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Infernal Iran; The Death Spiral Accelerates

January 28th, 2010 - 9:29 pm

Let’s start with economics.  Here are three recent tweets:

  • Updates on Iran’s economic situation: The price of bread has increased six-fold since subsidies slashed;
  • Iran’s Energy Ministry: The price of electricity for households will soon be quadrupled;
  • Bank Melli & Mellat have told AN (Ahmadinejad) if they don’t receive funds within 4 days, they’ll be bankrupt.

And here are some data on Ahmadinejad’s accomplishments from a Farsi web site:

  • 47% under poverty line.
  • 75% of all projects started remain unfinished&halted.
  • Average inflation of 20%.
  • Budget submitted one month late.
  • Welfare under $20 aftr promising $70 during elections.
  • Gov employees raises granted days before the election are now deduced in installments on paychecks.
  • Failure to submit progress reports & answer to legal authorities for the past 4 years.
  • No inflation-adjusting raises of Gov employees salaries & benefits.

So it shouldn’t surprise anyone that people are racing to the banks to get their rials and toumans out, and convert them to some harder currency.  But the banks won’t give them all their money;  withdrawals are limited to $15,000 per account, and there have been many angry scenes.  The people know that the rulers are shipping out their own wealth, and they hear terrible rumors about the impending failure of major banks.

A Tweet:  “Bank Melli security guard fires at people, injures old man”

This bespeaks a far broader malaise, a slow descent of the Iranian state into the inferno.  As Ahmad Alavi, a thoughtful economist, put it, the state now faces a crisis of legitimacy.  The people are acting on the basis of their experience, and, lacking reliable information and confidence, the only way they have to conserve their assets is to take it from the bank.

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