Information related to the discussion about "lobbing off" 3 zeros
You may or may not have heard some of the talk about "lobbing off" 3 zeros from the Dinar. I know even the suggestion can be alarming to people but I think it's important to get people all the information, not just the positive developments. People can make their own decisions accordingly.
I thinks it's worth addressing but honestly, I don't put much credence in it. If nothing else, the Iraqi government just re-issued the Dinar in October of 2003. Why in the world would they want to do that again? It wouldn't serve any purpose, particularly if there hasn't been a change in the country's gross domestic product (GDP) and exports. Even if they did lob off 3 zeros from their currency, I'm convinced they would do a currency exchange of the ("old") New Dinar for the new(er) Dinar. But I really don't think it will come to that. Nonetheless, what else would they do other than a currency exchange at that point? Declare all their national currency worthless? Consider the economic impact of that. Why would a government do that? The truth is they wouldn't. And don't worry about how you would be able to exchange your currency if the aforementioned conditions were met and they were going to do another currency exchange. If it came to that there would be many, many independent online currency dealers competing for the chance to do the exchange for you.
All the talk of knocking off three zeroes began with what was, in my opinion, a misguided statement by the Minister of Finance, Bayan Jabr Al-Zubeidi. There is yet another rumor that he might be removed and replaced for making statement that were considered reckless by some. I haven't been able to confirm that but if I do I'll let you know.
Read this article closely and it will give you another authors opinion on this issue which seems to be relatively unbiased.
http://english.daralhayat.com/business/07-2006/Article-20060711-5d8b279e-c0a8-10ed-01ce-4de8b7d2daf4/story.html
I think it really articulates three pertinent points:
1.) Historically, other regimes in power have suggested the same thing to the currency in Iraq and it never happened.
2.) Ultimately it wouldn't change anything. Essentially the value would remain the same. If 25,000 Dinar buys 1 chicken and they lob of 3 zeroes 25 Dinar buys one chicken too. You still have to increase exports before you can increase the value of the currency.
3.) And if they did re-issue the Dinar they would just have a currency exchange as they did when they went from the old Saddam Dinar to the current New Iraqi Dinar.
In a nutshell, here is how I would interpret the article: Minister of Finance, Bayan Jabr Al-Zubeidi, only suggested changing the currency. According to this article, the previous regimes in Iraq and other Middle Eastern governments had suggested the same thing and it never affect anything those times either.
The author, Ali Mahmoud al-Fakiki wrote: "This is just a formal issue of no use, and that is not to be celebrated." Let's say that, today, you buy 100 New Iraqi Dinars for $300. Five years down the road, what makes the New Iraqi Dinars worth more dollars? Al-Fakiki's suggestion, as I understand it, goes like this: What difference does it make if you purchase a bicycle in pennies or twenties, if your earning power has not increased?
The problem is not where the exchange rate begins but where it progresses after you have invested in it. For the exchange rate to improve over time would require the growth of economically sustainable business in Iraq that has only just begun. Sporadically and with great struggle but it has begun. Don't let the press blind you into complete hopelessness. Take a look at this article:
June 25, 2006 03:28 PM ET
Iraq says oil production at highest since invasion: http://snipurl.com/u0ei
This last point I'll mention is that I've heard it speculated that the Minister was suggesting lobbing 3 zeroes off of the exchange rate not the currency (i.e. .00068 becomes .68). I find that improbable myself and I don't even know if it's possible.
Those are my opinions on the matter. Let me know if you have any additional thoughts. I hope you find this to be helpful in making your decisions regarding this investment.
Back to main page about Iraqi Dinar.
Back to Iraqi Dinar II
You may or may not have heard some of the talk about "lobbing off" 3 zeros from the Dinar. I know even the suggestion can be alarming to people but I think it's important to get people all the information, not just the positive developments. People can make their own decisions accordingly.
I thinks it's worth addressing but honestly, I don't put much credence in it. If nothing else, the Iraqi government just re-issued the Dinar in October of 2003. Why in the world would they want to do that again? It wouldn't serve any purpose, particularly if there hasn't been a change in the country's gross domestic product (GDP) and exports. Even if they did lob off 3 zeros from their currency, I'm convinced they would do a currency exchange of the ("old") New Dinar for the new(er) Dinar. But I really don't think it will come to that. Nonetheless, what else would they do other than a currency exchange at that point? Declare all their national currency worthless? Consider the economic impact of that. Why would a government do that? The truth is they wouldn't. And don't worry about how you would be able to exchange your currency if the aforementioned conditions were met and they were going to do another currency exchange. If it came to that there would be many, many independent online currency dealers competing for the chance to do the exchange for you.
All the talk of knocking off three zeroes began with what was, in my opinion, a misguided statement by the Minister of Finance, Bayan Jabr Al-Zubeidi. There is yet another rumor that he might be removed and replaced for making statement that were considered reckless by some. I haven't been able to confirm that but if I do I'll let you know.
Read this article closely and it will give you another authors opinion on this issue which seems to be relatively unbiased.
http://english.daralhayat.com/business/07-2006/Article-20060711-5d8b279e-c0a8-10ed-01ce-4de8b7d2daf4/story.html
I think it really articulates three pertinent points:
1.) Historically, other regimes in power have suggested the same thing to the currency in Iraq and it never happened.
2.) Ultimately it wouldn't change anything. Essentially the value would remain the same. If 25,000 Dinar buys 1 chicken and they lob of 3 zeroes 25 Dinar buys one chicken too. You still have to increase exports before you can increase the value of the currency.
3.) And if they did re-issue the Dinar they would just have a currency exchange as they did when they went from the old Saddam Dinar to the current New Iraqi Dinar.
In a nutshell, here is how I would interpret the article: Minister of Finance, Bayan Jabr Al-Zubeidi, only suggested changing the currency. According to this article, the previous regimes in Iraq and other Middle Eastern governments had suggested the same thing and it never affect anything those times either.
The author, Ali Mahmoud al-Fakiki wrote: "This is just a formal issue of no use, and that is not to be celebrated." Let's say that, today, you buy 100 New Iraqi Dinars for $300. Five years down the road, what makes the New Iraqi Dinars worth more dollars? Al-Fakiki's suggestion, as I understand it, goes like this: What difference does it make if you purchase a bicycle in pennies or twenties, if your earning power has not increased?
The problem is not where the exchange rate begins but where it progresses after you have invested in it. For the exchange rate to improve over time would require the growth of economically sustainable business in Iraq that has only just begun. Sporadically and with great struggle but it has begun. Don't let the press blind you into complete hopelessness. Take a look at this article:
June 25, 2006 03:28 PM ET
Iraq says oil production at highest since invasion: http://snipurl.com/u0ei
This last point I'll mention is that I've heard it speculated that the Minister was suggesting lobbing 3 zeroes off of the exchange rate not the currency (i.e. .00068 becomes .68). I find that improbable myself and I don't even know if it's possible.
Those are my opinions on the matter. Let me know if you have any additional thoughts. I hope you find this to be helpful in making your decisions regarding this investment.
Back to main page about Iraqi Dinar.
Back to Iraqi Dinar II
No comments:
Post a Comment