Enorrste: Article: "Parliamentary Finance: do not oppose the project to delete zeros from the currency .. And postponed for technical reasons" First, the Parliamentary Committee is saying that it has no object to the project of deleting the large notes (three zeros).
This is not new. It is also not saying that they are going to act on it until they get the "green light" from Maliki (who is still the holdup). Second, they refer clearly to "dual both currencies" which means that both the current IQD and the new dinar currency will co-exist for at least some period of time. Again, this is not new.
In fact the Parliamentary Committee has said that they will not begin removing the large denom notes until 2014. This would suggest, then, that the change to a new currency would occur sometime before 2014, right?
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Third, there is a reference to a law that NEEDS TO BE enacted but has not been enacted yet, although Shabibi had said months ago that this law would be necessary before any change in currency could begin.
That law has to do with the "rules" for handling debt transactions. For instance, if I borrow 25000 dinars from you today, and then they change the currency, what will I owe you in terms of the new currency?
This is the problem, in a nut shell, because they clearly indicate that "dual both currencies" will co-exist. Now, if we are assuming a free float, then both currencies, old and new, will go up at the same time in value.
Therefore, theoretically, I could pay back my debt in either currency. HOWEVER, as the VALUE of the currency rises then a problem also arises.
If I borrowed 25000 dinars (worth $21) and the VALUE of the dinar rises to $1 per dinar, then do I owe you $25000? Of course not!
So, the law must be enacted in order to clarify debt to debtor transactions, both public and private, so that NEITHER SIDE benefits at the expense of the other.
This can be done, in my opinion, by using the dollar as the benchmark for the old debts. In other words, if I borrowed 25000 dinars worth $21 in the old currency, then I will REPAY $21 worth of the new currency, whatever value each note has.
If it is $1 per dinar, then I would owe you 21 dinars in new currency. If it was $3 per dinar, would only owe you 7 dinars.
This article is very important in that it brings to the surface now the essence of the final problems prior to freely floating the currency.
I suspect that I will have to call Turki and tell him to use the dollar as the "basis value" on old debts so that we can get this ball rolling ! LOL