What the Swiss Franc Means for the Iraqi Dinar (Spoiler Alert: Nothing)
January 20, 2015
shocked the financial world by removing its self-imposed cap on the value of its currency, the Swiss franc. The cap had been put in place in 2011 to prevent the overvaluing of the franc against the Euro, as many foreign investors had been parking their money in Switzerland to avoid getting entangled with Europe's debt crisis.On January 15, Switzerland
The reasons why Switzerland capped the exchange rate of its currency, then removed the cap, are complicated, and good explanations can be found on a variety of financial websites, written by people who understand this stuff much more than I do. But it boils down to bringing the franc back in line with its natural value
The economic crisis of 2007 had left the franc as one of the strongest currencies in the world — much too strong. Investors were buying it up so much that it was becoming massively overvalued against the Euro, causing problems for Swiss companies exporting goods that had become too expensive. So in 2011, Switzerland capped the value of the franc at 1.20 to 1 euro, meaning it couldn't go up in value past that.
The removal of the cap happened virtually out of nowhere, and the franc shot up in value by almost 30%, before measures were taken to bring it back down. In turn, this sent massive tremors through banks, brokerage firms, currency traders and the Swiss exporting industry.
But there's one other group of people that might be effected by the franc's jump in value: Iraqi dinar holders who are desperately hanging on, waiting for the worthless currency they've bought to "revalue" and spike by thousands or tens of thousands of percent in value.
If you're not familiar with the Iraqi dinar scam, I wrote a blog post about it around this time last year. In brief, the scam involves dinar "brokers" selling dinar by the millions (it's currently worth about 1165 dinar for one dollar) to speculators, who then rely on "intel" from dinar "gurus" to tell them when the "powers that be" (usually said to be either the IMF, the Iraqi Central Bank or President Obama) decide the time is right for the dinar to "RV" back to its pre Gulf War value of $3.22 to one dinar.
If this sounds completely insane, that's because it's completely insane. Currencies don't simply spike 100,000% in value, especially not when they're the currency of Iraq, a country struggling to fight off ISIS militants, rebuild its shattered infrastructure and establish something close to a sustainable economy. Not only that, but such an "RV" where a currency jumps thousands of percent in value at the stroke of a pen has never happened, can't happen, and would be horrific if it actually took place.
BUT...how does this square with the fact that the Swiss franc basically did that? It jumped by over 30 percent in value out of nowhere, making those who held large quantities of it a ton of money. Isn't that exactly what dinar holders claim will happen with the revalue? Furthermore, isn't the whole gospel of the "global currency reset" that the reserve currencies of the world will fluctuate in value due to interference from the elite powers that be?
No, and no.
The first thing to keep in mind is that the Swiss franc did NOT "revalue." There had been an artificial cap placed on its value, and when that cap was removed, naturally, its value went up, then back down. No such cap exists on the Iraqi dinar. The franc, much like the dinar in the 90's, was overvalued, and measures had to be taken to bring it in line. That measure was the artificial cap. The dinar, however, is exactly where it should be in terms of value, due to Iraq's struggling economy and massive overprinting of currency. There is no reason why the dinar should have more value than it already has. Currencies have value because of their scarcity and because of the economic power of the nation that prints them — and the dinar has neither of these.
Second, comparing Switzerland to Iraq is a fool's errand. The currencies are massively different in value — with one dollar getting you .86 francs, as opposed to 1150 dinars to the dollar. Not only that, but the franc is a reserve currency traded electronically all over the world, while the dinar is so worthless that you can only buy them in cash directly from Iraq — and even Iraqi citizens don't use them for anything other than minor transactions. Here's what the CIA World Factbook has to say about Switzerland:
Switzerland is a peaceful, prosperous, and modern market economy with low unemployment, a highly skilled labor force, and a per capita GDP among the highest in the world.As for Iraq:
Iraq is making slow progress enacting laws and developing the institutions needed to implement economic policy, and political reforms are still needed to assuage investors' concerns regarding the uncertain business climate[.]Do these sound like two countries who should have similar monetary values?
Another thing to keep in mind is that dinar "gurus" constantly talk about how Iraq will benefit from massively revaluing their currency. So how much did Switzerland benefit from its currency jumping in value?
Not at all. In fact, they took a beating. As Forbes writes of the immediate aftermath of the franc being uncapped:
[I]t's not good news for Swiss exporters, who have just seen their goods become 30% more expensive to European buyers in the space of an hour or so; Swatch, for example, saw its shares fall 16%, and Switzerland's main equity benchmark, the SMI, fell 7% on the news. The big Swiss banks, UBS, Credit Suisse and Julius Baer, all tumbled too.This, from the Guardian, isn't reassuring either:
The move wiped 9% off the value of the Swiss stock market — its biggest one-day fall in more than 25 years. One trader described the market reaction as "complete carnage".The fallout from the Swiss unpegging will reverberate through all of Europe as mortgages crash in value, currency exchanges get hammered and brokerage firms collapse. And remember, this carnage was in a wealthy and prosperous country, and for a jump of only 30%. Dinar "gurus" claim the dinar will jump thousands or tens of thousands of percent — in a country with a crumbling economy based entirely on oil exports.
One element of this that dinar holders should be especially wary of is the fact that this move by Switzerland came completely out of nowhere. Even high-ranking officials in the IMF didn't know about it, and certainly not the "wealthy elite" that dinar gurus constantly claim are already cashing in their dinars. Aren't these the people who would stand to benefit the most from the franc having a "revalue?"
If the leaders of the global financial industry didn't know about Switzerland's economic move, how is it possible that internet "gurus" with no access to credible insider information know so much about what the dinar is going to do? They don't. Their "intel" is bogus hopium, designed to stoke the RV frenzy and get scam victims to spend more of their money.
Finally, anyone who claims the Swiss franc uncapping is the first step toward a "global currency reset" should go ahead and define what that term actually means. Given that it's entirely made up, with no meaning or relevance in the financial world, they won't be able to.
The movement of the franc has nothing to do with the dinar. It's not a sign that anything is about to happen, or that you should sell the farm and buy dinars. Anyone who tells you differently simply wants your money — and they probably want it in dollars.
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