Originally Posted by
Greggory B Evans, PhD
Because the Iraqi People will benefit from a RV!
Wrong. If the Dinar revalued to a rate to make everyone who knows Okie Oil man rich, that money has to come from somewhere. I mean it does you know. And do you know where it comes from? The Iraqi economy! All the money that you and everyone else would cash out comes from Iraq, depleting their foreign reserves and sovereign assets. That’s right, the effect of a dramatic increase in the value of any currency is for foreign holders to cash in. The bigger the change, the more money leaves as the currency is repatriated. So if you’re worried about the good people of Iraq and doing what’s going to help them the most, you would be wanting the value of Dinar relative to other currencies to remain low. And that fact scales, by the way. When the US dollar is weak that actually stimulates the US export economy, it makes US goods more affordable in other countries which is good for exporters and makes foreign made goods more expensive in the US which is good for American companies selling to the US market.
Because Iraq has so much oil, it should be one of the wealthiest nations on earth!
Wrong. The GDP of Iraq is less than half of the GDP if economic powerhouse Mexico. Iraq does have a lot of oil, but westerners have a warped view of how important oil is relative to the wealth of nations. Oil is a commodity, and a vital one at that. Every large economy depends on solid and reliable energy supplies to power the growth of their economies. Now listen to this part, it’s important. In the same respect, every fast food restaurant needs a steady and reliable supply of salt to insure the growth of their fast food business.
Energy is just one of the components that make industrial economies function, oil is only a part of energy and one that in the next 50 years will almost surely be displaced in the proportion of which it now supplies. The economies of the world that depend largely on commodities sold (which is 92% of Iraq’s) are not wealthy nations, the countries who buy their commodities are. Per Capita GDP of Iraq is just $2090, that’s right, even with all that oil the country produces their entire economic output is less than $2100 per person, which hardly is a good basis to claim they are a wealthy nation, by any stretch of the imagination. The simple fact is, Iraq is a third world country and compared to the G20 nations they’re dirt poor. They survive only because the truly wealthy nations buy a product from them.
Because Iraq can ramp up production in its vast oil fields to raise revenue!
Well, wrong. They can of course raise production. Good cases can be made that if they want they can pump twice the oil out of the ground or more. The problem is, over the last few decades the world has gotten along fine without that oil, we don’t need it and if you ask the other countries selling oil they don’t even want it. Oil, being a commodity, is deeply dependent on supply/demand curves and all the icky stuff you should have learned in Grammar School Econ class. If Iraq were to dump twice as much oil on the market, the price per barrel would drop to less than half it’s current level, they could easily end up getting less cash for twice the oil.
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