تاریخ : چهارشنبه, ۶ مهر , ۱۴۰۱ 3 ربيع أول 1444 Wednesday, 28 September , 2022
9

Loaded Government, Gaunt Nation

  • کد خبر : 4844
  • 20 آذر 1399 - 11:39
Loaded Government, Gaunt Nation
In good old days, not too old though, when meat and eggs became rare and so expensive, the words of our former president reminded us of many things.
  • Mahmood Ahmadinejad is still an influencer figure in social media or news agencies and still plays his part in the society. Once being asked about the reason behind the high price of tomatoes, he, as a president, said “come and buy tomatoes from our neighbor’s grocery store, don’t let them overcharge you”!!!

    When we remember these words, a big question comes to mind: why do we really line up when we see that for example frying-oil got scarce or decide to hoard eggs when there is a surge in its price? Why don’t we go to the neighborhood of our authorities whose valuable words are still out there? Why not go to a place where everything is ridiculously cheap?

    When you look into the calendar, you’ll stop reasoning soon. From last August to this July, we realize a bitter truth. Prices have ride on expensiveness horses unceremoniously and surged so radically to a point that today we witness seven items have risen in price by 20 to 100 percent, and nine other staples that have grown by 16 to 20 percent.

    This is where we easily realize that the inflation knot is getting more tightened every day. These days, the scarcity of some basic commodities such as frying-oil, butter, rice, sugar, and their doubled price after being recharged in the market is like a joke, not funny at all though. According to the official statistics of the Central Bank, during 2018 and 2019, the inflation rate was about 31.2% and 41.2% respectively. Although many economists believe that the central bank’s statistics show a significant difference in economic indicators, but based on these official statistics, we can understand the rapid growth of inflation over a single year. At the same time in 2019, the central bank announced that inflation reached its maximum since 1995.

    But the situation is even worse between March and June 2020, the statistics and numbers in these months are more than ever and the indicators nearly meet the number 50 and show a steady upward trend. Interestingly, this increase in inflation has not created a boom in production, and the central bank has always stated that we will go back to a 22% inflation.

    Talking about the urgent need to pay attention to the ill economy is now pointless while Corona eradicated one third of jobs and exposes many to bankruptcy, and the government does not intend to lose weight; talking about recovery of economy makes no sense. If in Ahmadinejad’s era, we could spend 10 thousand tomans monthly on meat, fruit and food, now with a minimum salary of 2 million and 800 thousand tomans ($ 93.3 a month), we can not buy meat, pay the house rent or pay the installments, the only possible act is to make ends meet. Given the rising prices for housing, Bahar azadi coin, exchange rates, cars, pistachios, nuts, meat, egg, fish, dairy and now tomatoes and fruits, even making ends meet will not be that easy.

    Interestingly, the Statistics Center of Iran is not content with an inflation rate of 22 percent and has announced an inflation rate of 26 percent in September based on 2016. On the other hand, the Central Bank unofficially announced the inflation rate of 41.2 percent in March, and if the real inflation rate is similar to and more than this number, achieving 22 percent inflation will not be that easy. It seems that the statistics have not yet agreed on a sincle inflation rate and each has its own version of this much-debated index. So, in this situation, the best indicator to understand the real inflation in the country is the exchange rate as well as the basic commodities price in the market.

    Basic goods that have their own narrative and their price numbers do not lie. They are clearly and comfortably placed in the household basket and talk about the poverty that has dragged the middle classes of society down and turned them into the poor and lower class.

    Meanwhile, many labor activists have repeatedly said that the livelihood of 70% of the population is shrinking. Unofficial statistics show that only 30 percent of the population (working-class family) has access to a basic needs, and the rest live in absolute poverty. Many believe that expansionary policies can overcome inflation, but Teymoor Rahmani, an Iranian economist, believes that managing inflation in Iran is totally different from the rest of the world.

    «The main solution to treat inflation in different countries is to control aggregate demand by regulating the price of money,» he said. “However, the prevailing point of view in Iran is still focused on controlling the monetary base and liquidity in short term.”

    Teymoor Rahmani believes that the solution to control inflation has been identified in many countries, and currently this solution, i.e. controlling aggregate demand by adjusting interest rates, has been responsive, but as I mentioned, inflation management in Iran is different from other countries.

    However, many economists believe that economic planning cannot be accomplished by ignoring or simplifying existing facts. It is said that this rule also applies to inflation; Targeting 22% inflation is also good in theory, but not practically achievable; Because it is not possible to reduce inflation in a prescriptive manner. In general, inflation is a function of other variables, such as the exchange rate; Inflation is significantly affected by rising prices for goods and services. However, inflation in the middle of 2021 is a function of the exchange rate and does not correspond to the current economic conditions, and therefore, we can not hope to reduce inflation, which is crushing the poor and middle classes.

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