DINARDED DINARVETS – OK…Devil’s Advocate…Nothing More…

OK…Devil’s Advocate…Nothing More…

LOPPING A CURRENCY:

Removing zeros from a currency thus reducing the amount of that currency available on the market.

REDENOMINATING A CURRENCY:

Removing zeros from a currency thus reducing the amount of that currency available on the market.

Investopedia explains Redenomination
1. For example, the Bulgarian lev was redenominated due to inflation arising at the end of the Second World War. After the redenomination, one “new” lev was equal to 100 “old” levs. Did ya see that? 100 (two zeros LOPPED) became 1
http://www.investopedia.com/terms/r/redenomination.asp

So as in the example of the LEV above, you may have owned a 100 LEV note BUT AFTER the REDENOMINATION, your 100 LEV note was only worth 1 LEV. The 100LEV could still be used but you would need 10 (old 100 LEV notes) to purchase anything that sold for 10 LEVs. Now, if you wanted to have 100LEV in ONE NOTE, you would have to have in your possession a NEW 100LEV note.

FROM WIKI:
Second lev, 1952–1962
In 1952, following wartime inflation, A NEW LEV replaced the original lev at a rate of 1 “new” lev = 100 “old” leva.
http://en.wikipedia.org/wiki/Bulgarian_lev

Now I agree that, in order for the Iraqi Dinar to be a successful currency, they will need to remove the larger denominations from the market (public market anyway).

There are two ways to do this.
1.) RV the currency and force the larger denoms to cash in within a specific time frame (obviously this is what we hope for)
2.) Redenominate (LOP) the currency, rendering the larger denoms worth ONLY a percentage of their original face value

I need to explain WHY a redenomination does not change the purchasing power of the Dinar, it merely reduces the amount of Dinar in circulation AND increases by default, the value of the IQD/USD conversion.

lopping 3 zeros (redenominating) from the Dinar would ALSO reduce 3 zeros from the exchange rate. BOTH must change because the one effects the other mathematically.

1 Dinar is now worth .00086
after redenomination
1 Dinar WILL BE WORTH .86

BUT you don’t get to cash in a 25,000 Dinar Note for .86 because that OLD 25K note would only be worth 25 DINAR.

IF THE NEWEST ARTICLE IS TRUE then we can read for ourselves that a NEW currency is being released (and must be released IF THE NEWEST ARTICLE IS TRUE)

From the Article:
Both will be legal tender in Iraq until the old notes are completely withdrawn.

and…..

Salih added that in 1990 the value of banknotes in circulation was about 25 billion Iraqi dinars but is currently some 25 trillion dinars.

Economic analyst Hilal al-Tahhan told RFI that the bank’s move is overdue. He said he expects the currency change to go smoothly because of the decision to allow both the old and new banknotes to coexist, leading to less turbulence in the economy.

On a side note, I also thought that this was an interesting piece of information ….

FROM THE ARTICLE:
He said some 80 percent of Iraq’s money supply is cash in circulation.

LINK TO ORIGINAL ARTICLE:
http://www.rferl.org/content/Iraq_Pl…n/1950504.html

Then, we get this information from Adam Montana today….

8:24 AM [Adam Montana] his intel is that we’ll be trading big denoms for small denoms shortly

8:24 AM [Adam Montana] then the Dinar will increase rapidly

Well this is very telling. Once again, without saying it, the REDENOMINATION process, according to Adam’s connection, will soon begin.

AND the whole reason for redenominating a currency, is in hopes of increasing that currency’s value because VALUE is driven MOSTLY by supply and demand. SUPPLY AND DEMAND dictates the value of ANY marketable security and CURRENCY is a “security.”

The hope is that the smaller the supply, the higher the value will increase, IF AND ONLY IF, the demand remains the same or increases! If there is a REDUCTION in DEMAND, then the value will drop even faster. This is why developing nations redenominate their currencies multiple times as they progress. Unfortunately, they run into a scenario where demand reduces AND their Central Bank prints more currency to fund government budgets. The whole thing is a vicious cycle really.

SO, in summation, I would like to find out if the article is real and if the information conveyed in the article was translated properly to the reporter.

I am just like you. I own Dinar and I am looking for information. If anything I have written is incorrect, please correct me so that I may understand this issue better. I really am looking for correction in the facts and details.

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2 Comments

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2 responses to “DINARDED DINARVETS – OK…Devil’s Advocate…Nothing More…

  1. It seems to me that the lop articles are just like the formation of the government articles. One day Maliki will be prime minister the next day allawi will be prime minister. No wait big surprise, Now some guy named Mahdi will be prime minister.

    The same thing goes for the lop theory. First there will be a lop. Then there will not be a lop. Oh wait we changed our minds again there will be a lop. How can anyone no what the truth is. Let me tell you what I think.

    “AND the whole reason for redenominating a currency, is in hopes of increasing that currency’s value because VALUE is driven MOSTLY by supply and demand. SUPPLY AND DEMAND dictates the value of ANY marketable security and CURRENCY is a “security.”

    While this is true people tend to forget that the dinar is not traded globally yet. Yes there are countries that have dinar. But the dinar is not yet active on global markets. It will become more active when the dinar revalues and people invest for the first time. ie forex This will raise demand.

    There are really only two reasons for a lop. First the currency is from a country that has hyper-inflation. Too much currency is in circulation and the inflation is very high. Not the case for Iraq.

    Second reason for a lop would be to reduce wealth

    http://currencynewshound.wordpress.com/2010/09/25/iraq-business-news-redenomination-an-unlikely-priority-for-the-cbi/

    Remember that 2 thirds of the dinar in circulation is held by other governments in exchange for debt. It is also held by companies who have invested in Iraq. This is also how iraq has paid some contracts. If there was a lop then there is a clear danger that investment in Iraq by companies and countries would diminish causing a worse economic state. I have more points than this but this is a comment not a post.

    -Marcus

  2. gene green

    There is not enough $ in the world to pay 3m investors avg 1m dinars each,that would equal 3TRILLION US$,using 3$ to the dinar formula. The US could wipe out its total debt by purchasing 15TRILLION $ of dinars for $5B US. I dont think we R so smart & they R so stupid to pass this up. If u LOP off 3 zeros from the dinar u then have a more logical RV rate.

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