Saturday, 01 November 2014

Policy Papers

Panic in Persia as Hyperinflation Hits Iran

Posted by Gonzalo Schwarz
November 8, 2012

by Steve H. Hanke

For decades, the Iranian economy has been cobbled together by religious-bureaucratic regimes that have employed mandates, regulations, price controls, subsidies and a wide variety of other interventionist devices, in an attempt to achieve their goals. It’s all been kept afloat – barely afloat – by oil revenues.

Shortly after Mahmoud Ahmadinejad took power as president, Iran began to draw the ire of the United States, Europe and their allies over a number of issues related to Iran’s nuclear ambitions. Of late, this loose coalition of ‘allies’ has ratcheted up economic sanctions against Iran.

Has the cascade of sanctions had an effect? The Iranian rial’s exchange rate tells the tale. When US President Barack Obama signed the Comprehensive Iran Sanctions, Accountability, and Divestment Act in July 2010, the official exchange rate for the rial to the US dollar was very close to the black market rate. Since these sanctions took effect, however, the official and black market rates have increasingly diverged. …

Continue reading at Cato.org…

image: flickr.com/harveypekar

You can also listen to an interview with Dr. Hanke on hyperinflation here…