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Iran’s Economy on Its Knees: The West Built That

According to the New York Times, the video above has been verified as depicting the massive outpouring of Iranians to the streets yesterday to protest debilitating inflation rates and the free-fall of the Iranian rial. The impact of these economic developments on the Iranian people is devastating:

Iran’s freefalling currency is turning meat into a luxury, sparking overnight price surges and spurring shoppers to stockpile goods.

“Most of my customers just look at products behind the window and pass,” said Behrouz Madani, 42, who owns a butcher shop in northwest Tehran. “I see them going to the next store, which is a bakery, to feed their families with bread.”

The Bloomberg report goes on to describe the street protest that broke out in response to the pain felt by Iranians:

Iran’s rial is in a tailspin, having lost more than half of its value against the dollar in street trading in the past two months as U.S. and European sanctions aimed at curbing the country’s nuclear program bite. Riot police yesterday fired tear gas and sealed off parts of downtown Tehran after the currency’s plunge triggered street protests.

This graph (via Index Mundi) shows the number of Iranian rials needed to buy one US dollar over the past five years:

Iranian Rial to US Dollar Exchange Rate Graph - Oct 8, 2007 to Oct 3, 2012

But the graph only depicts the official rate set at Iran’s central bank. Note that the rial’s best value against the dollar is in early 2008, at just under 9000 rials to the dollar, but the graph hits an arbitrary straight line this year at just over 12,000 rials to the dollar for the official exchange rate. The unofficial street exchange rate has gone as high as three times that value this week. Going back to the Bloomberg article:

The currency dropped about 18 percent on Oct. 1, reaching 35,000 to the dollar on the unofficial market. The currency traded at 36,100 yesterday, the state-run Mehr news agency said, though traders in Tehran said most exchange houses have halted dealing in the greenback. That compares with the official value of 12,260 rials per dollar set by the central bank.

The primary cause for the devaluation of the rial is, of course, the sanctions put into place by Western nations to pressure Iran over its nuclear technology. From today’s Washington Post: Read more