For months, I have been following the collapse of the Iranian rial, tracking black-market (free-market) exchange-rate data from foreign-exchange bazaars in Tehran. Using the most recent data, I now estimate that Iran is experiencing hyperinflation – a price-level increase of over 50%, per month.
In recent days, Iranians have taken to the streets in protest over the collapse of the rial. In response, the Iranian government has cracked down on the protestors and shuttered Tehran’s foreign-exchange black market. Moreover, it has effectively cut off the supply of reliable economic information. Indeed, the signal-to-noise ratio in the Iranian economic sphere, which is normally quite low, is now even lower than usual.
To address this, I have prepared a fact sheet of the top 10 things you should know about Iran’s hyperinflation.
- Iran is experiencing an implied monthly inflation rate of 69.6%.
- For comparison, in the month before the sanctions took effect (June 2010), the monthly inflation rate was 0.698%.
- Iran is experiencing an implied annual inflation rate of 196%.
- For comparison, in June 2010, the annual (year-over-year) inflation rate was 8.25%.
- The current monthly inflation rate implies a price-doubling time of 39.8 days.
- For certain goods, such as chicken, prices may be doubling at an even faster rate.
- The current inflation rate implies an equivalent daily inflation rate of 1.78%.
- Compare that to the United States, whose annual inflation rate is 1.69%.
- Since hyperinflation broke out, Iran’s estimated Hanke Misery Index score has skyrocketed from 106 (September 10th) to 231 (October 2nd).
- See the accompanying chart.
- Iran is the first country in the Middle East to experience hyperinflation.
- Iran’s Hyperinflation is the third hyperinflation episode of the 21st century.
- Since the sanctions first took effect, in July 2010, the rial has depreciated by 71.4%.
- In July 2010, the black-market IRR/USD rate was very close to the official rate of 10,000 IRR/USD. The last reported black-market exchange rate was 35,000 IRR/USD (October 2nd).
- At the current monthly inflation rate, Iran’s hyperinflation ranks as the 48th worst case of hyperinflation in history.
- Iran currently comes in just behind Armenia, which experienced a peak monthly inflation rate of 73.1%, in January 1992.
- The Iranian Rial is now the least-valued currency in the world (in nominal terms).
- In September 2012, the rial passed the Vietnamese dong, which currently has an exchange rate of 20,845 VND/USD.
Last month, on the day the president was addressing audiences in the auto-parts-factory-rich state of Ohio, the administration filed a formal trade complaint before the World Trade Organization alleging that China is subsidizing exports of automobile parts.
Last week, at the request of domestic tomato producers operating preponderantly in the state of Florida, the Commerce Department agreed to terminate a 4-year-old agreement, which has allowed tomatoes from Mexico to be sold in the United States under certain minimum price conditions.
Of course it would be cynical to believe that these actions have anything to do with an incumbent candidate wielding Executive branch authorities to curry favor with special interests in major swing states before an election. So let’s make this latest episode a teaching moment about the perils of the antidumping status quo.
The long-standing – but vaguely understood – "trade agreement" between the United States and Mexico that was terminated last week was an agreement between Mexican tomato producers and the U.S. Department of Commerce to "suspend" an antidumping investigation that had been initiated at the request of U.S. tomato producers back in 1996. At the time, U.S. producers alleged that they were being materially injured by reason of tomatoes imported from Mexico and sold at "less than fair value." The U.S. International Trade Commission agreed, preliminarily, on the issue of injury and the Commerce Department had calculated that the Mexicans were, in fact, dumping – selling in the United States at prices below "fair value." (Here and here are two of many Cato exposés of what passes for objective administration of the antidumping law at the Commerce Department.)
But instead of carrying the investigation through to the final stage which likely would have included the imposition of duties, a "suspension agreement" was reached under which the Commerce Department would suspend the antidumping investigation if the Mexicans agreed to certain terms – most importantly, that they sell their tomatoes above a minimum benchmark price. Understanding why the parties would agree to suspend an investigation – and why there are only seven suspension agreements among 240 active antidumping measures – is important to understanding one of the most anti-consumer, anti-competitive aspects of the U.S. antidumping law.
In an antidumping investigation, the Commerce Department calculates a dumping "margin," which is purported to be the average difference between the foreign producer’s home market prices and his U.S. prices of the same or similar merchandise sold contemporaneously, allocated over the average value of the producer’s U.S. sales, which yields an ad valorem antidumping duty rate. That rate is then applied to the value of imports, as they enter Customs, to calculate the amount of duty "deposits" owed by the importer.
So, if a Mexican tomato producer’s rate has been calculated to be 14.6% and the value of a container of tomatoes from that producer is $100,000, then U.S. Customs will require the U.S. importer of those tomatoes to post a deposit of $14,600. Why is it called a deposit? Because the final duty liability to the importer is still unknown at the time of entry. The 14.6% is an estimate of the current rate of dumping based on sales comparisons from the previous year. But the actual rate of dumping for the current period – and, thus, the actual cost of importing tomatoes from Mexico – is unknown until completion of an "administrative review" of the current period’s sales by the Commerce Department, which occurs after the period is over.
In other words, because of the unique retrospective nature of the U.S. antidumping law, importers DO NOT KNOW the amount of antidumping duties they will ultimately have to pay until well after the subject products have been imported and sold in the United States. The final liability might be larger, much larger, smaller, or much smaller than the deposit. If smaller, the importer gets a refund with interest. If larger, the importer owes the difference plus interest.
How many business ventures would be started – or even qualify for a loan – with so much uncertainty about its operating costs? Imagine your local supermarket operating on the same principles. Imagine ringing up your basket-full of groceries, paying $122.45, and then waiting a year to find out whether you get a rebate or have to issue a supplemental check. Gamblers might enjoy the thrill, but this kind of uncertainty is anathema to business. Most grocery shoppers would buy their groceries somewhere else, where the prices are final. Likewise, importers and other businesses in the supply chain are likely to stop doing business altogether with exporters who are subject to antidumping measures.
Such is the consequence of our "retrospective" antidumping system. Every other major country that has an antidumping law has a "prospective" system, whereunder the duties assessed upon importation are final. And this brings us back to Mexican tomatoes.
The suspension agreement terminated last week had been in effect since 2008 and required Mexican producers to sell their tomatoes at prices above $0.17 per pound between July 1 and October 22 and above $0.22 per pound between October 23 and June 30. (That agreement was actually the third suspension agreement governing the terms of Mexican tomato sales in the United States since 1996. The previous two were terminated at the request of the Mexican producers, presumably because market conditions had changed, and they were seeking better terms.)
The advantage of a suspension agreement is that it brings a degree of certainty -- even if prices are higher. It would be collusion but for the fact that the deal is struck between foreign producers and the Commerce Department and not between foreign producers and U.S. producers. Occasionally, domestic producers desire certainty because its always possible that antidumping rates will decline in subsequent years. But foreign producers are more inclined to covet the certainty of a suspension agreement because the uncertainty that would otherwise confront their customers -- U.S. importers -- is often enough to chase them away entirely. And that helps explain the dearth of suspension agreements.
The retrospective nature of the U.S. law is just another example of how the antidumping regime is punitive and not remedial.
Here's what audiences understand about the new movie "Won't Back Down" that has proven so very elusive to film critics.
In Wednesday night's presidential debate, Mitt Romney claimed that ObamaCare's Independent Payment Advisory Board is “an unelected board that's going to tell people ultimately what kind of treatments they can have.”
President Obama officially denies it, yet he confirmed Romney's claim when he said, "what this board does is basically identifies best practices and says, let's use the purchasing power of Medicare and Medicaid to help to institutionalize all these good things that we do."
In this excerpt from his column in today's The Washington Post, George F. Will quotes my coauthor Diane Cohen and me to show that IPAB is even worse than Romney claimed:
The Independent Payment Advisory Board perfectly illustrates liberalism’s itch to remove choices from individuals, and from their elected representatives, and to repose the power to choose in supposed experts liberated from democratic accountability.Beginning in 2014, IPAB would consist of 15 unelected technocrats whose recommendations for reducing Medicare costs must be enacted by Congress by Aug. 15 of each year. If Congress does not enact them, or other measures achieving the same level of cost containment, IPAB’s proposals automatically are transformed from recommendations into law. Without being approved by Congress. Without being signed by the president.
These facts refute Obama’s Denver assurance that IPAB “can’t make decisions about what treatments are given.” It can and will by controlling payments to doctors and hospitals. Hence the emptiness of Obamacare’s language that IPAB’s proposals “shall not include any recommendation to ration health care.”
By Obamacare’s terms, Congress can repeal IPAB only during a seven-month window in 2017, and then only by three-fifths majorities in both chambers. After that, the law precludes Congress from ever altering IPAB proposals.
Because IPAB effectively makes law, thereby traducing the separation of powers, and entrenches IPAB in a manner that derogates the powers of future Congresses, it has been well described by a Cato Institute study as “the most anti-constitutional measure ever to pass Congress.”
Our paper is titled, "The Independent Payment Advisory Board: PPACA's Anti-Constitutional and Authoritarian Super-Legislature." It broke the news that, as Will writes, ObamaCare "precludes Congress from ever altering IPAB proposals" after 2017.
Magatte Wade, a Senegalese-American businesswoman in New York, writes in The Guardian:
Last Saturday I spoke at the Harvard Women in Business Conference, an annual event that I love...
Later, during a discussion on Going Global, a young woman asked, "For the Americans on the panel, how do you deal with being a person of privilege while working in global development?" My eyes lit up with fury as she directed her question specifically at the white Americans on the panel. I let them answer, then smiled and added with a wink: "I am an American, you know, and also a person of privilege." She instantly understood what I meant.
Her question assumed that those of us in developing nations are to be pitied...
For many of those who "care" about Africans, we are objects through which they express their own "caring".
To drive the point home, Wade posts this excellent video of "actor Djimon Hounsou perform[ing] a powerful rendition of Binyavanga Wainaina's piece How Not to Write About Africa."
(NB: The title of the original article appears to be "How to Write about Africa," without the "Not.")
It runs both ways. In Replacing ObamaCare, I discuss how "the act of expressing pity for uninsured Americans allows Rwandan elites to signal something about themselves ('We are compassionate!'). " Also:
My hunch is that this is an under-appreciated reason why some people support universal coverage: a government guarantee of health insurance coverage provides its supporters psychic benefits — even if it does not improve health or financial security, and maybe even if both health and financial security suffer.
Or as Charles Murray puts it: "The tax checks we write buy us, for relatively little money and no effort at all, a quieted conscience. The more we pay, the more certain we can be that we have done our part, and it is essential that we feel that way regardless of what we accomplish."