Inquiring minds note that Iran removes euro and dollar from its trade exchanges.
Minister of Economic Affairs and Finance Shamseddin Hosseini said Monday that Iran would no longer use euro and dollar in its trade exchanges according to a decision made by the government’s economic working-group. Iranian state news agency IRNA writes about this.
“Iran’s government is determined to remove euro and dollar from its foreign trade and is to change its foreign trade pattern,” said the minister while speaking to reporters at the end of a meeting with the representatives of the Economic Cooperation Organization (ECO) member countries.
Symptoms of Hyperinflation
Iran removed the Euro and dollar from its foreign trade patterns not because it wished to do so, but rather because it has no euro or dollar reserves it can use.
Regardless of its official statements on trade, euros and dollars are hoarded by Iranian consumers in the black market.
I spoke about the inflation nightmare in Iran on October 4, 2012 in Hyperinflation Hits Iran; Monthly 70% Inflation Rate; Reflections on Economic Warfare. Here are a few snips:
The oil embargo against Iran has worked, assuming one defines “work” as a destruction of the Iranian riall which has fallen 33% in a week, 57% in three months and 75% in a year vs. the US dollar.
On Wednesday, the Tehran bazaar closed in turmoil and police used teargas and batons on demonstrators protesting the currency crisis.
Monthly 70% Inflation Rate
Steve Hanke, Professor of Applied Economics at Johns Hopkins University, has also been following the Iranian currency crisis. He pinged me with these thoughts yesterday.
For months, I have been following the collapse of the Iranian rial, tracking black-market exchange-rate data from foreign-exchange bazaars in Tehran. Using the most recent data, I now estimate that Iran is experiencing a monthly inflation rate of nearly 70%, indicating that hyperinflation has struck in Iran.
Iran’s Lying Inflation Statistics
As soon as I saw trade exchange news I looked for an update from Steve Hanke. You can find one written January, 9 on Cato: Iran’s Lying Inflation Statistics
Today, the Central Bank of Iran released its inflation statistics for 2012. Remarkably, despite all of the international notoriety surrounding Iran’s outbreak of hyperinflation in October, the Central Bank claims that Iran experienced an annual inflation rate of only 27.4%.
The Central Bank has a habit of failing to release useful economic data, and what it does release often has what I would describe as an “Alice-in-Wonderland” quality. Indeed, the Central Bank’s official annual inflation rate is grossly off from the true rate. Using a well-established methodology, I estimate that Iran experienced an annual inflation rate of 110% during 2012.
The use of lying statistics is not a first for a country with hyperinflation. Indeed, when inflation begins to spiral out of control – such as the most recent cases in Zimbabwe and North Korea – it’s all too common for governments to wrap their statistics in a shroud of secrecy.
Official Exchange Rates and Clouds of Secrecy
One way to hide in a cloud of secrecy is to prohibit trades in other currencies. Iran did just that.
Officially, trade is in the Iranian rial. Unofficially, euros and dollars are precious on the black market.
By the way, anyone remember the silly claims the US went to war with Iraq because it was about to price oil in euros? If not, here is a refresher course.
- October 6, 2009: Ridiculous Hype Over Secret Oil Meetings
- October 13, 2005: Oil Priced in Euros. Would it matter?
- February 28, 2011: US Dollar About to Lose Reserve Currency Status – Fact or Fantasy?
Iranian oil is no longer available for either euros or dollars. Yet hyperinflation hit Iran, not the US, not Europe.
Iran’s biggest problem is the embargo, of course. However, it is still humorous to read the silly pontifications regarding the demise of the dollar if oil was not priced in dollars.
Oil priced in euros did not matter then, and it would not matter now, embargo or not.
Mike “Mish” Shedlock
“Wine Country” Economic Conference Hosted By Mish
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