I have been receiving countless e mails about whether or not it makes sense to invest in Iraqi currency. This appears to be especially popular within the Christian community at this time. The Dinar is the Iraqi equivalent of our Dollar. Many Christians have been swept up in the speculation that this is an investment that will offer a windfall in the coming years. As skeptical as I am, I thought it would make sense to do a thorough investigation into this opportunity with an open mind.
Investing In Currencies, Does It Ever Make Sense?
Investing in currencies is nothing new. Most of the investing that takes place in the currency markets are known as a ‘hedge.’ Think of it as sort of an insurance policy. Governments, businesses, and international investors, will take positions in foreign currencies to offset risks associated with the fluctuation in value between currencies. There are also speculators (the Wall Street term used in place of gambler). Speculators simply bet on the movement of a given currency attempting to earn short term profits. Investing in currencies does make sense for certain organizations and government central banks, but not likely for the average person.
Investing In Iraqi Currency
Those investing in Iraqi currency would not really fall into any traditional category of investor as outlined above. I don’t know of any other scenario where an investor would actually take physical possession of a currency. Currency positions are almost always in the form of a futures contract. These contracts represent the right to buy or sell at a specified price for a specified period of time.
Now, back to the Iraqi Dinar. I have heard from quite a lot of Christians that are buying and physically holding the Iraqi currency hoping that the value will skyrocket in the future. There are dozens upon dozens of firms on the Internet that sell Iraqi Dinars. The idea behind buying Dinars is rather simple. If Iraq becomes a stable country and begins to tap into its enormous oil reserves, it may stand a chance of becoming a burgeoning economy. The idea is to buy in now while the currency is cheap and be able to cash out for a fat profit later. Based on today’s exchange rates, for about $875 you can purchase one million Iraqi Dinars! While it seems like a lot of money, one million Dinars have very little value. To make matters worse, dealers selling the Dinar are adding huge markups. There are also quite a lot of warnings I have read about fake Dinars being sold by disreputable firms. So, there are a myriad of issues to be concerned about here beyond just hoping to buy low and sell high.
If you are going to buy Dinars you don’t want the old currency with the picture of Saddam on it you want the new currency. The old currency has no value other than as a collectible.
Is It Possible To Make A Windfall On The Dinar?
I don’t think it would be fair to simply write off any possibility of the Dinar paying off some time in the future, but I think this is a real long shot. The country of Iraq is still facing daily terrorist attacks, sabotage of its oil production, political instability, and an ogoing insurgency. When the remaining U.S. military eventually leaves, there are substantial risks on all fronts. The Middle East is already a tinder box and Iraq is right there in the middle of an unprecedented regional political crisis.
There are additional problems with this so-called "investment," in my opinion: For one thing, there is no established market for trading the Dinar, which means liquidity can be an issue. Unlike the Japanese yen, Swiss franc, British pound, and other major market currencies, banks will not yet trade the dinar with the public. Additionally, many of the so-called retail "dealers" will sell you the currency, but will not buy it back (what does that tell you right there?). In other words, after you buy a bunch of dinars, and decide...either for good or bad reasons...to sell it, you may not be able to do so in a timely fashion, and will then carry the entire risk that goes with that.
Lastly, and a companion to the issue of political instability, is the matter of inflation. Unstable economies always carry a risk of hyperinflation, and hyperinflation, as we know, destroys hard currencies.
While I am not convinced this is a good investment, I would not consider those who do to be lunatics. My bottom line advice would be to invest only that money which you can afford to lose and don’t consider this anything more than speculation. My biggest disagreement would be with those that are presenting this as a guaranteed winner. Like many of these nontraditional investments, those likely to make the most from this are the dealers selling Dinars (the same people hyping the opportunity).
Helping you make the most of God’s money!