Abdolnasser Hemmati, governor of the Central Bank of Iran, used a special broadcast on Wednesday to argue that the country's monetary crisis remains under control. "Some thought hyperinflation would happen," he said. "For now, it has not."
Later in the same program, describing how the government has kept the country running, he offered a defense that its critics will find more revealing than reassuring. Go into the market, he said, and you will see that basic goods are there. "I know it's expensive, but it's there."
The rebuttal arrived the same day. In an interview with Khabar Online, Farshad Momeni, professor of economics at Allameh Tabatabai University in Tehran, was asked whether Iran stands on the threshold of hyperinflation. "Hyperinflation has already happened," he answered.
While the two men argued over the name, Hemmati was proposing to raise the state food coupon by 23 percent, to 12.3 million rials a month. At market exchange rates, that is about $6.40.
An argument about a word
Both men are, in a narrow sense, right, and the gap between them is a definition.
The standard economists use, set out by Phillip Cagan in 1956, puts hyperinflation at 50 percent a month. By that measure Iran is nowhere near it: monthly inflation in the month of Tir (ended on July 22) was 3.1 percent. Looser conventions treat triple-digit annual rates as hyperinflation, and by that measure parts of the Iranian economy have already crossed the line.
Which is where Momeni takes his stand. He cites the statistics center's own reports showing that inflation lands hardest on low-income groups and deprived provinces. "Triple-digit inflation has already turned up in some regions in these official reports," he said, "and if we look at unofficial reports, the picture is far worse."
The dispute is not academic point-scoring. "Hyperinflation" has become one of the most heavily used words in Iranian economic discourse, deployed by lawmakers, newspapers and economists with increasing frequency and decreasing precision.
Iranians have lived with double-digit inflation for the better part of five decades, which is Momeni's own point: with one or two exceptions, he says, Iran's economy has been held captive by inflationary policies for 55 years.
A word that has described the ordinary condition of Iranian life for half a century stops carrying information. The reaching for a bigger one is a sign that the old word has stopped working, and that people are trying to name something they have not felt before.
The official figures give the reaching some grounding. Point-to-point inflation in Tir stood at 87.9 percent, and for food and drink at 128.1 percent. Those rates sit on top of a minimum wage of about 166 million rials a month, roughly $87 at market rates, and typical earnings of 200 to 300 million rials, about $105 to $157. Against food prices that have more than doubled in a year, a $6.40 coupon covers a fraction of a week.
What inflation does to a country
Momeni's larger argument is that inflation of this duration is not an economic problem that also has social effects; it is a solvent.
He points to John Maynard Keynes in The Economic Consequences of the Peace, who wrote that inflation beyond a certain point makes every contract unstable.
"That includes all contracts," Momeni said: "the constitution, ordinary laws, even the rules governing family life. In that atmosphere, kleptocracy takes the place of cooperation and trust." He notes that even Lionel Robbins, a market fundamentalist by his description, warned that phenomena such as Nazism and fascism were born of high inflation.
He also reaches for a historical case that carries an unmistakable warning for the government he is addressing. Analysts asking why the Chinese public accepted the fall of the nationalist government, he said, tend to answer that Mao and his allies controlled inflation in each province they took, while the nationalists could not.
Momeni's sharpest criticism is reserved for how officials talk about all this. They warn about the dangers of inflation as though they were bystanders.
"They play the role of the opposition themselves," he said. "They perform these deadly tricks and then hold a funeral for the consequences." Officials, he argued, should be reporting their remedies, not their alarm.
He extends the same skepticism to the labor figures. Official unemployment stands at 7.6 percent, which he called one of the most astonishing claims available, given a Plan and Budget Organization report showing that only one third of the working-age population is employed, with two thirds playing no part in national production.
Inflation and joblessness compound, he said, and "when inflation and unemployment come together, we have entered the abyss of misery."
The governor's toolkit
Hemmati's account of the government's response is a catalogue of technical interventions carried out under severe constraint.
He said oil exports have almost entirely stopped, that Iran's foreign reserves are blocked by the United States while neighbors in the same position can still draw on theirs, and that about $12 billion of Iranian funds in Qatar, which was to have been made accessible under earlier understandings, remains frozen. Preliminary banking agreements had been signed, he said, but nothing operational has followed.
On Iraq, he said Baghdad had promised to address its outstanding debts, while noting that Iraq's own oil revenues had slowed and that its payments to its own employees had been delayed.
He said a meeting with Iraq's prime minister had produced agreement to use Iranian funds held at the Trade Bank of Iraq as backing for guarantees to Iranian contractors. At the BRICS summit he proposed what he called a financial corridor among member states, using their digital assets to reduce dependence on other countries' currencies.
Hemmati's own figures show the strain behind the reassurance. Foreign currency allocated for basic goods and agriculture over five months was about 8 percent lower than a year earlier, and currency available to manufacturers fell roughly 30 percent.
The coupon program alone requires about 870 trillion rials a month, some $455 million, and the government drew $2.5 billion from the National Development Fund before the new year (March 20) to keep it running for four months. He said the government does not want to fund it by printing money.
He was blunt about the limits. Purchasing power has fallen, he said, and while Turkey raised wages in step when its inflation reached 60 to 70 percent, Iran's fixed-income earners, teachers, workers, civil servants, the bottom three income deciles, receive increases of 20 to 25 percent that leave them further behind each year.
The end of the chain
Whatever the argument is called at the top, its shape at the bottom is not in dispute.
Mostafa Pourdehghan, a member of parliament's industries and mines committee, has warned that Iran is heading towards hyperinflation, putting liquidity at a record 170 quadrillion rials and citing Hemmati for a figure of minus three percent economic growth over five months. He has called for an emergency committee on inflation and prices.
Below that, according to reporting by the ILNA news agency, companies that laid workers off and later recalled them have not paid wages since late May, and the returning workers have lost both the substitute income they found and their entitlement to unemployment insurance.
Akbar Shokat, executive secretary of the Workers' House in Qom province, said most of the workforce lives below the poverty line after years of wage suppression and has almost no resilience left, warning that workers could not endure more than another two months. In July, about 1,600 workers at the Tabriz Machine Manufacturing group struck over unpaid wages.
Hemmati and Momeni are arguing about which word describes the Iranian economy. In the shops, where a month's wages no longer reach the end of the month, the argument was settled some time ago.
