But what's happening in the last week or so is a new, much more serious thing. On New Year's Eve, President Obama signed the defense authorization bill, which funds the military. However, in this authorization bill there was a provision which sanctions companies which use the Iranian Central Bank to purchase their oil. There was also an agreement among the EU nations to stop the purchase of Iranian oil, which is set for a vote on January 31st. The action by Obama was an attack on the Iranian currency; the EU action would seriously harm Iranian oil exports. These are serious economic sanctions. Iran itself contributed to the mess when it announced that it was cancelling all trade with the United Arab Emirates a few weeks ago.. a decision they have since rescinded.
The effect was immediate. By Monday January 2nd, the Iranian rial was down 12% on the black market. The Mehr news agency reported that housing prices were down 20% in the last few weeks. There are reports that people are beginning to sell assets and then converting the rials for USD and other foreign currencies. On Tuesday January 3rd, the rial was trading at 17,800 per USD.. which compares with the official rate of 11,000 on the Iranian Central Bank's website. The Iranian Central Bank is holding meetings almost daily now. On Wednesday, the decline continued. I don't have any more information since then. Although this is only the last few days-- and the situation could very well reverse itself-- this has the feel of capital flight. If it goes on much further, the people themselves will lose confidence in their own currency. Prices of basic goods will soar. This is worth keeping an eye on. If it gets serious for Iran's economy, expect them to retaliate.
This has happened before; Argentina in the 1990s to be exact: http://themeanoldinvestor.blogspot.com/2011/11/remembering-argentina.html
Update 1/10 4pm: Seems like the inflation rate in Iran is continuing unabated. "TEHRAN, Jan 10 (Reuters) - Iran's currency has slid 20 percent against the dollar in the last week despite central bank intervention, and some Iranians concerned about the economy said on Tuesday that attempts to send text messages using the word "dollar" appeared to be blocked... On New Year's Eve, U.S. President Barack Obama signed into law by far the toughest financial sanctions yet against Iran, which if fully implemented could make it impossible for most countries to pay for Iranian oil. The Islamic Republic responded to the growing international pressure by warning last week that it could shut the Strait of Hormuz, the shipping lane for the Gulf's oil, if sanctions were imposed on its oil exports"
http://www.reuters.com/article/2012/01/10/iran-currency-idUSL6E8CA2MQ20120110
funny this comes RIGHT after local PBS airing of YES, MINISTER. This particular episode (made in the early 80's?) featured commentary on why Britain wouldn't support Israel against an Arab vote because they had a 'contract' for an air field or something. Also featured invasion plots of Communists vs. democracy on a small island. The unassuming Prime Minister managed to get round all this by sending a company of Brit paratroopers to show 'good will'. It was a clear battle of the 'Foreign Office' vs. the Prime Minister and the attitude that you had a different view of the long term vs. the political view of the short time 'power' of an elected official.
ReplyDeleteMy point--NOTHING HAS CHANGED.
Iran will cave. If they don't then their gov't does not see what is happening all around them. The people of the middle east are ripe for revolution. "Ah mad man for jihad" or Ahmadinejad will be executed and the crazy ass ayatollahs will be asking for whom the aya tolls. It tolls for them. The US and Israel would lay waste to their infrastructure and no one will blame them. China and Russia will not step in and the Sauds would applaud the move. Let's get ready to rumble.
ReplyDeletePride is one thing the Iranians have and will be their undoing. It is a global economy and you don't mess with Mother Nature. The central banks will slit your throat. If this does go down expect oil to go back to 150.00 and gas at the pumps back to 4-5/gal.
ReplyDeleteThings are already tight at work and the contractors that I hire have been complaining to me about not getting paid for months. If Oil goes to $150 then my employer will not be able to pay its energy bills and we will be bankrupt. The price of paper is set on the global market so we can not raise our prices, so we will be screwed.
ReplyDeleteThree hundred people will lose their jobs. I will probably be better off than most, as I am a saver and have other skills to fall back on.
If the EU goes thru with their threat to ban Iranian oil, Iran has said they would shut down the Strait of Hormuz. I doubt this. Irregardless, crude will soar; Goldman says it'll hit $140ish:
ReplyDeletehttp://www.zerohedge.com/news/socgen-lays-it-out-eu-iran-embargo-brent-125-150-straits-hormuz-shut-150-200
Amazing - just amazing, that the world is finally attempting to take serious action against iran at this point in time. For years they have been building up their nuclear weapons capability while the world dithered.
ReplyDeleteAnd now, just when they are oh-so-close to making an atomic bomb, the rest of the world tries to stop them. This would be comic if it wasn't such a serious issue.
Remember, the Fed creates dollars out of thin air and then forces countries to accept this counterfeit, backed by nothing, and consistently devalued money for their resources. While many people now understand this concept, what most U.S. citizens still do not seem to understand or want to accept is that it is not in the national interests of other countries to accept this certain to be vaporized currency for their hard produced goods. Fortunately for us, there is a solution to that. Support (or install via coup) if necessary despotic puppet regimes around the world to accept this monetary system. Our Federal Reserve system and indeed our way of life is supported through the barrel of a gun pointed at every other “sovereign” nation on the planet. If you step out of line you will be deemed a terrorist state and we will single you out and fight for sanctions on you and then if none of that makes you fall in line we will start bombing you. We will say that you commit atrocities against your people and you probably do (although we were also probably your ally recently despite the atrocities). Make no mistake about it. Every country we every go after militarily relates to defending the Federal Reserve system. Since oil being priced in dollars is the key to the system, we are always on the verge of invading oil producing countries that we do not already have under puppet control. Israel is merely another U.S. colony. We defend it so vociferously not because of the Jewish lobby but because they are a strategic asset in the oil rich Middle East that we use to defend the Federal Reserve system and the American empire.
ReplyDeleteGood comment Anon and the rest of you and big hello to Mr Kowalski. Hope you are staying warm.
ReplyDeleteMr K can you change the color of you comments back to black? The blue is really hard on my old eyes.
ReplyDeletenew balance outlet, canada goose, ugg boots, mcm handbags, ugg soldes, herve leger, canada goose outlet, babyliss pro, uggs on sale, birkin bag, reebok shoes, vans outlet, instyler ionic styler, p90x workout, soccer shoes, mont blanc pens, abercrombie and fitch, uggs outlet, north face outlet, canada goose outlet, jimmy choo shoes, hollister, bottega veneta, lululemon outlet, asics shoes, chi flat iron, insanity workout, nike trainers, canada goose outlet, marc jacobs outlet, ugg, ugg outlet, wedding dresses, longchamp, valentino shoes, north face jackets, rolex watches, soccer jerseys, nike huarache, nfl jerseys, roshe run, giuseppe zanotti, beats headphones, mac cosmetics, ferragamo shoes, ghd, celine handbags
ReplyDelete