Iran Inflation pushed by Incompetence+Restrictions

[Abdul]

Economic sanctions against Iran are really beginning to bite now. Hyperinflation has struck its currency, causing the rial to lose more than half its value against the dollar in the past couple of months.

The falling currency is putting severe pressure on Iranian civilians, which has led to street protests and riots. This week riot police had to fire tear gas at crowds of protestors, and now hundreds of security personnel roam the streets to try and deter any more campaigns.

The inflation, estimated at 29 percent last week, is causing food prices to soar. Milk rose by 9 percent yesterday, and Behrouz Madani, a butcher from northwest Tehran, said that chicken, once a staple of Iranian meals, has doubled in price since last year.

In fact meat has become so expensive that it is generally considered a luxury good now.

“Most of my customers just look at products behind the window and pass,” he said. “I see them going to the next store, which is a bakery, to feed their families with bread.”

Mostafa Daryani, whose family owns a Tehran supermarket chain, remarked that the people “are nervous about tomorrow and next week because they don’t know how much more expensive things will be. They only buy their daily needs and ignore most of the things that are not urgent for daily life. Instead of one bottle of milk, they buy two.”

[niseag]

Abdul,
29% would be nice, more like 79% and that is conservative, the currency lost 50% of the value and chicken is even difficult to get, never mind the prices, most middle class and below live of bread and rice, meat once a month if you are lucky; even the Mullah's are starting to run scared, because if the people don't eat, than the situation gets explosive, sure they all have their Swiss accounts, but....... and Allah beware the US unclassified the Mojahedin-e-Khalq Organization (MEK) [ a combination of Marxism, Nationalism and Shia Islam] from the Terrorist list and they are worse than the Mullah's.

People forget that Maryam Rajavi said when Saddam used his tanks against Kurds:
"Take the Kurds under your tanks, and save your bullets for the Iranian Revolutionary Guards."

Masoud Rajavi created a cult claiming to have a mystical relationship with a prophet known as Imam Zaman, (the Mahdi or Twelfth Imam of Shia Islam).

and things haven't gotten any better. So Iranians have no where to go, but the more inflation and higher living cost with sinking income air is getting difficult to breath in Tehran.

[Sapphire Capital]

“It’s time to broaden the war to other fronts,” enthuses an unsigned editorial at Bloomberg View. The editors are speaking of the U.S. sanctions against Iran, and they’re not using the word “war” metaphorically.

“A hidden and heavy war on a planetary scale,” is how Iranian president Mahmoud Ahmadinejad described the sanctions when he spoke to the United Nations last month. “I can see the global conspiracy clearly.”
Hyperinflation Hits Iran Like Weapon Of Mass Destruction Addison Wiggin Addison Wiggin Contributor

“He’s right,” say the Bloomberg editors. “and the Iranian rial’s death spiral is the first clear sign that we’re on a path to victory.” The economic meltdown there is all good, they say: The 50% drop in oil exports over the last year, an unofficial inflation rate of 70% and an unofficial unemployment rate of 35%.

The protests, put down so brutally by the cops last week? They’re all good, says Bloomberg: “Sanctions are a long game, and the objective isn’t to starve the increasingly restive Iranian people but to convince them that their leaders no longer have their best interests at heart.”

As Hazlitt and Bastiat before him have shown, war is a boon for some but a disaster for everyone else.

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“Don’t be surprised to hear as an additional argument,” writes 28-year CIA veteran and Georgetown professor Paul Pillar providing us with our 5 Min. forecast for the day, “that it would be a mistake to let up the pressure on Iran at a time when the mullahs’ regime seems to be teetering and there is hope for being rid of that regime once and for all.
English: THE KREMLIN, MOSCOW. With President o...

Mahmoud Ahmadinejad

Are the sanctions meant to influence the regime or to topple it? It can’t be both, Pillar says: “Holding out hope that sustained pressure will hasten regime change in this case represents a bad bet. Even if regime-change-wishers had a better bet to make,” he adds, “they need to think hard about what they are wishing for. Much of what they don’t like about Iran is not unique to the Islamic Republic and would continue under any imaginable successor regime. That includes the current nuclear program, which began under the shah and has broad public support. It also includes many other things, including opposition to Israeli policies in the region.”

Meanwhile, ordinary Iranians suffer still more.

source: www.forbes.com/sites/greatspeculations/2012/10/10/in-terms-of-hyperinflation-iran-going-the-way-of-weimar/

[alefdracon]

The Iranian Rial has just suffered one of the most cataclysmic crashes in the recent history of the foreign exchange markets. It was off 25% last week, and has plummeted a mind-numbing 72% since the beginning of 2011. One dollar bought 35,500 Rials. Watch out Zimbabwe!

When communications between intelligence agencies suddenly spike, as has recently been the case, I sit up and take note. Hey, do you think I talk to all of those generals because I like their snappy uniforms?

The word is that the despotic, authoritarian regime in Syria is on the verge of collapse, and is unlikely to survive more than a few more months. The body count is mounting, and the only question now is whether Bashar al-Assad will flee to an undisclosed African country or get dragged out of a storm drain to take a bullet in his head a la Gaddafy. It couldn’t happen to a nicer guy.

The geopolitical implications for the US are enormous. With Syria gone, Iran will be the last rogue state hostile to the US in the Middle East, and it is teetering. The next and final domino of the Arab spring falls squarely at the gates of Tehran.

Remember that the first real revolution in the region was the street uprising there in 2009. That revolt was successfully suppressed with an iron fist by fanatical and pitiless Revolutionary Guards. The true death toll will never be known, but is thought to be in the thousands. The anti-government sentiments that provided the spark never went away and they continue to percolate just under the surface.



At the end of the day, the majority of the Persian population wants to join the tide of globalization. They want to buy iPods and blue jeans, communicate freely through their Facebook pages and Twitter accounts, and have the jobs to pay for it all. Since 1979, when the Shah was deposed, a succession of extremist, ultraconservative governments ruled by a religious minority, have failed to cater to these desires.

When Syria collapses, the Iranian “street” will figure out that if they spill enough of their own blood that regime change is possible and the revolution there will reignite. The Obama administration is now pulling out all the stops to accelerate the process. Secretary of State Hillary Clinton has stiffened her rhetoric and worked tirelessly behind the scenes to bring about the collapse of the Iranian economy.

The oil embargo she organized is steadily tightening the noose, with heating oil and gasoline becoming hard to obtain. Yes, Russia and China are doing what they can to slow the process, but conducting international trade through the back door is expensive, and prices are rocketing. The unemployment rate is 25%.

Iranian banks have been kicked out of the Swift international settlements system, which would be a death blow to their trade. That is what the Standard Chartered money laundering scandal is all about. Sure, you can sell oil one truckload at a time for cash. Try doing that with 3 million barrels a day of oil which should fetch $270 million. That’s a lot of Benjamins. Forget the fives and tens.

Let’s see how docile these people remain when the air conditioning quits running because of power shortages. With their currency now worthless, it has become impossible to import anything. This is causing severe shortages of everything under the sun, especially foodstuffs, which in some cases have more than doubled in price in months.

What does the government in Tehran say about all of this? Blame it on the speculators. Sound familiar?

Iran is a rotten piece of fruit ready to fall of its own accord and go splat. Hillary is doing everything she can to shake the tree. No military action of any kind is required on America’s part. Think of it as victory on the cheap.

The geopolitical payoff of such an event for the US would be almost incalculable. A successful Iranian revolution will almost certainly produce a secular, pro-Western regime whose first priority will be to rejoin the international community and use its oil wealth to rebuild an economy now in tatters.

Oil will lose its risk premium, now believed by the oil industry to be $30 a barrel. A looming supply could cause prices to drop to as low as $30 a barrel. This would amount to a gigantic $1.66 trillion tax cut for not just the US, but the entire global economy as well (87 million barrels a day X 365 days a year X $100 dollars a barrel X 50%). This is why I have been hammering every rally in Texas tea from the short side.

Almost all funding of terrorist organizations will immediately dry up. I might point out here that this has always been the oil industry’s worst nightmare. Commercial office space in Houston may not do so well either, as imports account for 80% of the oil majors’ profits.

At that point, the US will be without enemies, save for North Korea, and even the Hermit Kingdom could change with a new leader in place. A long Pax Americana will settle over the planet.

The implications for the financial markets will be enormous. The US will reap a peace dividend as large, or larger, than the one we enjoyed after the fall of the Soviet Union in 1992. As you may recall, that black swan caused the Dow Average to soar from 2,000 to 10,000 in less than eight years, also partly fueled by the technology boom.

A collapse in oil imports will cause the US dollar to rocket. An immediate halving of our defense spending to $400 billion or less and burgeoning new tax revenues would cause the budget deficit to collapse. With the US government gone as a major new borrower, interest rates across the yield curve will fall further.

A peace dividend will also cause US GDP growth to reaccelerate from 2% to 4%. Risk assets of every description will soar to multiples of their current levels, including stocks, junk bonds, commodities, precious metals, and food. The Dow will soar to 20,000, the euro collapses to parity, gold rockets to $3,000 an ounce, silver flies to $100 an ounce, copper leaps to $6 a pound, and corn recovers $8 a bushel. The 60 year bull market in bonds ends in a crash.

Some 1 million of the armed forces will get dumped on the job market as our manpower requirements shrink to peacetime levels. But a strong economy should be able to soak these well trained and motivated people right up. We will enter a new Golden Age, not just at home, but for civilization as a whole.

Wait, you ask, what if Iran develops an atomic bomb and holds the US at bay? Don’t worry. There is no Iranian nuclear device. There is no real Iranian nuclear program. The entire concept is an invention of Israeli and American intelligence agencies as a means to put pressure on the regime. The head of the miniscule effort they have was assassinated by Israeli intelligence earlier this year (a magnetic bomb, placed on a moving car, by a team on a motorcycle — nice!). What nuclear infrastructure they have is being decimated by viruses as I write this.

If Iran had anything substantial in the works, the Israeli planes would have taken off a long time ago. There is no plan to close the Straits of Hormuz, either. The training exercises in small rubber boats we have seen are done for CNN’s benefit, and comprise no credible threat.

I am a firm believer in the wisdom of markets, and that the marketplace becomes aware of major history changing events well before we mere individual mortals do. The Dow began a 25 year bull market the day after American forces defeated the Japanese in the Battle of Midway in May of 1942, even though the true outcome of that confrontation was kept top secret for years.

If the collapse of Iran was going to lead to a global multi decade economic boom and the end of history, how would the stock markets behave now? They would rise virtually every day, led by the technology sector, offering no substantial pullbacks for latecomers to get in. That is exactly what they have been doing since mid-December. If you think I’m “Mad”, just check out Apple’s chart below.









source: www.resourceinvestor.com/2012/10/10/why-you-should-care-about-the-iran-rial-collapse

[Sasan Fayazmanesh]

In September and early October of 2012 the Iranian currency, rial, was in a state of free fall relative to the value of major world currencies and gold. The government of Iran, as well as the Central of Bank of Iran (Bank Markazi), appeared to be helpless in stopping the nosedive.

The adversaries of Iran, particularly Israel and the US, were jubilant and attributed the currency crisis to the success of “crippling,” “paralyzing” or “lethal sanctions,” to use various descriptions of these sanctions by US-Israeli officials. On September 30, 2012, Reuters quoted Israeli Finance Minister Yuval Steinitz as saying: “The sanctions on Iran in the past year jumped a level” and Iran’s economy “is not collapsing, but it is on the verge of collapse.” “The Iranians,” he went on to say, “are in great economic difficulties as a result of the sanctions.” Similarly, in a daily press briefing on October 1, 2012, US Department of State Spokesperson Victoria Nuland had the following exchange with a reporter:

QUESTION: Iran. The Iranian currency has lost about a quarter of its value in the last week alone. Is the Department pleased to see this? It seems to reflect the efficacy of the sanctions against Iran. Are you dismayed by it, or what is your view?

MS. NULAND: You’d like an adjective of choice?

QUESTION: I’d like a verb, really.

MS. NULAND: You’d like a verb, yeah. Well –

QUESTION: Delighted?

MS. NULAND: — simply to confirm what you are seeing, Arshad, our understanding is that the Iranian currency has dropped to a historic low today against the dollar in informal currency trading. This despite some frantic efforts by the Iranian Government last week to try to prop it up, rearrange the way it dealt with these issues. From our perspective, this speaks to the unrelenting and increasingly successful international pressure that we are all bringing to bear on the Iranian economy. It’s under incredible strain. Iran is increasingly cut off from the global financial system. Significant amounts of Iranian oil is also coming off the market. As you said, the currency is plummeting. And firms all over the world are refusing to do business with Iranian companies.

The jubilation and boastfulness about the success of sanctions were more subdued when the question was put differently to Secretary of State Hilary Clinton a few days later. In a press conference Clinton was asked about the efficacy of “hurting” the Iranian people by means of sanctions. She answered:

I think the Iranian Government deserves responsibility for what is going on inside Iran. And that is who should be held accountable. And I think that they have made their own government decisions, having nothing to do with the sanctions that have had an impact on the economic conditions inside the country. And of course, the sanctions have had an impact as well, but those could be remedied in short order if the Iranian Government were willing to work with the P-5+1 and the rest of the international community in a sincere manner.

What the Secretary was apparently trying to say was that the currency crisis was more due to the Iranian government’s economic mismanagement rather than sanctions levied against Iran. If that is what she meant, she was not alone in her analysis.

There have been, indeed, various explanations as to what caused the recent economic crisis in Iran, particularly the free fall in rial. But, for the most part the explanations seem to concentrate on the effect of draconian sanctions imposed on Iran by Israel’s allies, the US and EU, as well as the ineptness of the Iranian government, led by President Ahmadinejad, in dealing with the sanctions. Which one is more to blame would depend on the political perspective of the analyst. The opponents of Ahmadinejad put the blame largely on him. For example, the speaker of the Iranian Parliament Ali Larijani, a political rival of Ahmadinejad, told the Fars New Agency on October 3, 2012, that 80% of the problem in Iran is due to mismanagement and 20% due to sanctions. Similarly, an opinion survey of some Iranian economists by the Iranian Labor News Agency on October 2, 2012, showed that they mostly blame the Iranian government for the “currency tsunami.” These economists criticized the government for such things as disdain for the economic profession, doing away with the Management and Planning Organization of Iran, shrugging off the effects of sanctions, lacking any concrete plan to deal with sanctions, showing little transparency in financial matters, rent seeking, giving out cash subsidies after the removal of some price control, and arcane and arbitrary ideas of Ahmadinejad that interfere with the work of the Central Bank. Some even criticized Bank Markazi’s own inability and confusion as to how to deal with the economic woes of Iran.

In fact, the latest policies of the Central Bank, as well as the Ministry of Finance, have raised the ire of many Iranians. Faced with the falling value of rial and rising inflation, the Central Bank has followed a complicated set of exchange rates: a fixed rate of 12,260 rial per dollar for imports of some essential items, a free or floating market rate for non-essential items, and a rate 2% less than the free market rate for items in between. Moreover, on September 23, 2012, the Central Bank created a “currency exchange center” that would offer dollars at the market rate minus 2%. Yet, the creation of this center failed to calm the market and the Central Bank was accused of not providing enough currencies to the center. Indeed, the measure came too late to have any calming effect.

The Iranian rial has faced troubles a number of times in the past two years. The first major currency crisis appeared in September of 2010, when in two days the Iranian currency gyrated from 10,850 to 13,000 rials per dollar and then back to 12,200 rials per dollar. The devaluation was actually bigger on a weekly basis. A week earlier rial had traded at the rate of 10,500 per dollar (Financial Times, September 29, 2010). As most financial reports pointed out, the same devaluation of rial had taken place relative to the value of other currencies and gold.

The next crisis in rial occurred in September of 2011, when the Iranian currency fell to 13,000 rials per dollar. As the result of intervention by Bank Markazi, in October of 2011 the Iranian currency gained some of its value and reached a high of 10,750 rials per dollar. But in December of 2011, once again, the currency nosedived, reaching 15,150 rials per dollar on the street (The New York Times, December 20, 2011). One day later, the Iranian currency was trading at 15,800 rials per dollar (AFP, December 21, 2011).

By January 1, 2012, rial was trading at 16,000 per dollar, and the day after at 17,800 (khabaronline.ir). The Central Bank of Iran intervened by providing liquidity in the form of foreign currencies, and on January 3, 2011, the rial rose to 16,200 per dollar. But by January 10, 2012, the rial had once again fallen to the level of 17,200 per dollar (khabaronline.ir). On January 16, 2012, according to AP, Iran’s Central Bank deputy governor stated that “trading foreign currency outside of banks and licensed currency exchange operations was now banned.” The announcement did not do much to calm the market. On January 18, 2012, AFP reported that the Iranian currency was trading at 18,000 rials per dollar. The report also stated that Iran’s Minister of Economic Affairs and Finance Shamseddin Hosseini and Central Bank chief Mahmoud Bahmani were summoned before the Iranian parliament to explain the situation, and they “promised to bring the exchange rate under control.” In addition, the report stated that the price of gold coins in Iran had risen 16 percent in one week. On January 22, 2012, ISNA reported that the Iranian currency had fallen to 20,000 rials per dollar, and the following day The Christian Science Monitor reported that the “rial reached an all-time low today at 21,000 rials to the dollar.” Two days later, on January 24, 2012, Saham News was reporting that a dollar on Tehran’s street was selling for 23,000 rials. The Iranian currency was in a state of free fall.

On January 25, 2012, Reuters reported that “Ahmadinejad has agreed with the approval of the Money and Credit Council to increase interest rates on bank deposits to up to 21 percent.” Central Bank Governor Mahmoud Bahmani was quoted as saying: “Travelers, university students and patients will be supplied at an appropriate rate. . . The government will not give foreign currency for storage.” One day later, on January 26, 2012, Mehr News Agency reported that the Central Bank of Iran has set the official rate of exchange at 12,260 rials per dollar and would allow the currency traders to exchange dollar for 3-5 % more than the official rate. However, the report went on to say, those who sell at a higher rate than allowed by the Central Bank might lose their licenses. On the same day, an Iranian currency dealer, Mesghal, was offering dollar at the rate of 17,000 rials. Over the next few days the dollar steadily rose in the free market and passed 18,000 rials. It finally settled at the offer price of 18,980 rials in the market, while the official rate continued to be 12,260 rials.

Following its lows in January of 2012, the Iranian currency slowly rebounded. On May 13, 2012, the offer price of the dollar in the currency market stood at 15,750 rials (Mesghal Online). But in July and August of 2012 another free fall in the value of rial started. By early July the offer price of a dollar in the currency market stood above 19,600 rials and by early August it went over 21,000. Bank Markazi, which still tried to maintain the value of currency at the official rate of 12,260 rials per dollar, appeared to be powerless in dealing with the currency crisis. Indeed, the entire government of Iran seemed to be unprepared to deal with the effect of accumulating sanctions, particularly the EU sanctions that became officially effective on July 1, 2012. AP reported that according to Vice President Mohammad Reza Rahimi, authorities in Iran had already stockpiled imported goods and hard currency to help cushion the blow to the economy. Similarly, the same AP report quoted Iran’s Central Bank Governor Bahmani as saying: “We have not remained passive. To confront the sanctions, we have plans in progress.” However, the subsequent economic difficulties did not support the existence of any meaningful contingency plan. Indeed, the July 7, 2012 meeting of heads of three branches of the Iranian government to draw up policies to combat sanctions, which was reported by Mehr News Agency, indicated a lack of any serious plan to deal with the draconian sanctions. Some at the highest level of the Iranian government even tried to downplay the seriousness of the sanctions. For example, on July 7, 2012, Ayatollah Khamenei was quoted by AFP as saying: “Westerners are making much hype about sanctions against Iran but they don’t understand that they have vaccinated the Iranian people themselves by imposing sanctions over the past 30 years. . . [Iran] has resisted all sanctions and is now 100 times stronger than 30 years ago.”

By the end of August 2012 the offer price of the dollar stood at 21,930 rials, while the Central Bank Governor Bahmani was promising lower rates soon (ILNA, August 29, 2012). Then a free fall in the value of rial started. By the end of September the price of dollar was in zones never seen before, 30,500 rial per dollar (ILNA, September 30, 2012). Frantic meetings of government officials, the Central Bank’s complicated scheme of three rates of exchange, creation of the currency exchange center, and repeated promises that the relief is on the way, did not stop the free fall. On October 2, 2012, Mesghal Online posted its offer price per dollar: 35,500 rials. Then the website stopped posting the price of dollar in rial. On the same day ILNA reported even a higher price for the dollar: 36,200 rials per dollar! Cleary rial was now in a state of free fall. There were protests in the streets of Tehran and, in particular, in the bazar. Arrests were made and a few individuals were charged with creating market disturbances. Trading stopped on October 4 and then resumed on October 6, with the price of the dollar falling to 28,500 rials.

The September-October 2012 currency crisis in Iran is therefore not new. Such crises have been coming in waves. But each time a new lower value for rial is established. Like many economic crisis elsewhere, past or present, it is difficult to say what is causing these waves. Usually, a massive economic crisis appears to be multifaceted, the result of a perfect storm. The repeated currency crises in Iran seem to be no exception. A number of problems that have led to the creation of the recent crisis were mentioned in the survey of Iranian economists referred to above. Among these, however, two problems stand out: the accumulation of ruthless sanctions imposed on Iran and the ineptness of the government and the Central Bank of Iran to plan for, and deal with, the effects of these sanctions.

The sanctions imposed on Iran by the US and EU, mostly as a result of pressure from Israel, are adversely affecting the Iranian economy. This is, indeed, what the “crippling,” “paralyzing,” or “lethal sanctions” are supposed to do: destabilize the economy, inflict pain on the population, bring about panic and riots, overthrow the government of Iran, and install a US-Israel friendly government. That is why people such as Israeli Prime Minister Benjamin Netanyahu continuously threaten Iran with military actions. The threats are intended mostly to bring about harsher and harsher sanctions. They are also intended to create fear and uncertainty in the financial and productive sectors of the Iranian economy.

The Iranian government and the Central Bank of Iran have shown to be mostly inept in dealing with the effect of these sanctions. As some Iranian officials have at times admitted, the US-EU sanctions are tantamount to declaring an economic war on Iran. Iran, therefore, faces a war economy and the resulting inflationary pressure. Yet, for the most part, many Iranian officials at the highest level of power refuse to admit this. Some continue to boast about the ineffectiveness of the sanctions. Others, particularly Iranian military officials, add to the fear, uncertainty and speculative bubbles by repeatedly talking about an impending military attack on Iran by Israel, US, or both, and how Iran can withstand such an attack and even retaliate. Such utterances actually play into the hands of Israel and its US-EU allies.

Ruthless sanctions and threats of war are creating financial instability in Iran, and this could easily escalate into a massive and uncontrollable economic crisis followed by social unrest. Unless these sanctions are taken seriously by the Iranian government and drastic actions are taken to calm the market, Iran’s adversaries could accomplish what they set out to achieve.

[Rick Gladstone]

Western economic sanctions imposed on Iran over its disputed nuclear program have severely depressed the value of its national currency, the rial, causing higher inflation and forcing Iranians to carry ever-fatter wads of bank notes to buy everyday items. But the sanctions have also presented a new complication to Iran’s banking authorities: they may not be able to print enough money.

At least three European companies that have been providing currency production services to Iran say they have stopped doing business there. One of the companies, Koenig & Bauer AG of Würzburg, Germany, also says it has not responded to an Iranian request for bids to make presses to print new rials.

Koenig & Bauer’s disclosure was contained in a mailed response to a query by United Against Nuclear Iran, a New York-based sanctions advocacy group, which seized upon the 40 percent drop in the rial’s value this month to begin a campaign aimed at the currency itself.

The group began by pressing the Europe-based bank note industry, which has historically counted Iran as a client, to further ostracize the country by denying its central bank the basics of a functioning currency system: the printing presses, engraving paper, anticounterfeiting technology and other services needed to provide enough rials.

“By manipulating and increasing the printing volume of the rial, the regime can bolster its floundering currency and mask the disastrous impact of its political decisions, economic mismanagement and isolation,” Mark D. Wallace, the chief executive of United Against Nuclear Iran, said in announcing the campaign.

In letters to Koenig & Bauer and two other companies in the bank note business, De La Rue P.L.C. of Hampshire, England, and Flint Group of Luxembourg, he said that European Union sanctions already prohibit Europe-based bank note companies from providing such services to Iran’s central bank.

Rob Hutchison, a spokesman for De La Rue, said on Tuesday in a telephone interview, “We don’t provide technical support or services to Iran.”

Nathan Carleton, a spokesman for United Against Nuclear Iran, said in an e-mail that it had been contacted on Tuesday by Flint Group, which said it was no longer active in Iran.

As inflation erodes the rial’s purchasing power, Iran’s central bank must increase the supply of money, which risks hyperinflation, a cycle of rising prices and rising volumes of money in circulation. Denying the bank’s ability to increase the supply of money would theoretically hasten an economic crisis.

Some economists, however, say the campaign to restrict rial circulation may have the unintended consequence of helping Iran. They point to hyperinflation in the former Yugoslavia from 1992 to 1994 and Zimbabwe in 2007 and 2008. In both cases, the authorities could not print money fast enough to outpace their currency’s falling value and the systems collapsed; Yugoslavs began using a new currency tied to the German mark, and Zimbabweans used a currency tied to the American dollar. And the cycle of higher prices ended.

Steve H. Hanke, an economist at Johns Hopkins University, said that in Iran’s case, limiting the amount of rials in circulation “would solve the biggest problem they have: inflation.”

But Mr. Wallace said that in Iran’s economic system, the authorities “must maintain the ability to manipulate their money supply and must maintain the integrity of their currency.” Without sophisticated security and printing technology, he said, “Iran may not be able to do either — hastening the demise of the rial.”