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Post by RamblerNash Sun Dec 04, 2016 8:26 pm

Dinar Doubts Multiply

Dinar Doubts Multiply 5265a0aa552dff3c4fe1b03fd378fb28?s=136&d=mm&r=gJohn Wasik Contributor
This blog is about financial deceptions, swindles and costly untruths.
Opinions expressed by Forbes Contributors are their own.

2/24/2012 @ 12:48PM

Dinar Doubts Multiply 4425446952_ff60489e49_m
1 million iraqi dinar (Photo credit: mandiberg)

Most of the time, I like to write about a flim-flam once and move on. There are so many of them and so little time.

But when two completely unsolicited, independent sources come from opposite ends of the country to tell me something, I tend to revisit the matter. Hence this second post on Iraqi dinars.

Dinars are the currency of Iraq, which, as you know from the news, is embroiled in a low-grade civil war of sorts. American troops have mostly left and the government is trying to sort out the mess. There’s been an unfortunate amount of bloodshed and several factions that were oppressed under the late Saddam Hussein are at each others throats.

Somehow the word got out that Iraqi dinars would be worth a lot more in the future than they are now. It’s impossible to value them since they are not traded on any legitimate foreign exchange and major banks don’t buy or sell them openly. Yet that hasn’t stopped hundreds of operators from selling Iraqi notes in the U.S., promoting the currency as a get-rich-quick route when — and if — the Baghdad government gets its act together and revalues them.

So an untold number of would-be investors have bought dinars, which are heavily marketed by internet sites. Are the notes legitimate or counterfeit? What’s their true value? Will the Iraqis dump the currency or hyper-inflate? No one knows for sure.

The only thing we know is that lots of  dinars are being sold. Anyone can print money. It’s what it’s exchanged for relative to another currency that counts.

So when my first post on dinars ran last month, I got some flame mail. Then I started to hear from people whom I trust.

Here’s Barry Kaplan, a respected fee-only financial planner with Cambridge Southern in the Atlanta area, who talked to a local bank (which wished to remain anonymous) and heard this:

“This bank is getting calls every week from people who want to open accounts at their bank [which doesn't buy dinars]. They even confided in me that two widowed clients have paid dealers $10,000 each and are waiting for their dinars to arrive so they can convert them to $1 million. They get calls every week. Yesterday alone, they got three calls. The callers want to open accounts with zero balances waiting for millions to come in.  The bank is no longer opening zero-balance accounts; they got tired of doing it over and over. They now tell these people that this dinar conversion probably won’t work, but they will be glad to open an account for them if and when they get the money. To date, none of these zero-balance accounts that they opened in the past have been funded. The bankers think that these people have paid up to six figures for the dinars (but they have no proof). This is because some of these people are calling expecting not just millions, but tens of millions.”

Then I heard from another investment savant, Nadia Papagiannis, the head of Morningstar‘s alternative investments team (disclosure: I also write for Morningstar.com), who alerted me to this recent International Markets Weekly report by Wells Fargo Advisers:

“Some investors are curious about the Iraqi currency as a potential investment. Expectations for the currency to significantly gain in value against the dollar repeatedly have been disappointed since its introduction in 2004. Considering the illiquidity and fraud risk, Wells Fargo Bank has no plans to trade in the Iraqi currency, and considering that Iraq remains a dangerous place with an uncertain future, we strongly advise investors against taking the risk of buying Iraqi dinar as an investment.”

Was Wells Fargo issuing this report because it was getting a lot of complaints or inquiries about the dinar? Allison Bruns, a spokesman for the bank, would not comment on that directly. But you can rest assured that if a major bank puts something in writing about something like this, there’s a reason for concern. They also did a report on the subject last year. Here’s Ms. Bruns’s emailed reply to me:

“Our financial advisors sometimes pass along questions from their clients about the Iraqi dinar as an investment. There is no particular reason for the timing of the report. We simply like to keep a report current on conditions in Iraq and the likelihood of a dinar revaluation. Of course, we strongly advise investors to avoid the Iraqi dinar.”

I’m not saying that the Iraqis won’t revalue the dinar or list it on an exchange so that you could find out how much it’s really worth. That could very well happen. If that doesn’t transpire, who knows how much they will be worth. Since there are significant fees in any transaction, it may be tough to make money on the currency. Those are huge problems for any currency, and a major obstacle to one that’s not even traded by regulated exchanges.

If you’re considering such a purchase, ask if the dealers will guarantee to buy back the currency, how they will peg the price and how much they will charge. Then ask a fiduciary financial advisor such as a certified financial planner, chartered financial analyst, lawyer or accountant if such an arrangement makes sense for you. It may not be worth your time and consume every dime — or dinar — you’ve invested.


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