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| Iraq | |
| New Saddam-Free Dinar Showing Strength | |
| 2004-01-16 | |
| As the euro, yen and other major currencies surge in value against the wilting dollar, even Iraq’s bantamweight upstart - the "Saddam-free" dinar - is showing unexpected muscle. The new Iraqi dinar, introduced last fall to replace notes bearing Saddam Hussein’s image, has strengthened by about 25 percent in dollar terms. The older notes must be turned in by Thursday - they have no value after that. "You boys clear outta here -- yer money’s no good!" Coalition authorities see the dinar’s ascent as a vote of confidence in Iraq’s economy. But currency traders blame speculators in neighboring countries for hoarding the dinar and driving up its value in the hope of later dumping it to earn a quick profit. Sounds like the pit at the Chicago Board of Trade. Much of the dinar’s recent gain has come in just the last week. "This indicates that people are demanding the Iraqi currency, which is really flattering for us. ... This is now a currency that people want to hold," the deputy governor of the Central Bank of Iraq, Ahmed Salman Jaburi, told reporters Thursday. One dinar was worth close to 2,000 per dollar when the new notes - which depict Iraq’s important scientific contributions, history, landscape and economic life - entered circulation. After trading early Wednesday at 1,400 to the dollar, the dinar spiked that afternoon to 1,100 - an increase of 21 percent. Some Iraqis said this was the biggest same-day change in their currency’s value since late 1995, when the dinar strengthened as the United Nations prepared to relax the economic embargo then in effect against Iraq. The dinar retreated to 1,300 by late Wednesday and slipped further on Thursday to 1,350. Traders and economists alike foresee volatile changes in the dinar’s worth in the weeks and months ahead. About 13 dinars to the penny. It’s worse than the lira. Why not move a decimal or two while you’re introducing the new currency? Simon Gray, an adviser to the Central Bank of Iraq, said the dinar’s rise in recent weeks might not have been justified by improvements in Iraq’s economy and political stability. He attributed some of the new dinar’s strength to high-tech features such as watermarks and embossed lettering that make it harder to counterfeit compared to Iraq’s older currency. As the dinar has grown stronger, more people have shifted their savings from dollars into dinars in expectations of a further increase in value. These currency exchanges have added to the dinar’s momentum. Gray conceded speculators might be contributing to the stronger dinar. "It’s somewhat ironic that the Kuwaitis - if that’s what they’re doing - are buying the Iraqi dinar," he said. "I would guess that a year ago you wouldn’t have been able to persuade a lot of Kuwaitis to invest their wealth in the Iraqi dinar."
Got room for Sammy as well? | |
| Posted by:Steve White |
| #4 "Mr.Soros- Kofi Annan on line one..." |
| Posted by: Grunter 2004-1-16 2:56:00 PM |
| #3 compare this to argentina, Russia, etc. Speculation maybe, but speculators arent stupid, and tend to drive down the values of currencies where they expect the govt to be unable to deal with deficits and to print money instead. Not the expectation here, obviously. It's funny how liberals are suddenly concerned about budget deficits. Of course, this feigned concern isn't actually about deficits per se - it's about getting cover for tax hikes, which do happen to reduce budget deficits. At least until the next liberal spending binge. As to assertions that this government is printing money - that's the product of economy illiteracy. If the government was printing money, wages in America and prices of domestically-produced goods and services would be rising across the board. This is not happening. The dollar is falling because of cyclical adjustments in the balance of payments. The chest thumpers who were highlighting the dollar's strength as it went from ($1.10 per euro to $0.85 per euro) as a sign of American economic strength are just as wrong as the Cassandras who are now bemoaning the dollar's current weakness ($0.85 per euro to $1.30 per euro) as a sign of American economic malaise. Whatever the exchange rate, the US economy is growing. Unlike the Third World countries that have encountered currency crises, the US doesn't rely on imports of capital goods from other countries to keep its plants running - most American imports are elective - German BMW's and Chinese toys. If the dollar weakens substantially against other currencies, production can and will be moved back to the US. The problem with the Third World countries that ran into problems related to structural rigidities in their economies. Lousy infrastructure, confiscatory taxes, corruption, unions, regulatory issues, foreign ownership restrictions and a host of business-hostile issues all contributed to their economies not attracting foreign (or domestic investment) even as their currencies depreciated. The US does not have this problem. Currency depreciation isn't even a problem for every economy that goes through it. After depreciating their currencies by as much as 50%, East Asian economies adjusted, and have now resumed growing at the high single-digit rates they were accustomed to, prior to the depreciations. The Latin American countries continued to be stuck in perennial malaise, but that's a function of business-hostile environments, not currency depreciation. |
| Posted by: Zhang Fei 2004-1-16 10:33:55 AM |
| #2 "As the dinar has grown stronger, more people have shifted their savings from dollars into dinars in expectations of a further increase in value." compare this to argentina, Russia, etc. Speculation maybe, but speculators arent stupid, and tend to drive down the values of currencies where they expect the govt to be unable to deal with deficits and to print money instead. Not the expectation here, obviously. |
| Posted by: liberalhawk 2004-1-16 9:30:22 AM |
| #1 Well, at least this indicates the counterfeiters haven't cranked up the presses. Yet. |
| Posted by: Pete Stanley 2004-1-16 3:03:37 AM |