• Wed / 9 June 2021 / 12:59
  • Category: Economy
  • News Code: 1400031913786
  • Journalist : 71600

Iran’s misery, miserable state of Iranian Rial

Iran’s misery, miserable state of Iranian Rial

By Steve H. Hanke

Tehran (ISNA) - With Iran’s upcoming presidential election on June 18th, it’s time to determine whether Iranians are “miserable” or “happy”.

In the economic sphere, misery tends to flow from high inflation, steep borrowing costs, and unemployment. The surefire way to mitigate that misery is through economic growth. All else being equal, happiness tends to blossom when growth is strong, inflation and interest rates are low, and jobs are plentiful.

Many countries measure and report these economic metrics regularly. Comparing them, nation by nation, can tell us a lot about where in the world people are sad or happy. Is Iran, for example, more or less miserable than other countries? Hanke’s Annual Misery Index (HAMI) gives us the answers.

The first misery index was constructed by economist Arthur Okun in the 1960s to provide President Lyndon Johnson with an easily digestible snapshot of the economy. That original misery index was a simple sum of a nation’s annual inflation rate and its unemployment rate. The index has been modified several times, first by Robert Barro of Harvard, and then by me.

My modified misery index is the sum of the unemployment, inflation, and bank‐ lending rates, minus the percentage change in real GDP per capita. Higher readings on the first three elements are “bad” and make people more miserable. These “bads” are offset by a “good” (real GDP per capita growth), which is subtracted from the sum of the bads. A higher HAMI score reflects a higher level of misery.

So, where does Iran rank? Of the world’s 156 countries that I cover in the HAMI, Iran ranks as the 8th most miserable country in the world, behind Venezuela, Zimbabwe, Sudan, Lebanon, Suriname, Libya, and Argentina.

The symptoms of Iran’s misery are as clear as the nose on your face. Since January 2020, the Iranian rial has lost 44% of its value against the U.S. dollar. There are only seven countries in which their currencies have lost more than Iran: Venezuela, Lebanon, Zimbabwe, Sudan, Syria, Argentina, and Turkey.

As a result of the rial’s weakness, inflation has been an endemic problem in Iran. I accurately measure the inflation rate each day. Today, by my measure, the inflation rate is an intolerable 40% per year. 

The best option to bring an end to Iran’s misery is a currency board. A currency board issues notes and coins convertible on demand into a foreign anchor currency at a fixed rate of exchange. It is required to hold anchor-currency reserves equal to 100% of its monetary liabilities.

A currency board has no discretionary monetary powers and cannot issue credit. It has an exchange-rate policy but no monetary policy. Its sole function is to exchange the domestic currency it issues for an anchor currency at a fixed rate. A currency board’s currency is a clone of its anchor currency.

A currency board requires no preconditions and can be installed rapidly. Government finances, state-owned enterprises and trade need not be reformed before a currency board can issue money. Currency boards have existed in some 70 countries. None have failed.

As one who designed the currency boards in Estonia (1992), Lithuania (1994), Bulgaria (1997), and Bosnia-Herzegovina (1997), I can attest to the fact that they work perfectly to create stability. And while stability might not be everything, everything is nothing without stability.

Steve H. Hanke is a professor of applied economics at the Johns Hopkins University in Baltimore, USA. He is the world’s leading expert on hyperinflation.

End Item

Follow us on Twitter @Isna_Int

  • در زمینه انتشار نظرات مخاطبان رعایت چند مورد ضروری است:
  • -لطفا نظرات خود را با حروف فارسی تایپ کنید.
  • -«ایسنا» مجاز به ویرایش ادبی نظرات مخاطبان است.
  • - ایسنا از انتشار نظراتی که حاوی مطالب کذب، توهین یا بی‌احترامی به اشخاص، قومیت‌ها، عقاید دیگران، موارد مغایر با قوانین کشور و آموزه‌های دین مبین اسلام باشد معذور است.
  • - نظرات پس از تأیید مدیر بخش مربوطه منتشر می‌شود.


You are replying to: .