Investors in new Iraqi dinar spur thriving Web trade

Investors in new Iraqi dinar spur thriving Web trade

By John Waggoner, USA TODAY

Iraqis are serving dinars — and investors are flocking to the table.



An Iraqi man gets money at a Mosul bank last year.   
By Ivan Sekretarev, AP

Posted 8/3/2004 12:30 AM     Updated 8/3/2004 9:34 AM


The new Iraqi dinar, introduced in October, is now virtually worthless: It takes 1,460 dinars to equal $1, according to Bloomberg financial news service. (Related: Check the latest exchange rates at USATODAY.com).

But dinar trade is thriving on the Internet.

Internet auctioneer eBay, for example, lists 622 auctions of new Iraqi dinars, in lots from 1,000 to 5 million. Dozens of Web sites, such as www.BuyDinarsHere.com, www.DinarTrade.com and www.InvestInDinar.com, sell dinars to U.S. investors.

The lure: Investors remember that the Kuwaiti dinar plunged to 10 cents after Iraq invaded Kuwait. It's worth $3.39 now.

The Iraqi dinar sold for as much as $3 before the first Gulf War. And Iraq sits on the world's second-largest oil reserves, an enormous asset. "Even if it goes up to one penny per dinar, that's a lot of money," says Mahmoud Shalabi, president of SilverDinar.com.

Currently, a 250,000 dinar note is worth about $171. At a penny per dinar, the same note would be worth $2,500.

Interest has cooled since the U.S. handed power to the Iraqis. "Before the handover of Iraq, business was phenomenal," says Marshall Donnerbauer, president of InvestInDinar.com. "All the soldiers and contractors wanted to be investors before that."

The insurgency hasn't helped business. "It depends on the news," says Katja Morgenstern, president of Dinar Trading Company, which runs www.buydinar.com. "If it's a bad week, business is slow."

Risks for investors are enormous. If Iraq inflates its currency or otherwise devalues it, dinars could get demolished. Further civil strife also could clobber the currency. Speculators who bought dinars early are sitting on big losses. Other problems:

•Pricing. Dinar exchange rates vary widely, and only large institutions can get 1,460 dinars to the dollar. Dinar Trading Company offered 1 million dinars for $1,345 Monday. Dinar Trade offered 1 million dinars for $1,050. "There are lots of different prices around," says Shalabi. "Everyone has his own price."

•Liquidity. Most dealers who sell dinars won't buy them, and U.S. banks won't buy them either. You can, however, sell dinars on eBay. Monday, 1 million dinars were being offered for $840 to $940.

•Fraud. Unlike the worthless Saddam-era dinars, new dinars are difficult to counterfeit. But some investors have ordered dinars from unscrupulous dealers and never received them, Morgenstern says.

Donnerbauer says there's a side benefit to holding millions of dinars. "I'm not a rich guy," he says. "But it's a good way to simulate being rich."

http://usatoday30.usatoday.com/tech/news/2004-08-03-dinars_x.htm