The Latest Currency War

Monday, 08 Oct 2012 07:36 AM

By Sean Hyman

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The latest currency war is in Iran. If you want to see the effects of a falling currency and the rise of inflation, you have to look no further than there.

It all started when Iran refused to cease its nuclear-building operations. Now, the United States “could have put a hurt” on Iran by going in there with guns blazing. And that’s still an option.

But an option that could save lives and cost very little is to cripple them financially through sanctions and cause faith to be lost in their economy, which would then show up in their currency. So, that’s the road that has been taken.

Editor's Note: 5 Signs Stock Market Will Collapse in 2013

Ever since the oil sanctions went into effect, Iran’s oil income has plummeted. Therefore, they’re coming under a “cash crunch” and it’s really hurting them economically.

However, now their economic woes are fully being reflected in the value of their currency, which is the part that really puts the pressure on them.

Why? Their currency fell 18 percent in one day alone, on Oct. 1. If you look at what the currency has done in just the past 70 to 80 days, it’s lost about 50 percent of its value. So, just a few short months ago, $1 equated to around 18,000 rials. These days it takes more like 36,000 rials to equal just $1. That’s about a 50 percent loss of purchasing power within mere months.

If that happened here in the United States, we’d have riots in the streets and enormous pressure being placed upon politicians and the central bank. That’s why our government devalues “the smart way,” which is gradually over time to where the people don’t realize it so much.

And of course, you know I say that with a hint of sarcasm because our currency should never be devalued.

But the pressure being placed upon Iran is growing from internal struggles that they’re having. There have been riots in front of government buildings and in front of their central bank. People are furious. And they should be.

But nonetheless, hundreds of riot police were called out to shoot tear gas into the crowds, as protesters were lighting tires on fire and burning rubbish in trash bins in revolt. You see, the protesters were calling for the government to stand down in its nuclear program, but the government (so far) is being persistent, no matter what the people think.

However, if the pressure continues to build, then their government runs the risk of being overthrown.

Editor's Note: 5 Signs Stock Market Will Collapse in 2013

Meanwhile, the United States and Europe aren’t letting up on Iran. In fact, U.S. Under Secretary of the Treasury David Cohen visited France, Germany, Italy and the United Kingdom last week to discuss coordinated efforts to increase the pressure on the Iranian government.

They’re striking the iron while it’s hot because they know the people of Iran are stirred up over their economic woes.

In fact, some families are struggling so much that they have to pass on meat for their families and instead just give them bread since it’s much cheaper.

You see, the inflation rate right now in Iran is estimated to be at 29 percent.

Just some examples of how this is affecting the average person … the price of milk rose 9 percent in just one day this past week.

Home appliances have doubled in price over the past six months and storeowners are hoarding products because they know they can get higher prices for them with each passing day.

The cost of chicken? It’s doubled in the past year.

This is the type of stuff that happens as a currency loses purchasing power. The stuff you buy every day goes up. The process is just being accelerated in Iran so it’s easier to see the effects more readily.

So, notice what happens when a currency is devalued and inflation goes up. Commodity prices go through the roof.

That’s why we focus on commodity-related stocks and commodity exchange-traded funds and other stocks that benefit from foreign currencies in the Ultimate Wealth Report.

If you own the things that are being inflated, then you’re not hurt by the inflation and dive in the currency, as most people are who aren’t positioned properly in their investments.

This is why I established the Ultimate Wealth Report. You see, the United States is actually going through the same thing Iran is going through … just in slow motion. In other words, it’s happening at a slower pace is all. But your wealth is still being eroded. The government just hopes to do it slow enough to where you don’t “catch on.”

Editor's Note: 5 Signs Stock Market Will Collapse in 2013

However, if we don’t catch on and see this evil game for what it is, then we only work longer and harder just to have what we had yesterday and never make any “real” progress.

I’m all about moving our financial net worth forward, not just “holding the fort” or sliding backward. Position your wealth like we do and you’ll prosper too.

About the Author: Sean Hyman
Sean Hyman is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He is also the editor of Ultimate Wealth Report. Discover more by Clicking Here Now.

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