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  1. #1
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    Iraq purchasing power???

    I am a little puzzled. But, if the Iraqi Dinar is not traded outside of Iraq, then how are they able to sell oil and be the #4 producer of oil in the world? How can they purchase other resources from outside sources, such as rice or other perishable goods? How can or better yet, why would people want to go to Iraq seeking work if their money isn't worth anything? It just does not make sense.

    Forgive me for sounding like a novice, but no matter how much I read, I feel I know less and less...

  2. #2
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    Iraqi gov (GOI) sells oil for U.S dollars (petro dollars). GOI sells the dollars to the Central Bank of Iraq (CBI) for dinars. GOI then uses the dinars to fund programs. When imports are required, the GOI utilizes the Trade Bank of Iraq (TBI) to convert dinars to dollars for purchases. To purchase imports, the TBI buys dollars from the CBI using dinars. Simple explanation but the process is more complex than that.
    "There are plenty of reasons NOT to buy the Iraqi dinar this year, and plenty of great reasons to buy renminbi instead. So I say stick to the currencies that have value, and leave the dinar for the speculators who donít know any better." Sean Hyman
    Editor, Currency Cross Trader

  3. #3
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    Quote Originally Posted by Uno View Post
    Iraqi gov (GOI) sells oil for U.S dollars (petro dollars). GOI sells the dollars to the Central Bank of Iraq (CBI) for dinars. GOI then uses the dinars to fund programs. When imports are required, the GOI utilizes the Trade Bank of Iraq (TBI) to convert dinars to dollars for purchases. To purchase imports, the TBI buys dollars from the CBI using dinars. Simple explanation but the process is more complex than that.
    Exactly, good to hear from you Uno!!
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  4. #4
    Supporter and Investor! calstar's Avatar
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    Welcome back Uno

  5. #5
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    Quote Originally Posted by Uno View Post
    Iraqi gov (GOI) sells oil for U.S dollars (petro dollars). GOI sells the dollars to the Central Bank of Iraq (CBI) for dinars. GOI then uses the dinars to fund programs. When imports are required, the GOI utilizes the Trade Bank of Iraq (TBI) to convert dinars to dollars for purchases. To purchase imports, the TBI buys dollars from the CBI using dinars. Simple explanation but the process is more complex than that.
    Thank you Uno. Makes perfect sense. I understand there is much more involved, but I enjoy the shortened version. :-)

    It almost poses the questions "Why not just use US Dollars?" or better yet, "Why not just peg the value of the NID to the US Dollar to make these transactions simpler?"

    My question is, why do things have to be so complicated?
    Last edited by mcv50; 01-23-2013 at 03:05 PM. Reason: more info

  6. #6
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    Nice to hear from you UNO!! Your level-headed thinking and easy explaination's are refreshing.

    I would offer you some chocolates but I gave them all to Erin at the MCO Travelex as well as I saved a few special ones for Calstar!!

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    Supporter and Investor! calstar's Avatar
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    LOL Steve!

  8. #8
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    Iraq is (sort of) pegged to the USD. The CBI employs a floating (dirty) peg. If Iraq only used US Dollars, then all of Iraq would be at the mercy of the US Fed monetary policy (inflation) and US Gov spending addiction. At least now the CBI can intervene to establish a (dirty) peg rate to ensure some sort of insulation from US Gov negligence. Keep in mind, the CBI must be able to support the dinar rate with assets.

    To all, Thanks for your kind words. I didn't really go anywhere, just been silent. Up to now, I haven't really found a thread which spurned my stubborn, conservative, reality responses.

    Quote Originally Posted by mcv50 View Post
    Thank you Uno. Makes perfect sense. I understand there is much more involved, but I enjoy the shortened version. :-)

    It almost poses the questions "Why not just use US Dollars?" or better yet, "Why not just peg the value of the NID to the US Dollar to make these transactions simpler?"

    My question is, why do things have to be so complicated?
    "There are plenty of reasons NOT to buy the Iraqi dinar this year, and plenty of great reasons to buy renminbi instead. So I say stick to the currencies that have value, and leave the dinar for the speculators who donít know any better." Sean Hyman
    Editor, Currency Cross Trader

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