The Death Of A Currency In Real Time?
Iranian clerics’ attempts to curb speculation in the Rial and stabilize the currency appear to have backfired as the un-official (real) Rial rate traded as low as 34,250 Rial to the USD – a massive 20% plunge. Demand for gold is surging (as Tehran exchange volume is up almost 18%) as the population appears to be readying itself for hyperinflationary death. It really is no fun in Iran.
The rial’s losses have accelerated in the past week after the government launched an “exchange center” designed to supply dollars to importers of some basic goods at a special rate slightly cheaper than the market rate.
Instead of allaying fears about the availability of dollars, the center seems to have intensified the race for hard currency by linking the special rate to the market rate, meaning that even privileged importers will face sharply higher costs.
“The government’s initiative … brought to the surface a tremendous lack of confidence in its ability to manage the currency,” said Cliff Kupchan, a Middle East expert at the Eurasia Group, a political risk research firm. “The attempt to fix it triggered a worse crisis via market psychology.” It appears that locals are extremely active in selling out of their Rials and moving it into Gold. To read about the average Iranian’s plight click here.
Hummmm… I wonder what the effect of a dollar collapse is going to have on that cesspool of a country? I wonder what a total absence of an exchange currency will have upon a country that is already engulfed by hyperinflation? Not that we, with an absence of a free press, will ever know. We know how our founders felt about meddling in the affairs of others. I wonder what they would say about this? Yes, Iran needs to be stopped from developing nuclear weapons (which they surely are doing), but this could have been accomplished a couple of years ago when they tried to rise up. If you will remember. We failed them. Hillary Clinton (our sorry excuse for a SOS), and the Kenyan (our sorry excuse for a President) failed them. Now, while we funnel weapons into the Arab spring and lose our diplomats, the Kenyan is failing us on Iran. This will not turn out well. Nothing that the Kenyan touches ever does.