Many people in the dinar world are familiar with the observations of dinar blogger Marcus Curtis. He started his blog a couple of years ago and his work was copied and pasted all over the community. He stepped away from the dinar for awhile to reprioritize his life. I interviewed him a couple of months ago and he presented for us a list of dinar myths that need to be busted. Well over the past week Marcus has resurrected his dinar blog with some startling comments. Here’s an excerpt:
I began to research a little in January of 2012 because I had some extra time on my hands. I began to look at Kuwait. I did key word searches. Basically I typed things like Kuwait+news+articles+1991. As a result I began to read through countless news articles from 1991. Way back when Iraq invaded Kuwait. I used different types of keyword combinations. What I found shocked me. Kuwait never revalued their currency! The central bank did not change the rate. As people fled they grabbed all the cash they could. When they got to countries along their border they began to exchange the Kuwaiti dinar for the currency they needed. This created a flood of Kuwaiti dinar in other nations. The value dropped on the black market because foreign banks and the people lost faith in the currency.
Saddam Outlaws the Kuwaiti dinar and it falls in value. He said that people needed to trade in their Kuwaiti dinar for Iraqi dinar before Oct 6 1990. When America begins to regain Kuwait the value rose again. It is important to note that this is not a result of the bank changing the rate. It is a result of the black market interpreting the news of the day. This is the same thing stocks do. It is the same thing that happened when Saddam tried to adjust the rate of the Iraqi dinar and said it was worth more than it was towards the end of the 80’s. But outside Iraq. The Iraq dinar was trading for less.
The important thing is the central bank never adjusted the rate below 3 dollars. In fact, The Kuwaiti central bank was occupied by Iraqis and they were not open for business! When America came to the rescue of Kuwait primarily because of the petro dollar agreement they kicked Iraq out. When the people regained their country everything was up and running just 7 months later. All the oil well fires were put out, and everything was almost back to normal. Kuwait redenominated. The only reason for this was because Saddam took a bunch of Kuwaiti dinar from the Kuwaiti central bank.
This is an entirely different scenario then what happened in Iraq. Kuwait’s currency was not expanded because of sanctions and they did not have a period of hyper-inflation. This completely threw me for a loop. I always thought and was told that what happened in Kuwait was going to happen in Iraq. Kuwait never had over a trillion in circulation. You see when it comes to any denomination going through a revalue the money supply is key. This is because there is a debt liability with a revalue. They can’t just say it is worth x amount. The government itself is on the hook for that amount. Money=debt and debt=money.