Tuesday, June 12, 2007

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How's the economy going, Mahmoud?

The Financial Times' Najmeh Bozorgmehr and Gareth Smyth report that Iranian President Mahmoud Ahmadinejad, if left to his own devices, will succeed in running the Iranian economy into the ground:

Some 60 economists this week wrote to Iran’s President Mahmoud Ahmadi-Nejad criticising his government for putting “short-term welfare above long-term sustainable development”.

Almost half way through his first four-year term, the letter underlines the acute dilemmas faced by the president in delivering short-term welfare promises as he manoeuvres to bolster political support.

The government’s indecision over two major issues – the price of petrol and bank lending rates – is a particular source of confusion.

More than three weeks after the lapse of the original date for petrol rationing – designed to curb a $5bn (€3.75bn, £2.5bn) bill for importing 35m of the 75m litres Iran consumes daily – the government is still groping its way around any decision it fears might be unpopular. Officials have this week made differing statements over when and how rationing – which was to begin tomorrow – will start....

Private bankers wrote to the economy minister last week demanding a freeze on loan rates to “make survival of private banks possible”.

But even with inflation officially at 13.6 per cent last year, Mr Ahmadi-Nejad is battling with the central bank over his insistence on a 12 per cent lending rate, down from the current 14 per cent in state-owned and 17 per cent in private banks. The Guardian Council, a constitution watchdog, is due to rule this week on a compromise.

“What the government describes as economic policies do not match any professionally-known theories, but are rather populist political policies,” said Mohammad Tabibian, former deputy head of the Management and Planning Organisation, a cross-governmental co-ordination body....

Many observers doubt official figures of 14 per cent inflation and 12 per cent unemployment. One economist told the FT that inflation was above 20 per cent, while unemployment was 25 per cent among university graduates.

A depressing parlor game to play: which economy will implode the fastest, Zimbabwe, Venezuela, or Iran?

The smart money would have to be Zimbabwe, but don't underestimate the economic incompetence of either Hugo Chavez or Mahmoud Ahmadinejad.

UPDATE: Congatulations to Venezuela and Zimbabwe for making this list.

posted by Dan on 06.12.07 at 10:49 PM




Comments:

The current state of the Venezualan economy is analyzed here. (The comments on this blog post are -- unusually - also interesting.

posted by: Appalled Moderate on 06.12.07 at 10:49 PM [permalink]



As it happens, there's a story today about the US accusing Iran of aiding the Taliban. I wonder. Ya think the economic troubles of the Iranian government adds to reasons why the Bush-Cheney administration will need to ratchet up the anti-Iran rheotoric...

Can't have the damned devil falling of his own accord, now...

posted by: Periodista Miguel on 06.12.07 at 10:49 PM [permalink]



As it happens, there's a story today about the US accusing Iran of aiding the Taliban. I wonder. Ya think the economic troubles of the Iranian government adds to reasons why the Bush-Cheney administration will need to ratchet up the anti-Iran rheotoric...

Can't have the damned devil falling of his own accord, now...

posted by: Periodista Miguel on 06.12.07 at 10:49 PM [permalink]



As it happens, there's a story today about the US accusing Iran of aiding the Taliban. I wonder. Ya think the economic troubles of the Iranian government adds to reasons why the Bush-Cheney administration will need to ratchet up the anti-Iran rheotoric...

Can't have the damned devil falling of his own accord, now...

posted by: Periodista Miguel on 06.12.07 at 10:49 PM [permalink]



Hasn't Zimbabwe economy already imploded, or is currently imploding. How else do you describe four digit inflation and all the other crap going on there? This is like saying "BoSox, Yankees, A's" which one will crash and burn first...one of them already has

posted by: Matt Zeitlin on 06.12.07 at 10:49 PM [permalink]



What is this "lending rate" to which
the post refers?

I thought that Islam forbid the charging
of interest. Which is why Muslim taxi
drivers refuse tips.

posted by: anon on 06.12.07 at 10:49 PM [permalink]



The critical problem here is that if Iran manages to gain nuclear weapons, it suddenly becomes a vital national interest of America to _prevent_ Iran from collapsing at any cost. Thats the sad truth.

posted by: Mark Buehner on 06.12.07 at 10:49 PM [permalink]



I got this from the financial site "The Big Picture." A similar article from the Asian Times.

http://tinyurl.com/ypyt5l

"Why Iran will fight, not compromise" by Spengler

posted by: Russell120 on 06.12.07 at 10:49 PM [permalink]



anon on 06.12.07 at 10:49 PM,

in theory, Islamic banks cannot charge interest. In practice, they create contracts in which everything is worded in a correct Islamic way (with interest never being mentioned) but the resulting payment terms are the same as they would be on a Western loan with interest. With sufficient ingenuity, they can create a functional equivalent of any regular financial transaction.

posted by: adrian on 06.12.07 at 10:49 PM [permalink]






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