The West’s attempts to destroy the Iranian economy through heightened sanctions—including most imports, oil exports and use of banks for trade operations—is having its effect.
According to Johns Hopkins University Professor Steve Hanke, Iran is facing hyperinflation, with an inflation rate of nearly 70% per month and its national currency, the rial, plummeting in value against Western currencies. Iran is the latest casualty to be placed on his Hanke-Krus Hyperinflation Index, which includes France (1795), Germany (1922), Chile (1973), Nicaragua (1986), Argentina (1990), Russia (1992), Ecuador (1999) and Zimbabwe (2007), countries which experienced price-level increases of at least 50% per month.
Hanke, relishing his role as the world’s expert on this nightmarish phenomenon, has “played a significant role in stopping more hyperinflations than any living economist, including 10 of the 57 episodes” on his Index. He writes that Iran has three options: spontaneous dollarization (people unloading rials on the blackmarket for dollars, as happened in Zimbabwe), official dollarization (the government withdrawing the currency in favor of dollars, as in Ecuador), or a currency board issuing a new domestic currency backed 100% by—you guessed it—dollars. Hanke insists that the foreign currency doesn’t have to be US dollars. Pitcairn Island, for instance, uses New Zealand dollars.
The inflation doctor admits vaguely that there are “foreign factors”, without a hint of criticism of not only the sanctions, but the active subversion of Iran through everything from support of Iranian terrorists, assassinations of leading scientists, right up to war (the US encouraged Iraq to invade Iran in 1980). He emphasizes, “Iran’s complex system of subsidies, capital controls, and multiple exchange rates”, but most of all “massive overprinting of money”, though he complains that “the Central Bank of The Islamic Republic of Iran has not reported any such statistics for some time”. As if a country living through a state of emergency is likely to divulge such sensitive information.
He coolly dismisses consumers’ expectations influencing prices, since “fear surrounding military tensions is nothing new for Iranians”. Indeed, the US has been targeting Iran for destruction ever since it threw off its colonial chains in 1979—a dangerous example for other, especially Muslim countries. It is miraculous that Iran has done so well economically since the revolution, given the unremitting victimization it has experienced. One can only marvel at the stubborn courage it has shown to build an Islamic society in the teeth of opposition by the world empire and even by other Muslim nations allied to the empire.
We indeed may ask why Iran’s inflation rate has jumped so dramatically precisely in recent times. Of course, it is because of the sanctions. And why the sanctions? Is it really fears that Iran will develop a nuclear bomb, despite professions to the contrary and membership in the IAEA? No. Besides Iran’s role in inspiring the current ‘Islamic Reawakening’ in the Middle East, there is another very important reason, one which flies in the face of Hanke’s ‘three options’ for Iran.
Those ‘options’ all amount to one: accept US-dollar dictatorship. Iran has been trying to trade oil in non-US dollar currencies since 2008, when it opened its Oil Bourse. Iraq did this in 2000, and the US reaction was invasion—dollarization at gunpoint. The point of the sanctions today is a last-ditch attempt by the US to force Iran to comply with the US world order, as epitomized by continued acceptance of the US dollar as the world’s reserve currency.
Hanke insists it is not necessary for Iran to use US dollars as its substitute currency, which in any case would be ridiculous under the circumstances. However, the alternative of using, say, New Zealand dollars finesses the reality that all currencies are tied to the US dollar, as the de facto international reserve currency. This has been the case in reality since the 1930s, when the world abandoned the gold standard. Acknowledging this fact, over 20 countries call their legal tender ‘dollars’.
Whether the government moves quickly to raise the white flag, as in Ecuador, or belatedly, as in Zimbabwe, or insists on printing pretty new paper scrip tied 100% to the US dollar through an exchange board, as did Argentina, merely confirms the obvious. In past cases, such as Chile, Nicaragua and Zimbabwe, the message was: your socialist policies are unacceptable. In Iran’s case, the message is: take dollars for your oil.
Hanke’s monetarist credo—printing money causes inflation—ignores the underlying causes of inflation. As he admits, Iranians have faced war fears for over three decades. The exchange controls and subsidies, “government monopolies, price controls, and Soviet-style economic planning”, which Hanke calls “wrong-headed”, are not the cause of inflation, but a way for the government to keep it under control. However, at a certain point, the “foreign factors” become so egregious that even such measures fail. That is what has happened now, as sanctions have created extreme pain for the average Iranian. Bare shelves and panic in the face of invasion threats means that the currency will devalue, however many rials the government prints.
This is what happened in Germany in 1922, when it was forced to export everything to buy the gold to pay the extortionate reparations. It ended by resorting to Hanke’s currency board and marks issued against gold, but the underlying cause—the extortion practiced by Britain and France—only ended when Hitler took power and canceled the reparations. The devastation cause by “foreign factors” led in that instance to the rise of fascism.
University of Missouri Professor Michael Hudson maintains that “every hyperinflation in history stems from the foreign exchange markets. It stems from governments trying to throw enough of their currency on the market to pay their foreign debts.” Canadian commentator Stephen Gowans calls it “warfare by other means.” Devaluing the enemy’s currency was used as a war tactic by Napoleon against the Russians and by the British against the American colonists.
A consideration of all the countries on Hanke’s Hyperinflation Index can trace similar real causes and real ways to end the underlying problem that led to hyperinflation in each case. Ecuador finally took control of its economy and reduced its foreign debt in defiance of the IMF under President Rafael Correa, and is today the most popular political leader in all of the Americas. That is what created political stability and ended the ever-present threat of inflation there. The same goes for Argentina under President Nestor Kirschner and Russia under President Vladimir Putin.
Hanke is like the doctor telling the patient who was shot that he must have his leg amputated immediately. He refuses to condemn the sanctions as a violation of human rights, targeting the Iranian people without cause. He wants to cut off the patient’s leg to save him, which he can do in a matter of hours. The Iranian government is trying to remove the bullet and use a strict regime of rehabilitation, something that requires patience and grit. There is no magic cure to solve inflation under these circumstances.
The possibility looms that the US will undertake yet another criminal invasion of a Muslim country, recapitulating its war crimes in Afghanistan and Iraq. The real analogy for Iran is wartime. During war, all countries ration scarce goods, and people unite and accept sacrifice in the face of the enemy. This is the only solution for Iran today unless it agrees to join the US-dollar denominated empire as a junior member. Hanke’s patient could well die under the ‘anesthesia’ of US-Israeli bombs, but the Iranian people are proud and will fight for their dignity till their dying breath. The worries about hyperinflation will then pale in comparison to the real “foreign factors”, and the US will face the revenge of history for its criminal actions.
Most countries are too afraid of the US wolf to stand up to it. There are exceptions. China, Russia, India and South Korea have not abandoned ‘the patient’. Egypt is establishing diplomatic and economic relations with Iran in defiance of the US. Hopefully other ‘Arab Spring’ countries will join Iran in pursuing a policy of justice for the Middle East, working together to undo the horrendous legacy of US imperialism in the region. Someday, ‘dollarization’ will be a shibboleth, consigned to the ‘ash heap of history.’
Eric Walberg writes for Al-Ahram Weekly. You can reach him at ericwalberg.com. His book, “Postmodern Imperialism: Geopolitics and the Great Games,” is available at Clarity Press.
Persian Gulf:I don’t know who has said that you were a regime apogilost, but if I were you I wouldn’t give it even 2 seconds of thought that some one has said so. Who ever has said that you are a regime apogilost is not even worth thinking about.As I told you before I respect your passion for pursuing the TRUTH without being afraid where that truth leads you. However, this does not mean that I agree with some of your comments.Now as to the answer to your post:Allow me to make one thing clear first: I don’t approve IR’s internal reaction to the external threat. I don’t approve of the indiscriminate crackdown on the opposition EVEN IF some of them are in liasion with an external enemy. Just as I don’t approve of US system’s approach towards the radical opposition.The main difference between you and I is NOT that I approve of IR’s crackdown. The main difference between us is that I see a very obvious parallel between the West’s approach to radical dissent and Iran’s. You on the other hand see a fundamental difference between the two. That is our main difference. I disapprove of both IR and the West equally, you on the other hand see the west as having a much more civilized system.INDEED THAT IS WHY I KEEP GIVING EXAMPLES FROM THE WEST WHICH ARE PARALLEL TO WHAT IR DOES IN IRAN.YOU SAID: I think, your narrative of the west vs Iran is not right to start with. in particular your arguments about Iran being threatened continuously while the U.S is not. based on your logic, there wouldn’t be any possibility for virtually any country in the world to have an environment for its people to express themselves other than the U.S. because there is always going to be hostility from more powerful state one way or another. My friend, I am amazed that you can compare the security threat to the West (USA, Western Europe, Australia, Japan, Canada) with Iran!! WHO IS THREATENING USA WITH NUCLEAR ATTACK? WHO HAS BESIEGED USA, OR EUROPE OR JAPAN WITH THE WORLDS MOST POWERFUL MILITARY AND THREATENS THEM WITH A MILITARY ATTACK TO DO REGIME CHANGE ON A DAILY BASIS?!?!?However, let me re-iterate once more that the fact that I say Iran is under a constant military threat is not to approve their reaction to this threat with respect to our opposition. BUT IT IS AN EXTREMELY IMPORTANT POINT WHICH MUST BE CONSIDERED WHEN COMPARING THE SYSTEM IN THE WEST AND THE SYSTEM IN IRAN.The West (be it USA, UK, or Japan or any other), with a threat FAR LESS GRAVE than the one which is threatening Iran would react FAR more powerfully and ruthlessly than Iran! Even as it is right now, with the West being the military dominant power, it can’t tolerate Al-Menar or any radical dissent (esp. towards its foreign policy in middle east) much less would it tolerate the radical dissent if there were a real military force threatening its security the way there is one threatening Iran.YOU SAID: let’s accept your arguments that the government and the president is not that serious in the west, e.g the U.S, and there are other factors involved. at least you can say this or condemn it. you can point out to those elements and raise your voice. or else, you want to say criticizing the gov. is not that important and instead a fantasy (something like dailyshow, I would say). ok, then let’s our people have this at least, if they are happy with. it would be even nicer for the IR to do that since doing so would distract the opponents from the real barriers. I see from what perspective you see the situation, but believe it or not IR does the opposite. It’s exploiting every single opportunity to crash any meaningful criticism. First of all I think that the crushing response of IR to any meaningful criticism is being HIGHLY exaggerated in the west. I am not saying that they are not oppressing meaningful criticism, they are! And they do it with any excuse that may come up and as harshly as they can. But NON-THE-LESS the magnitude of oppression is highly exaggerated in the west.By the way, I have to repeat myself here, you think the west does not crush the meaningful opposition? If there is any difference in the response by the two systems to SOME OF the dissidents, it is because those dissidents in the West don’t pose any serious threat to the System, in Iran potentially they do.And no I don’t think that giving them such a superficial freedom will make them happy. To begin with the amount of freedoms that they enjoy is not even COMPARABLE TO what they had some 16 years ago. But do you see them any happier? NO!There is a significant tolerance for dissent in todays Iran, people such as Kawakebian, Zibakalam and EVEN Raisdana can come on the state TV and openly criticise things which are shown in the West as being taboo in Iran.The reason that I mentioned Zibakalams siding with Reza Shah was just to show you the amount of tolerance towards the dissent in Iran. He OPENLY SIDED WITH HIM ON THE STATE TV. NOT ONLY THAT HE ALSO INDIRECTLY (BUT NON THE LESS OPENLY) QUESTIONED IRAN’S SOVEREIGNITY ON THE STATE TV AND OPENLY SIDED WITH USA!The point here is not about siding with Reza Shah being a criminal act . ON THE CONTRARY the point here is that apparently siding with Reza Shah is NOT a criminal act in Iran!!But do these make our people any happier? NO!Let me tell you why I think it doesn’t:There are two main priorities among the Iranians. The priority of the middle class and the priority of the lower income classes.Quite contrary to what the middle calss itself thinks, its problem with IR is not political in nature. The middle class’ main problem with IR is cultural . For 30 years they have been culturally oppressed and have been forced to live their life according to the wishes of the religious fanatics.If today you see some people from the middle class claim that Shah’s time was much better it is ONLY because their priorities are not about political freedom but rather CULTURAL. Hell at the time of Shah they would send you directly to jail for saying about Qajar dynasty what Zibakalm said about Reza shah!! The amount of political freedom is not even comparable today to the dictatorship of Shah. However, at the time of Shah the culture and life style of the middle class was dominant today it is NOT.The main priority of the lower classes on the other hand is about bread and butter .So it does not matter which class you belong to, giving such superficial freedoms which are void of any true content will not solve our people’s problem.YOU SAID: I understand your arguments about some of the oppositions being in the payroll of the west. that’s too obvious to see. but we are not like that. those who I know are not cooperating with the enemies, and the majority of the opposition inside the country is not in that category. that’s really cheap to label everybody this way. I ask for basic norm, regardless of what the s*** might happen here and there. I never said all opposition members are on the payroll. Some of them are truly honest and love their people. And furthermore IR uses those who are on the payroll as an excuse to prosecute some of the others who are independent too, I don’t deny that at all. But that doesn’t change the fact that a great many number of those webloggers are being financed by the uncle sam! And believe me if the west had been in a similar situation as Iran it’s reaction would have been even harsher.YOU SAID: frankly, a few years ago, I was thinking that the difference with the income in the west and Iran to be the main source of radicalism and too much involvement in daily politics. this is simply not true. the lower income class has a less passion for political involvement as opposed to the middle one. your arguments actually discredits this basic fact. there is a very big diversity of lifestyle in the U.S (or any other modern society) which I would say is almost absent in a country like Iran and with the emphasis that IR has in advocating a certain norm of living. that diversity channels out different segment of the society and removes the chance of a big radical movement. Actually I disagree with you completely on this matter: The lower income class is not any less pasionate about politics. Look at the participation in the elections, where else in the world do you see >85% participation? Does this look like our lower income class is not passionate about the politics?By the way, it is a well observed phenomenon that with the increased number of middle class people, political pacification and apathy increases. And similarly as the number of middle class decreases, the social unrest and political radicalism increases. You can see this trend clearly in this history of the West in the late 19th and all over 20th century.YOU SAID: I have criticized Zibakalam for his deliberate talks about different issues and those who know me here saw that. however, if you read his writings, his is by no means somebody to take side with enemies of Iran as you said (he might be a bit paranoid). he questioned the rationale of a policy, in a far less degree of seriousness than what we see here in this website. it’s actually the absence of free access to information in Iran that gives opportunity to i*** like him. he loves Reza Shah. I didn’t know that is a crime! what is wrong with that? don’t you think, if it wasn’t for the discriminatory policies of RezaShah, for example in terms of language, you couldn’t have emphasized on Farsi as being a source of unification in Iran nowadays? he might have done many things wrong, but after all saved the country at the time of a total disintegration. I dont want to make this comment much longer than it has already become, so I will just tell you that I MYSELF witnessed his siding with USA/Israel.Look in youtube for some of his debates on the IRIB and you will see, he denies the existence of any Iranian assets which has been frozen in the USA in 1979, and VERY CLEARLY questions Iran’s sovereignity by giving the US judiciary to make a judgment over a completely internal matter in Iran.Also, as I said before, my argument was not about criminalizing the act of siding with Reza Shah. ON THE CONTRARY I WAS POINTING TO THE FACT THAT IT DOESN’T SEEM TO BE AS CRIMINAL AS MOST PEOPLE WOULD HAVE US BELIEVE IN THE WEST!!!Three last points:I never said anything about giving a completely free hand to ANYONE (much less to religious fundamentalists), what I said was about giving a free hand in freedom of expression! By the way, under the cover of religious fundamentalism people who are by no means fundamentalists have been deprived of their rights in USA.Helen Thomas and what happened to her is known to people like you and I. Do an experiment tomorrow, when you go to your work, ask people and see howmany people have actually even heard of her name let alone knowing what has happened to her!!By the way, who says that we don’t know about what is going on in Iran???Lastly, could you please tell me based on what you say that the freedom of expression in Iran is worse than in Pakistan?