Yesterday, in a speech, they said: “What is the reason for smuggling?” You all know! The reason for smuggling is cheap, not expensive. Why is meat scarce and smuggled? .
Why is all our meat going out to Iraq? Smuggling is not caused by high prices, smuggling is caused by cheap sex. When inside, expensive sex is smuggled out, sex automatically goes up, inside.”
(Document: https://t.me/eghtesadonline/76438)
This is generally true, but important details have been neglected. Let’s review these important details together.
In 1992, when the president came to power, the price of the currency was balanced. But with their insistence on stabilizing the currency price despite the growth of liquidity, the dollar gradually moved away from its real value. No matter how much it was insisted to increase the price of the dollar to maintain a balance, they did not pay attention.
(https://t.me/Economics_and_Finance/621)
With the depreciation of the dollar, its departure from the country increased, so that in 2016, several billion dollars of foreign currency left the country. With the lack of foreign exchange reserves, at the end of 2016, the currency jump started.
What was their way to deal with the currency jump? 4200 Toman dollars! They know that cheap goods are smuggled, why did they set the dollar rate at 4,200? (If they claim that this is not their opinion, publish the audio file of the meeting).
Due to the 4200 toman dollar, during the spring of 2017, a total of rent was distributed and the rest of our bank notes and transferable currency were also taken out of the country. Subsequently, a few months later, the dollar reached 19 thousand tomans.
So what did they do next? They limited the rate of 4,200 to basic goods. In this way, the finished price of the imported product was much lower than the domestic product. Naturally, domestic production, from diapers to meat, decreased. In an economy where everything is priced at 12,000 tomans per dollar, the farmer cannot compete with meat imported at 4,200 dollars. So either he exports live livestock, or he shuts down production altogether.
On July 18 this year, I wrote: “When the policymaker allocates 4,200 tomans to basic goods, while the price of other goods is 8,000 tomans, he is actually giving the wrong signal to the producer. The currency of 4200 for basic goods signals to the producer not to produce basic goods! It means that the currency of 4,200 will destroy the domestic production capacity of basic goods!
See what happened to the country’s livestock production today!
In the same text, I had continued that: “The destruction of domestic production capacity of basic goods, which means more dependence on the import of basic goods.” (Document: https://t.me/Economics_and_Finance/505)
If you remember, they made fun of economics at the introduction meeting of the Minister of Economy just a few months ago! (https://www.aparat.com/v/4b7gC) Well, this is the result: the sheep arrives by plane!!!
As a result of the withdrawal of foreign exchange reserves and the reduction of domestic production, domestic goods became more expensive for Iranian people, and cheaper for foreigners. Of course, smuggling increased.
Corruption is not the cause of the current situation! Be very careful, because this is an important point. The reason for the current situation is the government’s refusal to balance the market and resorting to mandated prices. Corruption, scarcity, and stagnation are all the result of unbalanced and mandated prices.
Dealing with the market balance, like dealing with the gravity of the field. It takes a lot of energy, it shakes the situation, and in the end, everything falls apart.
If the dollar rate grew by 20-25% per year from the same year 92, the dollar would not go up to 19,000 tomans, diapers would not become scarce, the steel sheet market would not collapse, the export of tomatoes would not be banned, and there would be no smuggling of meat. Been. That is, none of the economic crises of 2017 would have occurred, and of course, several billion dollars of rent would not have been distributed to some.
This post is written by amirsalimiQ