Wednesday, February 28, 2007

The Tomato Plot

The leader of Iran says there is a plot to make food unaffordable for the masses.

Iran’s president said on Sunday the country’s enemies had hatched a range of plots to push the Islamic Republic to give up its disputed nuclear programme, including driving up the price of tomatoes and other food.

But Mahmoud Ahmadinejad said such tactics would not work, Iran’s ISNA news agency quoted him as saying.

Rising prices, particularly the cost of tomatoes which form an important ingredient in Iranian food, have prompted growing public criticism of Ahmadinejad’s government. The president has often dismissed complaints as media exaggeration.

"In order to harm us, they (enemies) make plots, for instance they come and push tomato prices up in the market. They think we will give up our ideals with their plots," Ahmadinejad said in a speech in which he said Iran would not reverse its atomic plans.
The real reason for the rise in prices of course is too much money chasing too few goods. Significant inflation as Milton Friedman pointed out is a monetary phenomenon.

Iran had a lot of cash on hand from its $30bn in bank withdrawals last year. Now every one knows that running the printing presses is bad. So I think the surpreme leader thought that real money backed by a real economy couldn't hurt. However, it doesn't matter where the money comes from. What matters is the supply of money vs. the supply of goods. Too much money chasing too few goods causes inflation.

This is not a Western plot. It is the supreme leader shooting himself in the foot. That has got to smart. And make walking difficult.

1 comment:

linearthinker said...

Armani Dinnerjacket should promote some plots of his own.