I've been following the latest drama unfolding with the allegations against Shabibi and I felt that I should make a few comments. First of all I need to reiterate that I have never called the dinar a scam. I do think it's a scam to promote dinar sales on the notion that the value will go up 100,000% or more at the flip of a switch when the largest revaluation in history was less than 40%. I also think it's fraudulent to tell people that the CBI's plan to remove three zeros is actually a reference to a revaluation (pulling the 000 notes out of circulation to reduce the money supply) instead of a revenue neutral redenomination, and the recent federal indictment against the BH Group and Rudy Coenen confirms that fact. However, I have always maintained that it is possible to make a profit with the dinar, and have stated several times that I still own a small amount for that reason. My problem with the pumpers/gurus isn't that they're saying the dinar might go up in value, because it could and it has done so in the past. My problem is that they're lying about the upside and downside potential. There was never any chance that you could turn $1000 into $1,000,000 and there was always a chance that the dinar would be demonetized with no way for investors to redeem their IQD for USD or the new dinar, meaning that every dollar invested in dinar was at risk.
Well now we have a good example of how things can change in favour of dinar investors. Shabibi's currency reform plan was always a lop, despite the voluminous and vociferous protestations from the perpetrators of pumpitude. His plan to delete the zeros was from the beginning an event which would result in zero profits for dinar investors. Now that Shabibi has apparently been removed (at least temporarily - I'm not going to speculate on the legitimacy of the allegations or the outcome) some people like BondLady are coming around and saying that this could be a good thing because Shabibi wanted to lop and his replacement is pro-RV. Better late than never I suppose.
The options for Iraq have always been pretty much limited to stagnation (like we've seen since 2009), a lop, or a slow growth scenario toward a penny. One of the reasons I decided to take a break from blogging about the dinar was my belief that nothing significant would happen with the value of the dinar for a year or two with Shabibi and parliament at an impasse. With Shabibi out of the picture that could very well change now. Do I expect my dinar to be worth 1000 times more next week? Absolutely not. 100 times more? No. 10 times more? Again, no I don't. But I do think we could see the dinar's value increase by 10% a year or more. Perhaps much more. That wasn't going to happen with Shabibi in charge because as an economist he was focused on stability. From what I'm able to ascertain his replacement Abdel-Basit Turki is not an economist, but has served as a minister of human rights instead. With him in charge of the CBI I have to believe that Maliki has more control and the potential for an increase in the dinar's value has just gone up exponentially.
That's no guarantee that it will happen, of course. And it could just as easily go down, so the risk factor is still there. But the potential for a proft of any kind is better now than it was a couple of weeks ago, and the likelihood of a lop has decreased proportionately IMO.
With Shabibi at the helm the money supply was growing consistently and the exchange rate was motionless. With Turki in charge that could change. We could start to see the M2 figure retreat from over 70 trillion back to the 60 trillion neighborhood. We could see a reduction in the percentage of backing in foreign currency reserves. Any number of factors could change the landscape for the dinar investor. Despite all of the lying, scamming, and general douchebaggery that this blog has pointed out over the past year or so, the crazy thing is that the potential for profit has always existed and still does. The change in leadership at the CBI could signal a shift in that potential. I'll be keeping an eye on the situation. Meanwhile I'm watching for more developments in the dinar fraud investigation. I'm not a big fan of "intel" but I'm hearing that more arrests are coming. I'll be sure to report anything significant.
Shabibi and Stability
Maliki and the RV
Maliki and the RV II
Deleting the Zeros