Now that America has pulled out of the nuclear deal, and the American government is pursuing sanctions against countries buying oil from Iran, the economic news from Tehran has only been bad and getting worse.
The New York Times last December described how the Iranian middle class has shrunk by 50% in the last year.
The Iranian government has expanded the money supply by more than 30 percent annually for more than a decade, using the extra cash to cover budget deficits and other expenses. In the United States, by comparison, a broad measure of the money supply has increased by an annual average of 6.4 percent over the last decade, according to the Federal Reserve.
As a result of Iran’s rapid expansion of the money supply, says Djavad Salehi-Isfahani, a professor of economics at Virginia Tech University, inflation has exploded and by official figures is now running at an annual rate of 35 percent, compared with below 10 percent a year ago.
“The withdrawal [by the United States from the nuclear deal] busted the expectations for an economic boom created by the J.C.P.O.A. and Iran’s return to the global economy, which was expected to boost oil exports and foreign investment,” he said. “The reversal caused people to convert their rials into other assets, mainly dollars and gold.”
By raising the cost of imports, the currency collapse has reinforced the inflationary surge and decimated small businesses that… rely on imported goods.
President Trump’s decision to leave the nuclear deal, known formally as the Joint Comprehensive Plan of Action, or J.C.P.O.A., and to reimpose harsh economic sanctions prompted the other major economic disaster to befall Iran: a collapse in its currency, Mr. Salehi-Isfahani said. The rial lost about 70 percent against the dollar before strengthening recently, but its rates are still fluctuating heavily.
The Times described the economic collapse of one middle-class family, the Taymouris, who had a business selling computer accessories bought from abroad. The collapse of the rial made those goods much more costly for the Taymouris to buy; the higher prices they then had to charge caused a steep downturn in business.
Here is the grim tale:
Mr. Taymouri, saying it was best to let his money — or lack of it — do the talking, sat down and calculated the financial calamity that had befallen the family in the past year. Their monthly income fell from 50 million rials, or about $1,400, a year ago to 10 million rials, or $90, at the current heavily devalued rate.
From $1,400 to $90 a month is a colossal decline. Of course they were forced to close their business. Mr. Taymouri now works at a video arcade. His current salary is unknown. He and his wife have moved into a tiny two-room apartment in a rundown section of Tehran.
He is quietly furious about his own situation.
“If someone had ever told me I would one day live like this, I would’ve laughed,” Mr. Taymouri said bitterly, before falling silent. Finally, his wife spoke.
“I’m not really that sad, because we are not alone,” she said. “It’s happening to so many people.”
The Taymouris gave up:
“One night, Ms. Taymouri said, “he just came home, dropped on the couch and said, ‘It’s over.’”
In a country that still puts debtors in jail, the Taymouris had no choice but to make good on their debts. They sold the car, their furniture and the carpets they had been given as wedding presents.
Mr. Taymouri sold the shop to the arcade man on the condition that he could work there. Then they moved to their current apartment, which has a communal shower in the hallway.
The Taymouris are, like tens of millions of other Iranians, former members of the middle class now ravaged by inflation and the collapse of the currency. Those whose livelihoods were based on reselling goods from abroad, like the Taymouris, were hit the hardest. The steep rise in the price of imported goods, which had to be passed on to customers, led to a deep decline in sales.
Another economic catastrophe in Iran is the result of the severe drought that began ravaging southeastern Iran 20 years ago, and has continued to spread, so that now 96% of Iran is affected. In 2018 alone, the estimate is that the agricultural loss due to the drought — the worst in at least 50 years — has led to agricultural losses of four billion dollars. How many more billions have been lost in the years since the drought began two decades ago, and how many billions more will be lost in future years — for there is every sign that the drought is only worsening — is unknown.
Meanwhile, while the farmers suffer, and the urban middle class has decreased by half in just the last year, and one in five Iranians now live below the poverty line, the Iranian government continues to pour money into its aggressive projects abroad. The Iran Action Group in the State Department estimates that Iran has spent at least 16 billion dollars in Syria, Yemen, Iraq, Lebanon, and “Palestine” between 2012 and mid-2018. There is no end in sight for the war in Yemen, with deep-pocketed Saudi Arabia pouring more money into supporting the Sunnis than Iran does to the Shi’a Houthis. Assad may have reconquered almost all of Syria, with Iranian and Russian help, but now he has to reconstruct his country, which has suffered incredible destruction. It will cost, according to Western estimates, several hundred billion dollars to rebuild. How much of that will the Islamic Republic of Iran provide? It’s likely to be a lot, for Iran has too much invested in Assad to see Syria turn to others, including the Saudis, who have hinted that they would help Syria to rebuild. The commitment by Iran to support, with money and weapons, the Shi’a militias in Iraq and Hezbollah in Lebanon, remain. Iran has also increased its financial support to Hamas in Gaza.
Buraq says
Reduced to poverty. And all because of Islam’s psychotic hatred of the Jews.
Frank Anderson says
Buraq, islam teaches hatred, enslavement and murder of all who are not the “brand” of islam being accepted by those in control. Jews are just the tip of the (I’m sorry for the cliché) iceberg. Please consider the suggestion to read Bill Warner’s Abridged Koran as a starter to understand for yourself. I was highly impressed by his work. Please know of my love and respect for Judaism, even though I am not considered Jewish.
BC says
The calculation is way off. 10 is one fifth of 50. 90 is not one fifth of 1400.
Hugh Fitzgerald says
The quote from the NY Times article explains that the value of the Taymouris’ income fell from 50 million riyals a month, which at that time was equivalent to $1,400 dollars, to one-fifth the number of riyals, that is 10 million riyals a month. But at that later time, the riyal had also greatly decreased in value, so that 10 million riyals was then worth not one-fifth of $1,400, or $280, but $90 “at the current heavily devalued rate.”. I hope that clears things up.
gravenimage says
Thank you, Hugh.
Frank Anderson says
There are times when the most effective way to end tyranny and corruption is to focus on what is good for its opponents rather than what is bad for those evil in charge. That is not always the case; which demands serious thought rather than mindless action. We are seeing the impact of serious thought in these results. John Bolton and Donald Trump deserve high praise for their insight and action. WWII should have taught more people that appeasement only leads to a stronger appetite for more aggression.
gravenimage says
+1
mortimer says
The only solution for the crisis of Iran is for a coup d’état led by a military junta. They will have to arrest the mullahocracy and charge them with serious crimes and then quickly execute them. Then the country can transition to a more secular version with realistic, competent leadership, rather than greedy medieval tyrants.
gravenimage says
I see no evidence that the Iranian military is apt to turn on the Mullah’s, I’m afraid.
Walter Sieruk says
First, it should be made clear that Obama and Kerry were such an unrealistic deluded fools if they actually, really, felt that there was any actual value of that “deal” with that tyrannical “mullah regime” of Iran .When ,Obama and Kerry in their folly attempted work out a compromise with those Muslim tyrants in power in Iran only had an awful results, This was outcome of foolishly trying to work out a compromise resulted that the hoax and farce of a “deal.” A former US President, Franklin D. Roosevelt , had well-spoken when he said “There has never been – there never can be – successful compromise between good and evil.”
Second,President Trump has done better than Obama did on handling the subject of the dangers posed by the Islamic rogue state of Iran. It’s very obvious that President Trump had already done much better than Obama. In fact Obama could not have done much worse in the “dealing and negotiations” with this “mullah regime” than he did. Furthermore, It’s very obvious that the tyrants in power in this Islamic regime had and have no real or sincere intentions even for the start of keeping any of their promises in a nuclear “agreement deal” with Western nations. As for ,example , a “test firing” of a missile by Iran, In addition , it was reported on CBN on 5/7/16 only two days before this CBN report the Iran not only launched other “test firing” of missile. The “test firing” of that missile and it even had printed on that missile words in Hebrew that read “Israel must be wiped off the map.” There is no logical or valid evidence that the jihad-minded those in control of this Islamic tyranny have , in any way, changed their vicious and destructive intentions in their Islamic agenda against the State of Israel . There were other “test firing of other missiles by earlier this very year by the Islamic tyranny of Iran. This shows the gall and defiance of those mullahs and ayatollahs along those other Muslim villains in power in this tyrannical Islamic regime of Iran their total arrogant contempt for the US and the other Western nations in this so called “deal.” Those Muslim clerics and other Muslim tyrants in power in this cruel and oppressive Islamic tyranny are, in character, reflected in the Bible in Psalm 73:6-9. Which reads, “Therefore pride is their necklace; they clothe themselves with violence. From their callous hearts comes iniquity; the evil conceits of their mind know limits. They scoff and speak with malice; in their arrogance they threaten oppression. Their mouths lay claim to heaven, and their tongues take possession of the earth.” [N.I.V.]
CRUSADER says
What of “Ezekiel 38” regarding Iran, Russia, Turkey…and Syria being an easy kill…
???????
gravenimage says
I feel badly for individual Iranians, but they are always going to suffer under the Mullahs.