Even before US President Donald Trump began threatening to re-impose sanctions on Iran, foreign investors looking to do business there were wary. Iranian President Hassan Rouhani failed to get his pro-market agenda off the ground, and now international political developments are playing into Iranian hardliners' hands.
Unlike the 2008 global financial crisis, which was mostly a large negative aggregate demand shock, the next recession is likely to be caused by permanent negative supply shocks from the Sino-American trade and technology war. And trying to undo the damage through never-ending monetary and fiscal stimulus will not be an option.
The Communist Party of China would like the mainland Chinese population and the rest of the world to believe that the ongoing, sometimes violent protests in Hong Kong pose a threat of "terrorism." But the truth is that China has only itself to blame for pushing the city's idealistic youth into the streets once again.
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PRINCETON – Since December 2017, Iran’s currency, the rial, has lost one-third of its value. And on April 10, the exchange rate’s rapid depreciation prompted the government to halt domestic foreign-exchange transactions and outlaw foreign-currency holdings of more than €10,000 ($12,000).
This government’s move represents a radical change of course, following three decades of relatively liberal economic policymaking, during which the authorities have permitted private-sector foreign-exchange transactions and even capital flight. Iran is not just anxious about the reinstatement of US sanctions after May 12, when US President Donald Trump is expected to make good on his campaign promise to withdraw from the 2015 Iran nuclear deal. Rather, the country is already adapting to a new world in which the prospect of rapprochement with the West is fading.
With the threat of renewed US sanctions having already created a rial crisis, the Trump administration is using the nuclear deal, formally known as the Joint Comprehensive Plan of Action, to try to force Iran to accept more restrictions on its nuclear program, as well as on its ballistic missile program. Given that Iran came to the table to negotiate the JCPOA less than a year after an earlier exchange-rate collapse – by 200% as of October 2012 – it is not entirely unreasonable to believe that the government will bow to Trump’s demands.
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