Tuesday, May 9, 2017

"Revaluation vs. Redenomination" - GCR/RV Intel Update 5/9/17


A calculated adjustment to a country's official exchange rate relative to a chosen baseline. 

The baseline can be anything from wage rates to the price of gold to a foreign currency.

In a fixed exchange rate regime, only a decision by a country's government (i.e. central bank) can alter the official value of the currency. 

That has quietly happened via the US Congress and Trump's Presidential signature, per GESARA (2015 Paris Climate Agreement


When a currency is redenominated the central bank of that country will reissue notes at a decided ratio for both speculators and its citizens. 

For example, If you have a 1000 INR note and Reserve Bank of India (RBI) redenominated at a ratio 1:10 then RBI will take your old 1000 INR note and issue you new 100 INR whose value stays the same.

The net value of old 1000 INR will be same as new 100 INR. 

The old notes are given certain time period for exchange and then destroyed once they are returned to RBI. 

Note that, the purchasing power remains the same throughout the transaction except you are getting new notes for old notes.

Redenomination vs. Revaluation

Redenomination is not Revaluation, although they do share similarities. 

For redenomination, all old notes must be replaced with new notes. 

This is not needed for a revaluation, which just changes value from one trading day tot the next. 

Redenomination does not change the net value (Purchasing Power) while Revaluation does. 

Countries usually announce well in advance for a decision of Redenomination (Zimbabwe, Iraq) but not always (Vietnam, Indonesia, Afghanistan); while countries will never announce a Revaluation in advance as it creates an artificial arbitrage for experienced currency traders.

Both a Redenomination and Revaluation can occur on the same day--and without prior warning--and this is what we are waiting on as all currencies of the world revalue to the same gold standard of value newly determined by the Shanghai Gold Exchange in conjunction with the IMF, WB, BIS (all central banks) and AIIB.

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