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A Smart Money Investment
By Josh Vanderwerf
Bill’s Investment Bill is looking for a good investment that will give him a big return. He is willing to risk a maximum of $150 on an investment. Bill looks on the internet for good investments. He comes across buying stocks and other things. He decides to pass on buying stocks because he doesn’t understand how they work. But one of the other things he comes across is currency exchange. He comes across a web site that explains why the new Iraqi Dinar (Iraq’s new currency) could provide a huge return potential. This is because Iraq’s government was doing badly before, but it is getting better everyday. By doing more research online, Bill figures out that the Dinar has doubled in value since it’s inception in the year 2003. Currently, you can buy 1000 Iraqi Dinar for around 3 USD. That’s about 0.003 USD for 1 IQD. The reason for the Dinar dropping in value is because Iraq has been at war for awhile and their government is in turmoil. There was a time when the IQD (Iraqi Dinar) was over 3 USD per 1 IQD when Saddam was ruling Iraq. This means that if you bought 1000 IQD for 3 USD, it would now be worth 3000 USD. That is a huge return potential. Bill is really interested in this investment. Investing in the IQD is basically investing in Iraq’s future. Iraq is the second largest exporter of oil. This will help their economy tremendously. Bill tries to find when the IQD will rise in value and experts are saying it all depends on when Iraq establishes itself as an important country in the world. It could be less than a year, or it could be more than 10 years. Bill decides to invest in this in the IQD. He buys 50,000 IQD which costs him 150 USD because 3 USD buys 1000 IQD and he wants 50,000 IQD, so this would be 3 USD x 50 IQD. Bill goes to the bank but and 1000 IQD is worth 5 USD. Instead of buying IQD from the bank, Bill goes online to ebay and buys 50,000 IQD for 150 USD (3 USD per 1000 IQD) because it was cheaper than the bank. This is an example of unit of account. He buys the dinar on ebay with USD. This is a medium of exchange. Bill now has 50,000 IQD. The bank will not hold on to Bill’s money because it is not in USD, so he decides to just hold on to it and store it at his house. This is store of value. The IQD will always be worth something because it is a currency. When Bill goes home he only needs a little drawer to store the IQD in. This is because the IQD is very portable. In order for the IQD to retain value, there is a limited supply of it. One day, some of Bill’s IQD drops on the floor and water spills on it. However, the IQD is very durable, so it still has value and is still in good shape. Bill is excited to see when the IQD will raise in value so his investment will pay off.
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May, 2012
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