The financial world we live in is just as wild, if not more, than the mountains and woods we walk through. We are told that the fundamentals of our economy are strong, but we can feel that something is wrong. My unique financial background and survival passion make Financial Survivalist and excellent place to learn and share.

Monday, February 27, 2012

The Iraqi Dinar: Scam or Scoop?

What is the Iraqi Dinar?

The Iraqi Dinar is the currency being used in Iraq. There are heavily circulated rumors that after the war comes to an end the IMF will revalue the Dinar. If you buy a bunch of Dinars then when they revalue, those Dinars would be worth "millions." There are several websites "selling" Dinars.

The people that buy into this idea are very adamant about it. It seems to be in close nit groups like MLM (multi lever marketing) groups. Many of them bet every cent they own on this idea, and whether or not it is a scam is a very dangerous topic to discuss with them.

How does the IMF play a role?

The IMF (International Monetary Fund) often puts a hold on currency exchange with a country that is at war. This is so surrounding countries and currency traders do not take advantage of their currency. If no hold is placed on the currency, then currency traders and the surrounding countrys can make millions or billions, but in doing so absolutly destroy the country's economy.

This means that a guy in rural America, siting at his computer buying dinars is probably not buying actual dinars. Sometimes they get a certificate, but to remove the currency from the country for purposes of currency exchange would be illegal. In order to exchange your dinars you would have to physically be in Iraq.

How does revaluation of currency work?

Let's assume someone was able to get their hands on some Iraqi Dinars. The whole idea is that when the war is over the IMF will revalue the Iraqi Dinar and suddently their briefcase of foreign currency will be worth 1000x their original investment.

The problem is that these people don't understand how a currency revaluation works. When a currency is revaluated, there is essentially a new currency created. That currency (the new Dinar) will have an exchange rate for the old dinar. The old dinars will be just as worthless as they were before. If the "investor" is lucky they might be able to get back part of their original investment, but that is only if they actually have Dinars. I doubt they do.

Financial Survivalist Rule 27: If it sounds too good to be true, it probably is.

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6 comments:

  1. The iraqi dinar was printed by De La Rue an English organization which can be the globe leader in anti-forgery techniques. De La Rue may be the largest printer of currency on the planet and trades publicly on the London Stock Exchange. For more info check here

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  2. Yes there may be ways to obtain legitimate currency. However, the kind of arbitrage caused by a revaluation, that is expected by the people who buy Dinars DOES NOT EXIST. It's not how a revaluation works. You are fooling yourself and going to lose all your money. You are likely in denial. Very sad.

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  3. This doesn't fully answer the question!!! Use some legitimate figures as examples and prove mathematically it doesn't work. All I find on the internet is the same answer like here, "oh, their not real IQD's". How does revaluation of currency work?~ this didn't explain it for me.

    so if I buy dinars at 1 USD = 1166.00 IQD, then if the IMF revalues/issues a new IQD at 11.66 IQD =1166.00 IQD, my 1 USD would now= 100 USD? But first I would have to exchange my old IQD for new IQD then finally for USD, right?

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    1. When you exchange your old and new IQD it will not be a 1 to 1 ratio. In your scenario it would be 10 to 1. If your $1 bought 1166 IQD then you would trade your 1166 IQD for 11.66 of the new IQD. Then your 11.66 IQD would be worth $1 because the new IQD would have a new Dollar to IQD exchange rate of $1=11.66 IQD. The new and old IQD are different currencies.

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  4. Precisely. They will, in all likelihood, exchange them at the exact exchange rate that they are selling at on the day before the revaluation.

    It's like a stock split. You may end up with twice as many shares, but they're only worth half as much. This is actually more like a reverse stock split, in which they increase the value of the Dinar by a thousand fold, but then only give you 1/1000th of the face value for the old ones. It's a net wash... except for the people who have your money and have been living very well on it for years now. They won't be there to buy your Dinars back, I can assure you.

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    Replies
    1. THANK YOU!!!! Someone finally speaks sanity!

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