It has been almost five years since the current Iraqi Dinar (IQD) was introduced by the Coalition Provisional Authority some time between October 2003 and January of 2004. Since that time, a multitude of websites appeared and heavily promoted in the investment of the new Iraqi currency as a once in a lifetime opportunity to make a fortune.
As it stands, only the promoters have made a killing in the selling of the currency by charging a premium to what the actual exchange rate of the currency is. Extrapolating past data and current data, one can assume that the “investors” have not broken even or may still be at a loss with their investment.
The earliest quote available from XE.com was on June 1, 2004 where the exchange rate was 1455 IQD for 1 USD. The current exchange rate today, November 27, 2007 is about 1223 IQD. This equals to $817 USD for 1 million IQD. Based on the fact that some sites like buydinars.com are charging $1150 for 1 million IQD, it is a losing proposition for the investor. A 40% gain for the seller; not bad.
What investors are finding out is that there is no market for the IQD; no liquidity period. Basically, they are owners of almost worthless pieces of paper that can be framed and hung on the wall as decoration. If they are fortunate, they may be able to resell to another unsuspecting person on eBay to recover their money spent.
The promoters like to make a convincing sales pitch using the Kuwaiti Dinar (KWD) as an example of what can possibly happen. They want you to believe that your 1 million IQD will one day be worth between $100K - $1M USD. If the sellers really believed that, why are they not just hoarding it all for themselves? Why are they going through all the trouble setting up websites and buying Dinars to resell?
The reason is simple; the promoters are making a lot of money selling a dream. Iraq is not another Kuwait. Post-Gulf War Kuwait still had a stable government, stable economy and an intact infrastructure which enabled its currency to quickly return to its previous value.
In comparison to Kuwait, this is the current status of Iraq:
- A broken infrastructure
- $125 billion of external debt
- Millions of dollars in post-war debt
- No stable government
- An ongoing insurgency
- Limited oil production
Iraq’s oil alone will not cause the IQD to appreciate. It is its economy, government and infrastructure that will have to drastically improve before there is movement in its currency. While much of Iraq’s debts were forgiven, many of those same creditors will not reinvest in Iraq for a long, long time. It is like not loaning money to a person with a bad credit rating. To put things into perspective, there are other countries that are relatively more stable than Iraq, however, the value of their currency is unstable or have not appreciated much.
If you are basing on the rise of the IQD on its oil resources, look no further than the Venezuelan Bolivares (VEB). Venezuela is one of the world’s top 5 oil producers which accounts for 80% of its exports. In January 1, 2000, the exchange rate for it was 647 VEB for 1 USD. Today, it is 2,147 VEB. This proves that there are many other factors than just oil to keep its currency stable.
The Vietnam Dong (VND) is another currency to take a look at. It has been over 32 years since the end of the Vietnam War. It was not until 2001 was trading normalized with the U.S. In those 32 years, its infrastructure was being rebuilt and its economy is now booming, however, the currency does not reflect it. The exchange was 13,942 VND on January 1, 2000 and today, it is 16,073 VND to 1 USD.
If you are betting on a meteoric rise in the IQD, you might as well look at the Turkish Lira (TRY). You can get 1,000,000 Liras for 1 USD.
Many of the IQD supporters speak of this magical “revaluation” that will happen some time in the near future that will skyrocket the value of the Dinar. This revaluation will be nothing more than like a reverse stock split of the currency. It will probably be a repeat of Mexico’s own “revaluation” of the Peso back in 1993.
At the time, 2,894 Mexican pesos was about $1USD. The revaluation took place and 1000 pesos became N$1 nuevo or “new” Peso. So 2,840 pesos was now N$2.84 nuevo Pesos. In 1996, nuevo was dropped from the name and reverted back to Peso. Today’s current exchange rate is $1 USD = 10.97 MXN Peso
In 1990, if you bought (exchanged) 2,894,000 Pesos for $1000USD, today after the revaluation, you would have 2,894 “new” Pesos / 10.97 = $263USD. And this is with a country that is much more stable than Iraq or Vietnam with lots of oil. After about 15 years, you would have lost over 2/3 of your money.
Investors in the Iraqi Dinar are in for a long and unpredictable wait. Hopefully, the money invested will not be missed for a while. At this juncture, “investing” in the IQD is not a very good investment and highly speculative.
Did you like this article?
Submitted By 
's
