Rial Clear Politics

This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.

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What strikes us about the collapse of Iran’s currency, which is coming so dramatically into focus, is the speed with which it has happened. In the past week, according to Thos. Erdbrink’s dispatches in Times, the rial has plunged 40%. “In the Iranian capital, all anyone can talk about is the rial, and how lives have been turned upside down in one terrible week,” he reports. “Every elevator ride, office visit or quick run to the supermarket brings new gossip about the currency’s drop and a swirl of speculation about who is to blame.” Economist Steve Hanke reckons Iran is on its way to a hyperinflation.

President Ahmadinejad blames the sanctions that are being imposed by America and the West. Mr. Erdbrink quotes him as saying, during a news conference the other day, that Iran was facing a “psychological war,” which is being waged by the United States and is preventing Iran it from selling oil and transferring money. The president is also quoted by Mr. Erdlink as blaming a “domestic band of ‘22 people in three separate circles’ who with ‘one phone call’ could manipulate foreign exchange trades in Iran.”

In any event, Iranians are rushing to rid themselves of rials, and, as it was put in the Manchester Guardian, “rushing to convert their assets and properties to foreign currency and gold.” The rial is today worth about a third of what it was worth but a few months ago, raising the question — at least in these columns — of what it would be like here at America were the dollar to lose two thirds of its value over a short period of time. Would banks stop lending, would people begin to feel frustrated with their government, would people start to default on obligations?

If that sounds far-fetched, feature what has happened to the dollar. We don’t want to suggest — we don’t believe there is — any moral equivalency between the Iranian regime and America’s democracy. We merely mean to mark that between the day President George W. Bush was sworn in and today, the value of the dollar has plunged to less than a 1,750th of an ounce of gold — that is, not even a sixth of what the value that obtained at the start of the Bush years. During President Obama’s term in office alone, the value of the dollar has plunged to less than a half of the 850th of an ounce of gold at which it was valued at the started of his presidency.

Now we understand that the consumer price index has yet to signal the kind of catastrophe that has been signaled by looking at the dollar’s value. In other words, the value of key consumer goods has been plunging to ever smaller particles of gold, right along side the dollar. There are those, however, who see in the plunging value of the dollar a warning that what’s ahead is trouble of the kind that is erupting in Iran. We can handle it better than the regime at Tehran because it refuses to stand for the kind of democratic elections that are used here at America. It is no doubt the case, though, that eventually the political system will figure it out. Call it rial clear politics.


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