The Anatomy of a Contemporary Pyramid Scheme In The New Iraqi Dinar American Greed Ponzi Fraud 0

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A very strange Ponzi scheme is evolving in the United States regarding a small, instable currency called the (New) Iraqi Dinar. Fraudulent businesses dealing in the currency have popped up on the internet operating in a way analogous to the Bucket Shops that helped precipitate the 1929 stock market collapse that led into the Great Depression.

To understand this scam you have to understand foreign currency markets. The FX (Forex) market is an out-growth of commercial banking where importers and exporters are assisted by very large bank FX brokers. The market for foreign exchange is the largest financial market in the world, open 365 days a year, 24 hours a day with daily spot and forward contract volume estimated at $1.88 trillion dollars per day according to the 2004 triennial central bank survey.

But, here's the problem. The New Iraq Dinar is virtually not trading in this massive Forex interbank market because of the instability of civil war, the American military occupation, and prior embargoes all of which have made significant export-import transactions impossible.

In short the Iraqi economy is effectively sequestered from the rest of the world!


There is a very small, insignificant exchange market in each foreign currency in which small foreign national banks operate that allows tourists to exchange tiny amounts of currency when in Iraq that is NOT the Forex inter-bank market. It operates semi autonomously within local national banks where people get exchange for small personal purchases when in Iraq. This is where all the New Dinar trading is occurring. Without the necessary liquidity of the interbank market the New Iraqi Dinar has a miniscule float that is extremely volatile to this U.S. currency Ponzi scheme.

Central banks abhor excessive speculative exchange rate volatility because it confounds the process of economic policy implementation through supply intervention (e.g. the U.S. Federal Reserve affects supply and demand through its discount window). With no depth, breadth, or width in a New Iraqi Dinar inter-bank Forex market, combined with the majority of currency floating overseas due to the New Iraq Dinar Ponzi scheme here in the U.S., this already economically uncertain government is facing a particularly difficult monetary situation where policy interventions are neutralized by this scam.

The Iraqi government DOES NOT want the price of the currency driven up violently by fraudulent speculation. THIS IS WHY THE IRAQI GOVERNMENT IS ISSUING WARNINGS! If pyramid scheme people were to drive up the price of the New Dinar it would inject artificial inflation into the already unstable Iraqi economy. At some point the government would be forced to throw in the towel and stem the inflation by RETIRING the New Iraqi Dinar and reissuing new currency.

In so doing anyone outside of Iraq holding the New Iraqi Dinar will be wiped out! A somewhat similar, though not identical, scenario played out in Brazil in its conversion from a military regime to a democracy that was initiated by President Jose Sarney in the late 1980s with his moratorium on external debt accumulated by the prior military command economy. Retirement of the currency was part of that plan and they had to do it various times!


Here in Puerto Rico there is an internet website that offers Iraqi Dinars. A local physician informed me that his colleagues in a local hospital have bought between 500,000 to 1 million New Iraqi Dinars. They received a rush message from another doctor friend in New York that claimed that Chase bank exchanges 1 Dinar for $1.89. This means, for instance, if a group of doctors bought $100 US worth of Dinars from the Puerto Rican Dinar pyramid operator for $120 that they'll get $189 US in return. If the Puerto Rico fraud operator claims were true they would receive a holding period return of 57.5%.
Two of the physician's doctor friends bought tickets to travel to New York to exchange their money with Chase Bank
This astute physician kept getting calls from his colleagues telling him to buy Dinars. But he felt that the "opportunity" was too good to be true suspecting that the local Puerto Rican Dinar dealer created the rumor to increase buying demand and ill-gotten profits.
He contacted Chase directly and spoke with 2 people asking very simply and clearly:
"Hello I am looking for information about exchanging Iraqi Dinar for American US Dollars." The second lady answered, "You need an account to receive that information"
The physician said, "I don't have an account yet but please help me get information as I am planning to open one soon."

She said, "Yes, Hold a Minute." After 5 minutes of silence on the line she came back saying, "OK what kind of information do you need " He asked, "How much do I get for 1,000,000 Iraq Dinars." She put him on hold again but this time she came back faster, " Sir, for 1 million Iraqi Dinars you will get $749,000 USD." The physician was unpleasantly surprised and asked, "Can you tell me that amount again, do you mean 'seven hundred forty nine thousand.'" She said, "Yes, that's what you will get for that amount of Dinars."

The physician was shocked and perplexed at the low amount he would receive for his Dinars. If he would have made the mistake of investing $120 with the Puerto Rico operator he would have received only $74.90 in return... a loss of $45.10 or -37.58%!


Exchange is quoted directly or indirectly. Directly means that it's from the U.S. perspective answering the question, "how many units of country X's currency do I get per U.S. dollar?" Indirect quotes answer the opposite question, "how many dollars do I get per unit of country X's currency?"

So, in this case the kind lady was telling him that the direct quote for the Iraqi Dinar is 0.7490 US dollars per Iraqi Dinar when you buy with US Dollars. Note that quotes are out to 4 decimal places. From this it is easy to calculate the indirect quote by taking the reciprocal. So, you would get 1.3351 Iraqi Dinar per U.S. dollar if you bought Dinars at the time I wrote this article.

This reciprocal relationship, simple as it is, between the direct and indirect quote confuses people. The Puerto Rico Dinar website is confusing people by claiming that the indirect quote (which they are inflating) is what people will get when they hold Dinars.

Also, the fact that this group of physicians had to really hunt to find a bank that would exchange Dinars is further evidence that there is no strong inter-bank market for the currency. When people come back from travel they often carry foreign currency in their wallets. For small, instable currencies only a very large bank like Chase will bother with the hassle of exchanging the currency.


An excellent movie every beginning investor should watch is "Boiler Room" where Ben Afleck is one of the stars. In the investment industry "rabbits" are certain people that are most conducive to suggestion through a good story as a smoke screen for a bad investment with a big cut for the promoter. A "rabbit" is someone who a dishonest investment operator can make a buck on fast. Rabbits are those people that know they are very intelligent because they are highly specialized in fields that required outstanding academic excellence to have entered highly competitive professional fields. When you combine smug intellectual arrogance with high income such people are also prone to remain quiet AFTER they have been conned.

The people that best fit this profile for investment "sucker plays" are physicians, CPAs, attorneys, and engineers. The movie Boiler Room portrays the process perfectly. My father was a very successful optometrist. I hold a highly regarded research Ph.D. in finance today and am a university finance professor specialized in leveraged investments because of all the con jobs I watched dad get suckered into as I silently watched as an ignored child during "opportunity" meetings.


At the beginning of any pyramid scheme everyone makes a return when the operation is small but eventually every fool is parted with his money!

The Wallet Doctor cuts through the bull in Futures, Forex, and Options. Join his Fun In The Sun Investment Club in Puerto Rico at

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