Thursday, January 20, 2005

Bet on Iraq

Whenever I go to a right wing blog the ads I see all seem to involve either homoerotic weight conditioning or the sale of Iraqi currency.

I found this to be interesting with regards to the wiseness of investing in Iraqi currency:

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 US cents. (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.
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.
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
* International observers predict out-and-out civil war

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.

You'd think that blogs like Instapundit and Powerline would care enough about their readers not to expose them to an out and out scam, but I guess not.