A Brief History Of Iraqi Dinar

iraqi dinar noteBack before World War I, when Iraq still formed the part of the Turkish Ottoman Empire, Turkish pound happened to be the main currency in circulation in Iraq, although different European currencies were also in circulation. That changed after the World War I when British took charge of the country. It was decided that Iraq, along with most other Asian countries under British rule would be incorporated into the then contemporary Indian monetary system, and subsequently, rupee became the principal Iraqi currency. The rate was 1 Iraqi dinar= 11 rupees. Rupees maintained the status of principal currency in Iraq till 1931 when the British Government established the Iraq Currency Board with its headquarters located in London. The Iraqi dinar became the official currency after the introduction of the Board which was responsible for maintaining reserves for the new currency as well as for issuing notes.

Right from the start of their operations, the board pursued conservative policies to keep the value of dinar up. This was done in two ways. First, Iraqi currency was pegged at par with the British pound and it remained so until 1959. Secondly, The board developed a practice of maintaining high amounts of reserves behind the currency. These measures ensured the stability and high valuation of dinar during the most of this period. The board was dissolved in 1949 when the National Bank of Iraq, founded in 1947, took over the responsibility of reserves maintenance and issue of note. The National Bank incorporated little changes into the conservative monetary policies pursued by the erstwhile board and they continued to maintain 100% reserves behind domestic dinar.
Establishment of Other Banks

The stability of the dinar was furthered by the establishment of other important banks by the Iranian government. The Industrial Bank, the Agricultural Bank, and the Rafdiyan Bank were already established before 1947. In 1948 came the Real Estate Bank, and in 1951, the Mortgage Bank. All these were part of the government’s efforts to strengthen the domestic economy and facilitate foreign trade. With the success in the operations of these banks, the position of the dinar was further consolidated in the 50s. Along side these government banking institutions, many foreign banks established their branches in the country and there were also private banks operating from different regions. All these refer to the healthy state of the currency during this period. All of this positive Iraqi dinar news was great for the country of Iraq and its people.
1959-1990

In 1959, the peg was switched to US dollar from the British pound at the rate of 2.8 dollars for 1 dinar. After the nationalization of the insurance companies and all the banks in Iraq, the value of dinar got further stabilized. In 1973, with the devaluations in dollar, dinar reached a value of US $3.37. For the rest of this period till the start of the 90s, dinar enjoyed a steady prosperity and kept intact its position as one of the most valued currencies in the world.
1990-2003

However, the Gulf War changed everything for Iraqi dinar during this period. With the economic blockades in place, came inflation and the steady decline in the value of dinar throughout the 90s. Economic blockade also made sure that the Swiss printing technology, used until now for printing the notes, was not available any more to Iraqi banking authorities. In its place, they were forced to use an inferior technology and the new inferior quality notes also became highly vulnerable to counterfeiting. To counter that threat, the new notes were printed in excessive quantities which soon flooded the market, resulting in explosive inflation of the currency. Already in late 1995, the rate was going 3,000 dinars for 1 US dollar!
2003 – Present

dinar to usdIraq was invaded by American troops in 2003 and the US forces have been called back only very recently. Following the fall of Saddam government and the establishment of the new provisional authority, a new banking law, aiming at consolidating the banking system in Iraq in line with the regular international standards, was passed in September, 2003. The new authority started issuing new notes and coins printed using sophisticated anti-forgery technology. The following year, the banks issued a notice for exchange of old banknotes– both the earlier Swiss notes as well as the notes printed during the Gulf War years.
Following these measures, dinar recovered a bit. However, we are still far away from seeing a proper dinar revaluation and from gaining the status it enjoyed in the pre-Gulf War era. Currently, the rate is 1 dollar= 1163 dinar. The present conflicts in the middle-east (Israel- Palestine) makes it even more difficult for dinar to gain back in strength. However, many believe that dinar will ultimately go through a proper revaluation. This belief is also behind the trend according to which many US investors keep dinars in their retirement account. The investment specialists call it a gamble, but the belief is there that Iraqi dinar will eventually gain back its value, and substantially, too.

Below is a video talking about how many people are now investing in Iraq and the Iraqi dinar. Just like any type of investing, there is a risk associated with investing in this currency.

Famous Initial Public Offerings

An Initial Public Offering (IPO) is the when a company chooses to go public. By going public, it means that its shares are available for sale on various Exchanges and available for purchase directly by the public. When a company sells its shares through a securities exchange for the first time ever, it is called its IPO. This selling is generally to the institutional investors who further sell it to the common man. Any investor, who buys shares, seeks information about that company before buying. This is the stage when the company has to disclose its key information to the public that disclosures its financial statistics. The objective of most IPOs is to raise capital for further expansion and release the initial investors of the most of the burden that they bear through the initial process. The investors are not guaranteed any return. They have to bank on their instinct. If the company grows, then the share holders’ make profit by selling shares. Underwriters generally help a company go public. They help the company calculate the net worth of their shares and the offer price with which the company should go public.

 

Alibaba IPO

alibaba logo Alibaba released its IPO on 5 September 2014 in USA. The expectation was to raise $20 billion through this. On September 18, it first raised $21.5 billion. However, on September 22, Alibaba’s underwriters for the IPO announced that they will release more shares to raise the initial expected amount to $25 billion. The IPO over achieved its initial target of $ 20 billion and beat Facebook to become the largest in the history of United States of America.  Though Alibaba is generally known across the globe, buyers still had their concerns about buying the companies stock. Alibaba had the advantage as it combined the services of several leading MNCs like eBay and PayPal. Started in Dec 1998, Alibaba was raised from humble beginnings and it now on the verge of creating history. However, it had raised millions of dollars before the year 2000 from various investors including Goldman Sachs, Softbank and others. In June 2014, it has also acquired a Chinese mobile internet firm. The company has claimed it to be the largest mobile internet firm in Chinese history although the actual cost of the acquisition has not been disclosed. After all has been said and done, it remains true that Alibaba still earns the majority of its profits from the domestic Chinese market.

 

Facebook IPO

facebook logo
When Facebook went public, it broke several records for the information technology industry. In fact, it was the biggest IPO in internet history, leaving behind even Google. The initial capitalization was to the tune of 104 billion dollars.
Facebook went public on May 18, 2012. Until then, Mark Zuckerberg, its founder, had steered clear of going public despite the suggestions of several pundits. Although, by then, the company had been selling its stocks to several multi-national corporations like Microsoft and Digital Sky Technologies. During its first filing of the IPO in Feb, 2012, the company claimed of having 845 million users worldwide. Looking at the demand in market, the company sold more shares than it had planned. The company also set new records in the internet arena that year. Several analysts had predicted a moderate response from the market. Undaunted from this prediction, the company went on to become a market leader and trend setter in the IPO. Despite all this, the company set a new record of trading over 450 million shares and raised $ 16 billion thus making it the third largest IPO in the history of the United States.

 

Google IPO

google logo
Larry Page and Sergey Brin, both of whom Ph.D. students with University of Stanford, would have never thought in their wildest dreams that a company that was instituted in a very humble background would go on to making history. The internet arena was taken by storm ever since both of them began their research project in the early 1990s. Though initial funding was hard to come by, when the company went public, it was raining dollars for them. The initial investment received from a founder of Sun Microsystems before the IPO was to the tune of $ 100,000. However, once the IPO was released, the company has never looked back.

The Initial Public Offering for Google was released on Aug 19, 2004. The company had hired Goldman Sachs and Morgan Stanley to arrange for it. The company expected to raise $4 million, however, the IPO raised $ 1.67 billion and made the initial investors of the company millionaires. Close to 20 million shares were floated in the market at a price of $ 85 per head. Presently, the company is listed on NASDAW under the symbol GOOG.

Mutual Funds vs Annuities

Neither mutual funds nor annuities are qualified financial products that allow you to deduct your contributions. If you’re looking to reduce your tax obligations by contributing to your retirement funding you will need a qualified fund such as a Traditional IRA. Still, there are major benefits to be had from investing in mutual funds and annuities. As products often bought by the elderly, they have very different values that should be considered before being purchased.

Mutual Fund (MF) Pros

• No limit on withdrawal periods
• No limit on contributions or deductions
• Extensive products to choose from
• Growth is subject to capital gains tax only
• Liquidity is accessible year round
• Beneficiaries may benefit from step-up basis built into the fund

how a mutual funds works

Annuity Pros

• Growth is Tax Deferred
• Investment converts to non-taxable insurance upon death of owner
• Assets protected from creditors in 75% of U.S.
• Some built-in guarantees protecting the value of the account
• Guaranteed Retirement Income (beneficial if you live an especially long life)

different types of annuities
Even with these positive elements making both the mutual fund and the annuity look attractive to many, they have unique characteristics that make them more appropriate for some and inappropriate for others. The investor will also select one of these options if he or she is considering the product for retirement savings or simply general asset growth. Both products generally have fees associated with the purchase and maintenance of the accounts. There may also be penalties and limits to consider before making your final decision.

MF Cons

• Capital gains subject to annual taxation
• Assets seizable if owner is sued
• Is not a qualified investment unless part of a qualified account portfolio – does not grow tax deferred
• No guarantees for the value of the fund
Annuity Cons

• Annual asset withdrawal is limited
• Limited investment options
• Sales fees and expense ratios can be high
• Assets lack liquidity
• Growth is taxed as income (a higher rate than capital gains)
• Can only access monies without penalty after reaching retirement age

Consider the pros and cons associated with purchasing either of the investment tools. It is advisable to discuss your choices with an unbiased investment advisor. The advisor will select the option which provides for the least amount of penalties, fees, expenses, tax obligations as well as the investment with an appropriate duration of investing and withdrawal periods. It is imperative to not only evaluate the accumulation period, but also the withdrawal period of the investment.

Protecting the Investment Value

If you are a very conservative investor, some annuities may provide enough protection to give you adequate comfort. Some annuities also offer original investment protection. Even if you suffer losses, the annuity guarantees you do not lose the value of your original investment. MFs offer no guarantees or protection of your investment. Naturally, they are more suitable for investors who can tolerate losses.

Limits on Contributions or Withdrawals

Mutual funds have no limits on either contributions or withdrawals. If the mutual fund is a part of a retirement vehicle, the vehicle’s federal guidelines will govern the contributions. Annuities have no limits on the contributions, but there are limits on the withdrawals.

Removing money from an annuity is considered a withdrawal or surrender. Withdrawals from annuities prior to age 59 and 1/2 are subjected to a 10% early withdrawal penalty. After the first year, owners can withdraw up to 10% annually of the contracts previous year’s value without suffering a surrender charge. After age 70 and 1/2 the IRS institutes a required minimum distribution that must be paid out annually to the annuitant. The surrender period is defined by the contract and ranges from three to nine years. Surrender charges during this period are usually a percentage based on the number of years the contract has been in force. The charges decrease as the years elapse.

Taxation of Investment

Funds are taxed according to capital gains rates. Capital gains rates are based on your tax bracket. The lower your tax bracket, the lower your capital gains rate. If your tax bracket is 15% or less, you owed O in capital gains in 2013 and 2014. Tax brackets of 35%-25% owed 15%. Tax brackets of 39.6% owed 20%. These are the tax rates for non-qualified mutual fund earnings.

Annuity taxation is based on income rates which start at 10% for an income of $9,075-18,150 and 15% for an income of $9,075- 73,800. It goes up to 39.6% when you reach income levels above $406,750. Unlike mutual funds that are taxed on gains only, annuities are taxed on the full amount received annually.

The benefits of investing in one vehicle versus the other, is based on your investment goals. Annuities offer more guarantees and no limits on contributions, but are taxed more aggressively and have more limits on withdrawals. MFs have no limits on withdrawals or contributions, but offer no guarantees on investment value. In the end the taxation and purpose for your investment may determine which investment is best for you.