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lynnejanet
Happy Holly Days


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I was talking to my brother today and he mentioned that a guy from work was going around saying that he had some "inside information" that the Iraqi dinar was a great investment, because it's currently devalued, and IF Iraq emerges from the present turmoil as a strong independent state, then people who own dinars will make a huge return on their investment.

My brother did some cursory research, and decided to buy $300 worth. He was smart enough to go to a chartered bank, rather than through an internet broker, so he's reasonably certain that his dinar are not counterfeit. He said that he considered it like a night at the casino, and if he makes some money, great, and if not, he considered it a lesson learned. Nothing ventured, nothing gained, I suppose.

I did some googling, and found some information both pro - Bet On Iraq - and con (kind of) - Iraqu Dinar.org . It seems that the idea has been floating about since 1993, when the new currancy was issued.

I have no interest in "investing" myself (I'm not a gambler!), but I'm curious as to how wide-spread and risky this scheme is.

Has anyone else come across this UL? What do you think are the chances that there is any money to be made? Are there any other world currencies for which similar claims are being made?

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lynne"insert appropriate punny phrase here"janet

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FullMetal
I'll Be Home for After Christmas Sales


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there's a lot of money to be made on the foreign exchange market. heck look at the canadian dollar, a few short years ago, it was at 60 cents now it's at 90. that's a 33% increase. say you had invested $1000 US into it back then, and sold it back now, it would haev cost you roughtly $700 and you'd get back around 900 now. that's a $200 profit
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Honey Bunching Oats
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Back in 1862, a lot of people probably thought that confederate dollars were a good investment.

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"When we talk about democracy, if the people's stomach is empty, democracy is also empty. Democracy cannot be installed by fiat; it must be achieved by the people themselves." Y.C. James Yen (1893-1990)

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CitizenAim
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I have a vague memory of my dad investing some money into Iraqi currency a couple of years ago.

I've always kind of laughed at it behind his back but I can't really laugh all that hard because he's 45 and retired and has a ton of money and has always done stuff like this.

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Delta-V
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quote:
Originally posted by FullMetal:
there's a lot of money to be made on the foreign exchange market. heck look at the canadian dollar, a few short years ago, it was at 60 cents now it's at 90. that's a 33% increase. say you had invested $1000 US into it back then, and sold it back now, it would haev cost you roughtly $700 and you'd get back around 900 now. that's a $200 profit

That looks good, but it's really only a 29% return over 42 months, or 7.2% APR. (the last time it was that low was January of 2003). A simple index fund (say, S&P500) beats that easily over the same period (52% return), with a lot less risk.

With the Dinar, you're gambling. If Iraq suffers inflation, or worse, hyperinflation, you're the proud owner of worthless currency that no one will buy from you. You're also gambling that the US Dollar (or your currency of choice) won't be stronger. I'd consider it a very high-risk investment.

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"My neighbor asked why anyone would need a car that can go 190 mph. If the answer isn't obvious, and explaination won't help." - Csabe Csere

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DemonWolf
Ding Dong! Merrily on High Definition TV


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quote:
Originally posted by Delta-V:

With the Dinar, you're gambling. If Iraq suffers inflation, or worse, hyperinflation, you're the proud owner of worthless currency that no one will buy from you. You're also gambling that the US Dollar (or your currency of choice) won't be stronger. I'd consider it a very high-risk investment.

You're also gambling that Iraq won't dissolve into civil war and the Dinar won't plummet further.

Peter Maas wrote in his book that during the Balkans war a hotel cost over a million in local currency, but that it was only about $50 USD.

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IMJW-052804

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Delta-V
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quote:
Originally posted by DemonWolf:
You're also gambling that Iraq won't dissolve into civil war and the Dinar won't plummet further.

Peter Maas wrote in his book that during the Balkans war a hotel cost over a million in local currency, but that it was only about $50 USD.

That's hyperinflation at work. It's not a pretty sight. Post-WWI Germany is the classic example. At one point, prices were doubling twice a day, people were getting paid twice a day and would hand their pay to their wife or kids so they could buy food before prices went up again. The German government ended up printing 100 Billion Mark notes. That only ended when they issued 'new' Marks, replacing the old ones (but, of course, still paid reparations in the old currency). The other solutions to stop or prevent it is to freeze prices or convert to a stable foreign currency (usually US Dollars). In any case, your investment ends up as a novelty item (I've got a 100M Mark note I bought for 1 Mark).

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"My neighbor asked why anyone would need a car that can go 190 mph. If the answer isn't obvious, and explaination won't help." - Csabe Csere

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DemonWolf
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Oops, sorry. I honestly don't understand economics too well.

It's all "blah, blah blah" to me.

--------------------
Friends are like skittles: they come in many colors, and some are fruity!

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skeptic
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It's funny that this is posted now as I was about to put up a similar question in the next few days. But I have heard the opposite, someone warning not to have anything to do with the Iraqi dinars. The reasoning given is that they will become worthless when either,

1/ Civil war breaks out. (Officially it hasn't yet. Those bombs are imaginary)
or
2/ The US pulls out its troops.

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I like free speech. It lets me know who the idiots are.

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Publius
Happy Holly Days


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There's money to be made in Iraqi dinars--if you're one of the unscrupulous retailers trying to pass them off on novice American "investors."

Conditions in Iraq being what they are, the trade in Iraqi dinars is a wonderful piece of foreign exchange nostalgia. There's no fancy electronic transfers or anything like that. Retailers get their Iraqi dinars by knowing someone (who knows someone, who knows someone...) who has a contact in Iraq. That contact smuggles Iraqi dinars out of the country in suitcases as cold, hard cash, and passes the physical bills on down the supply chain with all the risk and markup that this implies. That's a lot of markup.

In fact, when this bundle of Iraqi dinars reaches you, the novice prospective investor (i.e., the mark), it typically does so at a markup around 30 percent. That's absolutely ridiculous. This extraordinary markup really can't even be explained by all the risk of carrying physical cash out of Iraq or all the middlemen that that involves; it's simply a rip-off passed off on unsuspecting buyers who have little or no experience in foreign exchange.

And then, supposing you buy these Iraqi dinars, you're left with little pieces of paper with numbers and Arabic writing on them. They also have pretty pictures of men in turbans and minarets and trees. And they're totally worthless outside of Iraq.

Since banks won't exchange your Iraqi dinars for real money, the idea is that you simply put the physical bills away in a vault somewhere until, one day far off in a magical future when Iraq is a shining paradise that has reached the Second Stage of Democracy, your bank decides to start exchanging your Iraqi dinars for hard currency at some rate more favorable than the outrageous price at which you bought your dinars in the first place. Right.

For comparison's sake, most other Middle Eastern currencies are totally worthless and unconvertible outside of their countries of origin. They show every indication of remaining so indefinitely. And those currencies come from countries that aren't completely falling apart.

The trade in Iraqi dinars is basically a pyramid scheme. You can make money in it, all right, but only if you're one of the middlemen who keeps passing the worthless notes on to gullible investors at an outrageous price.

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strange_little_girl
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I've got friends who bought some Iraqi dinars a few months ago. They were convinced to do so by a financial investor who seems like a really dodgy character. They used him to get their first mortgage because the banks wouldnt touch them because of bad debts and he messed about so much arranging their second mortgage they almost lost the house they were going to buy.

They say they're prepared to lose the money invested but I think they are waiting for a huge pot of gold to come their way when it is time to sell.

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RBCal
Deck the Malls


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One easy way to become a millionaire is to buy Zimbabwe dollars (Z$). With one dollar you can buy 300,000 Z$. Thus buying twenty dollars worth will make you a multi-millionaire.
Too bad that a loaf of bread costs about a million Z$ though.

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"The women who embraced in the wagon were Adam and Eve crossing a dark cathedral stage—no, Eve and Eve, loving one another as they would not be able to once they ate of the fruit and knew themselves as they truly were." - Lynn Cheney, Sisters.

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SchmooPie
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quote:
Originally posted by Publius:

In fact, when this bundle of Iraqi dinars reaches you, the novice prospective investor (i.e., the mark), it typically does so at a markup around 30 percent. That's absolutely ridiculous.

I agree with your post as a whole but, please tell me you're missing a zero. 30 percent really isn't much of a mark-up for multiple middlemen.

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skeptic
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quote:
Originally posted by SchmooPie:
quote:
Originally posted by Publius:

In fact, when this bundle of Iraqi dinars reaches you, the novice prospective investor (i.e., the mark), it typically does so at a markup around 30 percent. That's absolutely ridiculous.

I agree with your post as a whole but, please tell me you're missing a zero. 30 percent really isn't much of a mark-up for multiple middlemen.
But even 30 percent is high compared with the typical commission of 2 to 4 percent charge by a bank on foreign exchange.

--------------------
I like free speech. It lets me know who the idiots are.

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Publius
Happy Holly Days


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quote:
Originally posted by SchmooPie:
quote:
Originally posted by Publius:

In fact, when this bundle of Iraqi dinars reaches you, the novice prospective investor (i.e., the mark), it typically does so at a markup around 30 percent. That's absolutely ridiculous.

I agree with your post as a whole but, please tell me you're missing a zero. 30 percent really isn't much of a mark-up for multiple middlemen.
Is it really? My (very limited) experience with foreign exchange led me to think of 30 percent as ridiculously high in any context. But you probably know better than I do; sorry about that.
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zerocool
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30% is very high. that would mean if you ever wanted to sell them, they would have to increase in relative value 30% just to break even.
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lynnejanet
Happy Holly Days


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quote:
Originally posted by Publius:
Conditions in Iraq being what they are, the trade in Iraqi dinars is a wonderful piece of foreign exchange nostalgia. There's no fancy electronic transfers or anything like that. Retailers get their Iraqi dinars by knowing someone (who knows someone, who knows someone...) who has a contact in Iraq. That contact smuggles Iraqi dinars out of the country in suitcases as cold, hard cash, and passes the physical bills on down the supply chain with all the risk and markup that this implies. That's a lot of markup....

Since banks won't exchange your Iraqi dinars for real money, the idea is that you simply put the physical bills away in a vault somewhere until, one day far off in a magical future when Iraq is a shining paradise that has reached the Second Stage of Democracy, your bank decides to start exchanging your Iraqi dinars for hard currency at some rate more favorable than the outrageous price at which you bought your dinars in the first place. Right.

I understand what you are saying about the pyramid scheme, but banks do deal in Iraqi dinar. My brother bought his at his bank. He had to wait a couple of days for them to come in, but they didn't give him a hard time about it, or treat it as an unusual request.

I will caution him, though, not to get up in any private sales of dinar.

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lynne"insert appropriate punny phrase here"janet

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Publius
Happy Holly Days


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quote:
Originally posted by lynnejanet:
quote:
Originally posted by Publius:
Conditions in Iraq being what they are, the trade in Iraqi dinars is a wonderful piece of foreign exchange nostalgia. There's no fancy electronic transfers or anything like that. Retailers get their Iraqi dinars by knowing someone (who knows someone, who knows someone...) who has a contact in Iraq. That contact smuggles Iraqi dinars out of the country in suitcases as cold, hard cash, and passes the physical bills on down the supply chain with all the risk and markup that this implies. That's a lot of markup....

Since banks won't exchange your Iraqi dinars for real money, the idea is that you simply put the physical bills away in a vault somewhere until, one day far off in a magical future when Iraq is a shining paradise that has reached the Second Stage of Democracy, your bank decides to start exchanging your Iraqi dinars for hard currency at some rate more favorable than the outrageous price at which you bought your dinars in the first place. Right.

I understand what you are saying about the pyramid scheme, but banks do deal in Iraqi dinar. My brother bought his at his bank. He had to wait a couple of days for them to come in, but they didn't give him a hard time about it, or treat it as an unusual request.

I will caution him, though, not to get up in any private sales of dinar.

Do you mind if I ask what bank? I actually have some I need to get rid of.
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lynnejanet
Happy Holly Days


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I think he went to his regular branch, which would be a TD Canada Trust. I don't think you would have one in California [Smile] I can ask him if you like.

Are you really saying that chartered banks in the US do not deal in Iraqui dinar? I can understand that small branches in small cities may not be bothered, but I would be surprised if a major bank in a large city would refuse to honour it. From what I understand, it is an official currency. I suppose there is no legal obligation for any bank to honour foreign currency, though. I can understand that some banks may consider it to risky.

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lynne"insert appropriate punny phrase here"janet

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Publius
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quote:
Originally posted by lynnejanet:
I think he went to his regular branch, which would be a TD Canada Trust. I don't think you would have one in California [Smile] I can ask him if you like.

It's not a big deal: I only have like $15-20 worth, so it's not really worth a lot of trouble (or gasoline). Thanks, though.

I honestly haven't looked very hard, but I don't know of any banks or currency exchanges willing to buy Iraqi dinars with hard currency. Come to think of it, maybe banks are willing to sell it, but not willing to buy it?

The Financial Times had a good article (subscription only, unfortunately) on the Iraqi dinar trade in late March. It suggests that selling Iraqi dinars for hard currency on official exchanges is hard or impossible, but it's possible that there are other ways of doing it or that the situation's changed:

quote:
Since the currency is not yet convertible on the international market, the money is shipped as cash, in boxes, by courier services. Banks outside of Iraq will not deposit the currency, so those who purchase it must keep it in deposit boxes or other secure places.
(If it really is hard or impossible to change the Iraqi dinar back to hard currency, the dinar's not alone. It's almost impossible to exchange Syrian lira for hard currency outside of Syria, too. In fact, it can be difficult to change Syrian lira back to US dollars at official banks and exchanges even within Syria, though you can generally do it with a little coaxing and can almost always do it informally without much hassle. Even the Turkish lira is said to be worthless outside of Turkey and Turkish Cyprus, though it seems to do all right on Turkey's immediate fringe. The only other regional currency I have direct experience with, the Lebanese lira, mixes with the dollar pretty freely in its native habitat, so I don't know anyone who's ever been stuck with lira outside Lebanon under ordinary circumstances.)

Good luck to your brother.

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Delta-V
Xboxing Day


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I would say that such 'soft currency' is the norm, rather than the exception. Most 3rd world country's currency is rather difficult to exchange for Dollars (US, Aussie, or Canadian) or Pounds or Yen (or a few other 'hard currencies'). In some countries you aren't supposed to take currency out of the country, either. From my own experience, the old Eastern Bloc currencies were worthless outside those countries. You could buy East German Marks, but you were warned that you couldn't exchange them back. On the other hand, you could often offer someone US Dollars instead of the local currency and they'd happily take it (even if it was illegal to do so). IIRC, most trade in Cuba is done with US Dollars (and therefore, most trade is done on the black market).

A few countries just converted to using hard currency, (US dollars in the Western Hemisphere, US, Aussie or NZ dollars in the Pacific rim, and Euros elsewhere), or lock their currency to them. They give up control of their monetary situation, but gain a more stable inflation rate and currency value.

--------------------
"My neighbor asked why anyone would need a car that can go 190 mph. If the answer isn't obvious, and explaination won't help." - Csabe Csere

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abigsmurf
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I would think investing in iraq currency at the moment is a huge high risk venture. If the country officially goes into civil war, it could end up being worthless.
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Errata
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Small private investors really shouldn't trade in currency like that. Its a complex investment. But what it comes down to is that smarter, faster, richer people with better information than you are going to be one step ahead of you. Any certain trends are already factored into the price.

Its one thing to trade in businesses (or countries) that you really know inside and out better than anyone. But friend of a friend information just isn't good enough to qualify. Small time investors should stick with longer term investments and not put all their eggs in one basket. Individual currencies are generally a bad idea for them. You might try to find a mutual fund that does this sort of investing if you believe in it. You can go with a general trend you believe in by picking the fund, but you don't have to have up to the minute information to keep on top of your investment yourself.

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