LOP does not reduce money supply!

[iqdheadlines]

I just got thinking about how some people and even the CBI are saying that a LOP/RD is meant to reduce the money supply?

How can a LOP/RD reduce the money supply?

If I have 10 x OLD 25K notes and are replaced by 10 x NEW 25 notes, just how does that reduce the money supply?

Whether OLD or NEW dinar, I still have the same amount of IQD notes.

This does not reduce the money supply and therefore does not bring down inflation!

However if they were to introduce for example a NEW 20 dinar note, then this would reduce the money supply.

Remember and correct me if I'm wrong.......BUT reducing the money supply has to do with the amount of notes in circulation not the actual amount of dinar.

[Luigi1]

All IQD 25K notes will be treated as IQD 25. This will reduce the total IQD from 40 Tillion to 40 Billion. CBI can RV 40 Billion after LOP a lot easier than 40 Trillion. It don't matter if RV or LOP comes first or visa versa. We still stand to come out OK.

[iqdheadlines]

All IQD 25K notes will be treated as IQD 25. This will reduce the total IQD from 40 Tillion to 40 Billion. CBI can RV 40 Billion after LOP a lot easier than 40 Trillion. It don't matter if RV or LOP comes first or visa versa. We still stand to come out OK.

I repeat, reducing the money supply is not referring to the amount of IQD in circulation BUT rather the amount of NOTES.

[Anti This Anti That]

If they do take the 000 notes out, and bring in the 1 5 10 25 without a huge RV, they will still have to have two wheel barrows to go to the market etc, etc. They are stating that they are going to print a 50 thousand, and 100 thousand note according to what I heard on the IQD team.

Edited December 10, 2011 by Anti This Anti That

[keepmwlknfny]

I just got thinking about how some people and even the CBI are saying that a LOP/RD is meant to reduce the money supply?

How can a LOP/RD reduce the money supply?

If I have 10 x OLD 25K notes and are replaced by 10 x NEW 25 notes, just how does that reduce the money supply?

Whether OLD or NEW dinar, I still have the same amount of IQD notes.

This does not reduce the money supply and therefore does not bring down inflation!

However if they were to introduce for example a NEW 20 dinar note, then this would reduce the money supply.

Remember and correct me if I'm wrong.......BUT reducing the money supply has to do with the amount of notes in circulation not the actual amount of dinar.

Not quite.....reducing the money supply has to do with the actual amount of dinar.....the money supply numbers are the actual amount of dinar not notes.....

Which is why they have stated dropping it from 30 trillion (amount of dinar) to 30 billion....or numbers very similar.....

[ssmith]

All IQD 25K notes will be treated as IQD 25. This will reduce the total IQD from 40 Tillion to 40 Billion. CBI can RV 40 Billion after LOP a lot easier than 40 Trillion. It don't matter if RV or LOP comes first or visa versa. We still stand to come out OK.

Luigi, keep,pudge or whoever; here's my question; since everyone is so excited about Iraq being released from chapter 7, why have they been printing more & more dinar for the last 8 years ? Why do they get to keep playing with their currencies value ; while under chapter 7 & now they have to wait until their released from chapter 7 to continue to manipulate their currency that they have been doing for the past 8 years? RV, RD,RI,lop,etc.

[Luigi1]

Luigi, keep,pudge or whoever; here's my question; since everyone is so excited about Iraq being released from chapter 7, why have they been printing more & more dinar for the last 8 years ? Why do they get to keep playing with their currencies value ; while under chapter 7 & now they have to wait until their released from chapter 7 to continue to manipulate their currency that they have been doing for the past 8 years? RV, RD,RI,lop,etc.

Nobody is manipulating the IQD. Everything is going to schedule by the Framework To Rebuild Iraq. The RV will happen soon. There are just a few snags to clear up.

FYI, the IQD already RVed once back in 2004 when the new IQD was first introduced at a rate of IDQ 4000 to $1USD. Some governments purchased pallets of IQD & turned a 400% profit within weeks when the rate dropped to today's current rate.

[keepmwlknfny]

Luigi, keep,pudge or whoever; here's my question; since everyone is so excited about Iraq being released from chapter 7, why have they been printing more & more dinar for the last 8 years ? Why do they get to keep playing with their currencies value ; while under chapter 7 & now they have to wait until their released from chapter 7 to continue to manipulate their currency that they have been doing for the past 8 years? RV, RD,RI,lop,etc.

To tell you the truth, CH7 doesnt restrict the currency at all....they can raise it being under CH7, heck the value of the dinar has gone up and down since being under sanctions, and there is no written proof that they are under restrictions as far as raising the value of the dinar....they really are not related...

[joseroque]

What will happen is that the dinar will RV. Then the larger notes will be "retired" and the smaller notes issued. The Iraqui people will not have to use a wheelbarrow to go buy, they will use the new denominations that will be introduced.

[dinarck]

What will happen is that the dinar will RV. Then the larger notes will be "retired" and the smaller notes issued. The Iraqui people will not have to use a wheelbarrow to go buy, they will use the new denominations that will be introduced.

So Iraq will give Iraqis and us 1000 new 25 notes for our 25,000 notes? Maybe they will give us 250 of the new 100 notes. What if they are short on those denominations? Will they give us 5000 of the new 5 notes for each of our 25,000 notes? As you can see this would flood Iraq with so many notes that Iraqis would have to have room size safes in their houses to store it. If each of those 1000 of the new 25 notes was actually worth 25 USD do you think that Iraqis would trust the banks with their new found wealth? I dont. Lets say you hold 5 million dinar. The CBI would need to send you 200,000 of the new 25 notes. This simply isnt going to happen because they are not talking about doing this because it has never happened in history because it is impossible. What they are talking about is a basic redenomination like Turkey, Brazil, or Venezuela. Plain and simple.

[cooked]

I just don't understand why lopsters are here any way? Nothing personal, but ifyou believe in a lop why are you here? Why are you invested iff you are? Can you explain why someone who thinks it will lop follows here?

[Maggie123]

I just don't understand why lopsters are here any way? Nothing personal, but ifyou believe in a lop why are you here? Why are you invested iff you are? Can you explain why someone who thinks it will lop follows here?

Nope

[matthew6:19-21]

To tell you the truth, CH7 doesnt restrict the currency at all....they can raise it being under CH7, heck the value of the dinar has gone up and down since being under sanctions, and there is no written proof that they are under restrictions as far as raising the value of the dinar....they really are not related...

So Keep,

Do you think that us, that is dinar holders outside of Iraq, will gain anything on this investment on large denoms? If so what is your rate or what have you?

[keepmwlknfny]

So Keep,

Do you think that us, that is dinar holders outside of Iraq, will gain anything on this investment on large denoms? If so what is your rate or what have you?

If they revalue then of course, cause then it wouldnt matter what denoms you have you will make money.....they are all affected the same...

Realistically, seeing the numbers that are available to us it seems it would need to go up little by little while growing the reserves to back it, and retract a lot of the money supply at the same time.....but thats stricktly going off the numbers....

[Darin]

Your technically right, a LOP will not reduce the amount of bills in circulation. However, the face-value will add up by about 1,000 times less while the exchange rate will have the inverse effect. What does this mean? We not have 25,000 IQD that is the same as a 25 IQD at 1.17. Pretty simple concept, and the idea behind it is basically to make cash transactions easier in general public commerce, accounting, etc.

They believe by removing the 3 zeros, they'll help increase demand for their currency.

I have a few problems with that if I was an average Iraqi

1..) I may used USD & IQD for daily transactions, but, how do I know the new IQD will be accepted everywhere just as the old dinar would be. Simple solution? Turn to the USD until the fiasco ends.

2..) Will removing the 3 zeros make the IQD a convertible currency (internationally traded)?? If not, I'll turn to the USD. Why? Because maybe I travel to Europe, or other surrounding countries & I need cash that I know I can exchange with ease.

3..) We had a currency exchange situation in 2004, it has not even been a decade and here we are exchanging again... If anything, that may be a headache to me as in thinking, I use cash for all my transactions, why would I want to put my savings into the new IQD.. What if it fails? USD is a safe-haven, so to speak.

Now to top it off, the 3 zero articles that are continuously put into the media likely are not helping the demand & use of the IQD. If I was an Iraqi, I would be thinking, well I may as well convert to USD now, so I know that I don't have any issues down the road.

But that isn't to say I think like all of the citizens over there.. But, I wouldn't doubt that some think similar to how I would regarding the issue.

[lotsofdinar]

Why wouldn't Iraq just say that only the Dinar can be used inside the country? How many different currencies will merchants accept inside the US?

[joseroque]

Iraq is trying to get it's people to use the dinar instead of the dollar! The dollar is not to be used but we know that the average Iraqui will still use the dollar until it has all been taken out of circulation and replaced by the dinar!. That is why the new smaller denominations (already printed) will be introduced gradually over the next few years. The RV can come at any time either before or after release from chapter 7 but it is more practical to RV before chap 7. Also, there will more dinars in circulation when they release the new denominations and the larger notes are bought back! It will all be to the benefit of the Iraqui people.

[dinarck]

Iraq is trying to get it's people to use the dinar instead of the dollar! The dollar is not to be used but we know that the average Iraqui will still use the dollar until it has all been taken out of circulation and replaced by the dinar!. That is why the new smaller denominations (already printed) will be introduced gradually over the next few years. The RV can come at any time either before or after release from chapter 7 but it is more practical to RV before chap 7. Also, there will more dinars in circulation when they release the new denominations and the larger notes are bought back! It will all be to the benefit of the Iraqui people.

Again, unless the majority of Iraqis agree to electronic banking then there is simply no way new lower denoms can be exchanged for the current currency without a RD. It is the difference of giving an Iraqi one new 25 note or 1000 new 25 notes for their 25,000 IQD note.

[Darin]

Again, unless the majority of Iraqis agree to electronic banking then there is simply no way new lower denoms can be exchanged for the current currency without a RD. It is the difference of giving an Iraqi one new 25 note or 1000 new 25 notes for their 25,000 IQD note.

That doesn't make any sense. Money is money, whether you hold it in your hand or have it in a bank account.

If they slowly raised the rate over time, increasing the buying power of their current bills, it could be done.

I.e., if they were to need a 25 note to conduct transactions, and so forth as the value is risen.

If they were to double their current value, a 25 note would take place of what a 50 note buys now.

On a side note:

I don't think a RD will get many of them to agree with electronic banking either.. It would be more status-quo, so to speak. Especially if the project included an extended length of time to conduct the exchange (2-4 years).

If the CBI were to want more faith in banks, higher demand for IQD, etc. etc. Raise the value of the currency (I.e., raise the exchange rate against other foreign currencies)

If the CBI is concerned with their liabilities as far as money supply goes, do a R/D. It may have a slight increase in demand against the new IQD, but, nothing substantial.

A R/D is a psychological attempt to increase demand of the new currency. Simply because the intent is to ease cash transactions, make accounting easier, and give the appearance of a strong currency.

We all know that their money will not be any stronger or weaker from a R/D

A R/V would create a stimulus to their economy. Putting wealth into the people who spend it locally would help develop private sectors, improve local businesses, etc. etc.

IMO, companies generally have in most cases two periods in a year they do quite well. Prior to holiday seasons (People spending money) & after tax returns (People spending money).. We spend more when we get larger chunks in one sitting, or if we know we will be getting large chunks.

Who here takes their tax return, puts it into their checking account, and slowly spends it away?

Who here takes their return, and buys a big ticket item? (Vacations, TVs, Cars, pay off debt, etc.)

[wpsmit]

I've always felt removing the zeroes would apply to the rate and not the physical bills. If you delete three zeroes from the current rate of .00086 you would wind up with .86 which would equate to $1.16 per dinar. Might be wishful thinking, but just IMHO

[dinarck]

All that I am saying Darin is that this notion of exchanging the current notes for lower denoms is nonsense. How are they going to do this? So an Iraqi is suddenly a multimillionare. He goes to the store to buy a TV. He hands the clerk a 25,000 note and what is the clerk suppose to do? Hand him 975 new 25 notes as change? So he goes to the bank, same thing now he has 50 thousand of the new 100 notes for his 5 million old IQD that was worth 5000 USD the day before? Anyone with any common sense can easily see that this will never happen. The only way it is possible is if Iraq makes it manditory to open an account prior to exchange. Again I ask, do you think Iraqis would trust the banks with their new found wealth?

[Darin]

All that I am saying Darin is that this notion of exchanging the current notes for lower denoms is nonsense. How are they going to do this? So an Iraqi is suddenly a multimillionare. He goes to the store to buy a TV. He hands the clerk a 25,000 note and what is the clerk suppose to do? Hand him 975 new 25 notes as change? So he goes to the bank, same thing now he has 50 thousand of the new 100 notes for his 5 million old IQD that was worth 5000 USD the day before? Anyone with any common sense can easily see that this will never happen. The only way it is possible is if Iraq makes it manditory to open an account prior to exchange. Again I ask, do you think Iraqis would trust the banks with their new found wealth?

You do bring up a valid point.... But let me ask you this, if you were going to go and buy same said TV from a local Best Buy in the U.S., and you were to only pay in pennies... Do you think the store would allow it?

I have seen articles of people who do this to pay tickets..

Now, lets say we had enough pennies to buy a TV that we would want... What would common sense tell us to do? Go to the bank, exchange our pennies for larger currency & go purchase the TV.

Now, if the event of a R/V occurred, I am sure they would campaign what is necessary to be able to utilize the benefits fo a R/V.

I am sure that would include, suggesting to go to a bank, and exchange for lower denominations to be able to use in the regular market place.

Potentially opening up a bank account & converting to digital accounts (electronic banking)

And letting them understand that some places may not effectively make change with some purchases (so plan accordingly)

A lot of big purchases may consume up the 000s rather quickly.. (Houses, TVs, vehicles, etc.etc.)

Some may have their faith renewed in banks & store their cash there.

Who knows, this is brand new territory for everyone if indeed it goes down.

For those that remain cautious regarding hte issue, maybe they go to the bank on a as-need basis to exchange bills down to what they need.

Maybe they arrive with a 25,000 note & get smaller denominations.. Who knows..

[dinarck]

If Iraqis agree to smart cards and electronic bank accounts then yes. If the majority remain untrusting of Gov. and banks then no. I would like nothing more than for Iraq to become a somewhat cashless society where most people use electronic banking but I just dont see it happening anytime soon. An actual working and reliable electric grid would have to come first.

[JayP]

You do bring up a valid point.... But let me ask you this, if you were going to go and buy same said TV from a local Best Buy in the U.S., and you were to only pay in pennies... Do you think the store would allow it?

I have seen articles of people who do this to pay tickets..

Now, lets say we had enough pennies to buy a TV that we would want... What would common sense tell us to do? Go to the bank, exchange our pennies for larger currency & go purchase the TV.

Now, if the event of a R/V occurred, I am sure they would campaign what is necessary to be able to utilize the benefits fo a R/V.

I am sure that would include, suggesting to go to a bank, and exchange for lower denominations to be able to use in the regular market place.

Potentially opening up a bank account & converting to digital accounts (electronic banking)

And letting them understand that some places may not effectively make change with some purchases (so plan accordingly)

A lot of big purchases may consume up the 000s rather quickly.. (Houses, TVs, vehicles, etc.etc.)

Some may have their faith renewed in banks & store their cash there.

Who knows, this is brand new territory for everyone if indeed it goes down.

For those that remain cautious regarding hte issue, maybe they go to the bank on a as-need basis to exchange bills down to what they need.

Maybe they arrive with a 25,000 note & get smaller denominations.. Who knows..

I think that many that have this thought process that believes that a 1000 x RV would create automatic wealth is missing some very important economic points of the fundamentals of a country's import and export business. I understand what you are trying to say here as many people get clouded with this concept, but the truth of the matter is that you have to remember that this would directly affect their export business as well, something that they desperately will need to do to diversify their economy, and diversifying their economy is critical. They cannot be solely an import nation, as there is a very careful balance. Think about it like this, you have an Iraqi citizen earning let's say 1 million dinar a week, and let's say a US company employs this Iraqi citizen. That million dinar salary cost only 860 USD to pay that salary. Now, let's say they revalue the Dinar to .86 from .00086, no RD, no adjustment of salaries, bank accounts, etc, just a straight up change in exchange rate 1000x higher than the day before. Guess what you just did... that's right, you just cost that company 860,000 USD a week to pay that same Iraqi employee. Unless, your thought process is that you adjust the employee's salary by reducing his/her salary by 3 zeros as well, but then it is no longer a straight up RV is it

Imagine how this would affect their economy, and countries that do business there, and what it would cost them. So much for attracting the foreign investors, and so much for the economy. This is why countries like China now, or Japan after the World War had a flourishing economy, because they were able to take advantage of the competitive advantages. Well, to make my point even more clear, Japan in particular was eventually pressured into revaluing their currency, but keep in mind that this was less than 200% over the course of under 2 years. So what was the result of such a change? They actually ended up in a 'revaluation depression", and an economic recession. Please see the below link for reference if you would like to read more on the history and the impact that such a change in currency can have to an economy:

http://blog.hiddenharmonies.org/2010/03/professor-jiang-ruipingrevaluation-of-japanese-yen-a-historical-lesson-to-draw-analysis/

So you have to ask yourself, if this happened to a flourishing economy, with only a change of less than 200% increase in exchange rate, imagine what a 1000% or more exchange rate increase would do, especially to an economy still in the stages of trying to struggle to diversify, attract foreign investors, and try to flourish with a correct balance of import and exports!

Just some food for thought, but I thought that this was important to mention since many seem to think that a 1000 x increase in exchange rate can only mean everyone becomes automatic millionaires, but not think about the adverse affects on an economy this would actually have.