Only a little reliable information coming out of Iran to the outside world. But, one thing is increasingly clear: The Islamic Republic is firmly in the grip of Inflation. On the markets in Tehran, the prices for sought-after goods to draw strong. The Grand Bazaar featured products more expensive on an almost daily basis.
This has already triggered protests, and leads to much unrest in the population. Soon it is likely to be even worse. Because, in brief, the Inflation in Iran could spiral completely out of control. The 82-million-inhabitant Nation in the Persian Gulf is in danger of being the next country in the vortex of the Inflation device.
“What we are seeing in Iran, there is still no Hyperinflation, and not necessarily the precursor, but right now inflation is very high,” says Steve H. Hanke, Professor of Applied Economics at the Johns Hopkins University in Baltimore.
While the International monetary Fund (IMF), which had estimated inflation in the oil-rich country on the Gulf at the beginning of 2018 at twelve percent, located Hanke, one of the leading experts for the diagnosis and control of Hyperinflation, the annual inflation currently at 284 per cent. According to Hanke, it is the only precise measurement of Iran’s Inflation that exists.
Of Hyperinflation, Economists talk of a price increase of 50 percent in the month, before the speech is – from 20 percent in inflation – galloping Inflation. Examples of such “witches’ Sabbath of devaluation” (Elias Canetti), there were in history some: One of the worst took place in Germany. Between the First world war and the peak of the Hyperinflation of 1923 the German currency experienced a total of eleven months with more than 50 percent of the inflation rate on a monthly basis. At the end of this tragic Era, buy it for a trillion Mark as much (or as little) as for a Mark of 1914.
In the Weimar Republic led to Hyperinflation, and that a good part of the middle class saw their savings wiped out, and the fabric of the social was torn cohesion. But who had thought that Hyper-inflation episodes belong to the story, and in immediate connection with a lost war, was wrong. The recent past experienced a number of severe money crises. In African Zimbabwe, the depreciation hit in the past decade: Between 2006 and 2009, the Zimbabwe Dollar vanished practically into thin air.
Currently, the Latin-American Venezuela suffers disruptions similar to severe monetary: The rate of inflation for the national currency, the Bolivar, is currently estimated to be a Million percent in a year. And so now, the Iranian Rial. As a hard money is the currency of the Mullahs ruled in “God state” was also not previously known. The IMF recorded since 1980, annual inflation rates of up to 49 per cent. In the Mediterranean, the inflation rate was at 19 percent annually.
it was as bad as these days it never. The current escalation began with the new sanctions, which U.S. President Donald Trump. You will see that the Islamic Republic will in future no longer have the right to use the Dollar as the trading currency for commodities. Starting in November, in addition, countries should be punished, the buy Iran Oil. Since energy is the most important export of the country, the Embargo, the Iranian economy to the Mark.
For the inhabitants of the Republic of Iran this means that your standard of living, is thrown back to the level of the mid-nineties. The Tricky with Inflation: the depreciation of Money, once out of control, it can be not so easy to capture. At a certain point, the people of a thought are obsessed: When money comes in, it needs to be quickly re-issued – as tomorrow is worth less. For Monetary policymakers the challenge is, this death spiral to break.
Hyperinflation capture is only possible with rigid measures
it Has come so far, the political leadership in a Dilemma: Inflation re-capture, are unpopular measures are required that can drive in the extreme situation, the Dissatisfied slightly to the streets. This is also one of the reasons why the monetary authorities have made in Turkey, nothing against the prices of the screws this year to new heights. In Erdogan’s Kingdom, the inflation rate jumped in September to 24.5 percent, which is twice as high as in the spring.
“When it comes to the crunch, the States paid their bills always with the Start of the printing press,” says Thorsten Polleit, chief economist at Degussa goldhandel. Often banks also print Central of new money, in order to preserve faltering credit institutions prior to the payment default.
For Tehran is likely to be passed, the opportunity already, to save its currency, with the conventional methods. “The only way to stabilize the Rial, it seems to me a currency to his Committee,” explains Hanke. Such a currency Committee (English Currency Board) means that a state ties its currency to a value of anchor, the development of which he has no influence. The government is virtually in control of its own monetary policy, with the result that no-one has to suspect that economic and political problems continue to be solved with the printing press.
such A currency Committee of the U.S. researchers in Bulgaria in 1997 set up, with the result that the runaway currency devaluation has been captured within a short time. “With a Currency Board, the Rial would have to be a clone of an anchor currency. It would stabilize the Rial immediately, and the Inflation would fall like a stone,“ he is convinced.
binding to the D-Mark saved the lion
While the Bulgarian Lev at a fixed ratio to the D-Mark was tied (1000 Lev for a DM), Hanke in the case of the Rial, the binding to Gold: “The precious metal would be an ideal anchor because Gold is stable and is not issued by a state Institution,” says a currency expert.
Although the prices of the yellow metal sway, a rapid decay is, however, excluded. Also, Degussa-man Polleit able to gain this idea a lot: “The core idea must be that The state should play no role in the monetary system”, says the economist, who belong to the liberal Austrian school of Economics.
However, Polleit swears less on a currency-Committee on currency competition: “The free market will bring about better money, it could state monopolies ever.” For him, it is conceivable that Gold-based currencies, and maybe also silver-based, maybe even Bitcoin, as a medium of exchange.
Hyperinflation and runaway Inflation may be extremely cases. But also the normal depreciation of Money takes its toll. Since 2008, in a period of rising prices, subdued the Euro has lost in Germany, around twelve percent of its purchasing power. “Prices rise every year by two percent, the loss of purchasing power of money after 20 years, one-third,” says Polleit.
What are Central banks to spend today than price stability, namely an Inflation of about two per cent in the year – is in his view a delusion. Further, the majority of Economists considers that a slight Inflation is desirable. You give the business enough flexibility to economic shocks handle better, without that it comes to bankruptcies.