The growth of the Iranian Stock Exchange index led to about two million units in August 2020 so that many people went to invest in the stock exchange.
Returns and profits in the stock market had snatched the competition from other less risky areas of investment, including housing, coins, and dollars, and many people poured their money into the capital market. However, after a short time, Iran witnessed a fall in the stock market – an earlier issue that was predicted by many of the government’s economists, who described it as a fast-blowing bubble that would explode very soon.
There is a ratio in the economy that shows how much the country’s financing structure has become a capital-driven market. This ratio is higher in Iran than in the world. This ratio is nearly 80 percent in Iran.
While the ratio of the role of capital market in financing structure in countries such as Turkey and China is 30 percent and Germany, and the United Kingdom is about 40 percent.
This ratio is not normal in Iran at all, and the main cause is the bubble that has been created in the Iranian stock exchange.
Iranian politicians have turned the use of stock exchanges to finance and maintain the stock exchange bubble into a looting ideology and are even promoting it.
Their excuses for this harmful propaganda to the country’s economy are the small shareholders. Interestingly, the misery, poverty, and death of many people due to coronavirus and many other issues of the people are not very important, but they are still allergic to the situation of small shareholders.
The false boom in the stock market and the preservation of the bubble in different ways is a policy that has been implemented over the years under the pretext of micro-shareholders, but to gain access to the people’s dollars.
The fact that the financial structure of the country depends so much on the capital market has many consequences. One of the consequences is that the country’s public resources are not available to small and medium-sized enterprises and the public.
Iran’s Stock Exchange is practically an archipelago of private but government-controlled enterprises whose managers are non-governmental enterprises and entities. These entities are plundering the people and the economy in the name of the free market, so the financial resources of the capital market are practically in the hands of stock exchange firms that are private but government-controlled.
Regarding the rise of the price of the dollar, which in the last 10-12 years has increased about 25-times, and the effects of these entities on the dollar price, it should be said that for large firms to be able to make big profits on the stock exchange, these stock exchanges must keep the dollar price high, as well as the inflation of the commodities, should hold high so that this ailing and crisis-ridden economy can survive.
Last year, the government’s budget deficit was 250 trillion tomans. In the same period, 20 stock exchanges have had a net profit of 250 trillion tomans.
All their profits have been practically from rent-seeking sources, oil, and gas energy. If this rent is cut, these firms will also lose. The profit growth comes as the taxes paid by these firms in previous years were less than 6 percent. But the operating income of these 20 enterprises was higher than the government budget.
These so-called private but government-controlled enterprises are benefiting from various government concessions and economic and political rents and on other the side, they are allowed to sell their products at any desired price. Therefore, this trend is not competitive for real private and small entities.
People suffered great losses in these stock exchange conditions, and the huge losses that were inflicted on people because of this ailing economy are much more than the money those small shareholders lost on the stock exchange.
It should be noted that people’s wages have doubled in the last three years, but people’s purchasing power has decreased to a fifth. People can no longer afford to buy a home, while property owners’ assets have increased between 8 to 10 times.
No one in the government mentions these losses caused by the increase in the role of the capital market in the financing structure of the country’s economy and the power of rent-seeking private government-controlled enterprises. This is a fact about the corruption from which most of the officials benefit.