Buying Iraqi Dinar - Scam or Safe Investment?

Jim Cramer of Mad Money and CNBC have a couple of positive video clips out about the opportunity of buying Iraqi dinar, while Walter Updegrave, CNN/Money contributing columnist, calls it a "Stupid currency trick." In fact, it is difficult to find any financial expert who recommends buying dinar.

Buying Iraqi Dinar -- Scam or Investment?

So, is buying Iraqi dinar a scam or a safe investment? It depends on who you talk to.

Iraq has been working with the UN to restore the international status it had enjoyed before issuance of the UN resolution 661 in 1990 when Iraq's currency, the dinar, was reduced in value significantly. Many people believe that when Chapter 7 lifts, the worth of the Iraqi currency will go back up in value, perhaps close to or even surpassing the value of the dinar before sanctions were imposed upon Iraq.

Walter Updegrave on Dinar Economics

Walter Updegrave refers to a website he visited which had a chart showing the historical value of the dinar from 1932 through 1982. For 50 years it fluctuated between just under $5 and just under $3 per dinar. In August of 2004, the dinar was worth only $0.0007. Updegrave, says that "even if the dinar climbed in value to just one cent, that would represent a 1,329% return!!!" He goes on to warn that "it's the economic prospects for a country that determine the future value of its currency, not the price it trades at now or the price it traded at in the past."

Dave Ramsey on Investing in Dinar

John Jagerson and Dave Ramsey call buying Iraqi dinar a scam. Dave Ramsey warns his readers, "This is the dumbest thing to come along in years. It's borderline on a scam! A lot of military folks have fallen for this, and there are ads all over the internet for the stuff." (Christian Activities)

John Jagerson on Speculating on Dinar

John Jagerson with Learning Markets has written and syndicated several of the "dinar scam" articles for sites like nasdaq.com and mint.com/blog. His team reportedly surveyed several dinar dealers and found that "the difference between what you can buy dinars for and what you can sell them for is approximately 20 percent. This means that the dinar will have to appreciate by at least 20 percent before you could sell the currency back at break-even." However, he notes that the dinar has already increased in value about 23 percent total since the new dinar was introduced after the U.S. invasion. He goes on to state that countries with low-value currencies compared to other currencies frequently demonetize their existing hard currency and issue new currency with new values, so there is a risk the value of the dinar may go down instead of up.

Michael O'Hanlon on Investing Dinar

Michael O'Hanlon who is in charge of the Brookings Institute's Iraq Index, says the Iraqi economy is expected to grow slowly because violence is still too high for most investors. "I wouldn't invest a lot of dollars in dinar unless your time horizon is five years or more," O'Hanlon told Stars & Stripes.

This is not the only indication that some experts think the dinar will increase in value over time. In fact, according to a 2009 report on CNBC, the dinar has gradually increased in value by 45% since 2004.

Those who are enthusiastic about buying Iraqi dinar point out Iraq is the 3rd (some say the 2nd) largest oil reserve holder in the world, with reserves worth over $10 trillion at the current market value. The US and the UK are among nations who have pledged money, military and civilian support, and debt relief that will give Iraq the capability to develop its potential as a potentially wealthy, major oil-producing nation economy.

Jim Cramer on Buying Dinar

Jim Cramer says he is always in favor of owning the currency of a country - and he points to the tremendous support Iraq is receiving from the US as well as to "resourced-based" Iraq's oil reserves as reasons why investing in dinar is not a bad idea.

Proponents of Buying Iraqi Dinar

Proponents of buying Iraqi dinar, who can be found on forums like www.dinarvets.com, www.nenosplace and www.investorsiraq.com, may not typically be financial experts, but they say they are more than willing to risk a little bit of disposable income on the hopes that when sanctions are lifted and Iraq's government stabilizes, the country may regain its financial footing, causing the dinar to go back up in value.

Personal Observations

I am not a financial or investment expert. In fact, I can't even balance my checkbook, so I am in no position to make a determination one way or the other. However, investing a small amount of disposable income (not money needed for bills) in currency is not really a scam, (although investors do need to look for the new dinar as opposed to the old ones with Saddam Hussein's image). Even in the worst-case-scenario where the currency does end up devalued as some experts fear, investors should be able to get some -- hopefully most of their money back. And if the dinar does go up in value after the final sanctions on Iraq are lifted, the speculation might pay off nicely. More info at: Should You Invest in Iraqi Dinar? Five Points to Consider About Buying Iraq's Dinar

Sources:

• The Iraqi Dinar Scam Reemerges - Part Two
• Dave Says...Currency investing is ludicrous!
• Stupid currency tricks: Iraqi dinar
• New Investment Scam: Buying the Iraqi Dinar
• Is buying 1 million Iraqi dinar a wise move?