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Iran melting down

by Luis de Sousa Wed Dec 28th, 2011 at 03:57:29 PM EST

I had read en passant a short news byte last week on some sort of unrest in Iran, but at the time I couldn't dive into it. Yesterday I stumbled upon an amazing thread at the Kitco fora: a frightened, but courageous, civil engineer called Iman accounts in the first person the rapid deterioration of the Iranian government's lid on its currency. What is happening in Iran is not just social unrest, nor just a run on banks, it is something way more serious.


This is a crosspost from AtTheEdgeOfTime

The increasing isolation of the country in face of tightening economic sanctions from the exterior has halved the value of the Iranian currency, the Rial (I can't check it right now but this word likely has an origin in Portuguese). Feeling the rapid loss of purchasing power Iranians started flocking into the dollar and the euro. Apparently they exhausted (or menaced comfortable levels of) available reserves of foreign currency and the Central Bank was forced to its last resort: sell its gold reserves. Once these news got known folk piled up at banks to get the little gold they could.

This is a sad example of John Keynes' classical liquidity run. Portfolios move violently towards liquidity, even hard assets like land aren't spared, it's pure panic. The notable character of this liquidity run is that portfolios kept moving towards ever more liquidity, not stopping at local paper, nor at foreign currency, investors only feel safe with the ultimate liquidity: gold. It is a total loss of confidence on Institutions and the realization that greenbacks are easy to falsify in the black market.

In a few hours the unthinkable happens: the Central Bank closes shop and gold goes into backwardation. On the streets of Iran gold is more expensive than at international exchanges, more expensive than the official rates set by the Central Bank the day before, more expensive than the 4 month futures the Central Bank promises. This is the last place where a government and/or central bank wants to be, they are forced to intervene directly into the black market, but in reality they lost control of the situation, monetary policy is no longer possible.

Going forward this liquidity run will trigger a huge slowdown in economic activity and puts at risk foreign trade. From here to empty shelves, even if partially, can be a small step. Although Iman reiterates the unlikelihood of civil demonstrations mimicking recent events in arab countries, the social impact will be huge, migrations to nearby countries are a possibility.

In reality Iran has plenty of hard currency under its soil in the form of Oil and Gas. For decades the country has exchanged this currency for food, finished goods and abstract currency reserves. The hardening of sanctions by the US, likely to be followed by other large economies, will make it much more difficult for Iran to trade its energy, for those who may dare to accepted it shall get sanctioned too. In face of such perspective this energy currency lost its value, dragging with it the abstract Rial and the Iranian economy.

But the energy flows coming out of Iran are not really replaceable, especially in the Far East, it may eventually find alternative buyers for its hydro-carbons; some countries out of the sphere of influence of the US and EU may opt to shift their trade from other oil exporters to Iran, perhaps profiting from direct exchanges of energy for food and goods.  In case a scheme like this doesn't unfold Iran can be in for a very critical moment in its history and so the international Oil market.

The situation continues to develop at a fast pace. Today the press in Europe and the US finally decided to pay attention to the situation after menaces from the Iranian government to block the passage of oil tankers through the strait of Hormuz, in case the White House signs the new round of sanctions. This shows that the Iranian government fears indeed the sanctions; part of Iran's daily Oil output may not have buyers in case they come into place. Is it just bluff, or is Iran readying itself for armed conflict? The internal economic turmoil is designing a desperate situation for the Iranian government. In desperate situations desperate actions can easily take place.

As a closing thought I'd like to stress that this situation is a very likely scenario in case a state like Greece or Portugal decides to leave the EU at this stage. The main difference is that these states don't have Oil or Gas.

Best hopes for Iman and his folk.


Kitco Forum
Excerpts from a thread diary by Iman

12-18-2011, 05:32 AM

Tens of thousands pile into Iran National bank across different cities to buy gold government announced 40 tons of gold has been sold till the moment, our currency is going to end (40% deflected against us Dollar this year) like the other aspects of our loving country.

12-18-2011, 07:16 AM

It seems that our Central bank has run out of Dollar and people are aware of that.

officially there is 20% of inflation here but the CPI is more than 50% as I paid by Rial (not Dollar) this year I can buy just less than half of what I could buy last year!!

Finally Iranian aren't dare enough (especially comparing of Arabs) don't expect for any uprising here

12-18-2011, 07:27 AM

here people sleep one night in front of the bank !!
you have to wait 20 hours to buy 40 grams of gold

12-18-2011, 10:14 AM

I think It's absolutely due to economical problems not war central bank sells gold to balance gold price but it doesn't work and attracts more people to queue!! If President Obama signs the Central Bank Sanction I couldn't imagine what would happen here

People don't want Paper money thousand by thousand they change their properties to Dollar and gold coins/bars.

12-18-2011, 02:29 PM

Honestly I'm scared about next year like many other Iranian. our economy is gonna collapse. If we can't sell oil or can't get the money of our oil surely there would be many difficulties. Many peoples learnt the severity of this situation that and rushed to banks to buy gold. People sell all the cashable stuffs like stocks, land and other properties to buy gold.

12-19-2011, 01:26 PM

[The Central Bank has sold] 40 tons in six months but the rush in these days may force them to sell more tons
I'm sure they're lying they've run out of gold

Current blackmarket rate for the rial/dollar:
Yesterday 14000 Rial=1$
Today 14500=1$ the greatest jump in past ten years
Official coin today 5800000 Rial
Street coin price today 6050000 Rial

There is a breaking news:
CB of Iran Stop Selling Gold Coin it announced that buyer get coin after next 4months very bad signal to market
it seems they are hopeless of controlling the market

12-19-2011, 02:21 PM

our TV doesn't say that in news but everyone learned it from Internet.

there are many reasons trigger this rush:

  1. sanctions of CBI
  2. selling gold by bank(which stopped today after 9 months) shows they need money!!
  3. CPI near 50 % inflation near 20%

tonight after work time when I take a taxi to back home he said me to give him 3500 rial instead of 3000 I surprised (I remembered the Zimbabwe)
I told him I don't print the money Get your extra 500 Rials from CBI!! who print the money continuously

4) and the most important : losing confidence to economical policies of government especially our central bank chief DR. Mahmoud Bahmani


12-21-2011, 05:12 AM

After stopping of gold selling by banks coin price skyrockets from 6080000 to 6250000 Rials
1 Gold coin= 6250000
1 us dollar =15600!!! It's still unbelievable

Coin price in the morning jumped to 6250000 Rials while in the afternoon it back down to 610000 Rials

12-21-2011, 02:15 PM

Us dollar price in the morning jumped to 15800 Rials while in the afternoon it back down to 15000 Rials (I never had seen such a big swing in the price)

Central bank tried to beat the market severely by huge asset selling they've sold:

  1. Tons of gold coin in the street market to calm down the price rise.
  2. Millions of dollars in the street market to calm down the price rise.
  3. They opened thousands of future sell contract in merchandise marked to beat the bid future queues there
  4. They start future selling of gold coin in price of 5670000 (to be delivered to buyers next four months) in Melli Bank branches

12-21-2011, 04:29 PM

price raised from 5800000 to 6250000 in past 5 days near 8% raise while comex gold was down

12-25-2011, 12:25 PM

The first analysis of future selling gold coin in banks:

Equal to 5 tons have been sold in past4 days!!!

No one can stop Iranians from buying gold Coin

each house has already becoming like a central bank treasury it may not be safe like this.

Today Market Price:

Gold Coin Price: 6150000 Rials 2% rise

1 US $ = 14950 Rials 5.5% rise !!

Police attacked to US dollar seller-buyer on street market today morning


Display:
A 'real' (as in 'royal') currency has existed both in Spain and in Portugal. Many countries in the Arabian peninsula also have their currency named 'rial', in addition to Iran. Different 'rial' currencies were used in the Swahili world (from the horn of Africa all the way to Durban, RSA) for centuries; even nowadays, it's not uncommon to refer to a price as "riali koumi" (literally "ten rials").

BTW, I suppose you refer to the strait of Hormuz.

The Iranian situation described looks like a gold-bug wet dream, with hyperinflation looming to boot. It seems like this is triggered by an extreme external account imbalance in a country that is vastly dependent on imports...

by Bernard on Thu Dec 29th, 2011 at 08:04:34 AM EST
Thanks for pointing the typo.

I've edited the Wiki page on the Rial. It was Portugal that expanded to and Africa and Asia, not Spain. Already at that time Hormuz was a major choke-point that providing control over the regions trade.

You might find me At The Edge Of Time.

by Luis de Sousa (luis[dot]a[dot]de[dot]sousa[at]gmail[dot]com) on Thu Dec 29th, 2011 at 08:49:00 AM EST
[ Parent ]
Being a net food importer and losing access to imports due to sanctions or foreign deficits and credit constraints sucks.

Who woulda thunk.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Dec 29th, 2011 at 11:22:08 AM EST
[ Parent ]
Gold is not much of a deal in Iran - it's much more important in the Arab world, for instance - and I really do not recognise what the blogger is saying.

Strangely enough Iranians do put a great deal of store in the dollar, with which they have a Love/Hate relationship.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Thu Dec 29th, 2011 at 07:10:18 PM EST
[ Parent ]
Hi Chris,

The closing down of CBI's gold cash sales was well documented by the media last week. On the original thread at Kitco there are plenty of photos of people pilling up at CBI's bank branches. One of the little bits of info that Iman dropped is a rumor of fake US$ bills in the black market.

As you can read in the thread, folk flocked initially into foreign currency, but once the news came out of CBI's trouble to provide this currency they rapidly moved onto gold. As far as I can tell this was a watershed event that took place on the 20th of December. What is strange about this is that Iran supposedly had 100 G$ in foreign currency reserves at the end of 2010. This sum couldn't possibly be exhausted in a such a short time.

You might find me At The Edge Of Time.

by Luis de Sousa (luis[dot]a[dot]de[dot]sousa[at]gmail[dot]com) on Fri Dec 30th, 2011 at 04:46:42 AM EST
[ Parent ]
What the story doesn't seem to say, however, is anything about the inherent superiority of gold to currency, which you seem to imply.  The only reason people switched to gold seems to be because the bank couldn't make any more dollars available due to the economic isolation of the sanctions. With more gold also unavailable, gold is also in the same problem as dollars and euros. This means people would still prefer dollars, a foreign enemy's currency but one that is viewed as truly sovereign, like coins with Caesar's head, if they were still able to access them.
by santiago on Fri Dec 30th, 2011 at 05:22:29 AM EST
[ Parent ]
FT.com: Soros sharpens gold bubble debate
Mr Soros is not alone in cutting his exposure to the yellow metal. Investors sold 2.5m ounces of gold through exchange traded funds in January and February as prices slid 8 per cent, and bankers say several hedge funds were also selling gold on the physical market.

...

The fact that the Fed is set to turn off the liquidity pumps is seen as a negative signal for gold. First, it suggests increased confidence in the economic outlook - typically a bearish indicator for the yellow metal.

...

Even the normally bullish World Gold Council, a mining industry-backed group, concedes that the end of QE2 poses a threat to gold. "If and when central banks stop QE and then start raising interest rates, that is obviously a challenging environment for all asset classes - including gold," says Marcus Grubb, managing director for investment.



tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
by Migeru (migeru at eurotrib dot com) on Fri Dec 30th, 2011 at 05:27:11 AM EST
[ Parent ]
The important part to always keep in mind about gold is that the people who invest in it are as a group, always the most nervous investors. Which means that as an asset, when it drops, it very strongly tends to crash. Because if the people holding it were inclined to take a calm approach to fluctuating pricing in the assets they hold, they would not have entered gold in the first place. Gold investing is thus always a gamble that you can get out and stay out before the inevitable crash comes.
by Thomas on Fri Dec 30th, 2011 at 04:14:46 PM EST
[ Parent ]
... if it tends to crash, then that implies that investing in gold is a gamble that you can not always get out of before the crash.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Sat Dec 31st, 2011 at 02:49:07 PM EST
[ Parent ]
Santiago and Migeru,

The events last week in Iran (or perhaps in Teheran) are the best example that during a liquidity run gold can easily emerge as the most liquid asset. It was like this during the great depression, in 1968, in 1971 and again in 1980. This is not a question of "superiority" but rather of liquidity, which is determined purely by emergent forces.

Keynes himself was very aware of this dynamic and dedicated the last years of his life finding mechanisms to counter the problem. The result was the Bancor (which also addressed other issues) that unfortunately never came to be.

Today many so called Keynesians choose to ignore this problem. But ignoring it won't send it away, ask your regular Iranian.

You might find me At The Edge Of Time.

by Luis de Sousa (luis[dot]a[dot]de[dot]sousa[at]gmail[dot]com) on Fri Dec 30th, 2011 at 07:53:54 AM EST
[ Parent ]
The Bancor is not going to "solve" the problem of liquidity runs or of cultural preference for The Shiny.

tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
by Migeru (migeru at eurotrib dot com) on Fri Dec 30th, 2011 at 08:26:23 AM EST
[ Parent ]
This particular liquidity run is about balance of trade, as is common in soft currency countries.

However, if bancor was operating under some international governance, it could well have been subject to the same international political pressures that led to the existing Iranian sanctions ... so it seems like it would be no guarantee against an international sanctions-driven liquidity run.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sat Dec 31st, 2011 at 02:52:03 PM EST
[ Parent ]
The Bancor is not about liquidity, it is about balance of trade.

As long as the Iranian foreign balance is sound, the government can watch people go "ooh, shiny" about gold with relative impunity. The Iranian state has no commitment tied to gold.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Dec 30th, 2011 at 08:48:46 AM EST
[ Parent ]
Iran Current account balance in percent of GDP
The Current account balance in percent of GDP in Iran was reported at 2.40 percent of GDP in 2009, according to the International Monetary Fund (IMF).

Whats more, Iran has been running a CA surplus since early 90ies, so they should have reserves.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Fri Dec 30th, 2011 at 10:19:54 AM EST
[ Parent ]
Unless their reserves are in vault cash, it could be vulnerable to an assets freeze.

They are, of course, not likely to hold much reserve in accounts under US sovereignty, which would explain why a principle focus of their policy is to prevent other nations from succumbing to US pressure to freeze assets held in those countries.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sat Dec 31st, 2011 at 02:54:36 PM EST
[ Parent ]
You're right, liquidity is the right word to use, but I don't think your story makes that case because of the fact that foreign currency's supply is fixed, just like gold.  This means you can't separate the demand for gold or dollars as scarce commodities -- investments to hold, not currency to trade -- from the characteristics of demand for either as a form of money.  If there were no limit on the supply of dollars, and people still made runs on the bank for gold and not dollars, then your account of cause and effect would hold.  
by santiago on Fri Dec 30th, 2011 at 11:03:11 AM EST
[ Parent ]
Santiago,

I'm not in Teheran and I don't speak Farsi. But taking the words from Iman a rumor emerged that fake dollars where flowing to the black market. Even if not true, this rumor itself creates the expectation of expanding supply and has an impact on the velocity of this asset.

You might find me At The Edge Of Time.

by Luis de Sousa (luis[dot]a[dot]de[dot]sousa[at]gmail[dot]com) on Fri Dec 30th, 2011 at 03:50:30 PM EST
[ Parent ]
Wouldn't a rumor of counterfeit have the opposite effect -- of creating an expectation of contracting supply for real dollars and a desire to hold onto the real dollars instead of use them since if the rumor were true it would mean that every dollar held contained the change that it would be unusable in an actual transaction?  It's the threat of counterfeit that would drive people away from using dollars as money, not that gold in of itself would be more preferred than dollars. The same could be said of gold if an effort to counterfeit gold or, lower the weight of gold coins, were also to occur, something which is easier to do than counterfeiting dollars. The issue isn't that you're wrong but that the Iranian case doesn't seem to have the elements necessary to back up your point.
by santiago on Fri Dec 30th, 2011 at 04:45:53 PM EST
[ Parent ]
I wonder if there is an easy way to get an accurate measurement of the purity of your gold cache.

Obviously you can weigh it, find the volume, and calculate the density, but can you do it accurately enough to get a useful result? Worse, I can think of several ways to make a counterfeit gold coin without even working at it; how do gold enthusiasts claim to protect themselves from this problem?

by asdf on Fri Dec 30th, 2011 at 11:29:36 PM EST
[ Parent ]
Interesting how this thread became so gold focused. I find here the same religious attitude towards gold that I find at Kitco, all that differs is the stance.

If you're so interested in assaying gold coins at home you can do it by yourself using a bit of high-school chemistry, the periodic table and some instruments to measure volume and electrical conductivity.

You might find me At The Edge Of Time.

by Luis de Sousa (luis[dot]a[dot]de[dot]sousa[at]gmail[dot]com) on Sat Dec 31st, 2011 at 05:38:08 AM EST
[ Parent ]
Looks to me like the answer is that you can't actually do a good test at home.

http://commoditybullmarket.blogspot.com/2009/04/how-to-detect-counterfeit-gold-coins.html

If you have the facilities to melt a bar, you can adulterate the alloy to reduce the gold content. For example, if you start with a tungsten slug and wrap it in aluminum you can get the density of a core correct, and then surround it with gold you can get a bar that will pass everything except a melt-down or an x-ray. Whether that will be cheaper then the underlying gold is an interesting question.

Apparently it all boils down to trust, where you buy from somebody you trust and then trust that somebody else will buy it from you when the apocalypse arrives.

Also it seems, based on cursory investigation, that it's not illegal to sell "counterfeit" gold. It's a commodity, not government-issued currency.

by asdf on Sat Dec 31st, 2011 at 03:23:05 PM EST
[ Parent ]
asdf:
Also it seems, based on cursory investigation, that it's not illegal to sell "counterfeit" gold. It's a commodity, not government-issued currency.

I would not be counterfeinting, but surely there are laws in most countries against selling a commodity while claiming it is another?

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Sun Jan 1st, 2012 at 06:08:35 AM EST
[ Parent ]
Sure, but you can buy "copper" at the hardware store. What is the purity, the alloy details, etc?

The gold bug thing has fraud written all over it...

by asdf on Sun Jan 1st, 2012 at 07:32:27 PM EST
[ Parent ]
The only way I can think of it wouldn't be illegal would be by selling bars or coins without any information (fineness, metal, value) stamped/coined. Would you buy such a thing?  

You might find me At The Edge Of Time.
by Luis de Sousa (luis[dot]a[dot]de[dot]sousa[at]gmail[dot]com) on Mon Jan 2nd, 2012 at 03:43:47 AM EST
[ Parent ]
well maybe not illegal to sell counterfeit gold, Apart from the fact that it would be fraud to sell gold, and it turns out to be gold wrapped round whacky metal composite. But most gold buyers buy in the form of coinage, and those it would be illegal to counterfeit. You do get jewelers buying in bar form and those odd gold bar vending machines, but I've always seen them more as a PR stunt than anything like a proper business venture.

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Sun Jan 1st, 2012 at 09:13:34 PM EST
[ Parent ]
It's the threat of counterfeit that would drive people away from using dollars as money, not that gold in of itself would be more preferred than dollars.

Precisely. Under this scenario the velocity of greenbacks goes up while for gold it remains stable.

You might find me At The Edge Of Time.

by Luis de Sousa (luis[dot]a[dot]de[dot]sousa[at]gmail[dot]com) on Sat Dec 31st, 2011 at 05:40:01 AM EST
[ Parent ]
Except for the fact that it is a lot easier to rip people off with fake or reduced weight gold when used for currency than it is to print counterfeit dollars or euros, so the counterfeit threat doesn't add anything to the story here.
by santiago on Sat Dec 31st, 2011 at 03:05:20 PM EST
[ Parent ]
It does not have to be more difficult to counterfeit gold for people to prefer gold to dollars. It only has to be believed that it is more difficult to counterfeit gold...

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Dec 31st, 2011 at 04:31:56 PM EST
[ Parent ]
True, but such a condition can only last for a short time before actual gold counterfeiters begin to compete with each other, and with currency counterfeiters, for business.  Once people stop trusting the weight of gold involved in everyday, local transactions, any advantage of gold over currency disappears and "bad money" starts again "drive out the good" as people hoard the gold instead of using it as currency.  
by santiago on Sun Jan 1st, 2012 at 12:06:12 PM EST
[ Parent ]
People don't use gold as currency, they use it as a presumed safe store of value during a run on the currency. Runs are, of necessity, reasonably short affairs, so the belief doesn't have to last that long and the time window for the creation of fake gold to respond to popular demand is fairly narrow.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jan 1st, 2012 at 03:59:43 PM EST
[ Parent ]
Exactly. Gold is not being used as money, so any arguments about it being better than paper currency because people seem to want it (and also want foreign paper currency) now in Iran for wealth preserving purposes and not transaction purposes say nothing about gold used as money as the diary talks about -- just that people may want to hedge wealth in Iran now more than before for whatever reason.
by santiago on Sun Jan 1st, 2012 at 04:10:09 PM EST
[ Parent ]
It comes down to a fundamental dispute over whether money should function as a long-term store of value. The gold bugs believe that money should store value long-term, and so see the failure of paper currency to do so as evidence that it is a poor form of money.

I believe - and you seem to agree - that money should store value only long enough that its depreciation is not an inconvenience in ordinary transactions, because money is an instrument for organising transactions. In this picture, the failure to store value over years or decades says nothing about the suitability of currency to function as money, because money only needs to store value on the order of weeks and months.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jan 1st, 2012 at 06:23:42 PM EST
[ Parent ]
The beneficiaries of gold buggery are the traders, not the hoarders.

There are huge parallels here to the financialization of commerce that brought the booms and busts.

Gotta have booms and busts. Higher money velocity generates higher returns for financial parasites. I'm reminded of Kurt Vonnegut's analysis of lawyers:

"To encourage movement of money and always take ten percent."

Align culture with our nature. Ot else!

by ormondotvos (ormond.otvosnospamgmialcon) on Thu Jan 5th, 2012 at 11:04:08 PM EST
[ Parent ]
Kitco is a gold bug site.

There are any number of memes that originate in gold buggery.

The "US-invaded-Saddam-because-he-was-selling-oil-in-Euros" was one such meme and its close relative the "Iran-will-be-attacked-because-of-the Iran Oil Bourse-selling-oil-in-Euros" was another from the same stable, and moreover that was a meme which I knew for a fact was complete bollocks because the Bourse was my idea in the first place.

Nothing I have heard from my (excellent) contacts in Iran tells me that there is a general run for gold, although everything I hear is that their financial system is in deep trouble.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Dec 30th, 2011 at 05:39:18 AM EST
[ Parent ]
Some of the figures I posted where published in newspapers that were reproduced at the Kitco forum. I can't read Farsi but other Iranians read that thread and didn't flag it up.

There's another thing, the gold coins referred to are the Azadi, a low seigniorage version of the sovereign (1/4 pound) with Khomeini on the face. Some affinity with gold must exist among Iranians (at least the bourgeoisie) to justify this mintage.

You might find me At The Edge Of Time.

by Luis de Sousa (luis[dot]a[dot]de[dot]sousa[at]gmail[dot]com) on Fri Dec 30th, 2011 at 08:06:04 AM EST
[ Parent ]
It's always been regarded as something of a store of value in uncertain times, but that's not unique to Iran.

Gold-as-currency is a very different thing.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Dec 30th, 2011 at 09:36:12 AM EST
[ Parent ]
IIRC, two Albuquerque hidalgos sailed from Portugal around 1500 and defeated the Mameluke navy, seizing control of the Red Sea and thereby increasing the price of spices which they shipped around Africa.  

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Dec 30th, 2011 at 09:17:54 AM EST
[ Parent ]
:) It's fidalgos, not hidalgos.

And it was before Albuquerque. The first vice-king of India was Francisco de Almeida, admiral of the first real military fleet to enter the Indian ocean (note: the guy you call Magellan was part of the marine crops on board). Almeida soon got into conflict with king Manuel, the former preferred a strict maritime dominance strategy while the latter wanted to be the king of the world.

With the message relieving Almeida of his command on the way, his son was captured and killed by the Mameluks (or their allies). After learning that the authors of this act where hiding in Diu, Almeida rushed the fleet there seeking vengeance. At Diu he found an enemy fleet with more than 200 ships belonging to a coalition of 4 states waiting for him. But Almeida didn't vacillate in his revenge and issued an ultimatum: surrender the assassins of his son or prepare for battle. With the ultimatum overdue Almeida plunged his 20 ships into what would be one of the most important naval battles in History.

Soon after Almeida got the message from the king and headed back home. He would never made it back, dying in a wreck in the coast of what is today South Africa.

You might find me At The Edge Of Time.

by Luis de Sousa (luis[dot]a[dot]de[dot]sousa[at]gmail[dot]com) on Fri Dec 30th, 2011 at 03:47:40 PM EST
[ Parent ]
It appears that both Almeida and Albuquerque were involved. I did know that hidalgos were Spanish, but didn't know the term for the Portuguese equivalents. Thanks and no slight intended. :-)

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Dec 30th, 2011 at 03:59:18 PM EST
[ Parent ]
ARGeezer:
It appears that both Almeida and Albuquerque were involved.

But one of them took a left turn... (couldn't resist)

by Bernard on Sat Dec 31st, 2011 at 03:53:24 AM EST
[ Parent ]
Albuquerque took Hormuz alright (twice), but he didn't participate in the battle of Diu. They became adversaries when the king started disfavoring Almeida's purely naval strategy, and at some point Albuquerque was even held imprisoned by Almeida's men. When finally Albuquerque succeeded Almeida he went one to proceed the strategy of controlling all checkpoints connecting the Indian to the Atlantic and the Mediterranean.

But it was the battle of Diu that opened the gates to the watershed of globalization. I was a huge display of technological power and a geo-political turn of events with little parallel in history.  

You might find me At The Edge Of Time.

by Luis de Sousa (luis[dot]a[dot]de[dot]sousa[at]gmail[dot]com) on Sat Dec 31st, 2011 at 05:57:12 AM EST
[ Parent ]
It's all very familiar to me...Poor people...
What bothers me now is that I have plane tickets to travel to Serbia via Dubai in May and it smells like war in that area...shit...
If I manage to come (and to come alive) to Serbia looks like there will be election this European spring there and there will be protests who ever win simply because of terrific economic situation in Serbia. So it's going to be fucking grate holiday for me :(


Science without religion is lame, religion without science is blind...Albert Einstein
by vbo on Fri Dec 30th, 2011 at 06:20:37 AM EST
We live in interesting times. That's a great holiday, though maybe not in the conventional sense of the term...

tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
by Migeru (migeru at eurotrib dot com) on Fri Dec 30th, 2011 at 07:03:19 AM EST
[ Parent ]
I don't think there will be war: the real danger for that passed years ago.

I think that it suits a lot of people to make nationalist  bellicose noise, and others jump on the bandwagon to keep the oil price hyped.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Dec 30th, 2011 at 07:10:41 AM EST
[ Parent ]
The drums are being beaten loudly: U.S. District Court Rules Iran Behind 9/11 Attacks
In Havlish,   et   al.   v.   bin   La den,   et   al. , Judge Daniels held that the Islamic Republic of Iran, its Supreme Leader Ayatollah Ali Hosseini Khamenei, former Iranian president Ali Akbar Hashemi Rafsanjani, and Iran's agencies and instrumentalities, including, among others, the Iranian Revolutionary Guard Corps ("IRGC"), the Iranian Ministry of Intelligence and Security ("MOIS"), and Iran's terrorist proxy Hezbollah, all materially aided and supported al Qaeda before and after 9/11.  

...

The evidence was developed over a seven-year international investigation by the Havlish attorneys who pursued the 9/11 Commission's recommendation regarding an apparent link between Iran, Hezbollah, and the 9/11 hijackers, following the Commission's own eleventh-hour discovery of significant National Security Agency ("NSA") intercepts: "We believe this topic requires further investigation by the U.S. government."  9/11 Commission Report, p. 241.

...

Attorneys emphasized that it is important to understand that Iran, Hezbollah, and al Qaeda formed a terror alliance in the early 1990s.  The attorneys cited their national security and intelligence experts, including Dr. Patrick Clawson, Dr. Bruce Tefft, Clare Lopez, Kenneth Timmerman, Dr. Ronen Bergman, Edgar Adamson, and 9/11 Commission staff members Dietrich Snell, Dr. Daniel Byman, and Janice Kephart, as well as the published writings of Robert Baer, to explain how the pragmatic terror leaders overcame the Sunni-Shi'a divide in order to confront the U.S. (the "Great Satan") and Israel (the "Lesser Satan").  Iran and Hezbollah then provided training to members of al Qaeda in, among other things, the use of explosives to destroy large buildings.  The Iran-Hezbollah-al Qaeda alliance led to terror strikes against the U.S. at Khobar Towers, Saudi Arabia (1996), the simultaneous U.S. embassy bombings in Kenya and Tanzania (1998), and the USS   Cole (2000).  Shortly after the Cole attack, Iran was facilitating the international travel of the 9/11 hijackers.



tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
by Migeru (migeru at eurotrib dot com) on Fri Dec 30th, 2011 at 08:24:28 AM EST
[ Parent ]
Shit on Iran week.

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Fri Dec 30th, 2011 at 09:33:52 AM EST
[ Parent ]
I do hope you are right, this could turn very ugly.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Fri Dec 30th, 2011 at 10:47:42 AM EST
[ Parent ]
The escalation is stepped up so much that it could become a war by inadvertance
by Katrin on Fri Dec 30th, 2011 at 12:26:30 PM EST
[ Parent ]
Though I feel I still have to gather some more data on the issue, I second the ideas of other here. Unilateral military action by Iran against oil tankers in the strait of Hormuz seems unlikely at this stage. Strategically this would put Iran against all the Arab nations in the region that export oil. A really desperate situation must come for something like this to make sense.

Most likely Iran will continue trading with China and India and keep access to basic goods. But the trade surplus can close rapidly if these countries cannot absorb the remaining production that today goes to Korea, Japan and other OECD countries. There are several potential impacts from this, certainly hitting the common man in the street.

You might find me At The Edge Of Time.

by Luis de Sousa (luis[dot]a[dot]de[dot]sousa[at]gmail[dot]com) on Fri Dec 30th, 2011 at 04:00:40 PM EST
[ Parent ]
Oil is reasonably fungible. India and China can re-sell the Iranian oil if the price gap between what India pays and the Brent exchange gets too high.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Dec 30th, 2011 at 07:21:31 PM EST
[ Parent ]
I think war is very unlikely.  This actually looks more like a dispute between Israel and the US than it does between Iran and the US.  In order to put the provincials -- Israel -- in their place, Panetta had to tell the Israelis that the big boys would take care of their bully problem if it ever came to that, telling Israel to go back to the playroom.  Israel was slapped down, but that necessarily invokes a symbolic response from Iran for being portrayed once again as the bully.  But neither side, nor factions within the governments of either side, has anything to gain from a war with Iran at this time.
by santiago on Fri Dec 30th, 2011 at 06:11:33 PM EST
[ Parent ]
Having being in Russia when actual bank runs took place there in the early 90s, this doesn't look like such a massive event. 5.5% devaluation is marginal, frankly. In a real bank run, the value of the dollar or gold could easily triple or more.

It does point to problems and instability, but not as such to an endgame.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Fri Dec 30th, 2011 at 06:40:13 AM EST
While NBC News made mention of Iranian threats to close the Straits of Hormuz, (IMO of dubious feasibility - surprise attacks on Gulf oil export facilities would have a higher probability of disrupting shipment of oil, even if at a very high price), they made no mention of the effects of economic pressure on domestic events in Iran. This is despite having Ali Arishi, an Iranian, as their chief correspondent in Tehran. I suspect that the Fed's minions at JP Morgan, etc., are having expense enough keeping a lid on the PM market and don't want unhelpful news on that front. Keeping gold below $1500/oz through today will cap its rise for 2011 acceptably.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Dec 30th, 2011 at 09:30:19 AM EST
[ Parent ]
It seems that we, the humans, are once again preparing for a genocide of theism.

I suppose it could be thought of as a Darwinian weeding, as those ideologies contrary to total global homogenization are wiped out.

Theocracy can't compete with plutocracy.

Align culture with our nature. Ot else!

by ormondotvos (ormond.otvosnospamgmialcon) on Sat Dec 31st, 2011 at 05:03:13 PM EST


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