real causes of the rial crisis

by FG

1.     A visibly corrupt and economically incompetent
ruling class.

2.      Lack of natural checks on regime
misconduct (a free press, free speech and free, open and fair elections).

3.   The chasm between visible reality and claims by
state media regarding the IRI’s abilities, popularity, honesty or achievements.

4.  Three plus years of police state behavior.

5.   Foreign policies tailored to make enemies and
create deep mistrust of the sort that makes the prospect of a nuclear-armed IRI

6.  Sanctions, isolation and pariah status resulting
from the above behavior.

7.   Public mistrust of the regime, solidified irreversibly
by events since since 2009.





more from FG


by alimostofi on

Travelers buy foreign currency when they travel to other nations, but if the political situation in a particular country becomes unstable, fewer tourists and foreign businesspersons travel to the nation. When this occurs, demand for the nation's currency falls, and consequently it becomes less expensive as this creates a currency surplus. Excess currency directly leads to inflation because traders increase prices to keep profit margins the same. Consumers in the nation need to spend more money to buy the same goods, which means the value of the currency falls even further.


In an open market, the perception that a devaluation is imminent may lead speculators to sell the currency in exchange for the country's foreign reserves, increasing pressure on the issuing country to make an actual devaluation. When speculators buy out all of the foreign reserves, a balance of payments crisis occurs.


FB: astrologer.alimostofi


Regime threatens merchants who close up shops

by FG on

Another example of predictable behavior.   So is the incompatible regime lie that the shops closed for "security reasons."

The regime is doing a great job of alienating the merchant class that was once a bastion of suppor.


Meanwhile internal divisions continue:


Baztab claims that President Ahmadinejad lashed out at the Revolutionary Guards, the judiciary, and MPs in his Tuesday news conference because a warrant has been issued for the arrest of 1st Vice President Mohammad Reza Rahimi.





One prediction is substantiated today so here's another

by FG on


In a previous post I wrote that the rial begins to lose value at such a rapid rate merchants would have little choice but to close their doors until the picture becomes more clear--a phenomenon which adds to panic and inflationary pressures.

Today the bazaaris--long critical to supporting the mullocracy--did exactly that because they had no choice.  Any other decision would not be economically rational.  

That the regime would blame foreigners and domestic speculators rather than its own behavior was also certain.  So were its attempts to freeze the rial at a desired level. 


Economists have good reason when they speak of the "iron law" of supply and demand dictating prices.  Governments cannot stop this by issuing fiats.  Khamenei, with his simpistic education in theology, is a man addicted to the idea that fiats and force can end problems.  The proven effect is often to make them worse.   See the consequences of 2009 as an example.

Certain economic consequences:

l. Shortages in the "normal" outlets where things must be sold at the officially demanded prices.

2. The development of lucrative black markets where things will sell at their REAL (and much higher) value as determined by the interaction of the above two forces.   The more normal markets are closed down, the greater the profit in operating a covert one.

It's also likely that the effect of goverment intervention will drive prices up at an even higher rate.  As goods disappear from regular stores public panic is likely to increase.  Panic adds to demand.  Government pressures limit supply. In short, the economic prognostication is for chaos, chaos and more chaos. 


We'll have to wait and see.  Some theorists claim that regimes like this only fall when they run out of money to pay insiders and supporting thugs in which case it will take time.   It's also a good reason not to drop sanctions since the alternative--living under a hopeless regime forever--looks infinitely worse. 

If nascent protests do spread, are rank-and-file troops sufficiently disenchanted at preset to do what their counterparts did in Syria or is more time needed?

If that happens, the IRI will have to do what the Roman Empire did in Britain and elsewhere, summon its troops and advisors home from Syria and let Assad cope as best he can. 


One more reason: 1.

by vildemose on

One more reason:

1. Iranians middle class is very afraid of its future. They are scrambling to save their wealth by turning it into dollar so they can either leave Iran as soon as possible when the opportunity arises or not end up in soup lines when the economy completely crash once and for all.

The high demand for dollar has increased its value.


All Oppression Creates a State of War--Simone De Beauvoir


Scapegoats that are not credible

by FG on

Independent currency traders respond naturally to the forces
of supply and demand.  They did not create
this crisis.  They do not keep it
going.  Yet dozens
of independent currency traders are being rounded up and blamed.  The charge is bullshit.  Their sole crime is horning in on the regime’s
Big Boys who remain untouched.  

Khamenei “guided” the irreparable Islamic Republic into this
jam, creating a typical mafia-style regime where economic niches are divied up
among various “gangs” and little guys are not tolerated.   Insiders with swollen wallets now enrich
themselves further, buying low and selling high because they can purchase
dollars at rates unavailable to the general population.  

Two years ago Iran’s equivalent to Al Capone ordered the
arrest of the only regime figure ever to show an ounce of ability for dealing
with economic crises.   Moussavi’s first “crime”
was to win an election by proposing the sort of political, economic and foreign
policy reform that would have prevented the current crisis.   Moussavi’s second “crime was to protest when the
Moral Examplar stole the election for an endorsed “favorite.” 

In a mullocracy founded on the premise “Economics is for
donkeys” and ruled by the ignorant, inevitable consequences follow.  In a historical masterpiece of underachievement,
Iran—which should have a rich and diverse economy by now—has been converted (irreversibly?) into a one-dimensional, inflation-ridden, payless Third World nation totally
dependent on oil.  It now enjoys the same
vulnerabilities to market fluctuations.