Monday, June 04, 2007

Another nation state on the way out

In many ways, going the way of

. Who's next? Venezuela?

What most analysts, including this writer, foresaw as a medium-term problem seems to have confronted Iran much sooner than expected. The present inflation rate of about 20%, driven by a 40% rate of monetary expansion, suggests that government resources are already exhausted. Governments resort to the printing press when they no longer can raise sufficient funds through taxation, sales of state-owned commodities such as oil, or borrowing. That is surprising, considering that Iran reported a current-account surplus of US$13 billion last year. The fact that Iran cannot stabilize its currency suggests a breakdown of political consensus within the regime, and a scramble by different elements in the regime to lay hands on whatever resources it can.

Another possibility is that the official numbers are entirely false, and that Iran already has fallen into a current-account deficit. In a May 19 statement reported by the official Islamic Republic News Agency (IRNA), President Mahmud Ahmadinejad denied a report that Iran's imports now exceed $60 billion, against an official estimate of $45 billion. This sort of discrepancy typically occurs when capital flight is disguised as imports through fraudulent invoices and similar devices. A small current-account deficit would be of little concern for a nation with normal access to world capital markets, but Iran is unable to borrow. [My emphasis]

Full article.


Like the author says above, you can bank on the
idea that the official numbers in the link below
are false. Governments lie. That's what they
do best.

Now look at who's at the bottom of the list.

Thanks to David Goodyear for pointing that out.