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Reza Razavi

Nice analysis.  Your argument has one fundamental flaw, and that is you do not take into account that the economy in Iran is a government subsidized economy.  The reason why there’s so much cash purchasing power in Iran is because prices of basic living expenses are artificially low.  Everything from basic food necessities such as flour and sugar to gasoline, electricity and phone service is government subsidized.  All conditions being even, Iranians pay about 5% of what Americans pay for these goods and services.

Moreover, Iran is a tax free country.  There is no income tax, very little property tax and virtually no sales tax.  Again, that is why you have such a cash based economy.    But, as you know, cash based economies are very volatile and unstable.  The slightest fluctuation in government’s ability to subsidize goods and services can be catastrophic, as we have seen in this decade in countries such as Argentina.   Incidentally, this economic system is not unique to the IRI.  It's actually a leftoevr from Shah's period.  In sum, you set forth a nice theory, but you’re comparing apples and oranges.

Have beef with the government, but at least they are trying.

My friend, you know nothing about the monetary policy of the world.

You live in LA, and think the Islamic government needs to be overturned and let the USA liberalize the economy.

I don’t agree entirely with Iran's political structure but I have always agreed with the one pillar of the Islamic government. Non use of interest bearing banking.

I am student of economics my father is Dr Razavi, former head of Bank Saderat and I have had many discussions with the late Dr Nourbaksh (governor of iranian central bank) on this matter.

In the Western world all money is created via debt creation. For there to be money in circulation there must be debt in circulation be it Gov, Corp or personal.

This system has an inherit flaw. The only money which is actually created is the principal. When the bank lends you me and everyone else money they only give us the principal. However what about the interest amount. That money is never created it doesn’t exist, we as society might owe $100 but the $10 (10%) interest doesn’t exist. We all have to work hard to get that interest from each other. Some manage, the others don’t, and those that don’t are foreclosed. Some of you LA Iranians should understand very well this concept of foreclosure.

Yet in Iran, 95% of houses are bought cash up front, no loans, why is this? It is because Iran prints its own money with no interest obligation. Yes the value of money might decrease, i.e. inflation. However inflation always promotes the productivity of society. As people will want a rate of return greater than the loss of purchasing power.

In a system of debt free money (Iran), if the government spends any money which does not represent an increase in productivity then this will lead to inflation.

Thus at this juncture you can criticize the Islamic government, the government workers, military and basij. The governments instead of spending on productive gain actually spend money on anti-productive loss let alone neutral-productive (not taking account general expenditure). The money being spent on this unproductive gain always causes inflation. The government procedures which are paid for by our inflation tax are spent on government workers who hinder economic activity, how stupid.

Iran needs a free market economy based on its own fundamental strength (debt free currency) that the market will provide maximum optimization. The federal reserve of the USA, and all other central banks do not allow for the full free market to practice. The market should be setter of interest rates and there should be no economic policy set by the government. Let the market justify the price of everything, no government subsidies on anything including oil.

If the price of housing is high, then people will make houses, until the supply reaches satisfies demand until prices fall. If the wheat provides greater return on investment than rice for the farmer the farmer will produce more wheat and the price of wheat will come down and rice will go up until the rates of return for each product become the stable for the market.

The longer the Iranian government intervenes in the market the longer our economy falters.

If people need jobs, well provide them jobs; get them to build the infrastructure that will make the country more efficient.

Just don’t take your grudge with the Islamic government out on the fundamental strength of the Iranian economy's lack of debt.

Iran was the only country whose stock exchange showed a yearly gain in 2008? Out of the whole world Iran was able to show a gain? Now tell me, is there something wrong with that. Madoff lost money Mahmud made money.