TEHRAN (Iran News) Global economic experiences and field-tested models now provide relatively comprehensive solutions that any country, once it has properly understood its unique context, can selectively implement to establish a sustainable economic framework. However, when we speak of a “sick economy,” we are essentially summarizing the negative outcomes of misguided policies in just a few words.

Over the past century, Iran has been repeatedly subjected to waves of decisions made either under domestic political pressures or in response to severe shortfalls and constraints. In some cases, the absence of any decision at all has proven even more detrimental—indeed, inaction is often the worst kind of economic illness.

Broadly speaking, Iran’s economy has never been truly “popular” or people-centric. It might more accurately be described as state-dominated. This has caused chronic confusion and instability for ordinary citizens, who have rarely experienced periods of economic stability. Consequently, the groundwork for a truly people-oriented economy has never taken root.

A people-centered economy is one where ordinary citizens—not governments or large corporations—form the backbone of economic activity. In such a model, the government’s role is limited to statistical oversight, with no direct intervention. Prices are set purely by the dynamics of supply and demand—a system that has endured for millennia.

In this model, every unit of supply is matched against demand, creating inherent stability. Unfortunately, half of Iran’s modern economic history—particularly since the revolution—has been marked by excessive state intervention. Economic storms brought about by poor policy and mismanagement have driven capital flight, fueled unstable decision-making, anchored the economy to foreign exchange fluctuations, and most disastrously, entrenched a form of state capitalism that has widened inequality, given rise to nouveau riche elites, and deepened mass poverty.

Inflation, largely stemming from chronic budget deficits, has compounded over time. Government decisions to authorize private banks have only driven up interest rates, placing monetary control in the hands of newly rich elites. This is a compounding injury—a wound upon a wound—where monetary governance is now dominated by entities lacking both religious and national legitimacy.

Parliamentary laws, meanwhile, have either gone unimplemented or failed to have meaningful impact on major economic sectors. Today, Iran’s economy—trapped under the weight of international sanctions—faces a narrow, treacherous path forward.

Policy instability discourages investment by preventing entrepreneurs from predicting future conditions. This stifles new business development and hampers industrial growth, leading to stagnation in production. With production stagnant, supply tightens. Inflation escalates, adding yet more instability.

As prices rise, the real value of people’s income erodes. When wages remain static while the prices of basic goods—bread, meat, chicken, milk, and more—climb monthly, the public can no longer afford essentials. This breeds economic recession alongside inflation.

Worse still, market pricing is increasingly based on NIFO principles (“Next In, First Out”), which means current prices reflect future replacement costs rather than actual current costs. In this setup, if we consider foreign currency as a strategic commodity, the free-market exchange rate effectively becomes the benchmark for future prices—further fueling inflation. As mismatches in policy feed off each other, the condition of our economic patient worsens, moving ever closer to a terminal stage.

Today, the administration of President Pezeshkian sees exchange rate increases as the path to budgetary balance. The Central Bank is working to reduce allocations of subsidized foreign currency for essential goods and shift gradually toward the “NIMA” exchange rate system—raising the rate from 28,500 tomans per dollar to 70,000 tomans.

Though this policy shift is being rolled out gradually, it has already stirred market anxiety and diminished national resilience—especially critical in times of external threats. As a result, July and the months to come are likely to face inflation rates exceeding 40%.

The government must be urged to pause. These decisions should be postponed until after the looming crisis with the U.S. and NATO is resolved. Otherwise, the administration may find itself accused of undermining the nation’s resilience from within.

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TEHRAN (Iran News) According to the report, the Consumer Price Index (CPI) for households reached 285.1 in the month under review, reflecting a 2% rise compared to the previous month and a 31.4% increase year-on-year.

Over the 12 months ending in December 20, inflation was recorded at 32.5%, underscoring a slight 0.6% easing in inflationary pressures.

The month-on-month inflation rate for this month showed a 1.1 percentage point reduction compared to the previous month, signaling continued moderation in price growth.

Figures released last week by the Central Bank of Iran (CBI) suggested that the country’s inflation had eased to its lowest since 2020 when prices started to rise because of the US sanctions and the economic impacts of the coronavirus pandemic.

CBI figures showed that Iran’s annual inflation rate had dropped to 37.3% in the calendar month to November 20.

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Speaking in his New Year meeting with the CBI staff, Dr. Mohammad Reza Farzin pointed to the naming of the current year by the Supreme Leader as the year of “inflation control and production” and stipulated that materialization of the goal of curbing inflation hinges on liquidity control, curbing the rise in the government expenditures and taking proper financial and foreign policies.

Farzin noted that regarding the inflation, the central bank plays key role, emphasizing that for years inflation has turned into a chronic issue in Iran’s economy and all of the establishment should work to curb it. He added that regarding the liquidity, he believes all indicators should be directed to the generative markets in order that its effects can be seen in curbing inflation and production growth.

He reiterated that taking a proper foreign policy will help the adopted policies in the forex and monetary markets, adding that for curbing the inflation, the country needs monetary and financial policies.

Farzin also emphasized reform in the banking system and pointed to some problems of banks in recent years which should be taken into consideration during reforming banking system in order to control liquidity and curbing inflation.

He then pointed to the launch of center for forex and gold exchanges and the role of this center in the region and the world, reiterating that this center has irreplaceable role in economic stability and deepening the forex market and in the future after the removal of the sanctions will boost the relations in the region and the world and it even under the sanction can help stability in the forex market by using modern existing forex tools.

Farzin reiterated that the Central Bank is the most important economic body in any country and it is very influential in the financial policies of the countries and its decisions can have daily impact on other markets and therefore decision-making in the bank is very tough and vital.

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TEHRAN (Iran News) – A member of Tehran Chamber of Commerce, Industry, Mine and Agriculture says what the government says on reducing the inflation and forex rate depends completely on the amount of oil sales and reiterated that limiting the trade to only some certain countries is not good policy.

Speaking to ILNA, Ferial Mostofi said that in the past years all governments have talked about controlling the inflation but the reality of the market shows that all of them have been unable in curbing the inflation.

She termed inflation as the biggest threat to the national economy, adding that in recent years lack of proper management in economy and the international sanctions have led to the growth in liquidity and this growth has caused rise in inflation while in all developmental plans the governments had decided to unify the fore rate but all their words have left as just slogans.

She noted that the main task of the Central Bank in economies of the countries is to control the inflation, adding that in Iran the Central Bank is some part of the government and therefore it cannot focus on its main task which is to curb the inflation.

She reiterated that if the government tries to advance the economy with its past policies it will be unable to curb the inflation because curbing the inflation by the government needs precise planning and their proper implementations.

Ferial noted that one cannot expect a single-digit inflation rate this year because the market says so. She added that the supply-and-demand mechanism should determine the prices in the market and when there is not enough forex in the market, it is natural its price to go up. She reiterated that sanctions have also increased the price of forex in the country, noting that once Iran’s oil revenues used to exceed $100b but today it is around $16b and access to its money is also difficult.

She said that if the country can sell oil easily and return its money, it is expected the inflation and forex rate to decrease because curbing inflation is possible in the healthy economy while Iran’s economy is currently in the unhealthy condition.

She said that almost 70% of the trade in the world is done in dollar but it is wrong decision for Iran to focus on other currencies and restricting trade to some certain countries is not a correct policy and its outcomes are evident in the economy.

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The announcement, which contradicts a more aggressive withdrawal of crisis support by the US Federal Reserve and Bank of England this week, led to a slump in eurozone bond markets on Thursday as investors absorbed the ECB’s scheme to sharply reduce its bond purchases in 2022.

ECB President Christine Lagarde said the eurozone economy had recovered enough to allow a “step-by-step reduction in the pace of asset purchases,” but noted that “monetary accommodation is still needed for inflation to stabilize at our 2 percent inflation target over the medium term.”

With some investors reacting to the news by accusing the ECB of allowing inflation to run out of control, however, the European statistics agency Eurostat said its early flash reading of inflation in November had reached the highest level since relevant records began in 1997, two years before the euro was launched.

The sharp hike marked a giant upsurge from last year when Europe recorded deflation of 0.3 percent. A price increase of such scale was last recorded in the EU in July 1991.

High gas prices and the cost of imported goods were blamed for the inflationary surge. Energy prices – including oil and gas – jumped 27 percent from November 2020, according to Eurostat figures, to increase the headline rate from 4.1 percent in October.

According to local press reports, just in November, consumer prices in the euro area climbed by 0.4 percent.

Core annual inflation – which excludes volatile costs on energy and unprocessed food – also surged to 2.6 percent from 2 percent in the previous month.

Experts say that higher energy prices and persisting supply chain disruptions are the key drivers of the price surge, having significantly slowed the EU’s post-pandemic economic recovery.

Until recently, press reports add, Lagarde – like most central bank governors – had insisted that inflationary pressures would prove to be temporary and would probably start to wane in 2022, though other economists have discounted that notion as “wishful thinking.”

Some analysts further explained that the strength of rising core prices above the ECB’s 2-percent target showed the headline inflation rate was already having secondary effects through higher wage demands.

However, ECB authorities are expected to take a more cautious view, holding back from announcing any big policy changes while tests are carried out on the effects of Omicron.

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Here are the main figures effecting low and middle income American families: Fuel oil prices soared 12.3% for the month, part of a 59.1% increase over the past year.

Energy prices overall rose 4.8% in October and are up 30% for the 12-month period.

Used vehicle prices again were a big contributor, rising 2.5% on the month and 26.4% for the year. New vehicle prices were up 1.4% and 9.8%, respectively.

Food prices also showed a sizeable bounce, up 0.9% and 5.3% respectively. Within the food category, meat, poultry, fish and eggs collectively rose 1.7% for the month and 11.9% year over year.

The Labor Department says wages after inflation fell 0.5% from September to October, the product of a 0.4% increase in average hourly earnings that was more than offset by the Consumer Price Index surge.

Republicans have been quick to attack (repeatedly) President Joe Biden and Democratic lawmakers over the hike in inflation as well as hammering his economic stimulus plans as misguided. Writing on social media, Republican senator for Florida, Marco Rubio lashed out by saying “this will be a winter of high gas prices, shortages and inflation because far left lunatics control our government.”

According to the American multinational independent investment bank, Jefferies Group LLC, fueled by a persistent shortage of available workers, wage pressures will take over as the dominant driver of U.S. inflation in the second half of next year

The bank has reported that it believes “the U.S. is entering the tightest labor market conditions since the 1950s” As a result, wage pressures are not likely to ease any time next year, keeping inflation high even as the supply chain bottlenecks ease.

The U.S. is still six million jobs away from returning to the pre-pandemic employment-to-population ratio, a goal that Jefferies Bank says is “no longer attainable.”

Before President Joe Biden’s virtual meeting with Chinese President Xi Jinping began on Monday, two dozen business groups had called on the Biden White House to remove Trump-era tariffs on China to help ease the historic inflation. In a letter to Biden, the business groups warned tariffs on China and retaliatory levies are hurting U.S. companies and families by raising costs.

U.S. importers have suffered immensely by paying over $110 billion in these tariffs since they began under former President Donald Trump, a trend that continued with $40 billion of that sum paid after Biden came to power.

The letter argued that “these costs, compounded by other inflationary pressures, impose a significant burden on American businesses, farmers and families trying to recover from the effects of the pandemic.”

The business groups noted that the U.S. Treasury Secretary acknowledged the easing of trade tensions can help the suffering economy saying “we agree with Secretary Yellen’s recent comments that tariffs tend to increase domestic prices and raise costs to consumers and businesses due to higher cost inputs and that lowering the U.S. and Chinese tariffs could help ease inflation.”

Some financial observers say one of the main reasons for the rise in prices are constraints in commodities with the most demand for consumers, suffering disruptions in the supply chain. The chairman of the American Federal Reserve, Jerome Powell, has echoed that argument. time will tell if that is the source of the problem.

Other economists believe there is a much more sinister reason for the current inflation, a situation that appears to be getting seriously worse by the day and something that falls into the hands of a relatively few business giants who enjoy the economic power to raise prices at their own will.

The argument that these economic experts make is if the markets had been more competitive, then companies would have kept their product prices as low as possible to avoid their competitors from taking customers away.

However, that doesn’t appear to be the case anymore in America.

Corporate giants are raising prices instead of dropping them despite revenues showing they are actually making record profits. It signals the extent of the power they enjoy in the market that these massive companies are able to increase their prices after all the turmoil and economic damage caused by the pandemic to the American people (the record number of unemployment levels, the stimulates packages passed etc.) In fact, these large companies have so much market power that they are able raise prices carte blanche.

With that much freedom to operate with impunity; then analysts would probably say the underlying problem isn’t so much to do with rising inflation but rather more to do with not much competition out there for large corporations. Despite that, it has not prevented the very same businesses from using inflation as a pretext and an excuse to raise their prices. And that is something critics would describe as unbelievable greed.

Some companies have announced they will start charging more by claiming they need to increase their own purchasing prices because they too are enduring hefty costs to manufacture a product. However, a deeper look into the same companies’ financial books tells us they have been making extremely large amounts of profit before and after inflation rose.

There is a similar trend in the energy markets where demand is growing but supply is not. There isn’t that much competition so energy firms have allowed supply to be kept low while prices kept high. In essence, the few energy firms who run the industry can even coordinate among themselves. The same can be said about pharmaceutical companies or airlines.

Ordinary people are the biggest losers. The wealth gap in America is shocking to say the least. Here are some facts: By the start of this year, the richest one percent of Americans held 32% of the entire nation’s wealth, the highest level since records began in 1989. Meanwhile, the bottom 50% held just two percent of the nation’s wealth. Since the start of 2020, the richest 1% gained a whopping $10 trillion. Last year. U.S. billionaires owned nearly $4 trillion, that is approximately 3.5% of all privately held household wealth in the country. Billionaire wealth was twice the amount of wealth held by the bottom 50% of U.S. households combined, that is around 160 million Americans. The Federal Reserve estimates that the amount of privately held wealth in the U.S. stood at $112 trillion.

Meanwhile, the Biden administration has been negotiating with the oil industry in an effort keep American households warm this winter. This week, Biden himself acknowledged In a statement that “inflation hurts Americans’ pocketbooks, and reversing this trend is a top priority for me.’’

But these talks will be political survival tactics as there are major concerns already facing the current U.S. administration, so early into its four year term in office.

The President’s popularity has not only dropped but nosedived dramatically and the midterm elections are not too far away. Typically, American political parties tend to perform badly in their first term (in the midterm elections) as all their leader’s election trail promises that got their President into the Oval Office never actually materialize. Voters quickly realize they have fallen for the same trick again. The level of that voter disappointment will be assessed by just how much of the U.S. House of Representatives and the Senate the democrats can retain next year.

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Almost two-thirds of the businesses that were surveyed have warned that in the next three months, a shortage of items will hit their factory’s output.

The research shows this is the biggest supply chain shortage since 1975, a year when inflation also hit a postwar high with severe economic woes in Britain as health workers went on strike and bin collectors staged industrial action.

The latest survey of 263 manufacturers reveals increasing concern over staff shortages and skilled staff shortages. Those who participated in the survey also cited rising fuel, transport and energy bills, alongside steep price increases for items in short supply.

About 64% of UK manufacturers reported a particularly steep rise in unfinished work, with the backlog rate at its fastest since June, the data showed. They also warned they are struggling to meet customer demand, while blaming falling export sales. A lack of skilled labor to keep factory production lines running has also been cited.

As manufacturers face challenging months ahead, information provider IHS Markit says companies have also been hit by a record rise in costs.

Many countries around the world are facing challenging times as their economies emerge fractured from the coronavirus Pandemic, but the situation in the UK has been exacerbated by the government’s new post-Brexit trade and immigration rules.

With slow economic growth and concerns that severe disruption could ruin the Christmas holiday season, the government has drafted in former chief executive of Tesco, David Lewis, for advice on the shortages.

According to Downing Street, Lewis will offer his expertise on necessary long-term changes to UK supply chains and any immediate measures of improvement that can be taken.

In a statement, Downing Street said, “this includes both identifying the causes of current blockages and pre-empting potential future ones, and advising on resolutions either through direct government action or through industry with government support.” Lewis will also co-chair a new supply chain advisory group and will be based in the Cabinet Office”.

However, the Confederation of British Industry says action was required in the budget to unblock short-term challenges across the economy.

The lobby group warned that, “manufacturers are using key levers, such as hiring new workers and planning further investment in plant and machinery and training, to expand production. But with both orders and costs growth expected to climb over the next quarter; we’re not out of the woods yet.”

Companies have reported that average growth in the three months to October remained mostly the same as July, a period when company prices rose to their fastest rate since 1980.

This as UK consumer confidence has dropped for the third month in a row. According to consumer research firm GfK; consumer confidence index fell in October as the economy was hit with labor and fuel shortages, as well as a rise in COVID cases.

GfK says, “after six-months of robust recovery in the first half of 2021, UK consumer confidence has taken a turn for the worse with all vital signs weakening. The sharpest concern is how consumers see the future economy, with this collapsing 10 points this month just as it did in September.”

Meanwhile, a rise in inflation comes just one month after rocketing gas prices led to the collapse of several British energy suppliers, leaving households with the prospect of much higher bills in 2022.

There are growing concerns about the cost of living in the UK. The Bank of England believed the soaring energy costs will drive inflation above 4% this winter.

In recent weeks, more than a dozen energy suppliers have withdrawn from the retail market, and more are likely to do the same as wholesale gas prices rally. The UK has a so-called Energy Price Cap in place which puts the burden on energy firms.

One of the largest energy companies in the UK, ScottishPower, says unless the government intervenes “we are in danger of just sleepwalking into an absolute massacre [ScottishPower] think probably in the next month at least another 20 suppliers will end up going bankrupt.”

According to ScottishPower, the price cap currently costs providers around $6.9 billion (£5 billion).

Adding to the financial woes, figures from Confederation of British Industry shows the growth rate for orders in October was at its lowest level since April. This is while optimism had considerably fallen as many economists believe consumer demand may weaken in the face of rising living costs the end of the furlough scheme as well as rising Covid cases in the UK again. Experts have warned of another winter wave which could trigger another lockdown, something the Prime Minister has public dismissed as it could rock the economic recovery even more.

The Bank of England had warned that action will be taken if it saw a surge in inflation expectations in the medium term. Last month, Britain’s Central Bank defined medium-term inflation expectations as five to 10 years from now.

The Bank of England’s new chief economist, Huw Pill, has warned, “the UK inflation level is likely to rise close to or even slightly above 5 percent,” early next year, as he says the central bank would have to take a ‘live’ decision on whether to raise interest rates during its November meeting.

In a gloomy outlook he said, “I would not be shocked, let’s put it that way, if we see an inflation print close to or above 5 per cent [in the months ahead]. And that’s a very uncomfortable place for a central bank with an inflation target of 2 per cent to be.”

The British Chancellor Rishi Sunak has said he has no “magic wand” to stop increasing inflation as he admits that the issue could be out of the government’s control. Sunak will unveil his autumn Budget on Wednesday.

But the former Brexit Secretary, David Davis, when the Chancellor delivers his Budget this week, he will do so with the country facing its worst winter crisis for more than 40 years.

Davis warned that, the “high taxing chancellor will send the UK economy crashing into the rocks.” He added, “rising fuel prices, tens of billions of pounds of tax increases, inflationary pressures and an environmental activist agenda for net zero are fueling a cost of living crisis for ordinary families.”

A record proportion of the British public thinks inflation will accelerate over the next 12 months, according to data that could further boost expectations that the Bank of England will raise interest rates next month.

In 2011, a similar surge in public inflation expectations in the euro zone led the European Central Bank to raise interest rates twice that year, although it quickly reversed course.

Economists say those hikes in the interest rate by the European Central Bank had been a big mistake and some think the Bank of England is at risk of repeating the same errors amid increasing signs of a slow and long path towards economic recovery.

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Inflation is the opposite of deflation, which is a decrease in price levels. Since the 2008 financial crisis, the US economy has experienced very low inflation and even deflation. Outside of a few sectors, such as health care, Americans have not had to deal with many unusual price increases.

In 2021, however, as Reade Pickert and Vince Golle explain at Bloomberg, “Americans are likely to see prices jump across a variety of sectors next year, thanks in part to Covid-19 vaccines that will potentially turbocharge demand for such pandemic casualties as travel and tickets to sporting events.”

A moderate level of inflation occurs naturally in a growing economy.

Hyperinflation, which is usually defined as inflation above 50%, is destructive to an economy. In recent years, hyperinflation has destroyed the economies of Zimbabwe, Venezuela, and Argentina. The nature of the inflation being discussed for the US in 2021 is 2% to 4%, nowhere near the 438% rate predicted for Venezuela for 2021. Some people hear the word “inflation” and panic, but there is no need for that.

And, according to Pickert and Golle, “One critical ingredient will be missing to sustain higher inflation: a tight labor market.” Wages are likely to stay low, which will keep “pressure” prices, too.

As with most things (especially when it comes to financing), inflation is good for some people and not for others. Moderate inflation has plenty of economic benefits: Higher prices encourage businesses to invest and expand. Interest rates go up, so banks start paying interest on checking accounts again. And higher wages, which will indeed come to certain sectors of the labor market, give workers an incentive to spend money.

Early on in a period of inflation, corporate profits will increase because inventory costs may reflect pre-inflation prices – but wages will not increase right away.

Over time, wages and costs will both increase, and depreciation will be based on historic costs that do not reflect actual replacement values. Managers will need to think about costs differently, and some will do better than others.

If wages increase by 4% a year, then a mortgage with a 2.5% interest rate gets cheaper each year by comparison (essentially, if you owe somebody money, in a period of inflation you’re paying back your lender with cash worth less than it was at the time you originally borrowed it). However, a bank CD paying 2% interest would also lose spending power every year during inflation periods. Bond prices also fall.

In recent years, consumers have been trained to “wait for the sale” – to avoid buying a good because it’ll surely be cheaper later. In a deflationary environment, goods do in fact go down in price over time. But under inflation, prices go up, so it doesn’t make sense to wait.

(In a hyperinflationary economy, people essentially find that shopping is a better use of their time than going to work. If prices are increasing daily or even hourly, wages can’t keep up.) In 2021, act quickly based on real-time circumstances rather than what you expect to happen in the future – and think about whether you’re more of a debtor or a saver.

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