raising purchasing power-rv

[zigmeister]

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

But they are countries

[DaveH]

Yep! A redenomination... Why anyone would give you neg (-) for asking is beyond me. But when a person's money is dependant on their point of view, seldom will it change - in spite of overwhelming evidence to the contrary. This has become a cult mentality - a political position - not an investment.

when a currency lops or RD's, it does not increase in value and that is what the article states, why are you here exactly? To cause problems? To take away peoples hope? Do it elsewhere.

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

Your same old tired argument is getting old, we are all tired of it. Come up with a new gig.

[Realdinar]

But they are countries

ummm...oookaaaayyy...

Go rv?

[Realdinar]

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!!

Right, it may be better for iraq to lop after the rv. I can see the lopsters considering that since they are obsessed it will happen.

[Darin]

I still believe the education campaign claims are incorrect. I think the articles have an ulterior motive. Of course they articles will state they're not going to increase the value.. Otherwise people would hoard IQD, and use USD. That is my .02, dollarization is an issue enough, speculation upon rumors over there probably do not help the cause. Does it say anything about their true intentions? No, and it also doesn't confirm or deny a R/D (LOP). But, I am sure when U.S. soldiers are buying up their currency, they are likely thinking we are doing so for good reaons...

[zigmeister]

I still believe the education campaign claims are incorrect. I think the articles have an ulterior motive. Of course they articles will state they're not going to increase the value.. Otherwise people would hoard IQD, and use USD. That is my .02, dollarization is an issue enough, speculation upon rumors over there probably do not help the cause. Does it say anything about their true intentions? No, and it also doesn't confirm or deny a R/D (LOP). But, I am sure when U.S. soldiers are buying up their currency, they are likely thinking we are doing so for good reaons...

Darin are you an academic ? You bring interesting or should I say provocative dialogue to the table and I find myself thinking where is he going with this? I then have to consider your process and try to come to some conclusions on your hypothesis myself. I am afraid I may rate an F on my conclusions.

Where are going with because the soldiers are buying dinar, they are thinking so for good reasons?

[Dalite]

when a currency lops or RD's, it does not increase in value and that is what the article states, why are you here exactly? To cause problems? To take away peoples hope? Do it elsewhere.

Your same old tired argument is getting old, we are all tired of it. Come up with a new gig.

If you are a mod and prefer Easyrider taking a portion of the article out of context. stand up and be counted.

Totally up to you.

No opinions here, just facts.

[Nelson0528]

Dang!.. Why do I find myself needing more than 10 +'s and 10 -'s these days?!?!?!? lol

[estewart]

thx sonny1.

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

Well, you can't get get knocked down if you don't stand up. Think about that.

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

Right. Turkey is a white meat.

[JWJW11]

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

NO???? LMAO!!!

Bro you know you will never convince the tools on this site of that! How you could even compare the 2 s beyond me. This whole deal is soooo much bigger than the Dinar!

We know its gettin ready to happen!

[Bumper64]

You guys and gals crack me up with some of these comments!! I love this site!!

[JWJW11]

If you are a mod and prefer Easyrider taking a portion of the article out of context. stand up and be counted.

Totally up to you.

No opinions here, just facts.

Oh my! GO AWAY!

Dude you are so pathetic with the constant reposting of the same old crap everyday! Seriously dont you have something better to do with your time! Stop waisting space on the site with the same nonsense.

Facts???? Seriously??? you thnk comparing Iraq to Turkey is facts??? Comon man! Turkey was NOT and is NOT occupied by the United States Military! This whole thng is ALOT bigger than the currency you argue about everyday proving your "facts"!!!

You know there are alot of men and women out their fighting and dying for their country everyday so that you have the right to st their behind your keyboard on your lazya$$ everyday cuttin paisting the same crap comparing Iraq to Turkey! Man get a freaking life! Start thinking outside the box a little and stop waisting everyones time with your same ridiculous tired old posts everyday! Show a little more respect to people and ther intelligence. We all can read we know what you think by now!

For goodness sake find a woman or maybe get a dog and name him clue......I dont know but just bring something different! Howabout you head over to the LOP section where you belong!

[librapeace]

You guys and gals crack me up with some of these comments!! I love this site!!

No kidding. 99% of people online will openingly admit that NOBODY online really knows what will happen, however that same 99% will argue they are more correct. Mind boggling. Don't get me wrong...I love it haha

[zul]

Yep! A redenomination... Why anyone would give you neg (-) for asking is beyond me. But when a person's money is dependant on their point of view, seldom will it change - in spite of overwhelming evidence to the contrary. This has become a cult mentality - a political position - not an investment.

Figure this snips.....(from the same news), and you'll understand why he was given neg (-).

It is said that the President of the Iraqi Securities Commission, had confirmed, earlier, that the deletion of zeros from the Iraqi currency will not affect trading in the Iraqi Stock Exchange and its shares. 

in a LOP situation, just like the currency, shares will definitely be affected.

[keepmwlknfny]

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?

Turkey did get a handle on inflation before they RD.....they got it down to about 10% which is under control from what they were experiencing in the past.......

They seem to be doing quite well after they lopped.....the Lira is even in position to RV again.....

[sonny1]

i dont post articles to start arguements, this article states raising purchasing power, which means higher rate of exchange (rv) i dont know how the lop crew doesnt get that. oh and so you loppers know turkey and iraq are actually not the same..... just thought i would throw you guys a bone....

[Sirius]

Figure this snips.....(from the same news), and you'll understand why he was given neg (-).

It is said that the President of the Iraqi Securities Commission, had confirmed, earlier, that the deletion of zeros from the Iraqi currency will not affect trading in the Iraqi Stock Exchange and its shares. 

in a LOP situation, just like the currency, shares will definitely be affected.

Isn't common sense fun, some just choose not to use it anymore.

[Dalite]

If the day ever comes that you have something of substance to bring to the discussion, I hope someone let's me know.

I have never seen you do anything but whine.

While you are whining tonight, you better whine ti Shabibi.

Turkey is his comparison, not mine.

But, you never keep up with the news articles, so you wouldn't know.

Really, would you like some Cheese with that Whine???

I'm not planning on going anywhere.

Oh my! GO AWAY!

Dude you are so pathetic with the constant reposting of the same old crap everyday! Seriously dont you have something better to do with your time! Stop waisting space on the site with the same nonsense.

Facts???? Seriously??? you thnk comparing Iraq to Turkey is facts??? Comon man! Turkey was NOT and is NOT occupied by the United States Military! This whole thng is ALOT bigger than the currency you argue about everyday proving your "facts"!!!

You know there are alot of men and women out their fighting and dying for their country everyday so that you have the right to st their behind your keyboard on your lazya$$ everyday cuttin paisting the same crap comparing Iraq to Turkey! Man get a freaking life! Start thinking outside the box a little and stop waisting everyones time with your same ridiculous tired old posts everyday! Show a little more respect to people and ther intelligence. We all can read we know what you think by now!

For goodness sake find a woman or maybe get a dog and name him clue......I dont know but just bring something different! Howabout you head over to the LOP section where you belong!

[keepmwlknfny]

Oh my! GO AWAY!

Dude you are so pathetic with the constant reposting of the same old crap everyday! Seriously dont you have something better to do with your time! Stop waisting space on the site with the same nonsense.

Facts???? Seriously??? you thnk comparing Iraq to Turkey is facts??? Comon man! Turkey was NOT and is NOT occupied by the United States Military! This whole thng is ALOT bigger than the currency you argue about everyday proving your "facts"!!!

You know there are alot of men and women out their fighting and dying for their country everyday so that you have the right to st their behind your keyboard on your lazya$ everyday cuttin paisting the same crap comparing Iraq to Turkey! Man get a freaking life! Start thinking outside the box a little and stop waisting everyones time with your same ridiculous tired old posts everyday! Show a little more respect to people and ther intelligence. We all can read we know what you think by now!

For goodness sake find a woman or maybe get a dog and name him clue......I dont know but just bring something different! Howabout you head over to the LOP section where you belong!

You cry more when people talk facts and get happy when people talk forum facts......

Its quite obvious of your understanding of whats being talked about......

If you had even the slightest idea of what Dalite refers to when speaking about Turkey, then you would apologize to him.....which you should anyway because of the immature and ignorant way you responded....

The CBI has stated many times over that this plan of deleting the zeros, used Turkey and Brazil as a template or "model" to follow....

Please educate yourself before opening your mouth next time and you wont look so foolish....

[abby01]

Thanks Sonny1!!!

[zul]

FREQUENTLY ASKED QUESTIONS ON YTL

 

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

My link

I simply cannot understand why people go at length to try to justify Turkey and Iraq are the ;same country'....and why they think Iraq has no better option than Turkey. They try hard to map Turkey's model on Iraq.....eventhough nothing fits.

The only similarity between the two country is ' delete the zeros'. And it ends right there.

[hunz2]

I simply cannot understand why people go at length to try to justify Turkey and Iraq are the ;same country'....and why they think Iraq has no better option than Turkey. They try hard to map Turkey's model on Iraq.....eventhough nothing fits.

The only similarity between the two country is ' delete the zeros'. And it ends right there.

The similarity is that they have both expierenced hyperinflation which is all you need to fit.

Edited August 31, 2011 by hunz2

[Dalite]

i dont post articles to start arguements, this article states raising purchasing power, which means higher rate of exchange (rv) i dont know how the lop crew doesnt get that. oh and so you loppers know turkey and iraq are actually not the same..... just thought i would throw you guys a bone....

If you spent less time throwing bones, and more reading about what you promise everyone will never happen, you would understand why that term is used.

The new dinar, if they RD, would increase in value by a factor of 1000, while sharply contracting the liability of the money supply, while making it stronger by removing the remnants of past hyper inflation.

To be more plain, 1000 old at 1170:1 is equal to 1 new at 1.17:1

Note the increase in exchange rate .

Remember what I tried to get you to understand earlier?

The most basic aspect of economics; reduce the amount of a needed commodity, and it's value increases.

Reduce the Liability of the circulation by a factor of 1000, and the value will increase.

You may also want to know that the Turkey idea came from the CBI.

Oh, I forgot, that is all smoke and mirrors!

Have a nice RV!

[keepmwlknfny]

I simply cannot understand why people go at length to try to justify Turkey and Iraq are the ;same country'....and why they think Iraq has no better option than Turkey. They try hard to map Turkey's model on Iraq.....eventhough nothing fits.

The only similarity between the two country is ' delete the zeros'. And it ends right there.

I dont think anyone is saying they are the same country because its obvious to everyone that they are not.....

Iraq DOES have options as most of us would gladly admit....its the fact that the CBI is saying they are basically following Turkeys footsteps.....

Its not what any of us want for sure and we all want to see a straight up RV......but you cant ignore what they are telling us....

[bamjack75]

Someone has got their panties in a LOP, again!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!