Posted on 09/11/2007 7:44:19 PM PDT by nuconvert
Iran considers knocking three zeros off currency
Sep 11, 2007
TEHRAN (AFP) - Iran is examining a proposal to knock three zeros off its national currency to increase economic confidence and reduce the number of banknotes, the central bank governor said on Tuesday.
However new central bank chief Tahmasb Mazaheri said the suggested revaluation would need to be carefully studied before it could be implemented.
"This is at the suggestion phase," Mazaheri said, according to the IRNA news agency.
"In carrying out the preliminary studies we have to accurately evaluate the uses of this work and necessary measures taken for compensating any losses," he added.
Iran's economy has been hit by considerable inflation over the past 20 years, meaning that 10,000 rials (the main currency unit) is now worth less than one dollar.
The exchange rate of the rial to the dollar has soared from 70 rials to the dollar at the time of the Islamic revolution in 1979 to more than 9,300 rials today.
Paying for more expensive goods and services in Iran can thus involve handing over unwieldy bundles of cash. Every Iranian citizen holds at least 114 banknotes at one time, compared with 10 to 12 for a European, figures show.
Iran's neighbour Turkey, which has recovered from a major economic crisis in recent years, in 2005 lopped six zeros off its national currency to create New Turkish Lira and facilitate cash transactions.
The proposal came from lawmaker and member of parliament's economy commission, Gholam Reza Mesbahi Moghaddam, who said "practical and psychological" problems had been created by the fall in value of the Iranian currency.
IRNA said that President Mahmoud Ahmadinejad had told the central bank last week to "work thoroughly" on the issue.
"The deletion of three zeros from the national money is a method which could be useful, but first the ground should be prepared and the people need to be told why this is being done," said Mazaheri.
Ahmadinejad has been criticised by economists for stoking Iran's double figure inflation himself by ploughing money from high oil revenues into infrastructure projects and causing a a spike in money supply growth.
Nuevo Rials, anyone?
Actually, Iran do have interest:
Iran’s financial system suffered a fresh jolt yesterday with panic selling on the stock market after the president, Mahmoud Ahmadinejad, abruptly ordered banks to cut interest rates sharply, despite surging inflation.
The order, which Mr Ahmadinejad issued by telephone during a visit to Belarus and which flew in the face of expert advice - has triggered warnings of a financial crisis and spiralling corruption amid fears of a capital flight from the country’s lending institutions.
Mr Ahmadinejad’s decree forced all state-owned and private banks to slash borrowing rates to 12%. Inflation is officially 15% but is generally believed to be much higher. State banks had been offering rates of 14%, while those in the private sector ranged from 17% to 28%.
The decision caused panic in the Tehran stock exchange, with private banks losing much of their share value overnight. Shareholders in one bank, Karafarin, queued on Wednesday to sell their stock when previously there had been 1.2 million applicants to buy its shares.
Interest rates are normally set by the head of the central bank, who is nominally politically independent. The Hammihan newspaper carried a picture of a disconsolate-looking Mr Danesh-Ja’afari holding his head in his hand under the headline: Shock on the Tehran bourse.
http://www.guardian.co.uk/iran/story/0,,2087915,00.html
Only 3 zeros??
WHy don’t they go ahead and knock it down by NINE decimal points right now — that way they’ll be more prepared for the full Pres. Ahmawhackjob effect, especially after the USA kicks their sorry asses back to the stone age......
With that kind of inflation, it’s a wonder they have any economy at all. Must be based on barter and substitute currencies. (Dollars, Pounds).
Actually, compounded annually that’s “only” about 20% a year. Still, you’d be crazy to hold on to rials any longer than necessary.
Something else should be ‘knocked off’, as in the entire terrorist exporting régime.
That, and a few Jimmy Carer WIN buttons (Whip Inflation, Now), will fix everything.
It appears the Shiite aren't as concerned about Sunni Islam's admonition agaist Usury. I stand corrected.
Given our respective monikers, I'm sure you enjoyed the hilarity of the foregoing quote. What a hoot!
"Inflation is always and everywhere a monetary phenomenon." - The Real Uncle Miltie
On page 49 we can read that the average 3 M inter-bank interest rates was 4.9312 % in June 2007 and 4.9134 % in July 2007. ;-)
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