The amount of currency a country has is usually in proportion to it’s economy, measured in GDP.
The United States has a 12 or 13 Trillion dollar a year economy. That creates a massive demand for the currency. Being the number one reserve currency in the world also creates demand. Currency traded on the FX is not really backed by anything other than demand.
Iraq on the other hand is not on the FX, and they wont be either. None of the oil producing countries are on the FX.
Iraq has currency auctions to help set the rate. Countries that have currency auctions are required to back that currency with high levels of Foreign currency reserves, or gold. Oil in the ground does not count. Once it is pumped and sold, it can then be added to currency reserves, but more likely it will go to fund the budget.
Iraqs economy is tiny tiny tiny compared to the US, so they need very little currency compared to the US. In other words, with very little need because of such a small economy, there is very little demand for Iraqi currency.
So… Iraq can and is supporting it’s currency at the level, they can even increase the value a little if they want. But they can not increase the value to 1:1 or anything close to it and support the amount they have.
Remember… the huge US with MASSIVE demand has about 10 Trillion.
Iraq, with practically no demand has 3.5 times more currency. 35 trillion.
They will have to reduce that amount down to about 35 billion, which they can do with a 3 zero lop, new currency, they can then have a 1:1 exchange rate.
Absolutely no way without the lop… sorry to say, but it is truly a joke to even think it could happen without a lop.
