Hyperinflation Has Arrived In Iran

[SEE3772]

Posted by Steve H. Hanke

Since the U.S. and E.U. first enacted sanctions against Iran, in 2010, the value of the Iranian rial (IRR) has plummeted, imposing untold misery on the Iranian people. When a currency collapses, you can be certain that other economic metrics are moving in a negative direction, too. Indeed, using new data from Iran’s foreign-exchange black market, I estimate that Iran’s monthly inflation rate has reached 69.6%. With a monthly inflation rate this high (over 50%), Iran is undoubtedly experiencing hyperinflation.

When President Obama signed the Comprehensive Iran Sanctions, Accountability, and Divestment Act, in July 2010, the official Iranian rial-U.S. dollar exchange rate was very close to the black-market rate. But, as the accompanying chart shows, the official and black-market rates have increasingly diverged since July 2010. This decline began to accelerate last month, when Iranians witnessed a dramatic 9.65% drop in the value of the rial, over the course of a single weekend (8-10 September 2012). The free-fall has continued since then. On 2 October 2012, the black-market exchange rate reached 35,000 IRR/USD – a rate which reflects a 65% decline in the rial, relative to the U.S. dollar.



The rial’s death spiral is wiping out the currency’s purchasing power. In consequence, Iran is now experiencing a devastating increase in prices – hyperinflation. As Nicholas Krus and I document in our recent Cato Working Paper, World Hyperinflations, there have been 57 documented cases of hyperinflation in history, the most recent of which was North Korea’s 2009-11 hyperinflation. That said, North Korea’s hyperinflation did not come close to the magnitudes reached in the recent, second-highest hyperinflation in the world, that of Zimbabwe, in 2008, nor has Iran’s hyperinflation – at least not yet.


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Federal Reserve Bank of New York:
Staff Report No. 574 October 2012
"The Forward Guidance Puzzle"
Dynamic Stochastic General Equilibrium Model Predicts
Explosive Inflation - The Outcome Is Hyperinflation

[Sidewinder]

Indeed. I have on my desk in front of me a Zimbabwean 10,000,000 dollar bill. The postage stamp it cost the guy who mailed it to me was worth a lot more than the bill is, except as a collector's item.

[Guest123018-4]

So the rest of the sane world does not want Iran to have any nukes. Economic sanctions is killing the rial. Now what happens in the US if we were put under sanction by say, China.
We are printing money on valuable paper that is losing its value daily.
Why are things costing so much more and wages are stagnanat. Who is it that is getting squeezed.
What happens when the sanctions are finally lifted and the oil becomes more available on the market?

The real question is what is oil really worth? This is a reason that oil is traded in dollars nad not rials or yuan.
What happens when the dollar becomes unstable by the hyper inflation.Two things are value tresded, oil and gold.
I ntoice that gold has been on a steady rise.
I hope my fund mamagers bought more gold while it was down.

[Seedy]

F2's, #1 Fuck Iran

#2 When odumbo was elected, but not sworn in get, my brother tried to talk me into dumping 50% of my retirement and buy gold, I told him he was nuts. well he was right and I fucked up, I could have retired right now, and been extremely comfortable, and fucking some diffwrent trim Every fucking night. He dId retIre, fucker Is a multI mIllIonaIre, at 50.