> Overview > > A number of people have begun touting so-called > "investment" opportunities in the Iraq Dinar as a > "sure way" to make a lot of money with little or no > risk. Many of our clients have asked our opinion on > the legitimacy of this. > > Is "investing" in the Iraq Dinar a sure way to profit? > We don't think so. In our opinion, buying the Iraq > Dinar is a high risk investment with a poor outlook. > > A Little History > > The official rate of the old Iraq Dinar, $3.22 USD > (U.S. Dollars), was set in 1982 by Saddam Hussein. The > old Iraq Dinar could not be freely traded, so this > rate was never tested or upheld on the world market. > > The current Iraq Dinar (IQD) was introduced between > October 2003 and January 2004 by the Coalition > Provisional Authority in close consultation with > financial experts from Iraq and the international > community. The IQD is currently valued at a little > less than seven hundredths of a US cent. (1 USD = 1460 > IQD). The old "Saddam" Dinar has no current value and > is worth only what a collector is willing to pay for > it. > > What's Happening Now? > > The IQD is not freely traded, and is not being used in > any significant international transactions. We are > unaware of any official bank or foreign exchange > office outside of the middle east that will exchange > the IQD. > > The IQD trades on a very small, tightly controlled > exchange. The total volume of IQD traded by the > Central Bank of Iraq is in the thousands of dollars, > compared to the $1,900 billion dollars traded on the > Foreign exchange market every day. This small number > of trades makes the IQD's value effectively > immaterial. > > The Central Bank of Iraq's stated objective is not to > promote the free trade of IQD, as is the case in a > true free market economy, but rather to keep the value > of the IQD stable. The only way the Bank can ensure > the semblance of stability is by tightly controlling > the exchange of IQD on the market, and by ensuring > that the currency cannot freely trade on the open > market. They evidently fear that open trading of the > IQD would lead to a rout in which the value of the IQD > would sink to practically nothing. > > Consider the situation. Why tightly control the > trading of the IQD if it is likely to appreciate in > value? If the value of the IQD were to surge, this > could be held out as evidence of a surge of confidence > in Iraq's economy. So why not open the IQD to free > trading? Why would this be done unless the Iraqi > Central Bank itself feels that the IQD would decline > in value in a free market? > > A Snapshot of Iraq Today > > The current situation in Iraq is pretty grim: > > Over a decade of international economic sanctions and > a devastating war has left the infrastructure in > tatters > $125 billion of external debt > Millions of dollars in post-war debt > No stable government > Insurgency steadily on the rise > Oil facilities and pipelines are sabotaged regularly > Many predict out-and-out civil war, such as the former > Prime Minister of Iraq and the outgoing UK abmassador > in Baghdad > These aren't the kind of conditions typically > conducive to the creation of booming economies. More > to the point -- a 450,000% increase in the value of > the IQD (as predicted by some of its promoters) seems > ridiculous in the face of these challenges. > > But Surely There's Oil Under Those Dunes? > > A lot of the hype over the IQD centers around Iraq's > vast oil reserves and their supposed economic value. > The oil market is extremely unpredictable. An economy > based on oil alone (oil makes up 95% of Iraq's foreign > exchange earnings), will mirror that unpredictability. > Let's look at a real-world example: Venezuela. > > Oil accounts for 80% of Venezuela's national exports > and 50% of its government revenues. The country is one > of the world's top five oil producers. In the last > four years, Venezuela has experienced intense > political instability, including an oil strike and an > attempted coup d'état. The resulting economic chaos > has led to the extreme devaluation of the Venezuelan > Bolivar -- today, it is worth only about a third of > its US Dollar value from January 2000, and only about > a quarter of its Euro value from January 2000. > > Investing in a country's currency is tantamount to > investing in that country's economy as a whole, not in > any single commodity. Investing in the Iraq Dinar is > not the same as investing in Iraq's oil. > > But What About Kuwait? > > Promoters of the IQD like to compare Iraq now to > post-Gulf War Kuwait -- but this is comparing apples > to oranges. > > Before the Gulf War, Kuwait had a stable government > and its foreign investments generated more income for > its economy than its oil did. After the war, despite > losing a third of its pre-war investment portfolio > (over $100 billion USD), Kuwait still had a solvent > economy, a stable government, and an intact > infrastructure. It is not difficult to see why a > currency's value might increase in these > circumstances. > > In comparison, Iraq entered the war with a $125 > billion USD debt, has almost no infrastructure, no > stable government, and no other foreign income except > its oil -- the vulnerability and unpredictability of > which we have already pointed out. The outlook for its > economy and the IQD is grim for the foreseeable > future. > > In late 2004, the US was successful in convincing some > foreign creditors to "forgive" some of Iraq's debt. > However, debt forgiveness is seldom a blessing, and > generally comes at a very heavy price. Other countries > whose foreign debts have been "forgiven" have found it > nearly impossible to generate any foreign investment > afterwards. Think about it: how would you feel about > investing in Iraq again if you lost your entire > investment (i.e. you "forgave" it) last time? > > If it Sounds Too Good to be True... > > Ask yourself one question: if the Iraq Dinar is such a > hot commodity, why would anyone in the know be willing > to sell it to you? If you thought that the IQD was > going to multiply in worth by hundreds of thousands of > percent, would you sell it? Of course not -- you'd be > too busy buying as much of it as you could. > > But if you thought that the IQD was going to go down > in value over time, well, then you might start trying > to convince people that it was a "great deal" so that > you could get rid of all of yours as soon as possible. > > Remember the old saying: if it sounds too good to be > true, it probably is. Be careful! > > More Information > > Additional information on this issue can be found > through the following media links. These links are > selected to present an alternative point of view to > the "all is going well in Iraq" assertion found in > many IQD scams. > > __________________________________________________ > Do You Yahoo!? > Tired of spam? Yahoo! Mail has the best spam protection around > http://mail.yahoo.com >
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