The 10,000 Toman Dollar is the Result of Dollar Suppression and Economy, Not Negotiation with America

Ayatollah Alam al-Huda said in his Friday prayer on August 10, 2018, that Hassan Rouhani "says that America did this to us, so let’s negotiate with England and France, who have proven their enmity and malice towards us for centuries. The Quran says this is the logic of hypocrites... You went to negotiate, you sat down and executed plans, you turned the dollar from 3,000 tomans to 10,000 tomans, and you still want to negotiate? You still want to follow the same path?... Today, some devout forces say we have made America miserable; for 40 years they have been seated in the dust of hatred, today nothing is more hated on earth than the American government and flag; we will move forward and not be afraid, we have faith, we are submissive to God, and whatever fate brings, we will move forward until we are killed and destroyed or we hand this flag to its owner to correct everything... Dig the trench, we need a trench today as well, help us dig the trench." The representative of the Supreme Leader in Khorasan Razavi has one explanatory claim and four prescriptive claims: Explanatory claim: Negotiating with America and the nuclear agreement caused the dollar price to rise from 3,000 tomans to 10,000 tomans. First prescriptive claim: Do not negotiate with America at all. Second prescriptive claim: Europe is no different from America, and never negotiate with them either. Third prescriptive claim: We must dig a trench around Iran like in the trench war in early Islam, fight until either we are all killed and destroyed, or we hand the flag of the Islamic Republic to the Imam of the Time. Fourth prescriptive claim: Execute all hoarders of goods publicly as corruptors on earth to resolve economic problems. Looking at the explanatory claim, no economist has said or can claim that negotiating with America and the nuclear agreement caused the dollar price to multiply. The opposite of this claim is more accurate in a sense. That is, America’s withdrawal from the nuclear agreement and the onset of crippling sanctions, through an explosive increase in distrust of the future, caused the dollar price to rise. To confirm this claim, examples from Russia and Turkey can also be cited. With American sanctions, the national currencies of Russia and Turkey also decreased in value. The Turkish lira has lost nearly 45% of its value since the beginning of this calendar year. In Turkey, only two ministers of interior and justice have been sanctioned, and on August 10, 2018, Donald Trump tweeted: "As the value of the Turkish currency, the lira, rapidly falls against our very strong dollar, I authorized a doubling of tariffs on steel and aluminum imports from Turkey! Aluminum tariffs will now be 20% and steel 50%. Relations with Turkey are not good at this time!" Recep Tayyip Erdoğan immediately responded that if America has dollars, we have God. People should convert their dollars and gold to lira to give a crushing response to America’s "economic war" conspiracy. Americans still do not know the Turkish people and are supporting the coup leader. The reality is that the significant decrease in the value of the Turkish lira cannot be reduced to the dispute between America and Turkey; rather, economic variables play a more important role in this matter. As Yalçın Karataş, a political economy professor at Ankara University, said today: the loss of national currency value in the current situation is due to the existence of a disease in the country’s economic structure. Increasing unemployment rates, decreasing economic growth rates, increasing trade deficits, and the continued growth of inflation in the country’s market are among the painful realities and diseases in the Turkish economy that have suddenly surfaced and have gradually manifested themselves in recent months as a decrease in the value of the national currency. Regarding Iran, since the victory of the revolution until now, the rentier state economy has always suppressed prices through large subsidies - especially in the energy sector. The price of the dollar and other foreign currencies has also always been severely suppressed. These long-term suppressions occasionally manifest themselves explosively in the rising wave of foreign currency prices. To explain this claim and assess the real price of the dollar, it is enough to look at three important economic indicators in Iran: First - Inflation rate: According to the World Bank, the inflation rate in Iran from 1979 to 2017 has been 10.4, 20.6, 24.2, 18.6, 19.7, 12.5, 4.3, 18.4, 28.5, 28.6, 22.3, 7.6, 17.1, 25.8, 21.2, 31.4, 49.6, 28.9, 17.3, 17.8, 20.0, 14.4, 11.2, 14.3, 16.4, 14.7, 13.4, 11.9, 17.2, 25.5, 13.5, 10.1, 20.6, 27.3, 39.2, 17.2, 13.7, 8.5, and 10 percent. Thus, the average annual inflation during this period is 16.4 percent. Second - Money supply: According to the Central Bank of Iran, the money supply increased from 2,578.6 trillion rials in 1978 to 1,580 trillion tomans in June 2018. Third - Economic growth: According to the World Bank, the economic growth rate from 1979 to 2017 has been -10.5, -27.5, -5.1, 27.2, 8.5, -8.7, 2.1, -10.2, 0.6, -5.3, 6.0, 13.8, 12.3, 2.8, 1.0, -1.5, 2.2, 5.1, 0.4, 2.1, 0.8, 5.8, 0.7, 7.2, 8.7, 4.3, 3.1, 5.0, 8.1, 0.2, 1.0, 5.7, 2.6, -7.4, -0.2, 4.6, -1.3, 13.4, and 4.3 percent. Considering these three indicators, how much should the dollar, which was 7 tomans in the 1970s, be worth now? If the dollar's value were determined by the market based on inflation and the growth of money supply - under conditions of very low economic growth - rather than government suppression, the dollar reaching 10,000 tomans would not be unnatural. According to the quantity theory of money, a strong long-term correlation is predicted between money supply growth and inflation. This means that continuous and high growth of money in the economy leads to high inflation. Price suppression of energy is another example of this incorrect trend that has led to widespread smuggling and high corruption. When gasoline is sold for 10 cents in Iran, widespread smuggling of it to neighboring countries is a natural occurrence. Populist policies have not allowed any government to normalize prices. During Khatami's era, it was decided that energy prices (water, electricity, gas, gasoline, oil, etc.) would increase by a certain percentage annually. The seventh principlist parliament, chaired by Gholamali Haddad Adel, passed a law prohibiting energy price increases. Now, Hassan Rouhani, out of fear of principlists and populists, is unwilling to normalize energy prices - especially gasoline. The government must normalize all prices and spend the money on production, infrastructure, and non-cash subsidies to the bottom five deciles of society (justice as the removal of discrimination and in favor of the deprived class, similar to the model of Scandinavian countries). Thus, not only will gasoline smuggling be eliminated, but its consumption will also decrease significantly. However, this courage is lacking in Hassan Rouhani - who dreams of becoming the Supreme Leader - as he does not want to suffer the fate of previous presidents and aspires to leadership, but seems not to care about the fate of Iran and Iranians. This economy will not be fixed without fundamental reforms. Reforms that, if they are to be effective, must be accompanied by a peaceful foreign policy. A policy that is not in tension with the Western world and the Arab world. Looking at the prescriptive claims, the prescriptive claims of the representative of Ayatollah Khamenei are very ridiculous. Negotiating and the nuclear agreement led to a sharp decrease in inflation and an average annual economic growth of five percent. Cutting negotiations and returning to the past will devastate all economic indicators, and the people will have to bear all the heavy costs (refer to the article "Do crippling sanctions lead to the overthrow of the Islamic Republic?"). Executing hoarders of goods and economic corruptors, when the economy is rentier and state-controlled, is of no benefit. The existing systematic corruption requires structural reform. Most strangely, the prescriptive claim of resistance until everyone is killed and there is universal destruction is made. If elderly clerics aged 70 to 95 are ready for war, they should go fight in Syria or elsewhere and be killed. The Trump administration is also fluctuating between two strategies of "regime change" and "changing regime behavior" (refer to the articles "The U.S. Government and the Popular Protest Movement of December 2017" and "Is the Trump Administration in Iran Seeking Regime Change or Changing Regime Behavior?"). You will certainly not hand the flag to the Imam of the Time, but by forcing people to be killed, you will join hands with the devil.