Iraq Gold Backed Dinar – Can Iraqi People Have a Currency that is Backed by Gold Again?
By: Nick Giammarino
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Updated February 28, 2016
This article discusses my opinion on a gold backed Iraqi Dinar and why it’s not only possible, but needed. Make sure you read this article about ISIS and the Gold Iraqi Dinar
For many months, in my podcast, my videos, and my articles, I have stated that the ultimate form of money is gold and silver. Obviously the ISIS plan to use it in their takeover of Iraq, but eventually ISIS will fail (my opinion) but the prospect of a gold backed Dinar is still a good idea in may ways.
Below is an article that came out on November 14, 2014. Even though I might not agree 100% with the author’s statements, the prospect of a gold dinar is great, it goes to show you how gold is being reintroduced.
ISIS Iraq Gold Dinar Plan Won’t Work
Altered from this original article:
- BY JUSTINE DRENNANJustine Drennan is a fellow atForeign Policy. She previously lived in Cambodia, where she reported for the Associated Press, the Phnom Penh Post, and other outlets on topics including politics, human rights, public health, and the Khmer Rouge tribunal. She has a BA in history from Princeton University and an MA in international relations from Cambridge University.
The self-proclaimed Islamic State announced on Thursday that it’s visiting begin minting its own currency. The plan is fairly detailed: The medieval-style dinar will certainly be made from gold, silver, and also copper; the buying power of each coin will certainly be equal to the weight of the metal from which it’s made. Coins will certainly be inscribed with graphics that consist of stalks of wheat, a shield and harpoon, and also a map of the world to suggest the fanatic group’s international passions. (The group, additionally referred to as ISIS as well as ISIL, now has Treasury Department, which will certainly accountable for the currency.).
The system intends to boost the organization’s claims that it’s a genuine and also functioning country and also not just a collection of territory run by a gang of terrorists. But it’s likely to do just the opposite. For a money to be effective, those that utilize it have to think that it’s steady, which calls for both the group of customers as well as the company minting as well as distributing it to be steady. To be going to accept a currency in exchange for goods or services, folks have to have some guarantee that when they, in turn, wish to exchange it for goods or solutions, others will also approve it.
It’s rather instinctive that an ISIS currency would mostly fall short in these aspects. The group holds huge pockets within Iraq and also Syria, but territory frequently comes on and also from the team’s command. ISIS really did not mention where the dinar will be produced, showing the myriad troubles related to building confidence for a money released by a designated terrorist organization that is the target of an enormous, international bombing project and also participated in a sustained ground battle. And, naturally, the global neighborhood would not accept an ISIS-backed currency.
As a matter of fact, the issues with ISIS’s recommended dinar are so extreme that it might not also comply with the modern-day interpretation of cash. In order for economic experts to think about something cash, it needs to function in 3 ways: as a medium of exchange, a device of account, as well as a shop of value.
ISIS’s dinar could actually serve as a shop of value– something that holds its worth gradually– yet simply since the organization is straight tying the coins’ worth to the value of the rare-earth elements they ‘d be coined from. Unlike the monetary magic by which otherwise pointless pieces of paper retain worth after the united state Treasury has actually stamped them with the face of Andrew Jackson or Benjamin Franklin, ISIS coins would certainly, if anything, lose value when imprinted with symbols of the abhorred extremist team. The have to launder ISIS cash in locations outside its command would certainly reward individuals to merely melt the coins down to take out the ISIS discolor. Which, consequently, would deteriorate the coin’s various other functions as a financial device.
The ISIS currency could work as a decent circulating medium– an unit through which products and services can be traded without considering barter– within ISIS garrisons. Yet both ISIS’s moving territorial command and also basic international aversion to trade with the group would make it basically impossible to make use of the coins’ produced form in various other areas. Again, utilizing a distinct money would make it much more, not less, challenging to wash cash originating from ISIS.
Ultimately, also in ISIS-controlled areas, the Islamic State’s dinar would certainly at best be an ineffective unit of account– a standard versus which to contrast the costs of particular items, services, and also anything else being traded. Users won’t have a fantastic sense of whether one gold ISIS dinar, as a recently well-known money, would be about equal to the value of a set of boots, a Kalashnikov rifle, or 50 barrels of oil. The gold requirement would aid, but today’s consumers have much less of an user-friendly feeling of the value of a lump of gold than of an established currency. Sinced ISIS is normally trying to control like an actual state as well as not an anarchic crowd, it would probably try to make use of constant rates for solutions, which may help the coin feature a lot better as an unit of account. But the scattered as well as varying nature of ISIS’s territorial control, unpredictability concerning its broader ton of moneys, as well as the currency’s freshness would make it far more unstable than would certainly be perfect for a price benchmark.
Simply put, it’s highly extremely unlikely that the Islamic State’s dinar would certainly ever before be a steady or functional currency, or even real money in the technical sense. If and when it’s made, it will not show ISIS’s authenticity as a state, yet rather its illegitimacy.
Iraq Dinar Gold Backed Possibility – Nick’s Thoughts
I for one, am all for Iraq using gold as a factor in their new currency reform, however, the amount of Iraqi Dinar, in relation to the amount of gold they currently have, make for a poor combination.
Steps to take:
The first thing that Iraq needs to do would be to build up it’s gold reserves to a level consistent with countries like the United States, Germany and others.
Currently, Iraq has about 89.8 tons of gold, which equates to a 5% reserve ratio, not enough for even a 1 cent revaluation. Doesn’t matter how much oil they have, it would cost more to pull it out of the ground, so that argument that the dinar will be backed by oil is worthless at this time. Maybe if oil hits $150 will they have a chance to dig themselves out of the debt mess that they are currently in.
Screenshot of countries with the most gold holdings (Top 40 based on World Gold Council data)
Thanks for reading my article about the possibility of a gold backed dinar.
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