All governments print money . The U.S government is printing money to cover a two trillion dollar deficit . The government debt is reaching 40 trillion dollars. The exchange rate in Iran has nothing to do with money printing. Who sets the exchange rate ?
The inflation has a lot more to do with supply and demand, and the psychological factor being played on the Iranian population than the insignificant money printing.
In Iran, it has to do everything with capital flow and restrictions.
Below is the official exchange rate:
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Free market exchange rate
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There is a 70 toman spread .
anyone with privileged access to the cheap dollars can buy at the official window and resell on the parallel market for a large, often risk-free profit.
Who can do that in Iran? Put on your thinking cap.
You buy $1 at the exchange rate and sell it on the open market . You make a killing .Those benefiting from the gap have a clear incentive to resist rate unification or policies that strengthen the rial.The layperson doesn’t understand the the Ponzi scheme and it ends up having a devastating psychological effect.
those with inside access to cheap official dollars can flip them on the free market, pocketing enormous profit at the expense of ordinary citizens whose currency keeps losing value.
They( aghazadeha) drain foreign-exchange reserves while delivering no added productivity.
Ordinary working class Iranians face rising prices, as importers mark goods to the real (free-market) rate.
Let’s say an official or connected importer gets access to
$10,000,000 USD at the official rate = 42,000 IRR per USD.
Now he resells those same dollars on the free market at let’s say 90,000 IRR per USD.That’s roughly a 114% profit on one transaction.That $5 million profit didn’t come from productivity or exports — it came from currency distortion.The wider the gap between the official and free-market rates, the more lucrative the scheme.
That is called the enemy within.