Why does Iraq have to RV their currency?

My son asked me today why Iraq has to RV their currency. He said they seem to be doing just fine as it is and they are making money from oil sales so why is it important for them to RV at all.

After thinking about that for a while this is what I came up with. When Iraq pays an international company for goods, cars, food, building supplies, whatever, they have to convert dinars to dollars and send the payment in dollars because their currency is not internationally traded yet. As they continue to do business internationally they are converting more and more dinars to dollars, or using their reserves, and that is causing inflation because the lack of dollars on the streets in Iraq is making the dollar more valuable than the dinar. They are going backwards right now with the dinar because every day as they keep the dollar from flowing into the hands of the Iraqi citizens the law of supply and demand is taking over and making the dinar less valuable every day and the dollar more valuable.

If Iraq wants to truly be an international country and play with the world they have to have a currency that is recognized by the world and exchangeable with other world currencies. They are the president of OPEC this year, they are hosting the Arab Summit, they want to play with the big boys and to do that they have to have a currency that is recognized by the world. My best friend had a saying that always made me laugh but it is very apropos to this. If you want to run with the big dogs you can't pee like a puppy. Right now Iraq is peeing like a puppy but they want to run with the big dogs and to do that they have to have a currency that is internationally recognized. Just sayin'.

Good post. IRAQ has been working to get to that point -- a currency that is recognized by the world and exchangeable with other world currencies.

HOPEFULLY that is soon

I don't think they have to, but I think they will. Good post ibcraig0!

CaptnJerry true that their reserves are growing because of the oil they are selling but they still can't pay for anything internationally with dinars. Yes some countries are holding them, waiting for the RV, but Iraq can't wire transfer dinars to another country to pay for anything because the other country can't cash those dinars in on the international market since they are not traded on Forex or any other currency exchange so they still have to pay for everything internationally with dollars. Because they have to do this it makes everything they import more expensive, and it is causing inflation to rise. Yeah it is true that they need a stable government too but I think they are getting real close to that now, and how long are they going to continue to pay for everything in dollars? That has to be costing them a lot more than if they could just pay with their own currency.

ibcraig0 wrote:CaptnJerry true that their reserves are growing because of the oil they are selling but they still can't pay for anything internationally with dinars. Yes some countries are holding them, waiting for the RV, but Iraq can't wire transfer dinars to another country to pay for anything because the other country can't cash those dinars in on the international market since they are not traded on Forex or any other currency exchange so they still have to pay for everything internationally with dollars. Because they have to do this it makes everything they import more expensive, and it is causing inflation to rise. Yeah it is true that they need a stable government too but I think they are getting real close to that now, and how long are they going to continue to pay for everything in dollars? That has to be costing them a lot more than if they could just pay with their own currency.

Good answer

It's all very simple. the reason Iraq needs to RV the currency is just like the commercial says, "It's my money and I need it NOW".

ibcraig0 wrote:CaptnJerry true that their reserves are growing because of the oil they are selling but they still can't pay for anything internationally with dinars. Yes some countries are holding them, waiting for the RV, but Iraq can't wire transfer dinars to another country to pay for anything because the other country can't cash those dinars in on the international market since they are not traded on Forex or any other currency exchange so they still have to pay for everything internationally with dollars. Because they have to do this it makes everything they import more expensive, and it is causing inflation to rise. Yeah it is true that they need a stable government too but I think they are getting real close to that now, and how long are they going to continue to pay for everything in dollars? That has to be costing them a lot more than if they could just pay with their own currency.

I think you are right in that Iraqi has to do something and I hope an RV is what happens but an RD (re-denomination-deleting 3 zeros) does exactly the same thing... makes the new dinar roughly equal to the dollar and internationally traded.