, when the inflation was lowered to manageable levels. Turkey Inflation History

Sometimes, it is necessary to actually read the numbers to understand the concept.

Exactly what part of that are you having a question about accuracy?

The New Turkish Lira

If there is any other inaccuracies you would like to point out, I can read the information for you and try to find other things you may have overlooked.

I am only going to provide links and facts. You can stick to the opinions.

[firefighter_218546]

LOP ??

Hey,,, quit pissin in my Wheaties... Just kidding,, Nobody know's if it will LOP or RV or what it will do, or when it will do it.,, I am hoping for anything which will get me more money, but I will take what is offered me. There is nothing we can do to change what happens..

Go Rv

God Bless America

[easyrider]

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 August 30, 2011 by easyrider

[Carrello]

I was commenting on sonnys post in reference to the increase in purchasing power. You cant have an increase in purchasing power with an rd...its a neutral event...pay attention skippy...

I think skippy is capital S - Skippy. It's kinda like Bucko.

You cracked me up. I laughed out loud. Thx !

[Dalite]

FREQUENTLY ASKED QUESTIONS ON YTL

 

1. Why was Turkish Lira redenominated by dropping six zeros?

As it is known, the high inflationary process, which started in Turkey in 1970s, has led to the expression of some economic values in terms of billions, trillions or even quadrillions.

In this process, cash demand in the economy was met by new banknotes in larger denominations that were put into circulation nearly every 2 years since 1981.

As a result, highest-denominated banknote (20.000.000) was used only in Turkey. And this fact had a negative effect on the credibility of our currency.

Moreover, figures with multiple zeros led to problems in accounting and statistical records, data processing software and payment systems as well as in transactions at the cashier’s office.

Therefore, redenomination of Turkish Lira became psychologically and technically essential.

 

2. What are the benefits of removing zeros from Turkish Lira?

With the redenomination of Turkish Lira;

- Technical and operational problems arising from the use of figures with multiple zeros are settled,

- Determination in bringing inflation down to single digits permanently is better comprehended,

- With the introduction of two larger value YTL denominations, there is no need to make any changes in denomination composition for a long run under the stability environment,

- Transition to single-digit inflation restores the credibility of our currency.

- The habit of using coins develops, thus allowing the transactions to be carried out in Kurus again.

 

3. What is the name of our State’s new currency unit?

Effective from 01.01.2005, the name of our New Currency unit is “New Turkish Lira” (YTL). The sub-unit of New Turkish Lira is “New Kurus” (YKr).

One New Turkish Lira is equivalent to a hundred New Kurus.

 

4. Why is the new currency called “New Turkish Lira”?

While determining our new currency unit, the expression of “Lira” has been preserved, which is the unique currency unit traditionally used throughout the Republican period and identified in the international markets with Turkey.

Besides, other countries that have dropped zeros from their currencies introduced the title “new” before the name of their national currencies in general.

On the other hand, countries, which had to remove zeros many times due to hyperinflation, have preferred to introduce different names in order to avoid any confusion between old and new currency units.

However; under the assumption that there will be no further need to drop zeros in the long run thanks to the sustained economic stability, the expression “New” has been deemed appropriate to precede the name of the national currency for a temporary period of time.

 

5. What is the conversion rate between Turkish Lira and New Turkish Lira?

While converting Turkish Lira values into New Turkish Lira; one million Turkish Lira (1.000.000 TL) is equal to one New Turkish Lira (1 YTL).

In other words, 6 zeros were dropped from our currency. That means 20.000.000 Turkish Lira and 20 New Turkish Lira have the same purchasing power.

 

6. Why were 6 zeros rather than 3 zeros removed from our currency?

Removing 3 zeros from our currency was inadequate to overcome the technical difficulties caused by multiple zeros.

Dropping 6 zeros provides a parallelism to the denomination values in developed countries.

 

7. What is the composition of denominations for YTL banknotes and coins?

YTL banknotes: 1, 5, 10, 20, 50 and 100 YTL,

Coins: 1, 5, 10, 25, 50 New Kurus and 1 New Turkish Lira.

 

8- The smallest coin denomination is 1 New Kurus. So, how are the transactions below 1 New Kurus concluded?

Unit costs of goods and services can be specified below 1 New Kurus. As for transactions in New Turkish Lira, fractions equal to half-a-New Kurus or exceeding are rounded off to one New Kurus while less than half-a-New Kuruş is disregarded during payments and transactions.

 

9. When were New Turkish Lira and New Coins put into circulation?

New Turkish Lira and New Coins were put into circulation on January 1, 2005.

 

10. Why was the operation performed in 2005?

49 countries had removed zeros from their currencies so far. Transition to new currency units in these countries had been performed along with a stabilization program in general, and following the successful results of the program on the inflation front.

Since the successful implementation of the current stabilization program had produced favorable results, it was deemed appropriate to start the operation in early 2005.

Moreover, the beginning of fiscal year wass preferred in transition to zero removal operation in general, in order not to impose burdens on real persons and legal entities liable to keep books and records with drawing up interim financial statements.

 

11. How long will current banknotes and coins be in circulation?

Current banknotes and coins will be in circulation until the end of 2005. Throughout 2005, Turkish Lira and New Turkish Lira banknotes and coins will concurrently be in circulation for one year.

Starting from the January 1, 2006, Turkish Lira banknotes will be accepted during the 10-year redemption period and coins will be accepted during 1-year redemption period by the Central Bank of the Republic of Turkey (CBRT) and T.C. Ziraat Bank branches (where a Central Bank branch is not available).

 

12. Why has been a one-year concurrent circulation period stipulated in transition to YTL?

One-year concurrent circulation has been stipulated in order to enable our citizens to convert their banknotes and coins into new ones at their convenience throughout 2005. Hence, there is no need for individuals to rush for the conversion, since the currency conversion process will be accomplished in its natural course.

 

13. What are the stages of the transition to new currency?

Similar to the practices in most countries, the operation consists of two stages.

At the first stage, TL and YTL banknotes and coins will be in circulation concurrently for one year as of 1 January 2005.

At the second stage of the operation to be carried out on a later date after 2006, the expression of “Yeni” (New) before the “Turkish Lira” will be removed, and the use of the expression of “TL” will be reintroduced.

 

14. May the redenomination lead to higher inflation?

As it is known, rounding-off prices has become one of the most debated matters in Euro zone where a similar operation was experienced.

Unlike fractional conversion rates used in transition to Euro, the operation in Turkey is merely a zero-removal operation.

Therefore, rounding-off prices was expected to be smoother process in Turkey compared to Euro zone. Furthermore, according to official statements, the impact of rounding-off on general consumer price index in the first six months of 2002 has not exceeded 0.2 % in Euro zone.

Besides, it should be kept in mind that the rounding-off impact already exists in Turkey due to high inflation and the lack of habit of using coins.

As a result, the impact of rounding-off prices was expected to be temporary even if it realizes at low level. Afterall, it is clearly observed that the operation had no inflationary effect.

The zero-removal operation was not expected to have either a favorable or an unfavorable effect on exchange rates or interest rates, apart from its positive impact on expectations, since the main factors determining the general level of exchange rates and interest rates are the economic fundamentals and the current stabilization program.

 

15. Will the redenomination affect exchange rates or interest rates?

The zero-removal operation was not expected to have either a favorable or an unfavorable effect on exchange rates or interest rates, apart from its positive impact on expectations, since the main factors determining the general level of exchange rates and interest rates are the economic fundamentals and the current stabilization program.

 

16. How will the legislation, administrative, juridical and legal transactions involving Turkish Lira be concluded in terms of YTL after the transition to YTL?

All references made to “Turkish Lira” or “Lira” in laws and other legislation, administrative procedures, court decisions, legal operations, commercial papers and other documents that produce legal effects as well as means of payment and instruments of exchange shall be considered to have been made to “New Turkish Lira”.

 

17. Will the conversion of the documents issued in terms of TL into YTL during the transition process produce any fiscal liability?

The parties shall be exempt from any and all kinds of tax, duty, fee and other liabilities arising from all kinds of legal acts, negotiable instruments and documents issued in terms of Turkish Lira producing legal effects provided that these are converted into the New Turkish Lira before 31 December 2005 (including that date) by taking the conversion rate into account.

 

18. How will the price labels and lists displaying commodity and service prices be issued throughout 2005?

The lists of price labels and tariffs to be issued under Article No.12 of Law on Consumers’ Protection shall be displayed in terms of both TL and YTL between

January 1, 2005 and December 31, 2005.

Those who fail to fulfill this obligation shall be subject to the penalty stipulated in the second paragraph of Article 25 of the same Law.

 

19. What kinds of security features are incorporated into 100 New Turkish Lira banknote?

The security features built in current banknotes are divided into two groups: public-oriented and professionals-oriented features. The security features incorporated into 100 YTL -banknote are as follows:

I- Public-Oriented Security Features

1- Raised Print (Intaglio): On the observe side, the portrait of Atatürk, the band on the bottom, blue-green guilloche design, “TÜRKİYE CUMHURİYET MERKEZ BANKASI” and “TÜRKİYE CUMHURİYET MERKEZ BANKASI BANKNOT MATBAASI” clauses, the value numerals and letters are printed in relief.

2- Optical Security Feature: The figure on the right-hand side of the portrait, printed by optically variable ink, changes its colour from goldish yellow to green when the note is tilted.

3- Windowed Security Thread: On the reverse side of the banknote, a metallic silver windowed security thread with a mini-lettering of “TCMB” takes place on the right. The security thread forms a straight line when the note is held against light and can be seen from both sides.

4- Latent Image: On the observe side, the blue and green coloured guilloche design at the lower right corner contains a latent image of the letters ”TC” that can be seen when the note is horizontally tilted against light at the eye level.

5- Watermark: On the observe side, the watermark of the smaller size of the portrait of Atatürk and the value numeral “100” are placed on the blank space at the left-hand side of the note and can be seen from both sides when the note is held against light.

6- See-Through Image: On the bottom left of the denominational numerals of 100 on the upper left corner of the banknote, the see-through register is placed, which forms the letters “TC”, combining with the elements of both sides when the note is held against light.

 

II- Professionals-Oriented Security Features

1-Micro Lettering: On the observe side, the denominational numerals of “100” are filled with the clause of “YÜZYTL” and the bottom of the lower band are filled with micro-lettering of the clause of “TCMB” and  can be read with a magnifying glass.

2- Fine-Line Printing: The red and blue fibres embedded at the pure cotton paper are also visible under UV light.

3- Special Fluorescent Inks: When the note is exposed to UV light, 8 torch motifs and the signature of Atatürk appear on the ground of the portrait on the observe side..

4-Specially-Printed Serial and Sequence Numbers: On the reverse side, a nine-digit serial and sequence number, printed in red on the upper left corner, gives fluorescent red reflection and the serial number, printed in black at the lower right side, gives fluorescent yellowish green reflection under ultraviolet light.

5- Banknote Paper: Special banknote paper is used that does not glow under UV light.

Security features of all denominations are visually described on the Bank’s Internet page.            (http://www.tcmb.gov.tr/  - banknotes)

 

20. Is it possible to counterfeit all domestic and foreign banknotes?

Yes, it is possible to counterfeit all banknotes. However, fake banknotes fail to involve security features of original banknotes.

In the event of a control exercised over a few security features, it is possible to distinguish original banknotes from the fake ones.

 

21. Are there additional security features incorporated into YTL banknotes for visually impaired?

In order to facilitate the identification of the different denominations by all blind and visually impaired persons, the banknotes are printed in different sizes according to their denominations.

Due to the repeated issue of new larger value denominations owing to high inflation, it could not be possible to issue different denominations in different sizes up to today.  

In the transition process to YTL, few differences were introduced to some banknote sizes (1, 50, 100 YTL).

Following further improvement in Turkey’s current economic conditions and the zero-removal operation, the Central Bank is planning to introduce additional distinctive features to our banknotes issued with the latest technology on international standards, along with supplementary current measures, in order to help especially our visually impaired citizens.

 

22. How should the banknotes be used for a longer life span?

In order to enhance the quality of the banknotes in circulation:

- Necessary care and attention should be paid not to mutilate banknotes.

- Banknotes should not be wrinkled or perforated and nothing should be written on them.

- Torn banknotes should not be taped for the sake of smooth operation of banknote handling systems.

- The habit of using wallet should be widespread.

- Soiled and worn-out banknotes should be exchanged at the Central Bank branches or via banking system. 

 

23. Where and how are the old and damaged banknotes exchanged?

Whole banknotes, whose values can be identified, but are soiled, washed, dyed, burnt, torn or are worn or due to other reasons and the banknotes whose surface deficiency is less than 50% are exchanged with value at par. Banknotes with 50% surface deficiency are exchanged with new ones at half face value. The banknotes with more than 50% surface deficiency are not exchanged.

Soiled, worn-out banknotes or banknotes incurring partial physical loss can be exchanged directly at the Central Bank branches or at T.C. Ziraat Bankası, our domestic correspondent, or at the branches of other banks and financial institutions.

 

24. Is using soiled and worn-out banknotes dangerous to health?

Research shows that some microorganisms reproduce at a higher rate on damaged and contaminated banknotes and skin infections such as abscess and gastroenteritis are diagnosed especially in cashiers.

Along with the preventive health measures, one of the most effective ways to avoid possible negative effects of soiled and worn-out banknotes is to exchange them with the new ones and to use new and clean banknotes as much as possible.

With the aim to extend the scope of its services in order to make TL banknotes in circulation available in the composition of clean banknotes as much as possible, the Central Bank is establishing banknote deposits with the T.C. Ziraat Bankası branches, exchanging worn-out banknotes on site, chiefly at touristic districts, and encouraging banks to return worn-out banknotes to the Central Bank.

 

25. How did the transition to YTL affect bank accounts?

Bank accounts were converted into YTL as of January 1, 2005.

 

26. What is the currency code for New Turkish Lira?

According to the information received from BSI (British Standards Institution) – ISO 4217 MA/Secretariat, the currency code for New Turkish Lira is “TRY 949 2”.

 

27. When was the currency code for New Turkish Lira published in the official ISO currency code list?

As of November 6, 2004, ISO Code of New Turkish Lira was published at “SWIFT Network”.

 

28. Can "TRL" be used as the international currency code for Turkey besides "TRY"?

In the broadcast message dated November 22, 2004, SWIFT announced that until the end of 2006, "TRL" code would be used along with "TRY" at the "SWIFT Network" and the cancellation date for the "TRL" code would be announced later, again via another message. In this context, as of December 9, 2006, TRL code was deleted from the "SWIFT Network" and "TRY" became the sole international currency code for Turkey.

My link

[Darin]

Well, many people look at history and see that many countries took the R/D (revenue-neutral) event during periods of inflation. People are also stuck on believing that history tends to repeat itself.

Many countries have done their re-denoimations....

Some during inflation (yet likely many times)

Some when inflation was lower

Some right when inflation was brought down to reasonable levels.

And others after an extended period of time of maintaining stable inflation.

The CBI got inflation down in 2004-ish, but had a spike in 06. The spike was likely due to instability & violence within the region.

The rate was adjust numerous times (See UN operational rates of exchange)

Since 2007, it has remained very low and stable.... Small incriments were made along the way. Last change was 1175 to 1170 In March of 2011.

According to the UN site, they've held the same rate for nearly 1 1/2 years.

They're also pushing 5 years of low-low inflation.

They proved they can hold stability with their currency

They proved they can maintain low inflation

Wonder why they had to go to such great efforts to do so?

I think Shabs wanted to increase the private sector, increase productivity, and get the GOI to become stable & secure while offering security to the people.

Benchmarks are nearly reached... Yet, not entirely agreed upon.

So, does Shabs have to decie.. Which comes first, the Chicken or the Golden Egg? (Increase productivity/Private sector vs. R/V)

It must be crap or get of the pot time... Huh? We've been hearing "soon" forever, and "soon" to us in this investment has nowhere near the meaning of imminent.

And with articles about counterfeits flooding the market.. Who is going to gain faith in the IQD? -- Looks like the USD has 1 more reason to be the preferred use of currency.

A new currency may be a reasonable fix...

We have "yet" to see any specimens.

Don't they normally introduce specimens prior to a release?

[jg167]

Right.

While the RD, a removal of zeros and reduction of amount of currency in existence is needed, an increase in VALUE is absolutely needed. True value. And while having a considerably reduction of the amount of currency in existence from a LOP (RD) is good for the Dinar, it's not good enough. The best way for Iraq to go (in my view) is to do an RV then a LOP right after. Unfortunately, if both of these two situations occur in quick succession it may allow us but a very narrow window in time to get cashed out after the RV before a possible RD occurs.

I don't see this as a worry at all. They can RV at any time, before, or during the RD, as long as they don't do it after. The RD will last for at least 6 months and likely a couple of years (Venezuela's old currency is still legal tender as far as I can find out, after starting their RD in 2008 but its essentially all gone by now). If they wait till after the RD to RV, then we would have to exchange for new dinars (i.e. get shafted by dealers yet again) and wait for 2-3 years. But Iraq would have to wait too, so I don't think that will happen. They can easily RV before or during the RD and it happens to both currencies.

Say they RD at 1000:1 so to start off the IQD remains at $0.00086 USD and the new Dinar is $0.86 USD. Then they RV 1.2x (while the RD is going on) so the IQD is then worth $0.00103 USD and the new Dinar is worth $1.03 USD. That example would still be a loss for many of us having bought at the dealer price of $0.0012 USD per IQD.

So as long as they RV before or during the RD we won't to exchange (unless you want to hold for years). Then it just depends on the ratio between the two. It would be great of they RV 12x (to $0.01 USD per IQD) and RD 100x which gives about an 8x return. A RV of 120x ($0.10 per IQD)) and RD of 10x would be grand but, seems very unlikely to me, and an RV of 1200x ($1 USD) and no RD is impossible as I see it. But no point in selling now at a loss, so we'll just see what we'll see.

[TFK]

thx sonny1.

I deleted my diatribe about how well we treat each other here. Wasn't worth the effort!

[Dalite]

Benefits of Redenomination

 

The following are some of the standard benefits of currency redenomination.

 

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!

 

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.

 

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.

 

Redenomination reduces the phenomenon of money illusion that people suffer from when there are many zeros. Money illusion tends to generate inflationary pressure.

 

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”.  Before the recent redenomination of the Ghanaian cedi, it was ranked as the 5th  in the list of 26 least valued (i.e. “most unwanted) currencies in the world.  With the redenomination, it has left this list. The Nigerian currency, the naira, is not yet in the list of “most unwanted” currencies in the world.

 

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.

 

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.

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

 

The main costs and risks of currency redenomination include the following:

 

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.        If there is change to proposed ECO currency (for the West African Monetary Zone) or “AFRO” (for the proposed “African Union Monetary Zone”) within the next  five years, then the whole exercise of naira redenomination would have been unnecessary and the associated costs would have been an “avoidable cost” to the nation. However, it is not known yet if and when the ECO or AFRO will be introduced given the fact that the proposed ECO currency has been deferred several times already. 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” (popularly know as “419” in Nigeria). For instance, since the announcement of the redenomination of the Ghanaian currency I January 2007 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 such as “Three Arrested for Printing New Currency”, “Fake Ghana New Currency Notes in Circulation” and “Two Nigerians Arrested with Fake New Cedi Notes by Customs at Aflao Border”. You can trust that Nigerian fraudsters are already at work perfecting their strategies to take advantage of the proposed redenomination of the naira.      

Complete article partially quoted here, and selectively quoted by Easyrider

[zigmeister]

Well, many people look at history and see that many countries took the R/D (revenue-neutral) event during periods of inflation. People are also stuck on believing that history tends to repeat itself.

Many countries have done their re-denoimations....

Some during inflation (yet likely many times)

Some when inflation was lower

Some right when inflation was brought down to reasonable levels.

And others after an extended period of time of maintaining stable inflation.

The CBI got inflation down in 2004-ish, but had a spike in 06. The spike was likely due to instability & violence within the region.

The rate was adjust numerous times (See UN operational rates of exchange)

Since 2007, it has remained very low and stable.... Small incriments were made along the way. Last change was 1175 to 1170 In March of 2011.

According to the UN site, they've held the same rate for nearly 1 1/2 years.

They're also pushing 5 years of low-low inflation.

They proved they can hold stability with their currency

They proved they can maintain low inflation

Wonder why they had to go to such great efforts to do so?

I think Shabs wanted to increase the private sector, increase productivity, and get the GOI to become stable & secure while offering security to the people.

Benchmarks are nearly reached... Yet, not entirely agreed upon.

So, does Shabs have to decie.. Which comes first, the Chicken or the Golden Egg? (Increase productivity/Private sector vs. R/V)

It must be crap or get of the pot time... Huh? We've been hearing "soon" forever, and "soon" to us in this investment has nowhere near the meaning of imminent.

And with articles about counterfeits flooding the market.. Who is going to gain faith in the IQD? -- Looks like the USD has 1 more reason to be the preferred use of currency.

A new currency may be a reasonable fix...

We have "yet" to see any specimens.

Don't they normally introduce specimens prior to a release?

What about that where are the new specimens? Is this down the road kind of venture? Or it has to be approved by Parliament before they can begin the printing presses. Maybe there are no specimens because they are going to use the old currency initially for now.

[Realdinar]

What do you mean? Turkey started working with the IMF and their programs and by the time the lira was redenominated in 2005 the inflation rate in Turkey was down to about 10% or less. That would probably qualify for reigning in their inflation.

http://www.indexmundi.com/g/g.aspx?c=tu&v=71

http://www.tradingeconomics.com/turkey/inflation-cpi (change start year to 2002 or prior)

An RD doesn't require that inflation to be reigned in, Brazil for example preferred to redenominate before they reigned in their inflation problems and were required to do it a total of 4 times in about 8 years. A country simply has a better chance of not having to repeat the process if they deal with the causes of inflation first, then deal with the effects it produces.

Ok, lets take a look at how yall love to compare apples and oranges, lopsters in general love to say iraq will do as turkey did. Im not so sure, they seem different. Iraq has done a better job with inflation with no lop.

Turkeys inflation percentages years 2002 45.2, 2003 25.3, 2004 9.3, lop. 2005 8.2.

Iraqs inflation percentages years 2006 64.8, 2007 4.7, 2008 6.8, 2009 6.8, 2010 4.2.

In comparison, Iraq would qualify as reigning in inflation. Surprise insanely low inflation numbers for years, no lop.

Edited August 30, 2011 by Realdinar

[Alex38]

Iraq and Turkey AREN'T THE SAME!!!!! Ugh....