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  1. #1
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    Default Those worrying three Zeros!

    Some of the best, or worst, rumours floating around at present deal with the question of the '3 Zeros'.

    My personal belief has been that lopping them off was counter-productive. However a report I recently read on another site has suggested an alternative that is apparently coming from an economist who is involved in the decision process.

    In general terms, this report suggested that there would be three distinctly different 'outcomes' of any RV: Local (in-country Iraq), International, and electronic.

    Locally, the idea propounded was that a person would bring in a NID25,000 note valued at USD25, and receive a newly issued NID25 note valued at USD25, with the large-denomination note then being shredded to take it out of circulation. This would then leave the country with a currency on 1 NID = 1 USD, but would have little impact on the local populace.

    Internationally, the currency would be established at 1 NID = 1 USD, meaning that your out-of-country NID25,000 dinar note would be worth USD25,000, less the tax you poor Yanks are going to have to pay on capital gains. And the US would then use these funds to buy oil, which the Iraqi government pays just USD1.30 (I think that was the value quoted) for. So the speculative investors, and the US Government make a profit on their holdings of NID. I like that! [It was suggested that a relatively small proportion of the available Dinar fit into this category, if one excluded those held by the US government]

    Dinar held in electronic form would simply convert at 1 for 1.

    I have to say this makes some sense to me, as a practical balance. The only fly in the ointment that I see is the monies invested in the Iraqi stock market. It seems to me that if Coca-Cola Iraq (or whatever) is currently trading at, say NID 1,000, giving it a real value of around USD 0.85, then it is still only going to be worth USD 0.85, so it has suddenly devalued, in NID-terms to NID 0.85 from NID 1,000.

    But frankly, I cannot see any way out of that situation, whatever process is applied to achieve the necessary(?) revaluation!

    I would be interested in intelligent comments!

    Regards

    GrahamB
    Graham Bockett
    [email protected]
    Ariel Consultancy Services
    PO Box 13-859
    Johnsonville, Wellington
    New Zealand

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