Posted on: Sunday, August 8, 2004

Investors willing to take risks with worthless Iraqi dinars

By John Waggoner
USA Today

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

The new Iraqi dinar, introduced last October, is now virtually worthless: It takes 1,460 dinars to equal $1, according to Bloomberg News Service. But the 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 United States 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.buydi nar.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. Also, dinar exchange rates vary widely.