Iran's Currency Collapses

The folks in Iran who have any money are stampeding to get rid of their Iranian dollars and exchange them for USA dollars.

What the heck is going on?

Iran’s already fragile currency, the rial, has fallen in value by about 40 percent over the past week, battered by a combination of potent Western sanctions over the disputed Iranian nuclear program and new anxieties among Iranians about their government’s economic stewardship, analysts said.

While the value of the rial has eroded for the past few years as Iran’s economic isolation has deepened, the severity of the drop worsened with surprising speed in recent days as Iranians rushed to sell rials for dollars. By the end of the day on Monday, it cost about 34,800 rials to buy $1 in Tehran. The rate had been 24,600 rials as of last Monday.

“It’s sort of in a full-blown stampede mode today,” said Cliff Kupchan, a Washington-based analyst at the Eurasia Group, a political risk consulting firm. “There’s very little confidence among many Iranians in the government’s ability to adroitly manage economic policy.”

The shriveling value of the rial is now contributing to fears in Iran of a severe inflationary spiral, as an increasing amount of rials are required to buy food, medicine and machinery needed from abroad. At the same time, Iran’s ability to sell oil, its main export, has been severely hampered by the sanctions on the nuclear program, which Iran says is for the peaceful development of nuclear energy but Western nations suspect is intended to produce nuclear weapons.
      

Economists said the rial’s decline was one of the clearest signs that the accumulated impact of sanctions had deeply wounded the Iranian economy.

      

“When a currency collapses, you can be certain that other economic metrics are moving in a negative direction too,” Steve H. Hanke, an economics professor at Johns Hopkins University and a senior fellow at the Cato Institute, a conservative think tank in Washington, wrote in an article published this month in Globe Asia, a business magazine.

 

Here;  http://www.nytimes.com/2012/10/02/world/middleeast/irans-rial-plummets-against-the-dollar.html?src=recg

 

First off, sanctions ARE working to punish Iran.  There can be no doubt about that.  Will it be enough to stop their nuclear ambitions?  Who knows??

 

What is very interesting is to watch is what happens when confidence in our paper money collapses.

 

Now imagine what WILL happen (we don't know when) when some event shatters the confidence in U.S. dollars. 

 

What will happen to America when folks stampede to get rid of their paper U.S. dollars?

 

As for now the world still considers the USA to have one of the best paper currencies out there....this is evidenced by Iranians stampedeing out of their currency and into ours.