Tag: inflation rates

Syria’s Annual Inflation Hits 200%

In an attempt to beat Western sanctions and halt the fall in the Syrian pound, the Assad regime – with the help of Iran, Russia, and China – has begun conducting all of its business in rials, roubles, and renminbi. This decision supplements other existing arrangements between Syria and its allies that are keeping the Syrian economy on life-support. These include transfers of $500 million per month in oil and an unlimited credit line with Tehran for food and oil-product imports.

According to Kadri Jamil, Syria’s prime minister for the economy, this life support is necessary because Syria’s devastated economy is the target of an elaborate plot, hatched by the U.S. and Britain, to “sink the Syrian pound.”

So, what about the sinking pound? As the accompanying chart shows, the Syrian pound has lost 66.2% of its value in the last twelve months.

The rout of the Syrian pound has been widely reported in the press.  But, Syria’s inflation problems that have accompanied the collapse of the pound have gone largely unreported.  That’s because, beyond the occasional bits of anecdotal evidence, there has been nothing to report by way of reliable economic data.

To fill that void, I employ standard techniques to estimate Syrian’s current inflation. Currently, Syria is experiencing an annual inflation rate of 200% (see the accompanying chart).

Indeed, Syria is experiencing a monthly inflation rate of 34%. To facilitate the monitoring of the quickly deteriorating situation in Syria, I am creating a resource which will allow readers to view up-to-date data on the Syrian pound and the country’s inflation problems. Soon, black-market exchange-rate data and ­inflation estimates for countries with troubled currencies like Syria will be made available via the “Troubled Currencies Project” – a joint Cato Institute-Johns Hopkins collaboration under my direction. In consequence, the days of Syria’s plunging pound and raging inflation being covered in a shroud of secrecy are soon coming to an end.

Bernanke on Monetary Policy

Every August, the Federal Reserve Bank of Kansas City sponsors a conference on monetary policy. It is the most valued invitation of the year for central bankers and Fed watchers. The Fed Chairman typically presents his views on monetary policy and the economy, and his talk inevitably makes headlines. (A select few reporters are invited.)

This year, Ben Bernanke promised the Fed will do whatever it takes to aid the faltering U.S. recovery, and most of all to prevent deflation. The problem for the Fed Chairman is that the central bank is plainly running out of options, as some had the cheek to observe. He suggested the Fed could do more of the same (purchase long-term securities), or try something new and untested (tweak the interest rate it pays on bank reserves).

Bernanke also suggested a third option, plus offered some professorial speculation on another. Taken together, these suggest the Fed may be prepared to chart a dangerous course.

In its policy statement, the Federal Open Market Committee has promised to keep interest rates low “for an extended period.” Bernanke suggested (as the third option) that the FOMC might make it clear that rates will remain low for an even longer period than markets are currently expecting. Within the Committee, there have been calls for caution and to remove the “extended period” language from the statement. These have been led by Thomas Hoenig, president of the KC Fed and host of the conference. By suggesting the only option was lengthening the period of low interest rates, Bernanke delivered the back of his hand to his host and the other inflation hawks on the FOMC.

Bernanke then mused about suggestions by some economists that perhaps the Fed should set an inflation target – that is, promise to deliver higher inflation rates to stimulate the economy. Fed chairmen do not engage in abstract speculation about policy, and to raise the inflationary option gave it place above all other possibilities. Bernanke hastened to add that there was at present no support for such a policy within the FOMC, and it “is inappropriate for the United States in current circumstances.”

In other words, the Fed chairman is thinking about an inflationary policy and, if circumstances change and he can build support within the FOMC, he is willing to implement it. When central bankers speculate in public about the possibility of an inflationary monetary policy, the currency is in jeopardy and the country in peril.