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Iran's currency collapsing

By Catholic Online (NEWS CONSORTIUM)
October 2nd, 2012
Catholic Online (www.catholic.org)

It's a bad time to be a merchant in Iran just now. That country's currency is in a free-fall, losing a third of its value last week alone. The government says speculators and sanctions are to blame. 

LOS ANGELES, CA (Catholic Online) - The Iranian rial has lost a third of its value in the last week and is now worth about half of what it was a year ago. President Mahmoud Ahmadinejad is under fire for the recent losses and is himself calling for security forces to take action against speculators. 

Ahmadinejad said, "According to a report from one of the security services, 22 individuals are ringleaders of the recent turmoil in the currency market, and since these individuals are known, security institutions must act." 

Some dealers have stopped using the rial altogether because of its extreme volatility. On Tuesday, one US dollar was worth 37,500 rial. 

The recent instability suggests that sanctions are having a withering effect on Iran as that nation insists on completing a nuclear project of unknown scope. The Iranian government says the program is intended exclusively for peaceful use, while the US and Israel among others, suspect it is intended to develop a nuclear weapon. 

The UN has attempted repeatedly to broker a deal between Iran and its detractors, but Iran has blocked much of the progress, insisting on secrecy. It hasn't helped that major components of the nuclear operation have been moved into deep underground bunkers for continued development.

Likely harming Iran more than anything is its difficulty in accepting payments for its oil shipments. With the country essentially blocked from the international banking system, it has been difficult for officials to transact business on a global level. 

Many Iranian business workers have stopped dealing in rials, worsening the slide. 

Both Ahmadinejad and his opponents blame the other for problems. For their part, opponents of Ahmadinejad in parliament accuse him of insisting on policies and rhetoric that promote mistrust and keep the country isolated. 

Most experts seem to agree that it's government mismanagement of the strained economy that is worsening the problem. Ali Larijani, a parliamentary speaker told the Fars News Agency, "Eighty percent of our economic issues and problems are related to the system of management."

As for merchants, they're having to raise prices to break even, or close shop. Many people can no longer afford to keep up with the rise in prices, forcing many out of business. 

Until some kind of stability returns to the rial, it is unlikely that things will improve for the people on the street anytime soon. 


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