Baseball91's Weblog

October 2, 2012

Hearing the Screams, As Money Talks in Iran

The Fall of Iran’s Currency to Now Half of a Half.

“There is just such a tremendous disconnect, said Marianne Banziger of the International Maize and Wheat Improvement Center, “with people not understanding the highly dangerous situation we are in.” Would it not be gratifying to see a presidential candidate take the lead in directing attention to the issue not of “food security” but food prices? In what has been an ongoing story over the past five years, a new crisis is emerging — a global food catastrophe that will reach further and be more crippling than anything the world has ever seen.

The credit crunch and the reverberations of soaring oil prices around the world will pale in comparison to what is about to transpire, said Donald Coxe, global portfolio strategist at BMO Financial Group, at the Empire Club’s 14th annual investment outlook in Toronto in 2008. “It’s a matter of when, not if,” he warned investors in 2008. “The greatest challenge to the world is not US$100 oil; it’s getting enough food so that the new middle class can eat the way our middle class does, and that means that we have to expand food output dramatically,” he said.

In 2008, the impact of tighter food supply already was evident in raw food prices which had risen 22%. And this talk at the Empire Club was before what happened in 2010-2011, leading to the Arab Spring. At the center of the imminent food catastrophe is corn — the main staple of the ethanol industry in the push for biofuels — which many blame for pushing up food prices. The price of corn in 2008 rose about 44% over the past 15 months, closing at US$4.66 a bushel on the Chicago Board of Trade — its best finish since June 1996. This not only impacts the price of food products made using grains, but also the price of meat, with feed prices for livestock also increasing.

“You are going to have real problems in countries that are food short, because we’re already getting embargoes on food exports from countries, who were trying desperately to sell their stuff before, but now they’re embargoing exports,” he said — citing Russia and India as examples. “Those who have food are going to have a big edge.”

World population growth is outpacing food production of particularly wheat, rice, corn and soybeans which provide the bulk of nutrition for the world. Studies have previously shown little land left to convert to farming, as water supplies dry up — without the issue of climate change.

Scientists have been predicting for years that increasing water demands could cause food shortages, coupled now with evidence of a warmer planet. “Food security” has emerged as a political buzzword in conversations about stability in the developing world, with 54% of the world’s corn supply grown in America’s mid-west, the U.S. is one of those countries with an edge.

A study in 2007, building on and confirming previous research, warned that climate change could help cause food shortages. Donald Coxe had warned correctly that U.S. corn exports were in danger of seizing up in about three years if the country continues to subsidize ethanol production. Biofuels are expected to eat up about a quarter of America’s grain harvest in 2012, after eating up about one-third in 2007. There are about two dozen stocks in the world that are going to redefine the world’s food supplies, and “those stocks will have a precious value as we move forward.” Donald Coxe said crop yields around the world need to increase to something close to what is achieved in the state of Illinois, which produces over 200 corn bushes an acre compared with an average 30 bushes an acre in the rest of the world.

Mass terror was the undercurrent in the story of food prices in the ongoing monetary wars which have come out of the War on Terror. Every nation on earth that has reserves in US dollars have been contributing to the cost of funding the wars in Iraq and Afghanistan. And there is a sense of irony of the affect on Iran. The weakness of the rial means the country cannot afford to import as many foreign goods and raw materials which are priced in hard currency, and this has harmed the wider Iranian economy. On August 22, 2012, it was reported that the rial was down forty percent over the past twelve months. Over the past thirty days, the currency of Iran has fallen another fifty percent. The BBC reports the rial now has twenty percent of its purchasing power from this time last year. Consequently, the working stiff in the nation is personally suffering with rising unemployment and high inflation. Food prices are rising, despite the government’s effort to import food during 2011.

When Money Dies. Though Aristotle said something about the relationship of democracy to mob rule, it is social mood and risk appetites which determine the way people live their lives, and it is a currency which holds a nation together, and their financial fate. There is the threat to human life which happens next in “mass terror against enemies of the revolution”, as in the days of the Bolshevik Revolution when a people is divided. After the Islamic Republic had tried their form of totalitarianism, and it was was dying, there would be, with regard to love and money, greater executions of the ‘enemies’ of Iran. The New York Times reported today that to buy one US dollar in Tehran late Monday afternoon cost about 34,800 rials, as compared to the cost one week before of 24,600 rials. How over twenty-four months values change, when it was that one dollar brought almost 10,000 rials. Yes, there is just such a tremendous disconnect, with people not understanding the highly dangerous situation they are in. Because it was the price and availability of food that nation really fought wars over. Because despite the horrible leadership among almost all world leaders, we are all human animals with the same basic needs.

Hearing the screams, as money talks. When money dies, accompanied by torture as Iran moves toward a barter economy. There are signs of unrest in this currency story, as a currency collapses after monetary discipline is lost. Iran has had their own version of quantitative easing, as more money was printed. Can you hear the sound of government collapse in all of this paper currency which was like what was coming out of Syria most of this year? With just such a tremendous disconnect, rebellion would not be far behind, with grave consequences to the entire region involving Turkey, Jordan, Saudi Arabia, and Russia. After seeing the cost and availability of food last month compared to the price today, the Iranian populace had begun to act. There were the internal and external screams, as a government attempts to deal both with 29 percent inflation and deflating worth, and its people, seeing the complete lack of direction in its leadership, begin to flee.

Had anyone else recognized the implementation of Lenin’s plan for revolution over the past thirty years in what had happened in the Islamic Republic of Iran? Last week Russian Foreign Minister Sergei Lavrov stayed on the sidelines, away from a world powers meeting at the U.N. General Assembly of the six nations that have unsuccessfully negotiated with Iran to persuade it to halt its nuclear program. Perhaps Russia had other plans for this neighboring state, or just understood a lot better what the people were living through.

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3 Comments »

  1. N.B.: State-supported companies continue to have access to the official exchange rate in Iran. That official exchange rate still is approximately 12,000 rials to the dollar; there is also a travel exchange rate with restrictions to $2,000. Then there is the black market rate — the real world rate — which is what is reported in this piece at 35,000 to the dollar. State-supported companies continue to have access to the official exchange rate of 12,000 rials to the dollar; like state-subsidized price supports for farming, that advantage is not granted to the private sector and, thus, the protests in Iran over those with special financial resources benefiting from currency arbitrage.

    Just like in the Soviet Union, the Islamic Republic has seen over time a status quo develop of overwhelming corruption. The economic sanctions in place have, as half of Iran’s oil markets abroad has been taken away, exposed the overwhelming corruption in the nation. And the populace emotionally responds. The policy of the EU and the United States has contributed to the instability of another Persian Gulf nation, which will resound in the years to come.


    Religion Blogs

    Comment by baseball91 — October 3, 2012 @ 1:03 PM | Reply

  2. Comment by baseball91 — September 10, 2016 @ 11:14 PM | Reply


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