Gyroscopic Investing

TEHRAN — Faced with a plummeting currency in the wake of toughened international sanctions, Iran is cracking down on black-market money changers and warning that major speculators could face execution....

...Products ranging from imported steel to iPhones and wheat have doubled in price, with traders changing price tags by the hour to keep up with the rial’s plunging value. The drop has prompted housewives, businessmen and pensioners to buy up even more foreign currency and gold, as few expect the situation to normalize anytime soon.

Read the rest here.

We often talk about a hypothetical SHTF scenario on the forum.  This is the real deal, happening now in what was until recently one of the most developed and powerful nation states in the Middle East.  Very ugly situation.  I feel for the people most of whom are just pawns on a chessboard.

This is especially disturbing to see after watching the Rick Steves documentary on Iranian culture that MachineGhost posted recently.

Watching pain inflicted on people is always easier to take when they are painted as "the other" in some way. But the truth is that the Iranian people are like most of us: peaceful, friendly, and just trying to live a good life.

It angers me that squabbles between governments can lead to such widespread, indiscriminate suffering of an entire nation.

Tortoise wrote: This is especially disturbing to see after watching the Rick Steves documentary on Iranian culture that MachineGhost posted recently.

Watching pain inflicted on people is always easier to take when they are painted as "the other" in some way. But the truth is that the Iranian people are like most of us: peaceful, friendly, and just trying to live a good life.

It angers me that squabbles between governments can lead to such widespread, indiscriminate suffering of an entire nation.

I completely agree.  That is not an endorsement of Iran's government which I detest.  But we need to understand that what is going on here is essentially an economic Pearl Harbor.  We are playing a dangerous game.  Hyperinflation can destabilize governments and Iran might lash out if they think they have nothing to lose.

Isn't the classic line, "when people have nothing to lose, they lose it".

What the UK did during and after WWII to prevent hyperinflation etc was to have rationing of food, fuel, cars etc etc basically everything was rationed. I think that that is the only thing that works in those circumstances.

This could be very bad for the people of Iran.  I feel for them, but think of it from a more global point of view:  Would it be better off to try these sanctions before, or after Iran has nuclear weapons?  A nuclear capable Iran with nothing to lose - now that is a scary thought.  At least right now, the damage they can inflict is somewhat limited.  They can dump mines in the strait of Hormuz, however, laying mines is considered an act of war and punishment would be swift from the US and allies.

It just all seems so avoidable to me. I don't think Iran would have the crackpot government that they now have if it hadn't have been for decades of the West messing them about. It is now a mess that is very hard to cope with but it is a mess that we played a hand in creating.

If they did get nuclear weapons isn't there a very good chance that they would just have them and not use them just as with North Korea, Pakistan (and the UK etc)?

Iran says that it is going to threaten currency speculators with the death penalty.  Do they really think that is going to help stabilize the value of their currency?

stone wrote: What the UK did during and after WWII to prevent hyperinflation etc was to have rationing of food, fuel, cars etc etc basically everything was rationed. I think that that is the only thing that works in those circumstances.

But what's the point? When prices increase due to inflation, aren't people effectively forced to self-ration anyways? If you can afford less of something, you buy less of it.

stone wrote: It just all seems so avoidable to me. I don't think Iran would have the crackpot government that they now have if it hadn't have been for decades of the West messing them about. It is now a mess that is very hard to cope with but it is a mess that we played a hand in creating.

Preach it, brother!

We've seen this kind of blowback before with Iraq and Afghanistan. We never learn. In dealing with Iran's hostile ruling regime, the U.S. is just reaping what it has sown in that nation and the wider region for decades.

This Iran situation is like a slow moving train wreck.  Hopefully, we will come to our senses before another war is started.  

Harry Browne on 9-12-11

http://www.antiwar.com/orig/browne2.html

Iran simply needs to be stopped before they develop a nuclear weapon. Anything short of that would be Neville Chamberlain-like.

Reub wrote: Iran simply needs to be stopped before they develop a nuclear weapon. Anything short of that would be Neville Chamberlain-like.

Do you regret that the U.S. didn't go to war with North Korea a few years ago to prevent it from getting nuclear weapons?

Do you think that Bush's failure to prevent North Korea from obtaining nuclear weapons was Neville Chamberlain-like?

I tend to agree with the notion (made by Ron Paul iirc)  that the US & US allies' sanctions on Iran, apparently whose effects include 2X the price of many basic consumer products, could be viewed as an Act of War itself.  If a foreign nation caused this effect these SHTF-conditions to me & other Americans, I'd definitely view it as an Act of War.

cabronjames wrote: I tend to agree with the notion (made by Ron Paul iirc)  that the US & US allies' sanctions on Iran, apparently whose effects include 2X the price of many basic consumer products, could be viewed as an Act of War itself.  If a foreign nation caused this effect these SHTF-conditions to me & other Americans, I'd definitely view it as an Act of War.

That is not an unreasonable position.

Tortoise wrote:

stone wrote: What the UK did during and after WWII to prevent hyperinflation etc was to have rationing of food, fuel, cars etc etc basically everything was rationed. I think that that is the only thing that works in those circumstances.

But what's the point? When prices increase due to inflation, aren't people effectively forced to self-ration anyways? If you can afford less of something, you buy less of it.

In practice I don't think it works like that. Let's imagine you have $1M and your children are starving. You will spend $1M on some bread. That will mean that money will no longer function. Money is a vital part of having a functional economy. Not having functional money makes the supply side of the economy become much much worse because rather than being busy producing more food, people are preoccupied with trying to barter gasoline for bread or whatever.
Under rationing everyone gets the meager but just sufficient provisions to keep them OK and money still functions and so people can focus on getting the supply side sorted out. In the UK people were encouraged to turnover city parks etc to growing food for personal consumption etc. It did actually work and what is more people who had cash savings did preserve some of the value through the period. There was no starvation at all in the UK during that period. In fact some health statistics then were the best that they have ever been.
I guess it is a classic example of how an emergency requires an emergency response rather than hoping normal process will cope with an emergency situation. The very fact that hyperinflations happen shows that the system that works best in everyday circumstances can break in emergencies.

Reub wrote: Iran simply needs to be stopped before they develop a nuclear weapon. Anything short of that would be Neville Chamberlain-like.

Reub, I hadn't realized that Iran was similar to Nazi Germany in that way. What indicates that that might be the case? There are an awful lot of bad governments around the world. We won't make them better by going to war but I totally agree that the Nazis should have been stopped well before they were. I'm just failing to see how Iran is anything other than just another bad government.

Who exactly is under threat from Iran? Iran supports terrorism against Israel and that is dreadful but there isn't any way that Iran is likely to escalate that is there? Having nuclear bombs wouldn't alter the situation would it? Israel itself has nuclear bombs and even Iran wouldn't choose to start a nuclear war with a nuclear armed adversary would they?

"Who exactly is under threat from Iran?"

http://www.csmonitor.com/USA/Foreign-Po ... ch-America

From the article:
"The missile under construction at an Iranian research-and-development facility, which was damaged by a mysterious explosion in November, was a long-range missile prototype with a range of 6,000 miles – enough to hit the United States, a senior Israeli official said Thursday in a speech to a defense and security forum."

But Reub, France has missiles that could reach the USA (the UK nuclear weapons are not independent of the USA, we need US involvement to use them).

MediumTex wrote: Do you regret that the U.S. didn't go to war with North Korea a few years ago to prevent it from getting nuclear weapons?

Nuclear proliferation is one of those puzzles that I just don't know how to solve.

Economic sanctions cause a lot of misery but very, very rarely work.  (Apart from South Africa, few effective examples come to mind.)  Edit: And after the 2000s, the downsides of war probably don't need to be cataloged here.

During the Cold War, the pragmatism and rationality of the United States and the Soviet Union kept us from going over the brink.  In short, both the leaders of the United States and the Soviet Union greatly, greatly treasured the idea of not being annihilated.

We have not yet experienced a world where nuclear weapons are within easy reach of irrational actors or even actors against whom we have no easy means of threatening retaliation.  Fanatics are unlikely to behave the way that the stars of the Cold War behaved.  The Iranian people aren't fanatical enough to do this.  Even their theocratic government probably isn't.  But... is the Iranian government fanatical enough to sell a bomb to someone who might have some really unpleasant things in mind?  How responsible will they be with this technology?

It's like hearing that some stranger has the key to your house.  What kind of people does this person hang around with?  How carefully will this person guard your key?  How many degrees of separation are they from the neighborhood axe murderer?

No rhetorical questions here.  No answers, either.  Just questions.

LW,

You said exactly what I think.  For some reason I'm not nearly as afraid of the nuke that Iran has developed for themselves, but the one they let out the back door.

Is Pakistan any comparison in terms of likely nuclear proliferation to terrorists?  We seem to be relatively complacent with them having one...

Lone Wolf wrote: We have not yet experienced a world where nuclear weapons are within easy reach of irrational actors...

I shudder to think of what might happen if this irrational actor were to get his hands on a nuke.

moda0306 wrote: Is Pakistan any comparison in terms of likely nuclear proliferation to terrorists?  We seem to be relatively complacent with them having one...

I imagine that there's little left to do but act casual once the toothpaste's out of the tube. 

Tortoise wrote:

Lone Wolf wrote: We have not yet experienced a world where nuclear weapons are within easy reach of irrational actors...

I shudder to think of what might happen if this irrational actor were to get his hands on a nuke.

LOL!

It saddens me that the last words spoken before the world was consumed in nuclear fire would be "Your worst nightmare, butt-horn!"

http://www.youtube.com/watch?v=9T2S8GHzxqc

Lone Wolf wrote:
It saddens me that the last words spoken before the world was consumed in nuclear fire would be "Your worst nightmare, butt-horn!"

http://www.youtube.com/watch?v=9T2S8GHzxqc

hahaha! Gosh, if some or all of us have to go down in flames, I hope it's Danny Trejo behind the button and not Gary Busey.

The fact that there wasn't a murmur as Pakistan developed nuclear weapons makes me wonder whether all of this actually has anything to do with nuclear proliferation.

How much war interest would there be if the draft was re-established and a separate tax was levied for the cost of the war.

brick-house wrote: How much war interest would there be if the draft was re-established and a separate tax was levied for the cost of the war.

TPTB learned their lesson during Vietnam - never draft civilians for an unjustified war.  It's far easier to appropriate money for contractors than to haul college kids off to the slaughter.