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Iraqi Dinar Economic Speculation

Old 11-12-07, 11:22 PM
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Iraqi Dinar Economic Speculation

Hey, all.

I was going to post this in Other, but seeing's as how I know it will undoubtedly turn into a political discussion anyway, I'll just put it here.

The question is, "How much do you think the Iraqi Dinar will rise, if at all?"

I've got about 30 million so far...doubt I'll get too much more, but when I bought it (majority in '05) it was trading at about 1500 to 1 dollar, towards the end, 1450/1.

Now, it's up to about 1200 or 1250 to one dollar. Naturally, the weakening dollar plays a factor in that, I'm sure. (In Australia in '05, I was getting about 3 AUS Dollars for 2 USD (68 cents/dollar), now it's about 88 cents on the dollar.)

When officially introduced at the end of the British mandate (1932), the dinar [consisting of 1,000 fils or 20 dirhams] was equal to, and was linked to, the British pound sterling, which at that time was equal to US$4.86. Iraqi dinar (ID) equaled US$4.86 between 1932 and 1949 and after devaluation in 1949, equaled US$2.80 between 1949 and 1971. Iraq officially uncoupled the dinar from the pound sterling as a gesture of independence in 1959, but the dinar remained at parity with the pound until the British unit of currency was again devalued in 1967.

One Iraqi dinar remained equal to US$2.80 until December 1971, when major realignments of world currencies began. Upon the devaluation of the United States dollar in 1973, the Iraqi dinar appreciated to US$3.39. It remained at this level until the outbreak of the Iran-Iraq War in 1980. In 1982 Iraq devalued the dinar by 5 percent, to a value equal to US$3.22, and sustained this official exchange rate without additional devaluation despite mounting debt. In early 1988, the official dinar-dollar exchange rate was still ID1 to US$3.22; however, with estimates of the nation's inflation rate ranging from 25 percent to 50 percent per year in 1985 and 1986, the dinar's real transaction value, or black market exchange rate, was far lower-- only about half the 1986 official rate.

The Iraqi dinar was worth $US3.20 before the United Nations embargo that followed Iraq's 1990 invasion of Kuwait. By August 2002 it was trading at just below 2000 to the US dollar, and by mid-April 2003 it had slipped to anywhere between 3500 and 4000 against the dollar. In July 2003 one US dollar equaled about 1,500 Iraqi dinars. Nearly all the bank notes issued after the 1991 Gulf War were without watermark or metal line due to technical difficulties, which is why so many forgeries took place.
http://www.globalsecurity.org/milita...ncy-reform.htm

As of today, it's trading at 1227 to 1 USD.

What do you think?
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Old 11-12-07, 11:41 PM
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It seems to me that the currencies of oil-based economies that aren't pegged to the dollar can do quite well in the future. If Iraq were able to exploit its resources sometime relatively soon it seems it also could do very well. However there are political conditions that could keep that from happening.

As for the long term, who knows? Iran could potentially affect Iraq enough that any eventual confrontation with Iran could hurt Iraq as well. Because of that, it seems that there would be safer places to try to take advantage the potential appreciation of an oil-based currency. But maybe it wouldn't hurt to have some minor position in the dinar so you don't miss out, just in case.

Of course I have no idea what I'm talking about so don't take this as investment advice.
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Old 11-12-07, 11:43 PM
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That is a speculative buy. My guess is that if it ever becomes very stable, they do to it what was done to the Mexican Peso and basically say, "1000 old pesos is now worth 1 new peso" or something similar. One of the major problems with it ever returning to where it was is the fact that being so devalued, everyone has them, which means the poor people have them. Elevate them back up, and the poor people aren't poor anymore. Things don't usually shake out that way. Though, if it were possible, Iraq seems like it could do that easier than most areas because of the natural resources. Similar to the average wealth of someone from Dubai, etc. But there are a lot more Iraqis.

And to be able to put $20k into such a speculative thing? Must be nice.
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Old 11-13-07, 12:53 AM
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Originally Posted by kvrdave
And to be able to put $20k into such a speculative thing? Must be nice.
You should see what I have in Comic Books.

I see it as a win-win, because my time over here is not defined by that speculation. I figured it into my own personal version of a retirement fund or savings plan, and figured what I would put into a company stock option deal, then paid it up front, as the cheaper the dinar was from the beginning, the more I'd get out of it. I say my time is undefined by it, because if I were to lose it all, hell, I still paid off my house and created a decent nest egg.

Company stock in my situation turns out to be a shitty deal, because the companies over here are banging on all cylinders during a war and the stock skyrockets, whereas afterwards, it will plummet accordingly. Still, I wanted to put some money into something, and it does seem speculative, but I'm looking at least in keeping it for 20 years, and I think long-term is the way to go.

I don't think it will ever get back to what it was, but saying it could be 100 or 200 to one is realistic, IMHO. Major rises in the currency will happen when the dinar is released to the world market, when oil production levels grow to never before seen heights and violence subsides to a near non-existent low.

The biggest benefit, as I see it, is that if it rises to, say, 200 to one, then I have 150,000 dollars. Currency exchanges are untaxed up to 10,000 dollars per month, so if I change out over the course of fifteen months, any profit I make is tax-free. To me, that's a HUGE incentive. Even if it rises the same as a 'hot stock' or something, the tax breaks make up for the risk, I think.

Sure, the population over here is greater than, say, Dubai, but there's a helluva lot more oil here, as well.

I would like to put a similar amount into silver by the end of the year.
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Old 11-13-07, 02:27 PM
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Originally Posted by kvrdave
And to be able to put $20k into such a speculative thing? Must be nice.
We're not there yet.
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Old 11-13-07, 03:07 PM
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