I browse through dinar forums frequently to get a sense of what people are saying. Some of these forums and blogs have debates going on between people who believe that Iraq is going to RV to 86 cents and those who believe that Iraq is going to lop to 86 cents, which is always interesting to me. Sometimes the loppers claim that Iraq has never used the word “revalue” in regard to the IQD, and cite that fact to bolster their belief in a redenomination. Well, unfortunately the word “revalue” has appeared in many articles about the upcoming currency reform.
“The Iraqi Parliament and the Finance Committee support the Central Bank of Iraq (CBI)’s efforts to revalue of the Iraqi Dinar through the removal of three zeros from the currency.”
That’s one of the problems in this investment – semantics. Articles are being translated from Arabic to English. Representatives at times are issuing statements in their second or third language of English. Reporters often use the wrong terminology in their ignorance. And what results is mass confusion in a world full of novice currency speculators.
Let’s first of all define some terms.
- Revaluation – A policy-based increase in a nation’s currency. When a country raises the official value of their currency to adjust for changing economic conditions they “revalue” it.
- Devaluation – A policy-based decrease in a nation’s currency. When a country lowers the official value of their currency to adjust for changing economic conditions they “devalue” it. (Not to be confused with “depreciation” which is market-driven.)
- Appreciation – A market-driven increase in a currency.
- Depreciation – A market-driven decrease in a currency.
- Redenomination – The process of changing the face value of banknotes or coins used in circulating currency. Usually this is done to undo the effects of hyperinflation by removing zeros from the exchange rate, issuing a new currency of higher value, and eventually demonetizing the existing currency. This process makes cash transactions easier and has a psychological impact on the people using the new currency. In the case of the euro the participating nations converted at a ratio determined by their respective currencies’ valuations. In the case of Kuwait in 1991 there was no adjustment to the face value since the purpose was merely to replace the former Kuwaiti dinar, much of which had fallen into the hands of Saddam Hussein.
When ambiguous terminology is used you have to look beyond the wording and determine the meaning from the context. If the context describes an increase in the value to more accurately reflect current economic conditions as has occurred with China in recent years, then the term “revaluation” would be correct. However, if it describes the process of removing zeros from the exchange rate, issuing new currency, and demonetizing the existing currency then the correct term would be “redenomination”. In the case of the Iraqi dinar, these stories typically describe the redeonomination process. “Lifting zeros”, “new currency”, “easing cash transactions” … etc.
This ambiguity plays right into the hands of douchebags who want to convince people that Iraq is going to raise the value of the IQD held by speculators by 10,000% – 400,000% or more. The opportunity of a lifetime. A blessing from God. A brilliant plan put together by Dick Cheney and the Federal Reserve to reboot the world’s economy and generate a tremendous windfall for the US and all the fortunate investors who weren’t really supposed to know about this secret plan but wouldn’t you know it, it leaked out anyway. Lucky ba$tard$!
When Russia lopped three zeros from its currency in 1998 this article called it a revaluation.
The same thing happened with Venezuela when they lopped in 2008.
It was also called a revaluation when Ghana lopped off four zeros in 2007 and when Zambia announced their plan to remove three zeros earlier this year.
(NOTE: Thanks to DaveD a.k.a. Stew for these links.)
As some of these gurus are so fond of saying, you have to watch what they do and not listen to what they say. Even if they use the word “revalue”. If all of the above cases were redenominations where zeros were deleted from the exchange rate, a replacement currency was issued, and nobody got rich in the process, why would anybody conclude that Iraq’s description of the same process is going to make anybody a millionaire?
Folks, a rose by any other name would smell as sweet. And a lop by any other name is still a lop and it won’t make anybody rich. Call it a revaluation. Call it “raising the value”. Call it “currency reform”. Call it “removing the zeros”. Whatever you call it it’s a revenue neutral event that has happened dozens of times in history and never made anybody rich, and it won’t in Iraq’s case either.