Will Iraq be able to pull off an RI or RV, like Kuwait did? -- Opinion Editorial

Opinion Editorial
 
Will Iraq be able to pull off an RI or RV, like Kuwait did?
August 8, 2013 at 5:39am
Author: Ken Howard
Copyright 2013


Caveat Emptor, each person should seek the Investment Advice of their own Investment adviser. Remember, this is one mans humble opinion, each of us must travel on the path of our own choosing, so, please, be kind and do not attack me for my opinion, as I respect yours and those of everyone in the Dinar community.



From March 18, 1975 to January 4, 2003 the Kuwaiti dinar was "pegged" to a weighted currency basket. From January 5, 2003 until May 20, 2007, the pegging was switched to 1 U.S. dollar = 0.29963 dinar with margins of ±3.5%. The central rate translated to approximately 1 dinar = 3.33745 dollars.

From June 16, 2007, the Kuwaiti dinar was "re-pegged" to a basket of currencies, and is now worth about US$3.51. It is the world's highest "PERCEIVED" valued currency unit. Now comes the caveat.

So, one can easily see, the Kuwaiti dinar is not "Free Traded" on the GLOBAL FOREX open currency market like the US Dollar is, rather, it's "Perceived Value" is not the real/actual "Market Valuation" (like the US Dollar), instead, the KWD is a "SET" (pegged) valuation (MANAGED FLOAT) and, it too, like the IQD does not represent an actual "TRUE VALUATION" based on "FAIR MARKET VALUE" as determined by financial metrics typically used in evaluating the real world "Fair Market" valuation that would and should be used to allow FREE MARKET TRADERS to determine valuation based on their analysis and real world financial metrics. The KWD is a falsely manipulated currency that in my opinion is way over valued and hyper inflated. Simply look at the Saudi Riyal and the United Arab Emirates Dirham and you can quickly see, both of these "Oil Rich" countries currencies are not falsely valued anywhere near the "Perceived" valuation of the KWD. Both the Riyal and Dirham trade at a much closer price to "REAL WORLD" valuation of approximately $1 USD to 3.67 (Riyal and/or Dirham). Whereas, the KWD, I think, is hyper inflated to a "Perceived" valuation far exceeding what I think is a healthy and sustainable valuation, it's $1 to .28 KWD, or, in other words, the KWD is "Perceived" to be valued 13 TIMES Higher in valuation (1,300%) than it's neighboring oil rich countries of Saudi and the UAE!

Kuwait was able to pull off an RI (Reinstated Value) because of it's HISTORICAL Economic and Political STABILITY along with it's modern INFRASTRUCTURE that remained intact after it's invasion and liberation. Kuwait is NOT a country that is, or, ever has been DIVIDED like Iraq is by 3 different cultures, religious sects and territories. KUWAIT has always remained STABLE (War free and Terrorist free) for CENTURIES before Iraq INVADED them. Kuwait was not at odds with the UN like IRAQ was for INVADING, so, KUWAIT had none of the NEGATIVE stigma associated with it like IRAQ has had to overcome by being forgiven of massive DEBT (over $140 BILLION Dollars misappropriated by Saddam and his corrupt government). KUWAIT was never MISMANAGED economically like IRAQ was by Saddam. You cannot compare KUWAIT and IRAQ, they are POLAR OPPOSITES, "Apples and Oranges". IRAQ will have a long hard road to RECOVERY before they reach POLITICAL and ECONOMIC STABILITY and before they're INFRASTRUCTURE is on par with MODERN 21st Century standards, as such, there currency CANNOT come close to being valued ("Perceived" or otherwise) near Saudi' or the UAE currency rate, let alone, never mind, trying to "PEG" the IQD near the value of the KWD. It's not rational.

One man's humble opinion.


Ken Howard is an Entrepreneur, Best Selling Author, Radio Host, Investor, Inventor, Mechanical Design Engineer, Writer, Composer, Musician, Speaker, and Futurist

Ken's websites are:

www.BuyaCopyNow.com (His Best selling Book)

www.GreenROIRadio.com (His Radio Show)

www.PressurePest.com (One of Ken's Inventions)

www.ChooseGreenInfrastructure.com

Ouch! He makes some sense.

He does indeed make sense until you look a little closer. First, Kuwait does not have a history of centuries, let alone centuries of stability. Both countries were a pert of the Ottoman Empire until after WW1. Iraq achieved independence in 1932, while Kuwait did not become independent until 1961. Iraq actually considered what became Kuwait a part of their territory, and only grudgingly recognized them in 1963.

I also disagree that the KWD is over valued. Kuwait's GDP is as much as double that of Saudi Arabia. Their expenditures as a percentage of their GDP is comparable, and the national debt per capita is roughly half that of Saudi Arabia.

So what about Iraq? I took a look at that a couple of years ago, and don't have all my research handy, but resource wise, Iraq has a lot more in common with Kuwait than Saudi Arabia or any of the other surrounding countries.

IMO he gives a strong reason we can expect to see a RV in his last paragraph. The Iraqi Dinar was driven low as a result of external and artificial circumstances. Since the fall of Sadam, it has been held artificially low as well. Their foundations are solid, with a strong currency reserve, and a plentiful supply of resources. There is a lot more reason to expect to see a strong RV of the IQD than not. Another man's opinion ...

Thanks for the counter point Kevin

Except Kuwait did not RV

Ken also thinks he can build a train that goes 4500MPH! Reminds me of the Donald Fagen song I.G.Y. where he sings about going "90 minutes from New York to Paris" and "under sea by rail". Wonder where Ken got his idea from?