It’s not enough that the US invaded and occupied the country, killing thousands and smashing infrastructure, and setting off mass looting. Now the US is inflating the currency that had risen against the dollar precisely because its supply was fixed. See Reuters: “ Everybody wants their money in 250- dinar notes, even though large transactions require sackloads of them to be hauled around. To meet the demand for the smaller notes, the central bank is printing millions, each bearing the picture of a youthful Saddam with neatly combed hair and a smart jacket and tie.”
See also Dollar or Dinar? Note: a reader writes to say it is wrong to call this inflation if the US does nothing but redeem 10,000-dinar notes for 250-dinar notes. I asked Per Hansen, who says: if the banks redeem at face value, it would indeed be inflation and the exchange would bid up prices in general. If, however, the notes are traded at a discount in currency markets, prices would fall. Another question: will the US printed note trade at par with the Saddam-printed note?
Another correspondent writes that we should think of the different denominations as completely different currencies: “The Dinar, as an effective single entity, doesn’t currently exist, so the question of inflation doesn’t have a single answer. Assuming that the banks do not leak the redeemed 10,000 Dinar notes, then the holders of 250 Dinar notes will see their purchasing power diminished and the holders of 10,000 Dinar notes will see their purchasing power enhanced. To the extent that the banks continue to credibly promise a one-to-one face value exchange, the purchasing power of both notes should tend to substantially equalize at face value.”
More interesting Dinar news:
- Dinar or Dollar: Which will Iraqis Prefer? (Gulf News)
- Suddenly, Saddam Noteworthy (FT)
- Iraq’s Thriving Currency Market (Wash Post)
