Tuesday, July 31, 2018

Iranian economy collapsing - Thomas Lifson

by Thomas Lifson

When people get hungry because they can’t afford food, the prospects for regime stability decline.

The hundred-some billion dollars that President Obama sent to Iran apparently has come and gone, leaving the Iranian economy once again desperate to avoid collapse. The pallets containing more than a billion dollars in hard currency have funded terror groups, and the rest of the haul apparently has gone to pay for debts, spending, and graft, leaving the real economy gasping for air, unable to generate hard currency yet dependent on imports.

Steve Hanke reports at Forbes:
Iran's rial plunged from 98,000 IRR/USD on Saturday to 112,000 IRR/USD on Sunday on Tehran's Ferdowsi Street. That stunning 12.5% one-day plunge has pushed the rial into a classic death spiral. The last time the rial was in a grip of such a spiral was back in September 2012.
The chart below shows the downward roller coaster ride the rial has been on during the past six months, as well as this weekend's free fall. As the chart indicates, the official IRR/USD rate is 44,030; whereas, the rate in the black market (read: free market) is 112,000. That wide spread is now measured by a huge black-market premium of 154%. This means that those who are privileged and have access to the official exchange rate can turn handsome profits of 154% in the blink of an eye.

Chart via Forbes.
The corollary of the collapse of the currency is wildfire inflation, affecting the life of everyone in Iran.

Chart via Forbes.

When people get hungry because they can't afford food, the prospects for regime stability decline.

Stay tuned for big news from Iran. If and when the mullahs' regime is toppled, it will be a new day in the Middle East and geostrategy.

Thomas Lifson

Source: https://www.americanthinker.com/blog/2018/07/iranian_economy_collapsing.html

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