http://www.tutor2u.net/economics/revision-notes/a2…
http://www.reuters.com/article/2012/09/29/us-iran-…
Everyday we hear that the currency of Iran is diving to a new low against the US dollar. It actually does not matter on bit. I will explain.
In the Beginning
The people of Iran have been under Ayatollah sanctions, from the moment His Imperial Majesty Shahanshah Aryamehr left Iran on Jan 16 1957. I know the date, because it is my birthday. We all know that scene of him crying as he left Iran. We in the diaspora cried. So if you are not a Constitutional Monarchist, don’t read on. He and his men, like my dad and my grandad, created an economic system that worked. The people cooperated then. Now they don’t. But the people are winning nevertheless. Here is the remarkable story.
Guardian Mountains of Iran
Quite frankly Iran has been a very difficult country to govern from thousands of years ago. The reason is that it is protected by various mountain ranges. It is both hard to go out of Iran, and hard to get into Iran. Bad rulers of Iran, who want to invade other neighboring countries will not succeed, and vice-versa. So Khomeini found it bloody hard to invade Iraq, and Saddam failed as well. So waging a war on Iran is futile. All this hoo haa on attacking Iran is a waste of time, as the geography makes it absolutely impossible. So it is all market manipulation.
By-Passing Mullahs
But the good aspect of Iranian geography, is that the cunning smugglers of Iran, are the very people who save Iran. These old families know the sacred routes like no one else does. Just like the Afghans know the secret passes in the Hindu Kush, so do the Iranian smugglers know the paths through the Zagros and Alborz mountains. “The Iranian currency is diving.” That is what the mullah ministry says everyday, after they take new short positions. But it does not matter. There is a thriving alternative market, or what they call “Black Market”, that has been vibrant and growing for years. It by passes all international barriers. It feeds Iran. It was created to by-pass the mullahs economic system right from the start. Later as the world tried to do business with the mullahs, it actually lost business. Then as the world sanctions started, the black market started to thrive.
Dead Mullah Dollar
The effect of an alternative black market, is that there are resources arriving into Iran, that the IRGC and there henchmen cannot control. This system is totally invisible to them, if they get anywhere near it, they die. They are at a loss of what to do. They can see that no one deals with them. No one trades in mullah dollars. They trade in black market dollars. In their embarrassment, the mullahs have to scream that the rial is falling. No one gives a toss. People are dealing in another currency completely. They barter. Traditional economics as the link above describes, does not apply.
The Good Smugglers of Iran
It is then with great pleasure, that I see the mullahs lose their purchasing power on the world markets, and the people of Iran get what they want from the good smugglers of Iran. They are keeping Iran alive. No matter how much money the mullahs hand out to the people, they will not buy from them. No matter how much they subsidize the staple food, no one buys from them. It is just not worth the head-ache. People have their own secret supply lines, with no religious obligations. There is an economy inside the economy. And there is another economy inside that. Most countries have a bit of this. But in Iran it is huge and very convoluted. Some estimate it to be 50% of the economy. The beauty of it is that is totally dispersed. It is like thousand of drops of water. Far too many for any of the mullah henchmen to tackle. Heck it was happening in the time of the Shah, and they got away with it then. Free trade has never existed in Iran as free trade has in the West.
The Finale
The upshot of all this, is that one day when enough money is in the hands of the Persian Pirates, all the little droplets of water will form a wave, and overthrow the mullah. That day will only come when sanctions erode the mullah dollars completely, and they have to get their food from the smugglers. It has not happened yet, but we are getting there. The trend is there. They are buying some luxury items, but not the staple items. We are getting there.
