The CBI buying back dinars with gold is being used as an assurance that the dinar is going to gain great value again. In the same discussion it's also explained that a lop isn't going to happen. Let's break these two things down separately so they can be better analyzed.
Starting with today's dialogue about why a lop isn't going to happen. It was explained that a lop would be a lessening of value, in fact a termination of value, that a lop would render the current dinar worthless. The discussion went on to explain that all of the focus inside Iraq right now is to increase the value of the currency therefore a lop simply wouldn't happen.
Well first this explanation is far from being accurate. Ask yourself what does a lop mean? Deletion of the zeroes off the value of the currency right? Which essentially means what? A reduction in the total number of dinar being represented by the bills that are lopped. Still all correct right? If so and I think most would agree that this is what a lop means...it instantly decreases the amount of currency in circulation which everyone I think agrees on this too....the reduction of the amount in circulation dictates that the amount left remaining in circulation has to rise in value because now there is less of it.
Nowhere is a lop defined as a definite termination or lessening of value as was described on the call. In fact, it's highly possible that a lop and an rv could occur simultaneously. In which case the value of a single dinar could increase tremendously while the total U.S. dollar value of the currency we hold would be unchanged. Why is this possible you might ask? Well because yes a dinar is worth more if it rv's but, you wouldn't have as many of them as you did previously because it lopped. The dinar itself would have greater value and be a stronger currency but no change in equivalent dollar value would be evident. This would be described as a net currency neutral event.
My apologies for the long narrative in explaining this but I'm trying to leave no stone unturned so as to draw a complete picture as to why today's no lop discussion was over simplified and inaccurately portrayed to make a point that in reality doesn't hold water when all of the facts are presented.
Moving on to the narrative about the CBI buying back dinars with gold that was covered in the same discussion today... It was made to seem like the dinar is virtually guaranteed to be of great future value (in it's current form mind you), otherwise there's no way the CBI would be using their most valuable possession (gold) to purchase it.
Well again, the unanswered million dollar question that isn't being answered is, exactly how much gold is being paid for the dinars? The answer to that question and that answer alone is what determines whether or not the point being made about the value of dinar in its current form being great is accurate or not.
For example. If the CBI buys a million dinar with the equivalent of half a million dinars worth of gold they've just doubled their money. Nothing at all stands in the way of them from then selling the dinar at auction for twice the value they just paid for it in gold...and then turning right around and buying twice as much gold as was originally paid for the dinar. In effect they'd be doubling their supply of gold at no cost to themselves.
So, while the points of today's speech were delivered as if they held great meaning and were supported by real evidence, the fact is both points are inconclusive because of incompleteness and inaccuracy. Specifically, no amount has been assigned as to how much gold the CBI is paying for dinars, and, a lop will not render the dinar worthless as was described. In fact it would do just the opposite and cause the value of the individual dinar remaining in circulation to increase tremendously in value because there would suddenly be a lot less of it in existence.
Look folks, I hope there's no lop and an eventual $3.22 + rate and all the other stuff that economically speaking is virtually impossible...but at the same time I'd like for all of us to have all of the facts. It's unfair, and unconscionable for this thing to be represented as a complete picture when too many of the critical details are being left out.