Mohammad Reza Kouchakzadeh:
Abbas Kamran:
Simohsen:
Why is the price of the dollar increasing and how long will it continue, the country’s economy has been sitting on a time bomb called liquidity or money in circulation for a long time, which will explode sooner or later!
But let’s see where this bomb came from? Why does it explode? What are its explosive effects on Iran’s economy?
Where did it come from: The amount of money in circulation in 1357 was equivalent to 16 thousand billion Tomans. At the end of Mohammad Khatami’s government, this figure was equivalent to 62 thousand billion tomans within 27 years, which was handed over to Ahmadinejad. Ahmadinejad also increased it to 450 thousand billion tomans by printing money and bank credits within 8 years, and in the new government, this figure became 1100 thousand billion tomans in just 3 years.
Let’s be careful that in economies with accounts and books, the amount of money in circulation should be between 5% and 15% of the country’s gross national product. For example, in Canada, the volume of liquidity is about 80 billion dollars and the gross national product is about 1600 billion dollars. Or America, with 18000 billion dollars of gross national product in 2014, the amount of money and pseudo-money in its circulation was about 1400 billion dollars!
But currently, in Iran, the amount of money in circulation is more than 1000 thousand billion, that is, a liquidity volume of more than 300 billion dollars is in the hands of a small group, while the gross national product in 2015 was announced as 485 billion dollars! This means that the volume of liquidity is about 60% of the country’s national production for one year. Or it can be said that it is between 8 and 12 times the global average! The effect of which is unbridled inflation. But two factors have helped the economy so far not to witness three-digit inflation:
A: Most of this liquidity is at the disposal of a small part of the people, and therefore, despite having legendary wealth, they do not have much effective demand and therefore do not have a special effect on the field and overall demand. But the lower classes, or about 90% of the people, who do not have a share of this huge amount of cash, do not have the time to look for buying, for example, dollars and gold, and they are stuck in buying food, and therefore the total demand in the society has not only not increased. which has become even less.
B: The better relations of the Obama administration had caused a kind of patience and tolerance with optimism in the market, especially for big capitalists, and therefore they hesitated to convert their rials into currency or gold coins.
But today, the violation of the JCPOA and the continuation of bilateral commitments have scared big capitalists and even ordinary people, and everyone is thinking about protecting their capital. This is why the demand for buying foreign currency, i.e. the conversion of rial into a better product, has started, and because the demand has increased, the price of the dollar will rise even higher. They immediately think of converting their rials into dollars or gold coins. Now suppose that only 20% of this amount of liquidity will go towards buying dollars and gold? That is, if people with liquidity want to buy only 60 billion dollars of gold and dollars, is this amount of dollars or coins at the disposal of the central bank or banks to meet the needs of the market? The answer is negative. The total gold reserve of the central bank is about 13 billion dollars and the foreign currency reserve (for emergency cases) is about 22 billion dollars! That is, even if the central bank wants to exchange all its gold and dollar reserves with riyals, it will still bring less, so it will not be able to control the rate of currency and coins!!!
Its meaning is that if domestic investors are worried and think of converting their Rial capital into foreign currency and gold, the price of the dollar can increase up to twice the current level.
Of course, you can tell better what is meant by domestic capitalists.
This post is written by shinsinbin