Would you consider yourself a gambling person? Would you consider investing in something completely unrelated to U.S. stocks and bonds? How about the Iraqi dinar?
Iraq’s a country rife with warfare and conflict. And the Iraqi dinar, presently pegged at 1,165 dinars to a U.S. dollar, could eventually soar when the Iraqi government stabilizes. And considering the enormous reserves of oil Iraq contains, some daring investors are playing a very long game by betting on the dinar.
History is on their side. West Germany saw dramatic improvements in its currency value after World War II. Kuwait had the same thing happen after the invasion in 1990. Even Hollywood’s getting into the game; the new movie Hit and Run portrays a get-rich-quick scheme that bases itself precisely upon the Iraqi dinar premise.
But it’s a very high risk/high rewards situation. The Iraqi government could keel over at any time and the dinar is not held by U.S. banks or otherwise traded by any major currency exchanges, all of which makes investing in the dinar rather complicated. Interested investors would need to source out dealers willing to deliver the investment in hard paper, and that opens the doors to easy fraud.
And that’s not all. Those difficulties mean the markup for purchasing the dinar is high, not accounting for storage fees. Finally, selling the dinar will also be complicated given the lack of prominent institutional purchasers. At DinarTrade, it costs $1,020 to purchase 1 million dinars. However, selling them earns a return of just $810.
Interestingly, given the spectacular failures of long-established financial institutions and frameworks worldwide, it appears some investors are willing to take long odds. What say you?