I apologize up front for the length of this post BUT I hope my efforts here will help shed a little light, on what may or may not be true, in relation to the value of OUR INVESTMENT in the Iraqi Dinar. I want to emphasize the term “OUR INVESTMENT” because I OWN DINAR too.
I am not what you might consider an “old timer” in this investment. In fact, I have owned my Dinar for less than a year. I made my first purchase in November of 2009 because a friend suggested I do so, quickly. Normally I do not JUMP into anything but I was convinced that he might be right; so I made my purchase.
I think, in the effort of full disclosure, I should at least throw my “qualifications” out there, for speaking on the Dinar, before you read any further.
I am not a currency trader nor am I an investment advisor. I was however, a registered representative (stock broker – Series 7 – fully licensed by the Fed and the State of Texas) for 6 1/2 years. I was an ACTIVE broker (managing client accounts, making stock recommendations, executing buy and sell orders, and researching prospective opportunities for my clients) for the first 4 of those years. To put it in simpler terms, I was a “Bud Fox” (Like in the movie Wall Street). No, I never got to sleep with Daryl Hannah (a chick – for those that don’t know) but then, nobody’s perfect.
As you can see, I am NOT a currency specialist; nor do I play one on tv. But what I do posses, is the mind of someone who understands markets and securities. I am not making the claim of being a financial guru or that I am even qualified (in the most astute sense of the word) to tell you guys what to do with your money. Cash, whether it be the USD, the IQD, the EURO, or the Peso are considered “securities.” And as such, their values fluctuate on the most basic of financial principles; “supply and demand.” For those of you that would like to read up on how a central bank controls the value of their respective nation’s money supply, I would suggest you google the purpose of a central bank.
So without further delay, let’s just dive right into this……
We have all been told that 25 Trillion Iraqi Dinar were printed. Of that amount, we have no way of knowing how much of that currency the Central Bank of Iraq still holds in it’s liability column. Or, how much of that cash is in the hands of the global public.
As of 2010, the population of Iraq is approximately 31,234,000.
So we have a nation of people who’s population totals a little over 31 million, who’s central bank originally had 25 trillion of their dollars (dinars) printed for circulation.
Now let’s compare that to a country like, oh I don’t know……The United States. Probably a good place to start since their money is pegged to our dollar.
As of 2010, the population of the United States is approximately 305,689,000
And as shown below, we currently have 1,132,337 Trillion dollars (real currency) in circulation. Of course the Fed (Federal Reserve) is on the hook for much more than hard currency but that’s another discussion altogether.
12. Collateral Held against Federal Reserve Notes: Federal Reserve Agents’ Accounts
Millions of dollars
Wednesday Aug 4, 2010
Federal Reserve notes outstanding: 1,132,337
So let’s compare:
Iraqi population of 31.2 million
US population of 305.6 million
Iraqi currency 25 trillion with no proof that ALL of it is NOT in circulation
US currency in circulation 1.13 trillion
Let’s think about this for a minute………we have 305.6 million Americans that are fighting for their share of 1.13 trillion worth of cash. LET ME STATE THAT I UNDERSTAND THE BASICS OF FRACTIONAL RESERVE BANKING so I know that “wealth” is not represented in the currency supply OR the amount of money an entity may have in the bank. So for illustrative purposes let’s focus on the marketability of the currency alone. We have a supply for a market and a demand for the equity on that security. Not only are American’s vying for the dollar, but other nations are as well. (SUPPLY AND DEMAND)
Contrast this with Iraq:
We have a nation of 31.2 million Iraqis that are fighting for their share of 25 trillion worth of cash. We have a supply for a market and a demand for the equity on that security. At this point, the only REAL demand for that equity is created by the 31.2 million Iraqis. Other than travelers and speculators (like us) there isn’t much demand internationally. Thus, the whole point of bringing the IQD to the international markets.
Now I ask you this…..
Does it make sense that a currency, without much marketability, would maintain it’s current level of supply, and hit the international market at a 3 to 1 ratio to one of the most valuable currencies on the market?
Wouldn’t it make more sense to reduce the currency supply before bringing the currency to the international market?
Look, I know that this line of thinking, or reason, is frowned upon by those who are hoping to become millionaires overnight. And the last thing that I want to do is trash people’s dreams of this giant windfall that WE ARE ALL hoping for. (I own IQD as well)
But is it possible that there is a “plan” in place that ISN’T exactly what WE are all hoping for??
I already know the counter arguments to this and I know that the BIG thing people like point out is the “low rate of inflation” in Iraq. But what does that REALLY mean?
Well, the definition of “inflation” is: The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.
So when someone points out that inflation in Iraq is “under control” or “low”, what they are saying is that the prices of goods and services are increasing, annually, at a low rate. The problem with this argument is that the ridiculous amount of currency needed to purchase goods and services in Iraq is still WAY out of line when compared to non-third world nations. I mean come on; it takes 40-50 of US currency to take the family out to dinner on a Friday night. In Iraq it takes 40,000 – 50,000 of THEIR currency for the same meal. So the nominal value of their currency, while common place in Iraq, is in no way representative of a currency holding any REAL value. That’s why it takes SO MUCH OF IT to purchase goods and services in Iraq.
When people talk about the historical value of the Iraqi Dinar, they like to point out the rate prior to Sadam’s reign. And that rate may have been a legitimate valuation of the currency at that time. BUT….what was the country’s population and how much currency was available to the market? I can almost promise you that BOTH figures are dramatically smaller than what we are seeing today.
Look, I am not here to bash hopes and dreams. I am not here to cause discontent and I am not here to dissuade folks from doing what they want to do with their money. All I am trying to do is put forth reasonable posits that MUST be considered by EVERY PERSON, that owns Iraqi Dinar.
Now I know that MANY will respond negatively to this post and I am ok with that. I am merely sharing the thoughts, questions, and reservations that I have in relation to OUR INVESTMENT.
Thanks for reading…………..