I have watched this rube of an investment idea for years. The heart of the rube assumptions is that the Iraqi dinar will be revalued upward. At 1,168 to the US dollar – it more or less makes sense to some less world people that there were too many dinars to the dollar.
Here is the scenario…
From 2004 until 2012, Iraq Government Debt to GDP averaged at 188.4 Percent reaching an all time high of 493.7 Percent in December of 2004 and a record low of 31.3 Percent in December of 2012. In short, the government was on its way to be a debt free nation. Thus a major revaluation would have to occur – as they would be one of the only debt free nations in the world! And they were part of the treasure kingdom with billons in gold and oil. Furthermore, it was no doubt a plan put together by George Bush, Dick Cheney, Alan Greenspan, and then Senator Barak Obama years ago as a way for the U.S. government to be repaid for their efforts and expenditures in Iraq.
The US government is reported to be the single largest holder of the Iraqi dinar. Fueling the speculation that somehow the US government was on the inside track of wealth making. Really? What crack addled thinking is this -‐ especially after the US lost billions of US dollars lost in solar subsidies. The US government
cannot make good investments. Yes, the US treasury is the largest holder of the Iraqi dinar outside of Iraq – but that was because the Iraq government needed US dollars. There is no active market for Iraqi dinar other than for people in Iraq to sell the dinar and get dollars.
Currency has two components of value. The first is a combination of the reliability and creditworthiness of a government. The second and more importantly is what people think of the currency. Up until recently, Iraq has been a credit worthy country post Hussein. However, no one for a long time has trusted the stability of the government. Most Iraqi businessmen held their reserves in US dollars and Euros in other jurisdictions. This mistrust has recently proven omniscient to us on the outside of Iraq. But this is not the case for those inside Iraq including the Kurds in the north, Suni in the west and the Shia in the southeast. They have all told anyone who would listen that Iraq will split in three and the betrayal of their sovereign rights by the Sykes-‐Picot of 1916 treaty will finally be undone.