The Iranian Rial
The Iranian Rial has come under tremendous pressure. Internally, the currency is depreciating in purchasing power at an astonishing rate. Internationally (illustrated here), the Rial has fallen generally to the 123.50 level from the 79 to the dollar level back in 2003. Internally, the Rial has just suffered one of the most cataclysmic crashes in the recent history of the foreign exchange markets since there is no viable access to the international markets. On the black-market, It has plummeted 72% since the beginning of 2011. The geopolitical implications for the U.S. and the world are enormous for if Syria goes, Iran will be the last rogue state hostile to the U.S. and the West in the Middle East. However, we must keep in mind that the driving force behind the Iranian Revolution that overthrew the Shah was religion. The Shah left Iran January 16th, 1979. The revolutionary movement was the Religious Right as it always poses the greatest danger to society in any religion. History is littered with the movement of religious right wing movements that seek to seize political power to force their beliefs upon everyone. Remember Oliver Cromwell? He killed the king, then put his own portrait on the coinage as the new religious right Puritan Protector of the people. Of course he outlawed Christmas, sports, plays, and made it a felony to kiss your wife in public. It was the extreme right that saw the death of Nero in 68AD as an opportunity to revolt against Rome since there was no Julio-Claudian successor. What the Jews did not count on was the usurpation of power by generals. Vespasian had to destroy the Temple to demonstrate his power to head the Roman Empire. Let one state leave and the empire would have crumbled. The Pilgrims who came to America were the extremists within the Puritan movement. Even the term “April Fool” referred to the religious right who refused to accept the current calendar because the Pope revised it. They continued to celebrate the start of the New Year as April rather than January. Religion has played a endless role in revolutions. Recall Constantine claiming to see a cross in the sky to inspire his troops to fight fellow Christians and to destabilize the convictions of the opposing army. Here, the Iranian Revolution of 1979 was the religious right extremists who believe that the state should not be separate from religion. Hencem they seek the destruction of not just Israel, but the overthrow of Turkey, Saudi Arabia, and Egypt just for starters. It is this undercurrent which is not wiped out, but is starting to teeter against the most powerful tool of all for political change – economics. The last attempted revolution in Iran was in 2009 as the world economy plummeted. That attempt was successfully suppressed with an iron fist. There is now an undercurrent that is rising once again but this time it includes the merchants who have lost a fortune in the face of the collapse of the currency. Here is a chart of quotes purported to be the black market in Iran. There is a growing youth movement in Iran that wants to join the tide of globalization – Arab Spring. The older religious right elements are fighting hard just as we see the religious right in the United States trying to use the rule of law to further their own agenda as every religious right movement has always done throughout history. Since 1979, when the Shah was deposed, a succession of religious extremists have dominated Iran. We are looking at the end of that cycle is also lining up for 2032. The real encouragement will come with the fall of Syria. This will give reinforcement to their resolution to press for freedom and that a regime change becomes possible. After all, unemployment has exceeded 25% equal to that which took place in the United States during the Great Depression that also caused political change. We should expect nothing less in Iranian society. The oil embargo imposed upon Iran has done an amazing job in fueling the fires of political change. They were already burning yet this has fanned the flames in a very decisive manner. What we see in Syria may eventually emerge in Iran once elements of the army begin to look at the collapse of their own pay. Russia and China have slowed the process to some extent giving hope to the political powers that they will survive. Nevertheless, conducting international trade through the back door is expensive, and prices are rocketing. The key will be the military. Even during the financial crisis of Rome during the 3rd Century AD when the denarius collapsed in purchasing power, the key to rise from the ashes of economic collapse was the political destabilization that emerges from the military. For example, in 249AD the Roman troops were quite dissatisfied with the rapidly decaying economic conditions concerning the rising costs or living, debasement of the currency, rising taxation as the demands increased as currency declined in value, and economic stagflation that emerged as prices rose in value but economic growth declined. Emperor Philip I was confronted by a usurper Trajan Decius and he marched out to meet him. They met at Verona in September 249AD. However, the Philip’s troops turned and killed him as well as his son, thus avoiding a battle because they saw no point when their pay was declining. Decius was seen as a viable alternative to economic stagflation. After this event in 249AD, the political collapse of the Roman government was illustrated by the succession of 43 emperors/usurpers by 285AD in just 36 years. Economics is by far the most powerful weapon ever devised to destroy any empire, nation, or city state. This is what took down Communism, the Middle East, and it will destroy Western government thanks to the Sovereign Debt Crisis. That same 36 year time span comes into play precisely with the next peak on our Economic Confidence Model – 2015.75. The Iranian banks have been locked out of the SWIFT international settlements system, which prohibits payment to reach them for oil in international trade. Of course then there is the Standard Chartered immediate money laundering scandal. The New York banking regulator has accused Standard Chartered of scheming with Iran to launder as much as $250bn (£161bn). According to the New York court filings, Standard Chartered “schemed with the government of Iran and hid from regulators roughly 60,000 secret transactions, involving at least $250bn, and reaping SCB hundreds of millions of dollars i
n fees. SCB’s actions left the US financial system vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes, and deprived law enforcement investigators of crucial information used to track all manner of criminal activity”. Banks have routinely laundered money for big clients and it is known as “wire-stripping” which takes place when a bank alters bank codes to hide the origin of a transaction. This is usually done by changing the code that identifies the beneficiary’s bank. Of course US Federal Prosecutors embellish everything they ever do for they have a personal incentive to overstate cases. The more bullshit they can add to gain press, the higher profile they personally achieve that enables them to shop around for one of those high paying jobs, run for mayor (Rudy Giuliani), run for governor (Eliot Spitzer, Christopher James “Chris” Christie). Then there is the problem of prosecutors being really just political pawns making alleged crimes really political assassinations. There was the dismissal of U.S. Attorneys Controversy initiated by the unprecedented midterm dismissal of seven US Attorneys on December 7, 2006 by the President George W. Bush administration’s Department of Justice that was really taking directions from Dick Cheney. The dismissals reeked or political manipulation where the Department of Justice and the White House were using the U.S. Attorney positions for political advantage. Allegations were that the attorneys targeted were either to impede investigations of Republican politicians or for their failure to initiate investigations that would damage Democratic politicians. The U.S. attorneys were replaced with interim appointees, under provisions in the 2005 USA PATRIOT Act reauthorization that gave this new power to the President as well. These 19 guys and a camel have totally eliminated the Federal Constitution for there is nothing that cannot now be swept aside. If a Federal prosecutor enters your house and rapes your wife, you do not even have a right to have him arrested. Any charges against a federal agent are purely discretionary at the pleasure of government. Nevertheless, the implications for the financial markets will be enormous if a vacuum emerges in the Middle East with the collapse of Iran and Syria. Some are touting that the U.S. will reap a peace dividend equal to the fall of the Soviet Union in 1992. This is not likely and it assumes both Russia and China will sit on their hands. The more likely scenario is that the jockeying for control over the Middle East will then rekindle the cold war. The United States cannot simply walk in and talk whatever it wants in that region. Russia, even more so that China, will make a power-play for that region for it will provide the checkmate move over Europe that Russia has dreamed of since Lenin. Our sources in that area of the world have confirmed that posture is already developing. The Iranian regime has taken the stand that “speculators” are the reason for the Rial’s collapse. This is of course nonsense and is no different than Obama blaming the rich for government’s failure to manage the economy. In the case of Iran, obviously it has been the scantions cutting off Iran from the SWIFT codes blocking its ability to sell oil even on the black market. Food supplies are growing scarcer by the day and the sanction are impacting this as well. There are now even reports surfacing dealing with a shortage of fuel. The police have been called upon to deal with rising street protests. Unlike the Arab Spring driven by the youth, we are starting to see the Middle Class rise up as well. Keep in mind that it was the collapse of the Roman Economy during the 3rdCentury that really led to the widespread acceptance of Christianity. They did not convert people out of the goodness of their heart, passions for their fellow-man, but for the blunt reason that they prayed to their gods, received no help, and turned simply to Christianity. Therefore, keep in mind that evcen religion has been altered historically by economics. Indeed, the rebellion in Syria began in this manner. The Russia Revolution also began over economics. The United States Revolution as the French Revolution were economic driven. Rebellions throughout history unfold according to the underlying economic conditions. If the economy under communism had been sound, there would have been no uprising in 1989. Even China began with a decline in the economy that made communism salable. In Libya we saw them drag Colonel Gaddafi and shot him in the head all economic driven. Monitor the economy, and you will understand the fate of that nation. It is why politicians ALWAYS try to blame external powers or engage in class warfare to divert blame upon themselves. The whole rise of Hitler began with getting the bankers who conveniently were Jews and by-the-way, just get them all and solve the problem. Edward I (1239–1307) also attacked the Jews expelling them under the pretense of religious grounds, but he default on his loans to them and confiscated their property. The Spanish did the same sending the Jews fleeing to Amsterdam making that the new center of the Financial World.
As goes the Rial – so goes Iran.
Those who think that the collapse of Iran will lead to a huge peace dividend and cause the U.S. dollar to rocket off the charts simply presume Russia is powerless. There will be no halving of our defense spending to $400 billion or less combined with the rise in tax revenues would cause the budget deficit to collapse and interest rates will stay at zero forever are just not thinking very rationally. There will be no “peace dividend” and there will be no recovery in U.S. GDP growth causing it to jump to 4%. The idea that the commodities and precious metals will decline as the world enters into a new age of Pax Americana causing the Dow to then soar to 20,000 as the Euro collapses to parity is a dangerous dream of the uneducated. We are by no means approaching a new Golden Age in civilization as a whole. People are still confused about how capital moves. They do not understand that at times its confidence resides with government creating a PUBLIC confidence wave. That is when power rises and consolidates. As that cycle reaches its peak, the abuse of human power always enters the process. The abuse of government sends capital fleeing into the PRIVATE sector. This is why the Dow is rising, not because the market is anticipating a new Golden Age. That is just nonsense.
Here are the Forecasting Arrays for the Rial. Note that we have a Panic Cycle Year in 2013. It is interesting how the computer determines such events that are clearly geopolitical based solely upon the movement of the markets. They clearly reflect the changing trends in the attitudes of the people.