Want to buy foreign money? You’ll be sure to make millions. What’s the catch?
Earlier today a man called the BBB about an email inviting him to invest in Iraqi currency. It claimed he could profit from the now nearly-worthless dinar that is “sure” to appreciate later.
Foreign currency investment has been around for a long time, and isn’t in and of itself, a scam. What makes this email one is that it promises high earnings within a short period of time with little or no knowledge of the market or without you having any skills except the ability to open up your pocketbook.
So before you invest in one of the most illiquid currency markets in the world, consider this:
Hype: The email claims the Iraqi dinar is poised to appreciate just like the Kuwaiti dinar after the Gulf War, or the German mark post-WWII.
Fact: You’re not comparing apples to apples. Neither Kuwait nor Germany had a free-floating currency, so their money’s value was mostly a function of official policy. If the Iraqi government pursued a policy of currency appreciation, it would make government funding and debt-paying more expensive. An economy in Iraq’s situation is actually likely to experience a currency crash or intentional devaluation.
Hype: The email claims that prior to the 1990 Kuwaiti invasion the dinar was worth $3+ US dollars. Its potential is theoretically unlimited.
Fact: The pre-1990 dinar has been demonetized (made worthless). Its former high value was arbitrarily set by Saddam Hussein’s autocratic regime. Following the embargo, the Iraqi government was unable to manage its currency’s value and the dinar spent the next decade at 2,000 – 3, 500 dinars to 1$ U.S. dollar.
Hype: The email claims that everybody will want to get in on this.
Fact: There is currently no active market for dinars. You can buy them but can you sell them? Since the new dinar was introduced after the U.S. invasion it has only appreciated about 23 percent. Total.
In conclusion, beware of “opportunities” marketed by unregistered advisors to mostly unsophisticated currency investors. Legitimate opportunities should disclose risks and avoid modifying or fabricating past information to make the opportunity look better than it is.
Start with Trust by looking up companies at www.bbb.org before you do business with them. The US Securities and Exchange Commission is a great resource for investment opportunities and rules at www.sec.gov.