Scam (5/3/2013)

Yet another news organization has done a feature on the dinar scam. This time it's from a TV station in Utah.

http://www.ksl.com/?sid=25004930&nid=148&title=beware-amazing-investment-opportunity-in-iraqi-dinars-experts-say&fm=home_page&s_cid=queue-1


The response from many dinar investors is that it can't be a scam because they have made money on the dinar. Well, that's a possibility. If you bought dinar in Iraq in 2004 and later exchanged it for USD you might have made a profit. But if you bought from a dealer in the US at a 20% markup since 2008 you're in the hole. If you bought from a dealer at a 20% markup prior to 2006 you're ahead by about 6% until you try to exchange it, at which time you will take another hit. If you bought from a bank with only a 5% markup prior to 2006 you're up by 21% or so until you try to exchange, and since banks are no longer handling dinar you'd be forced to exchange through a dealer. The point is that any gains people have made by owning dinar have been mostly eaten up by markup, shipping, and exchange fees. Under the most ideal circumstances a dinar investor could have only netted about a 15% gain in a three year time frame which would equate to a return of a about 5% a year. When you weigh that against the risk from illiquidity is it really worth it? And let's face it. Most dinar investors didn't get into it for that kind of gain. They were looking for the home run scenario. The overnight millionaire dream. And that's the scam.

The very first post I did in September of 2011 was entitled "RV Reality Check", and in that post I said this:

Is the Iraqi dinar a scam? Well that depends on what you're referring to. The IQD is a legitimate currency. There are people out there selling counterfeit dinars or worthless Saddam era dinars so you have to make sure you're buying from a reputable seller and are getting the real IQD. You could easily be scammed if you don't. If you own the new Iraqi dinar and you go to Iraq you could use it to make transactions in Iraq just like you could use Canadian dollars in Canada or the Mexican peso in Mexico. So in that sense it isn't a scam. If you bought the dinar thinking that it might increase in value at a rate that outperforms mutual funds over the next five years I would say it's not a scam. But if you bought it thinking it would RV next week at 1,000-3,000 times its current value, then yeah ..... you've been scammed! And chances are it was by one of the douchebags we list on this blog.

So the only thing I called a scam was the big RV scenario where you could turn $1000 into $1,000,000 or more. If you own dinar because you think it will outperform mutual funds I would just call that a highly speculative investment, because at least that very unlikely scenario is possible. (Again, the CBI's policy is a stable exchange rate, so the only way to make a profit is if they depart from that policy for some reason.) I stand by that belief today. The only thing that I have been inconsistent on is the potential upside, because when I started the blog I thought that they were only backing about 25 trillion dinar and that they were reducing the money supply. I was also operating under the assumption that they were going to be allowed to monetize their natural resources. Based on those factors I concluded that they could only support 1-2 cents although I even considered that a longshot. As it turns out, despite all of the talk about returning to asset backed currencies I was never able to find one bit of evidence that Iraq is ever going to back their currency with anything other than their foreign currency reserves, and I now know that they're backing everything in their M2 (which is currently at 75 trillion and growing) with about $70 billion in their foreign currency reserves which would mean that they can't realistically support more than a tenth of a penny without a considerable increase in their GDP, a reduction in the M2, a reduction in the % in foreign currency reserves that they're using to back the dinar, or a combination of those factors. These discoveries contributed to my decision to sell all.

You'll often hear dinar investors say "how can this be a scam if XYZ bank was selling it?" Well if that bank sold dinar as a courtesy to their customers who are going to Iraq (where else are you going to use it?) then it's not a scam. But if they sold it by marketing it as an investment with incredible potential then it is. That's one reason the banks quit handling dinar. They were concerned about the liability they might incur by selling it to people who only want it as an investment.

Think of it this way. If you buy a bag of beans at a grocery store for $2, take them home, cook them, and then eat them .... is that a scam? Of course not. It's a perfectly legitimate transaction. But if that store advertises those beans as magic beans that can grow a beanstalk that will reach up to an incredible new land in the sky, and sells them for $50 .... okay, now it's a scam. Comprende?

Although I haven't called the dinar investment a scam there are plenty of entities that have, or at least issued some cautionary statement about it. Here's a short list:

You Can't Fix StupidThe Iraqi Dinar Scam Lives

The Investment Scam That Refuses To Die

The Iraqi Dinar Scam / Fraud Prevention Unit

Washington State Dept. of Financial Institutions

Better Business Bureau

AMTFL Consulting Agency of Canada

Wisconsin Dept. of Financial Institutions

Learning Markets - The Iraqi Dinar Scam

Money Show: Why Won't The Iraqi Dinar Scam Die?

Scam Detector - Iraqi Dinars

Eagle Research - Iraqi Dinar

The Curse of Saddam - Iraqi Dinar Deals

419 Legal - Iraqi Dinar Scam

Dave Ramsey - Currency "Investing" is Ludicrous

Treece Advisory Corp

World Currency Watch

Wall Street Daily

Investment U - Is the Iraqi Dinar a Good Investment?

Iraq Business News

Debunking the Dinar

Salt Lake Tribune

Oklahoma Bankers Association

Idaho Estate Planning

Wells Fargo Advisory

Pacific Rim Bank

Bank of America

5th/3rd Bank

Federal Indictment of Brad Huebner, Rudolph Coenen


Okay, maybe that wasn't so short. It always puzzles me when people accuse me or others like me of being paid to bash the dinar or "reverse pump". Why would anybody pay me to say what all of these institutions have already stated for free? All I've done is put the information in one easily accessable location. And even more puzzling; why do so many people choose to believe the likes of unqualified and mostly anonymous "experts" on the internet and ignore the advice of identified, qualified professionals in banking, investing, government, and law enforcement when it comes to buying dinar, especially given the track record of fraud and deceit documented in this blog?