POST RVs Suggestions that are circulating:
DEFINITELY DO NOT CALL your bank transaction AN INVESTMENT.
It is a currency-to-currency conversion. rehearse this
WE are all CONVERTING one currency to another currency.
Unless Congress changes laws retroactively, there cannot be a tax because there is no gain of capital.
There is no profit or capital increase in this transaction - no capital gain. Explanation follows:
You did not buy the foreign currency for personal use (as when taking a trip),
WHEN YOU BOUGHT THE FOREIGN CURRENCY, YOU PAID EXACTLY WHAT IT WAS WORTH AT THAT TIME.
AND WHEN YOU EXCHANGE IT TO ANY OTHER CURRENCY, YOU WILL EXCHANGE IT FOR EXACTLY WHAT IT IS WORTH AT THIS TIME.
Illustration, assuming the old rate is still in place. As this is written It takes one US dollar to buy 1193 Dinar on March 9.
There is one country where you can buy things either with dollars or with Dinar (IRAQ)
So, you could fly to Iraq today March 9 where they have prices showing both US dollars and in Dinar in their stores.
You can go there and price a new car. The car sticker on March 9 probably reads:
PRICE: 30,000 US Dollars or 35,790,000 Iraqi Dinar (Multiply the US dollar price by today's rate of 1193 Dinar/dollar.)
BUT, after the RV the new rate might be reset causing each single Dinar to be worth US $4.00.
So if you fly to Iraq after the RV to price a new car, the sticker may read this way:
PRICE: 30,000 US dollars or 7,500 Iraqi Dinar (Divide 30,000 USD by the $4.00 rate in this example.)
It will look to us as though we have a lot more dollars in our accounts after the RV, BUT WE MADE NO GAIN IN BUYING POWER. That's why the government resets or revalues the currency rates sometimes - the government increases or decreases your buying power by resetting the rate of exchange. THIS NOT PROFIT FOR YOU THE BUYER. The RV rate change brings you up to an equality that matches the value of the other international currency.
Reread this example and at least memorize the upper case letters above. DO NOT VOICE THE WORD INVESTMENT AT THE BANK OR ANYWHERE.
Speaking of currency values, the US dollar is worth less and less each passing day. Buying power is DECREASING when you buy anything with dollars.
Gasoline used to be under a dollar, now it's 4 or 5 times higher.
A gallon of orange juice was $1.40 in Feb 2010
Then $2.00 then $3.20 in Feb 2011.
In Feb 2013 it is $6.20
As the dollar descends in buying power, IT WILL TAKE MORE AND MORE DOLLARS to buy one Dinar. In other words, the rate of exchange of Dinar to US dollars, is likely to go UP to $7.00, then $10.00. then $12.00 in the future.
That's the reason that many people expect to hold on to some Dinar for a while. They may convert a few Dinar ASAP, but hold other Dinar to see how quickly the US dollar will go down (meaning how quickly will the Dinar conversion rate go up).
If you have DInar or Dong in your hand, you are probably holding the most valuable currency on the planet - on the day after the Revaluation. You deserve to be converting your Dinar into a Gold or metals-backed currency - but there aren't any.
Therefore we should store our incoming dollars from the converted Dinar in a no-interest account temporarily, in case the US Treasury comes out with a new metals-backed currency, enabling you to then convert your bank dollars (uncorrupted with old greenback dollars) - converted someday into new US treasury bills that will have some yellow colors on the bills.
IS THE US GOVERNMENT BEING CHEATED IF THERE IS NO CAPITAL GAINS TAX?
NO: When you do your exchange, the Treasury is going to get 1 or 2 or 3 dollars for every Dinar you conver to dollars.
NO: The government has some deal by which the US will get Barrels of oil for some low price (did I read $30 per barrel for 5 years?)
NO: The bank also will get at least one dollar for every Dinar you convert, thus helping to bail out the bank derivative debts.
NO: You will rush around buying boats, cars, trucks, and airplanes, providing a tsunami of sales tax inflow to the Treasury.
Posted by John MacHaffie at 9:21 AM