Iraqi Dinar Discussion Board

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The Kuwait RV was one of the reasons I invested in the dinar in the first place. It was articles like this that caused me to have confidence in my investment. On the surface this does look like an RV. But the fact remains that Kuwait never revalued their currency. Kuwait redenominated their currency. What is an RV? It is a policy decision from the central bank to change the value of its currency. It can only happen to pegged currencies. This is because the market determines the value for all those currencies that float. This is the standard definition of an RV.

The Kuwaiti Central Bank NEVER adjusted the rate of the dinar. The rate plummeted when Saddam invaded the country and took over the central bank. Everyone was instructed to trade the Kuwait dinar for Iraqi dinar in October of that same year. Speculation drove the price down. Once Iraq was kicked out of Kuwait it took 7 months to get the country up and running again. They had to put out fires because the oil wells were set ablaze. The value of the Kuwaiti dinar was reestablished after Iraq left. The Kuwaiti central bank redenominated the currency because Saddam left with a lot of Kuwaiti dinar. But in the exchange there was no change in value.!

Even Wikipedia acknowledges that this was a redenomination and not a revalue. This scenario is a lot different then what gurus say is going to happen to the dinar. The claim is the dinar will revalue which is due to a policy decision. That is not what happened in Kuwait. The Kuwaiti dinars change in value was due to speculation in the currency itself. It is nothing the central bank controlled. When the country was invaded the value fell because no one new Kuwait’s future. When Kuwait recovered the value came back. The central bank had nothing to do with the change in value! It was perception of a fiat currency and the fact that people lost faith in the Kuwaiti dinar that changed its value.

So there was never a Kuwaiti revalue! And given the very definition of revalue it has never happened before on the scale of what people expect from the dinar. There has never been a revalue over 50 percent.

We need to also consider that Iraq has over 34 trillion dinar in circulation. The dinar is backed by U.S. dollars. They don’t have enough dollars in their reserves to back any kind of significant revalue. Given the fact that there is only around 12 trillion U.S. dollars in America’s M2 money supply it is highly unlikely that Iraq will ever get enough reserves to revalue to any significant level

At least 28 trillion of the Iraqi dinar in circulation today is outside of Iraq’s border. When dinar is exported it is exchanged for US dollars. That money goes straight into their reserves. I agree that Iraq will take the path of Kuwait. They will redenominate their currency. When they do this they will not honor the currency outside of their border and they will cite their currency laws as the reason. Then they get to keep all of that reserve that was collected over the years due to the export of their currency.