Today, the signs of Iran’s economic collapse can be seen not only in official reports but also in the daily behavior of the market and on household tables. The intervals between currency surges have become shorter, and the prices of goods no longer even follow the current dollar exchange rate. The market is effectively pricing in the future. More than any official statistic, this behavior demonstrates the collapse of confidence in the ruling structure’s ability to control the future.
The Market Does Not Trust the Ruling Structure’s Promises
Within a short period, the dollar exchange rate rose from around 2 million rials to 2.3 million rials, while claims were simultaneously being made about the adequacy of foreign currency reserves. But the market responded differently to these reassurances. The prices of many essential goods were calculated at rates equivalent to a dollar worth 2.4 million or even 2.5 million rials.
Insecurity and Poor Economic Conditions in Iran Have Driven Citizens to Brink
A seller who prices a product based on a higher exchange rate is not necessarily seeking greater profit; the seller knows that replacing the same product in the future may be much more expensive.
In such a situation, the Iranian regime’s promises regarding foreign currency reserves or market control lose their effect. An economy cannot be managed through directives and statements. Market participants, households, and investors make decisions based on their own experience. When the experience of past years has been consistently accompanied by a decline in the value of the national currency, it is natural for society not to believe promises of stability.
Coins Become More Expensive as People Sell Their Gold More Cheaply
One of the most painful signs of the crisis can be seen in the difference between the coin market and the market for people’s gold jewelry. When coins are priced based on expectations for future exchange rates, while people’s gold jewelry is purchased largely according to the current price, the gap between people’s assets and the cost of living becomes more apparent.
Many households, under economic pressure, are selling their remaining asset reserves to cover the costs of food, rent, medical care, or other daily necessities.
This cycle is a mechanism for the gradual transfer of wealth from weaker social classes to those with the ability to preserve their assets. People are consuming the assets they accumulated in the past, while the cost of living is growing even faster. The result is clear: becoming poorer does not merely mean a decline in income; it means gradually selling the financial cushions that families had saved for difficult times.
The Economy Has Reached the Point of Depletion
Recent warnings by Masoud Nili, a state-affiliated economist, also present a similar picture, but from a more structural perspective. He had spoken for years about the major challenges facing Iran’s economy, but his latest account of the country’s situation is more alarming.
According to Nili, 2018 was a turning point in Iran’s modern economy. After that, the exchange rate experienced unprecedented surges, the general price level rose sharply, and food prices experienced much greater increases. The economy entered an environment in which instability was no longer a temporary event but had become part of everyday life.
The Station Before a Greater Crisis
Chronic inflation is not a new phenomenon for Iranian society. The real danger begins when society becomes accustomed to the crisis. Continuous price increases may reduce public sensitivity, but becoming accustomed to them does not mean the danger is diminishing.
A warning about approaching the range of very high inflation is, in fact, a warning about changes in society’s economic behavior. When people are no longer willing to hold the national currency, contracts become shorter and everyone tries to convert their assets more quickly into goods, gold, foreign currency, or other assets, inflation enters a new phase.
Under these conditions, inflation expectations themselves become a driver of inflation. People fear the future, so they buy more today. Sellers fear the future, so they set higher prices. Investors are also uncertain about the future and postpone productive investment. This cycle further limits the economy’s ability to return to stability with each passing day.
Iran’s economic collapse is not merely a statistical issue. The crisis can be seen in the quality of families’ diets, declining purchasing power, the migration of skilled workers, young people’s withdrawal from the labor market, and the sale of family assets. The victims of the crisis are also gradually moving from the lower income deciles into the middle classes.
Iran’s main problem is not a lack of natural or human resources. Iran still has an important geographic position, extensive natural resources, and millions of educated people. The crisis lies in the way these capacities are governed.
