The Iraqi Dinar: Investing in the New Iraqi Currency

Recently I've come across an investing phenomenon that is pretty fascinating and definitely out there - investing in New Iraqi Dinars (NID), the currency introduced by the elected Iraqi government in 2004. These NID's replaced the old currency that prominently featured Saddam. As it turns out, there are quite a few websites devoted to this fringe investment - dealers, buyers, forums, and sites both defending the viability of this investment and pooh-poohing it. Though most people would likely express amazement that this type of thing exists at all, it's developed into a pretty prolific trade. For proof, just type in "Iraqi Dinar" on eBay.

Anyway, the idea behind this speculative trade is pretty simple: the Iraqi Dinar traded at an exchange rate of $3 US/1 ID before the two Gulf Wars, and now sits at about $.008 US/1 NID (or, put another way, roughly 1190 NID buys one US dollar). However, the NID does not trade anywhere outside of Iraq, and it is currently waiting on an eventual revaluation on the world market to set its official rate. Proponents of NID investing maintain that due to its vast oil reserves and thriving pre-war economy, the potential for the NID to reach pre-war levels at revaluation time is high. They point to post-war Germany, Japan, and Kuwait as examples. So, you can buy a million NID for about $840 now, and when the NID revalues, your $840 investment turns into hundreds of thousands of dollars, or potentially millions.

Skeptics of this investment strategy point out the obvious: Iraq is in bad shape. Really bad shape. While it is at a nascent investment period for those brave enough to get in on the basement-level floor, it is still a country that counts among its current occupants al-Qaeda and Iranian Revolutionary Guards, not exactly the formula for stability. If there's anything investors abhor more than anything, it's instability and uncertainty. Those two words describe Iraq right now pretty well. Additionally, the 3/1 pre-war rate was not established internationally, but rather by Saddam himself. That rate was untested on the world market, and may or may not have reflected the actual economic realities in that state, where information was closely held by those in power. For a contemporary example, look no further than China's 8 yuan/1 dollar rate, which is (and has been for a while) at odds with actual market conditions.

However, Iraqi Finance Ministry officials have indicated they'd like a rate closer to 1/1 at some point, so it's not completely out of the realm of possibilities that it could happen. And Iraq's economy is certainly in better shape today than shortly after the fall of the Ba'athists, as is its internal security (though, it still has, of course, a long way to go). And if it does revalue at or near that rate, those roulette investors will be laughing all the way to the bank.

Anyway, if you want to experience this for yourself, just google "Iraqi Dinar" and pick one of the thousands of sites up there. And if you want to jump in on that investment, I'd say good luck.