Monday, May 01, 2006

Iran Is Having Money Troubles

The Iranian economy is collapsing. Iran seems to be having a lot of trouble paying its workers. Despite record oil revenues and the withdrawal of massive amounts of cash and gold from its European accounts there does not seem to be enough money in Iran. Inflation in Iran is now in the 15% a year range, and it appears to be accelerating.

Regime Change Iran has reports on labor unrest in Iran:

Marches and Reports on the Marches and Teheran City Hall workers unpaid and Textile Workers Unpaid and Unhappy bus drivers and Bus Driver's Union Leader imprisoned.

Now where would all the money be going? I believe those who can are spiriting it out of the country. It seems all the war talk by the leaders has the population feeling economically shakey.

Update: 0704z 2 May '06

Corrected inflation rate.

Update: 0725z 2 May '06

It looks like the Iranian welfare state is not meeting expectations. Even though Iran's oil profits are surging they are still only $30 bn a year above last years figures. From the IHT:

In a surprise move just before the spring holidays last month, Parliament reluctantly approved Ahmadinejad's proposed budget, despite fierce criticism from Iranian economists and others. Critics said his plans for generous spending to create jobs and increase salaries were politically motivated and fiscally unsound. His budget relied too heavily on continued high oil profits, they said, and would be likely to invite inflation.

"The government has reached the conclusion that it needs to spend large sums of money immediately to keep its allies and the masses of people happy," Muhammad Sadeq Jannansefat, an economic analyst, wrote in the reformist daily Shargh last month as Parliament battled over the budget. He suggested that Ahmadinejad, who came to power in June on a populist mandate, was using the oil money to placate his supporters.

The government, Jannansefat wrote, "wants to distribute money and create jobs, no matter what the consequences are or what kind of jobs it is creating."
It appears he has bought into socialist economics in order to buy off a restive population. Tough times ahead for Iran no matter what.

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1 comment:

Kneave Riggall said...

If Iran is running out of "money", then how can inflation be increasing?

I will bet the answer is as follows: The mullahs are stripping Iran ofc wealth, such as dollars, euros, gold and oil, to fund their nuclear ambitions, overseas terrorists and secret bank accounts, and "printing" dinars to cover up the deficits. As Iran's currency is diluted, prices increase, real wages decline and -- voila! -- inflation increases.