Sept. 15, 2006 -- The odds are debatable, but many people around the world have wagered that the new Iraq will flourish and democracy and free-market capitalism will thrive there. Some have even put money on that bet.
Phil Lloyd of Devon, England, 41 years old and unemployed, is one of them. A simple typing error while surfing the Internet gave him the idea to bet on Iraq and, perhaps, become a millionaire overnight.
Searching for a dinner set on eBay one evening in 2003, Lloyd misspelled the first word and found himself looking instead at a page of "dinar" auctions: wads of the new Iraqi dinar, introduced that year. Some of the listings claimed this was potentially a dynamite investment: Buying into the Iraqi currency at its historically low exchange rate would hold the potential for an enormous profit in the future.
After some Web-based research, Lloyd decided purchasing hard-cash dinars on eBay was a "good risk." He explained, "Since I live on a council estate [the British subsidized, low income housing] and know I won't be rich at all in my life, I decided to give it a go." By purchasing roughly 25,000 Iraqi dinars at regular auctions, he is now a dinar multimillionaire.
But will the Iraqi economy improve enough that Phil Lloyd's millions of dinars will eventually equal millions of dollars?
Lloyd is far from being the only investor to gamble on an improved economic situation in Iraq.
In 2003, the Bush administration argued that the military operation in Iraq would be largely self-financing, because of Iraq's enormous untapped oil reserves. After the fall of Saddam Hussein and the introduction of a new Iraqi currency, the former dinar-dollar rate of 3-1 altered to roughly 1400-1.
The Baathist regime had set the 3-1 rate, but it had never been tested on the open market. In the face of a prospective flood of international assistance and Iraqi enthusiasm for rebuilding the country, though, this detail didn't worry many investors. An increase in the dinar's worth seemed inevitable. Buying dinars at 1400-1 seemed like a great investment if the Iraqi currency exchange rate returned to 3-1, or even 1-1. Buying up as many dinars as possible as quickly as possible seemed the only rational thing to do.
Many of these investors, or "dinar-holics" as they're sometimes dubbed, have connections to -- or experience as -- military or contractor personnel in Iraq. Others found out about the investment in much the same way Lloyd did: They stumbled across the idea on Web sites like BetOnIraq.com.
Lloyd and several thousand others discuss their investments on investorsiraq.com, a message board forum in which members use shorthand forum names to chat, gossip, exchange information, and offer encouragement.
One regular exhortation for courage compares the Iraqi dinar's potential rise in value to the rise of the Kuwaiti dinar after the 1991 Gulf War. Following that war, the enormously devalued Kuwaiti dinar rallied steadily, bringing substantial returns to anyone who had bought the currency while its price was low.
The deutsch mark's rise after World War II, with West Germany rising as the economic phoenix from the ashes of a vanquished, oppressive regime, is also a point of comparison for the dinar investors.
The Threat of Civil War
But these lofty historical parallels often seem further out of reach, especially as military or diplomatic leaders worry openly about a descent into full-scale civil war in Iraq. Rather than history repeating itself for the benefit of investors, increasing sectarian violence suggests Iraq could be closer to James Joyce's maxim, that history is a nightmare from which we are trying to escape.
Reaction to the growth in sectarian fighting has varied among the dinar-holics. Some have crumpled in the face of overwhelming negativity. A member dubbed "Skillet" wrote with almost paranoid exasperation on the Iraq investors message board that "Since I made the move to invest, I have come to the realization that quite possibly this could be yet another ploy to take advantage of the American people."
Others remain optimistic but increasingly cautious. Forum member "Ferrari500" of Columbus, Ohio, told ABC News that although "I know we won't make the millions we were told we would," he still expected to make "some serious money on my investment."
Another Ohio investor wrote that he took a similar but humorous approach. "WebGuy75903" told ABC News that although he still believed investing was a "no-brainer," he tried to keep it in perspective. Knowing that in the worst-case scenario of an Iraqi civil war and national breakup, his dinar collection could become worthless. But he could still say to his wife with every newly arrived order of dinars, "Honey, our pretty wallpaper came today!"
Many of the investors appear to fall in this category: people whose initial expectations have dampened somewhat but who continue to hold hope for the future. They expect this to be a long-term investment. They bank on Iraq not falling into civil war, on the violence diminishing, and on -- essentially -- a positive response to the choice Gen. Peter Pace posed for Iraqis in a recent U.S Senate hearing: to decide "whether they love their children more than they hate their neighbor."
The Financial Version of the Rapture
There are some investors, however, who accept this onslaught of bad news as a kind of gantlet -- a fire though which those with courage shall pass but will leave the faithless singed. Many hold that a "re-pegging" of the dinar rate is imminent. They expect that the authorities will soon set the dinar-dollar rate at something far more favorable. If that were to occur, those who maintained their faith will be millionaires; those who buckled in the face of adversity will have missed their opportunity.
With its religious intensity and scorn for nonbelievers, this belief is almost the financial equivalent of the rapture. Some members of investorsiraq.com, such as "Charmed Piper," seem true believers to the bone, frequently predicting a "1-1 or higher" dinar-dollar revaluation "any day now."
Another member, "Taxmama," the proud owner of 31 million Iraqi dinars, wrote to ABC News saying that she expected the Iraqi government to repeg the dinar to the dollar at around 100-1 later this month. This, however, would just be the beginning. "When it starts out small, it will only grow. Most feel it should easily reach one U.S dollar per dinar by one year."
Rumors of a coming repeg fly around the Internet regularly. William Murray, chief press officer at the International Monetary Fund, says his office receives calls "on a relatively regular basis" from people inquiring about "a whole raft of speculative stories" they seem to have discovered online. Murray tells each caller that the IMF would not have a hand in any putative revaluation, and told ABC News that he suspected these rumors are fabricated by dinar sellers to "influence" people into buying more.
Many postings in the Investorsiraq.com forum suggest there is some truth to this, and that dinar-sellers prey on this hope. But heavy-handed sales tactics do not seem to account for all the true believers. "I am WANTING REAL BAD to retire," the member known as "Taxmama" told ABC. Many have similar aims: putting the kids through college; finishing off the mortgage; creating a financial pillow while setting up their own businesses.
For some, the dinar investment is also political. Sean Malowney, a self-described prowar investor, argues that supporters of the war like him need to "put their money where their mouths are."
What finally sold him on the investment, Malowney said, joking, was the prospect of "the everlasting ability to say, 'I told you so.'" He recalled that on discovering the dinar investment opportunity, "visions of driving a new car with a personalized license plate of BUSH CO or WARBUX danced in my head."
Many investors, however, would take exception to the WARBUX implication. They would say, rather, that they are profiting from -- and contributing to -- peace within Iraq. One poster on the Iraq investors Web site who calls himself "Darkring" hoped that ABC News would emphasize that most dinar-holics are "trying to help out in our own small way by investing our money into Iraq."
This opens a door on the thinking behind what drives many who believe in the wisdom of investing in the dinar: The investment just feels as if it ought to be right. After all, the tale of the little guy taking a big risk, flying in the face of conventional wisdom but winning holds great emotional resonance. The core of the "sudden repeg" belief is a magic combination of virtue, courage and hard profit.
Sadly, like many a get-rich-quick scheme, the dinar investment plan may be a nice idea that crumples in reality.
First, as several members of the Iraq investors online forum observe, if there was to be an overnight 1-1 revaluation, ordinary Iraqis would wake up to find their currency had ballooned in value, and there would surely be utter chaos.
The writer and economist Paul Ormerod, author of "Why Most Things Fail," said that some may be overly optimistic about the dinar's prospects in order to gain quick wealth. If the dinar did indeed hit a 1-1 level in the near term, Ormerod said this would come from a "redefinition of the currency" rather than a genuine appreciation in value. Rather, a new lower currency would be introduced, and the old currency traded in for that. The appropriate historical parallel would not be the West German deutsch mark or the Kuwaiti dinar but France's transition to the "new franc" in the late 1950s/early 1960s, in which one new franc was worth 100 old ones. Needless to say, no one stands to make a windfall from that scenario.
A Long Term Prospect?
Ormerod noted, however, that the difference of opinion on the dinar's future may help true believers. Simply put, he said, "If the dinar-holics succeed in converting everyone to their view, they won't be able to cash in their investment. If literally everyone thinks the dinar will go up and up, no one will ever sell."
Given that one can usually buy 1 million Iraqi dinars for less than 1,000 U.S. dollars, the dinar game could still be of interest to optimistic -- and patient -- investors. Experts at the currency conversion site www.XE.com note that "in our opinion, buying the Iraq dinar is a high-risk investment with a poor outlook."
But to some investors, the lure of proving doubting experts wrong can be as strong as the prospect of the eventual reward.
And, of course, some will invest because they simply cannot shake the fear that if they failed to join the dinar project, and it did eventually pay off, they'd kick themselves forever.
"Ozizoz," a 33-year-old Los Angeles carpenter, posted on www.investorsiraq.com bemoaning that he was always working in the houses of people who had cashed in on deals he too could have entered if only he had heard about them earlier. "I have always been looking in the window from the outside," he wrote. "Now this is my turn ... my time to be one of 'those people.'"
It would be heartening for these investors and for Iraq if their hunches were to prove correct and optimism triumphed over the nay-saying experts. But few expect that positive outcome to happen, literally, overnight.