A Unique Perspective on the Dinar (12/14/11)

I recently came across a video on YouTube where a minister named Sammy Tippit is talking about his experiences with currencies as he traveled around the world preaching in various nations through the past forty years.  If you want to listen to his views here’s the link.  In this video he mentions that Breitling discussed this with him and they thought that it would be a good idea for him to share from his perspective.  (This isn’t offered as criticism of Rev. Tippit.  He admits to not being any kind of authority on this type of investment, and he was responsible enough to say that there is risk and he didn’t invest any more than he could afford to lose.)  He lists several countries whose currencies appreciated over the years as examples of why he thinks the dinar has to go up in value.  Among them:

  1. Romania – Romania experienced hyperinflation from 1991-1997.  In 2005 they redenominated, removing four zeros from the old lei to create the new leu.  Iraq mentioned Romania’s RD (along with Turkey’s) to determine how they should proceed with their redenomination.
  2. Ukraine – Ukraine experienced hyperinflation from 1993-1995.  In 1996 they redenominated, removing five zeros from the old hryvnia to create the third issue of karbovanets.
  3. Russia – Russia experienced hyperinflation from 1993-1995.  In 1998 they redenominated, removing three zeros from the old ruble to create the new ruble.
  4. Brazil – Brazil experienced hyperinflation from 1981-1993.  They redenominated several times beteween 1986 and 1994, replacing the cruzado and the cruzeiro real until finally they introduced the real at a rate of 2750 to 1.  Not exactly a lop since the math is a bit trickier, but essentially the same as a lop.  Shabibi mentioned Brazil’s successful redenomination in a recent statement regarding Iraq’s future RD.

If you’ve listened much to Breitling you know that he tends to rant against people who believe that Iraq will lop.  I find that somewhat ironic since he apparently encouraged Rev. Tippit to share his views, and the reverend is making a good case here for the lop, since all of the countries he mentioned did exactly that.  He states that now when he goes to those countries their currencies are much more valuable against the USD than they were in the past.  Why do you suppose that is?  It’s because they redenominated.  They issued new currencies with zeros removed that gave them greater purchasing power.  The value went up and the supply went down, which is exactly what Iraq is telling us that they intend to do with the dinar.  There’s a good chance that if he goes to Iraq in a few years he will experience the same thing there that he did in the other countries that he mentioned.  But it doesn’t mean that anybody is going to become a millionaire by investing in the dinar.

People like Breitling exclaim “where do these people get this lop stuff?”.  The answer is very simple.  Research.  Information on redenominations is all over the web.  Anybody can find it with a little effort.  Will Iraq redenominate or remove (lop) the three zeros from their currency as so many other nations have done in the past?  That remains to be seen.  But the precedent is there, and what Iraq is describing sure sounds consistent with what others have done.  And as the reverend stated, the results were often quite positive for their currencies.