Why does Iraq have the large notes right now? Because when they invaded Kuwait and we went in and took control the UN artificially devalued their currency as part of the sanctions imposed for the invasion.
They printed new currency with the large notes because the UN made their currency worthless and they needed more of it to purchase anything on a day to day basis. The large notes are a direct result of the UN devaluation of Iraq's currency and have absolutely nothing to do with the true value of their currency.
When they say they want to remove the 3 zeros that is because they were forced to print them due to the low value of their currency imposed by the UN. Prior to that the Iraqi dinar had consistently been valued among the world's currencies at very close to or just over $3 dollars.
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When the UN devalued it the value was around $3.22. It went from $3.22 dollars per dinar to 4000 dinars per dollar instantly when the UN devalued it. This is not in any way like the situation when a country's currency devalues over time because of economic conditions within that country as many LOPers point to when stating their opinions that this is what will happen with the dinar.
Iraq has the second largest oil reserves in the world, they have the largest natural gas reserves in the world, during the war when the US was fighting Saddam in Baghdad and the US soldiers dug fox holes in the streets of the city they discovered gold lying beneath those streets, huge deposits of gold.
It has been estimated that the gold discovered right beneath the streets of Baghdad is one of the largest gold deposits in the world. Iraq has two fresh water rivers flowing right down the center of the country and land that is rich and fertile giving them the opportunity for agriculture that most Middle Eastern countries can only dream about.
Iraq is so wealthy in natural resources that they could very well become one of the wealthiest countries in the world and the leaders of Iraq know this. By valuing their currency low they make their exports less profitable. Here is a quote from an article on the New York Federal Reserve website
(http://www.newyorkfed.org/aboutthefed/fedpoint/fed38.html) : “A key effect of devaluation is that it makes the domestic currency cheaper relative to other currencies.
There are two implications of a devaluation. First, devaluation makes the country's exports relatively less expensive for foreigners. Second, the devaluation makes foreign products relatively more expensive for domestic consumers, thus discouraging imports.”
Iraq will not have much need for importing once they get their infrastructure in place and they have historically been the world’s leader in exporting dates, plus their oil and natural gas exports, so why would they want to make their exports less expensive to the world?
I am not an economist but logic tells me that at the very least Iraq will reinstate their currency at the value it was when the UN came in and forced a devaluation on it. Anything less than that makes a statement to the people of Iraq and the world that they have no confidence in their country, their resources or their currency.
Obviously NO ONE has a clue what Iraq is going to do because nobody has been right about anything since this began, and if this were up to Iraq and only Iraq they may do something that is illogical and senseless. This is not ONLY up to Iraq.
The UN, the IMF, and the US are all involved in reestablishing Iraq as a sovereign country capable of independence and self governance. These organizations are not going to allow the leaders of Iraq to do something that will further harm the country or the people of that country.
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