06:42 GMT +324 February 2017
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    What's Behind Iran's Plan to Redenominate Its National Currency

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    This year, Iran’s national currency, the rial, has seen several big drops against the United States dollar, reaching a record low in early-December.

    At the time, it was also reported that the Iranian government had decided to revalue its rial tenfold and revert to the currency’s old name, the toman.

    The current exchange rate of the Iranian currency is 32,376/$1. However, the government eyes redenomination of the rial, in an attempt to avert the costly process of additional currency issuance.

    Iranian economic analyst Hushyar Rostami explained that the redenomination planned by Tehran is different from similar attempts by other countries.

    "When inflation rate is high the government wants to decrease it. There was a similar situation in Turkey, Argentina and Eastern Europe. The simplest option is additional currency issuance, but it is outdated. An optimal scenario is redenomination of the national currency," Rostami told Sputnik Persian.

    Currently, for example, $10 is exchanged for hundreds of thousands rials. Such an exchange rate seriously complicates accounting transactions in major companies and banks.

    According to the economist, if the government wants to fight high inflation rate and redenominates its currency it does not need to carry out additional money issuance.

    "What Tehran is considering is an example of typical redenomination. The rial exchange rate against dollar will not change. The banknotes will also remain unchanged," the economist said.

    The redenomination process is very expensive, and currently there is a discussion underway in Iran on how to handle the situation.

    "Some say that it’s better to cut one zero from the banknotes, other say that four zeroes should be cut. The estimated cost is $2.5 trillion. All factors should be taken into account before a final decision is made," Rostami said.

    According to the law, redenomination of the national currency must be reviewed by the parliament. The process also involves the Central Bank and the national Finance Ministry.

    "Redenomination is crucial for the Iranian economy because the country needs stimulated economic growth, a low and stable inflation rate and a predictable exchange rate," Rostami concluded. 

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    US dollar, rial, inflation, economy, Iran
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    • avatar
      mvlazysusan
      The problem is that Iran is using "currency" rather than "money" as defined under Islamic law.
      The Iranian Rial was worth less than a single square of toilet paper 100 years ago, and it will be worth less than a single square of toilet paper 100 years from now.
      If Iran ended the un-Islamic use of 'currency' and began using real money, all their problems with their currency would go away overnight.
      Simply weave a strand of gold or silver into the paper 'bill' and their toilet paper becomes real money. Its value will stay constant and all other Nations "currency" will fluctuate comparatively to that "rock" of yellow or white stability milled into a strand and woven into the paper. .
    • city-zenin reply tomvlazysusan(Show commentHide comment)
      mvlazysusan,
      Paper money is not a store of value as you suggest. Resources are. Money is a split tally. Iranian banking is the way to come back to principles!
    • avatar
      mvlazysusanin reply tocity-zen(Show commentHide comment)
      city-zen,
      I never said paper was "money".
      I said a commodity such as gold or silver was money, and within the paper the money could be woven.

      I want you to go to Iran, and get 3 Iranian Rial paper currency notes, and two thin strands of gold. thread a needle with a strand of gold and weave/sow them into two of the three Iranian Rial currency notes, leaving one currency note without a gold strand sown into it. Now, get into your time machine and go back in time and them try to buy dinner with the note without a strand of gold sown/woven into it and then try to buy dinner with the currency note does have the strand of gold sown/woven into it. You will find that absolutely no one will sell you dinner for the currency note without the gold strand, but you can easily get dinner for the paper note with the gold strand sown/woven into it. Now, since you've had a nice dinner, get back into your time machine, travel back to today, and then travel forward in time 100 years, and use the remaining currency note without the gold strand and try to buy a dinner with it, and then try buying dinner with the currency note that does have a strand of gold sown/woven into it.

      ---

      I'm going to tell you this one more time: I have NEVER said "paper" was money. Paper never has and never will be money. Paper is "currency". A gold or a silver strand is money. If it makes it convenient to handle a tiny strand of gold by weaving it into some paper, that does NOT make the paper the money, the paper is just a container for the money.

      If Iran did as Muhammad said and used only gold and silver as money and if Iran did NOT have a "currency", Iran would be doing OK regarding not having a "currency problem" today.
    • city-zenin reply tomvlazysusan(Show commentHide comment)
      mvlazysusan,
      So You mean paper currency with sown/woven stripes of gold or silver is the same as commodities and You call it MONEY? $2.5 trillion for this cosmetic is qute a lot.
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