Growing Imbalances at the Philippine Stock Exchange: Coincidences or Patterns? Will the Philippines Be Immune from an Escalation of the Middle East War?

Doubt isn't the opposite of faith; it is an element of faith—Paul Tillich, German theologian and historian

Growing Imbalances at the Philippine Stock Exchange: Coincidences or Patterns? Will the Philippines Be Immune from an Escalation of the Middle East War?

Stock market trading opened the second decade of the twenty-first century with a peculiar twist, both the headline index and broader market were in the red!

On January 2nd, when the PSYEi 30 tumbled below the 2% threshold, similar to December 20, the international business media outfit, the Bloomberg immediately released a tweet of an article that highlighted the market’s dilemma. 

Perhaps because of the abbreviated trading week due to the holidays, which many used to extend their vacation, attempts to push the index higher post-lunch break lacked vigor unlike December 20, and therefore, lost ground. 

The fizzling of the intraday day pump didn’t deter the rescue of the index, though. Similar to December 20th, a massive mark-the-close pump cut the index’s losses by almost half!

But unlike the historic December 20 pump*, the low volume activities limited the scale of the rescue.

*Plunge Protection Team Rescues Index with December 20’s HISTORIC Magical Pumping! BSP’s Consumer Survey versus the CPI December 22, 2019

Was the media’s article about the struggling PhiSYX a coincidence or a pattern? Was it a beacon signal for a rescue?

Was the gigantic (+2.7%) pump on January 2nd led by SM Prime a coincidence or a pattern?

After soaring by close to 2%, the second day of 2020 saw the index jump by only 1.26.

 

And have the strength of the index in the first two days of the last two years, backed by mark-the-close pumps, been a coincidence or a pattern?

But why the inferior performance of 2020? Because of the want of vim expressed by the low volume? 2020’s two-day return was significantly below the over 2% in 2018 and 2019.

Despite understanding that in interpreting statistical probabilities, the difference between case probability and the class probability matters, will 2020’s significant inaugural underperformance weigh on the month’s returns? Except for 2016, the two-day trading week led the headline index to return a paltry .31%, the lowest since 2011.  

Historically, less than 1% return on the first week have led to negative January returns.  The headline index posted negative returns in the first week only in 2016 and 2008 in the last 13-years.

As a reminder, the index composition and weight distribution have differed over the years.

Even as several index issues, like Ayala Corp, Megaworld, PLDT, Jollibee, Metro Pacific, LT Group, DM Consunji, and Semirara Mining have touched multi-year lows in the last month or two, shares of only the Sy Group of companies have carved either a milestone or have been within the ambit of fresh highs!

While BDO and SM closed the week 6.06% and 7.81% off their respective January 2018 zeniths, SMPH has vertically ascended to repeatedly carve fresh highs in December 2019 extending to the first week of 2020.  SM Prime’s September 2019 climb should be the steepest in history! And the headline index is at the 7,800 level only!

SMPH’s % share weight of the index jumped 65.2% from 6.12% in the first week of 2016 to a stunning 10.11% share in 2020!

Has the disproportionate accumulation of the share weight of the free-float index of Sy Group been a coincidence or pattern?

Is the mounting divergence between the Sy Group and most of the PSYEi issues a coincidence or a pattern? How sustainable is such an imbalance?

 

Has it been a coincidence or a pattern that 2019’s 4.68% returns had almost entirely accrued from the advances of the top 5 issues? And that such gains, which has magnified the lopsidedness of the index, came at the expense of the rest! The first quintile’s percentage share jumped by 14.9% in 2019 to 48.98% from 42.64% in 2018. Since Bloomberry replaced Petron Corporation in February 2019, the last quintile group has been excluded.

To what extent would such fundamental discrepancies from either coincidence or patterns persist?

Or should we just deny facts and economic precepts to blindly embrace with unquestioning faith what we have been programmed to believe?

Finally, have we not been repeatedly told that the Philippines would be immune from external events**?

Then why the sudden backpedaling of establishment experts with the likely escalation of the US-Iran conflict, following the assassination of Iran’s military commander Qassem Soleimani in Iraq by US President Trump, which may have likely been done under the implicit bidding of the US military-industrial complex, Israel's Netanyahu and Saudi Arabia?

**Are Philippine Stocks a Buy in 2020? December 30, 2019

And since Syria and Iran have a mutual defense cooperation deal, would the theater of war expand should Syria lend a helping hand to Iran?

And would this not drag members of the China-led Shanghai Cooperation Organization (SCO) to an open conflict with the US-led NATO? Iran is an observer state of the SCO.

As Richard Haas, President of the politically connected Council on Foreign Relations (CFR) recently tweeted, “Make no mistake: any war with Iran will not look like the 1990 Gulf war or the 2003 Iraq wars. It will be fought throughout the region w a wide range of tools vs a wide range of civilian, economic, & military targets. The region (and possibly the world) will be the battlefield.”

And should the Middle East tinderbox be ignited, would the Philippines decouple from World War III????

For those who believe in this, good luck!

Eric Margolis: US Supplied Iraq’s Saddam with Chemical and Biological Weapons

Writing at the LewRockwell.com historian Eric Margolis claims that the US has been responsible for supplying chemical and biological weapons to their once favored tyrant ally, Saddam Hussein (bold mine, italics original)

While covering Iraq in 1990 – just before the first massive US bombing campaign – I discovered the US and Britain had secretly built a germ weapons arsenal for Iraq to use against Iran in the eight year-Iran-Iraq War.

This while both the US and Britain were fulminating with breathtaking hypocrisy against the alleged dangers of Iraq’s supposed WMD’s (weapons of mass destruction) that never existed. Some years later, the two leading apostles of attacking Iraq, George W. Bush and Tony Blair, delivered Philippics against Saddam Hussein’s weapons programs while never mentioning that high level of western support for Iraq’s late leader.

Last week the widely read “New York Times” ran a multi-page exposé entitled “Abandoned Chemical Weapons and Secret Casualties in Iraq.”

The NY Times played a key role in driving the US into two wars against Iraq. America’s leading newspaper is finally facing part of the ugly truth over Iraq’s non-existent weapons of mass destruction, the pretext used by the US to bomb, then invade Iraq. Perhaps it’s trying to atone, or clear its besmirched name.

Iraq had no nuclear weapons, as the US falsely claimed. But it did have an arsenal of chemical and biological weapons – delivered by the western powers. All were battlefield arms, not strategic, weapons. None could be delivered more than 100 kms.

According to the “New York Times,”  after the second war against Iraq in 2003, 17 US servicemen and seven Iraqis were injured by mustard and nerve gas after they dug up buried caches of Iraq’s 1980’s chemical weapons. Shamefully, their plight was kept secret by the Pentagon; the soldiers were refused adequate medical care in order to cover up this sordid story.

But what I uncovered in Baghdad was far worse.

I found two British scientists who had been employed at Iraq’s top secret Salman Pak chemical and biowarfare laboratory near Baghdad. The Brits confided to me they were part of a large technical team secretly organized and “seconded” to Iraq in the mid-1980’s by the British government and the MI6 Secret Intelligence Service. Their goal was to develop and “weaponize” anthrax, plague, botulism and other pathogens for use as tactical germ weapons.

The US and  Saudi Arabia feared Iran’s Islamic revolution would sweep the Mideast and overthrow its oil monarchs. So Washington and its Arab allies convinced Iraq’s president, Saddam Hussein, to invade Iran and overthrow its new government. Arms and money flowed to Iraq from the US, Britain,  Kuwait and the Saudis.

After three years of WWI-style warfare, Iraq found its outnumbered troops could not stop Iranian human-wave attacks. Iran was slowly winning its bloody war against Iraq.

So the US and Britain supplied Saddam Hussein with chemical and biological weapons to break the waves of attacking Iranians. Chemical warfare manufacturing equipment – disguised as insecticide plants – came from Germany, France and Holland. The feed stock for the germ weapons came from a US laboratory in Maryland –approved by the US government. 

Over 500,000 soldiers and civilians died in the eight-year Iran-Iraq conflict. To this day, Iran blames the US and the Saudis for instigating the war and causing some 250,000 Iranian casualties.

By contrast, in the Anglo-American view, chemical and biological weapons were fine – so long as used to kill Muslim Iranians. Used against westerners, they would be denounced as “terrorism.” In 2013, US President Barack Obama threatened Syria with war over unfounded claims that Damascus planned to use chemical weapons on US-backed insurgents.

Read the rest here

The consequence of the past has been relevant to current events. Mr. Margolis concludes:

the current horrible mess in Iraq and Syria is a direct result of the US-led invasion of Iraq in 2003. ISIS is a manufactured monster that could have crawled out of the germ warfare plant at Salman Pak.

Saudi Arabia Cuts Ties with the US over Syria-Iran

After the US government has been forced by the public, aided by Russian President Vladmir Putin’s appeal, to stand down against attacking Syria,  Saudi Arabia reportedly severed ties with the US.

Writes the Daily Mail, (hat tip Mises Blog)

Upset at President Barack Obama's policies on Iran and Syria, members of Saudi Arabia's ruling family are threatening a rift with the United States that could take the alliance between Washington and the kingdom to its lowest point in years.

Saudi Arabia's intelligence chief is vowing that the kingdom will make a 'major shift' in relations with the United States to protest perceived American inaction over Syria's civil war as well as recent U.S. overtures to Iran, a source close to Saudi policy said on Tuesday.

Prince Bandar bin Sultan told European diplomats that the United States had failed to act effectively against Syrian President Bashar al-Assad and the Israeli-Palestinian conflict, was growing closer to Tehran, and had failed to back Saudi support for Bahrain when it crushed an anti-government revolt in 2011, the source said.

'The shift away from the U.S. is a major one,' the source close to Saudi policy said. 'Saudi doesn't want to find itself any longer in a situation where it is dependent.'

It was not immediately clear whether the reported statements by Prince Bandar, who was the Saudi ambassador to Washington for 22 years, had the full backing of King Abdullah.

The growing breach between the United States and Saudi Arabia was also on display in Washington, where another senior Saudi prince criticized Obama's Middle East policies, accusing him of 'dithering' on Syria and Israeli-Palestinian peace.

A US attack on Syria means a likely involvement of Iran which the Saudi leadership also desires the US to go to war with.

Syria and Iran signed a defense pact in 2006 “for military cooperation against what they called the "common threats" presented by Israel and the United States” (Wikipedia)

Aside from the Syrian stand down, Iran seem to be warming up to the US to improve diplomatic relations. Both parties including intermediaries have reportedly been conducting talks for the lifting of economic sanctions against Iran. This further got the goat of the Saudi leadership. 

The prospect of Mideast peace has influenced oil prices. WTIC oil has been on a downward trek.

Yet falling oil prices also imperils the welfare state of many Mideast political economies as previously discussed. 

Latest estimates suggest that Saudi’s budget has been equivalent to $64-67 bbl oil

And high oil prices to keep the welfare state afloat could also be one reason why Saudi’s leadership demands the US to take on Iran.

As a side note, Iran has higher oil price requirements for her welfare state, but obviously economic sanctions poses as a bigger danger or threat. For instance, Iran experienced an episode of hyperinflation in about a year ago

And since the Shale oil revolution, the US has been least dependent on oil imports. In fact, US oil production has surpassed Saudi last April, according to Professor Mark Perry.

This also means lesser influence by Saudi on American foreign policy, which may also have irked the Saudi political leadership

But aside from the geopolitics of oil, the other aspect of Saudi’s demand for the US to go to war with Syria-Iran may have been about regional power

As historian Eric Margolis explains:

But what will happen if punishing US-engineered sanctions against Iran are eased? Oil-rich Iran will rebuild its ravaged economy and infrastructure, and quietly enhance its military power. A key priority for Tehran will be modernizing its decrepit civilian air fleet that routinely crashes from mechanical problems or pilot error. Good news for Boeing and Airbus, as well as US energy companies.

If Iran regains its former role as a major Mideast power, this important development will run head-on into current US strategy to keep it weak and isolated until a pro-US government comes to power in Tehran. A strengthening Iran will generate fear and anxiety in Saudi Arabia and some of the less flexible Gulf states, and increase Tehran’s influence over Iraq.

An Iran with the capability of producing a few nuclear weapons within a year also deeply alarms Washington, its Arab allies, and Israel. An Iran with even a few nukes, like North Korea, would sharply limit US Mideast power and its ability to use military forces against Iran.

Israel knows that Iran has no intention of launching a nuclear attack on the Jewish state, which is a major world nuclear power with an invulnerable triad of land, sea and air-launched nuclear weapons.

But Israel’s constant alarms about Iran’s so far non-existent nuclear weapons serves to distract attention from its rapid absorption of the West Bank and Golan, and generate potent political and financial support from its North American partisans. Or maybe Israel’s leader, Benyamin Netanyahu has actually come to believe his own Jeremiads about Tehran’s supposed suicidal “mad mullahs.”

Today, Israel has no serious enemies in the Arab world: Egypt has been bought off; Iraq and Syria destroyed. Saudi Arabia is in secret alliance with Israel. The only nation that can hope to challenge Israel’s increasingly dominant role in the Mideast is Iran. That puts Israel, Iran and Saudi Arabia in a three-way competition for regional hegemony.

Mideast politics is surely a complicated one.

Gold as a foreign policy tool: US Government Bans Gold Sales to Iran

The US government overtly intervenes in the gold markets when it uses gold as a foreign policy tool.

From the Economic Times:

WASHINGTON: The United States is working to block sales of gold to Iranians in order to undermine their currency the rial and to step up pressure on Tehran over its nuclear program, officials said on Wednesday.

From July 1, the US will ban sales of gold by anyone to either the Iranian government or to Iranian citizens, a senior US Treasury official said. Washington has warned Iran's neighbors Turkey and the United Arab Emirates, key regional centers of the gold trade, to stop gold sales to Iran, said David Cohen, treasury under-secretary for terrorism and financial intelligence.

Embargoes and trade sanctions are acts of war. The US has been provoking Iran into a war ever since.

Yet the US government’s arbitrary ban gold sales are really an attack on the average Iranians whom has gravitated to gold and to bitcoins due to Iran’s simmering hyperinflation. 

This shows how ruthless governments are, in wanting to starve or sacrifice innocent civilians in order to serve the political (neocons) and economic (military industrial complex) interests of the powerful elites. 

And I don’t think gold has just been a foreign policy tool but a monetary signaling channel or central bank communications tool as well.

“Wall Street versus the world” attempts to impress upon the main street and the real economy that gold has lost its luster as inflation hedge. The Iranian ban seem to also suggest of the same. The same article quotes the above US official: (bold mine)

The move to block gold sales is part of the effort to further weaken the rial, he explained. "There's a tremendous demand for gold among private Iranian citizens, which in some respects is an indication of the success of our sanctions."

"They are dumping their rials to buy gold as a way to try to preserve their wealth. That is I think an indication that they recognize that the value of their currency is declining."

So from the political authority’s perspective, the ban on gold means that Iranians would have to revert to the rapidly diminishing value of the rial and die alongside with the decaying currency.

Nonetheless the average Iranians know better thus the “dumping their rials to buy gold as a way to try to preserve their wealth”. 

Gold, not an inflation hedge? Only in Wall Street.

 

Like all forms of prohibitions they are most likely to fail.

Aside from Gold, Iranians Discover the Bitcoin

Aside from gold, economic and financial sanctions against Iran, which has partly led to hyperinflation has spurred Iranians to use the virtual currency, Bitcoin.

From Businessweek Bloomberg,

Created in 2009 by a mysterious programmer named Satoshi Nakamoto, bitcoins behave a lot like any currency. Their value is determined by demand, and they can be used to buy stuff. Bitcoin transactions are encrypted and handled by a decentralized global network of tens of thousands of personal computers. Merchants around the world accept the currency, from a bakery in San Francisco to a dentist in Finland. Individuals who own bitcoins and wish to exchange them for physical currencies like euros or dollars can use exchange sites such as localbitcoins.com, a Finland-based site founded by Jeremias Kangas. “I believe that bitcoin is, or will be in the future, a very effective tool for individuals who want to avoid sanctions, currency restrictions, and high inflation in countries such as Iran,” Kangas wrote in an e-mail.

The advantage for Iranians is that bitcoins can be swapped for dollars that can then be kept outside the country. Another plus: Regulators can’t easily track the transactions, since bitcoins aren’t issued from a central server. Bitcoin users can conduct business on virtual private networks, which hide customers’ identities.

At online store coinDL.com, shoppers can use bitcoins to buy Beyond Matter, the latest album from Iranian artist Mohammad Rafigh. Anyone in the U.S. downloading songs, which fetch .039 bitcoins or 45¢ each, risks violating U.S. sanctions. That doesn’t bother Rafigh, who’s studying computer engineering as well as playing music. “Bitcoin is so interesting for me,” Rafigh wrote in an e-mail. “I wish the culture of using digital money spreads all over the world, because it does not have any dependency on anything like politics.” Rafigh has translated some bitcoin software into Farsi for his friends. “I love Iran, and if bitcoin is good for me, it can be good for more Iranians like me.”

Iranian-American bitcoin consultant Farzad Hashemi recently traveled to Tehran and talked up bitcoin to his friends. “They are instantly fascinated by it,” he says. “It’s a flash for them when they realize how it can solve their problems.” Iranians working or living abroad can send bitcoins to their families, who can use one of the online currency matchmaking services to find someone willing to exchange bitcoins for euros, rials, or dollars. Bitcoins are useful to Iranians wishing to move their money abroad, either to children studying in Europe or America or simply to stash cash in a safe place.

As the value of the rial plunges, many Iranians are trying to acquire foreign currencies. “We have no idea what will happen,” says Amir-Hossein Madani, who says he’s traded tens of millions of street market dollars in Tehran over the past two years. “These days prices change every 10 minutes.”

The uncertainty has led some Iranian software developers to ask clients to pay them in bitcoins. “Anyone with a computer is able to own, send, and receive them. You can be at an Internet cafe in Iran and managing a bitcoin account,” says Jon Matonis, a founding board member of the Bitcoin Foundation, a Seattle nonprofit that promotes the currency. The exchange rate in Iran is 332,910 rials per bitcoin. It isn’t known how many Iranians use bitcoins to skirt sanctions. According to localbitcoins’ Kangas, 32 people in Iran have contacted each other through his site.

This is another proof which shows that the world doesn’t exist in a vacuum. People respond to incentives brought about by changes in the environment and social policies.

Hyperinflation and financial restrictions have compelled Iranians to discover alternative methods of money through gold and now bitcoins.

Sanctions Against Iran Spurs Burgeoning Use of Gold as Money in the Middle East

US sanctions against Iraq has been promoting the use of gold as medium of exchange in the Middle East, particularly the Iran-Turkey-Dubai corridor.

From Reuters:

Couriers carrying millions of dollars worth of gold bullion in their luggage have been flying from Istanbul to Dubai, where the gold is shipped on to Iran, according to industry sources with knowledge of the business.

The sums involved are enormous. Official Turkish trade data suggests nearly $2 billion worth of gold was sent to Dubai on behalf of Iranian buyers in August. The shipments help Tehran manage its finances in the face of Western financial sanctions.

The sanctions, imposed over Iran's disputed nuclear program, have largely frozen it out of the global banking system, making it hard for it to conduct international money transfers. By using physical gold, Iran can continue to move its wealth across borders.

"Every currency in the world has an identity, but gold means value without identity. The value is absolute wherever you go," said a trader in Dubai with knowledge of the gold trade between Turkey and Iran.

The identity of the ultimate destination of the gold in Iran is not known. But the scale of the operation through Dubai and its sudden growth suggest the Iranian government plays a role.

The Dubai trader and other sources familiar with the business spoke to Reuters on condition of anonymity, because of the political and commercial sensitivity of the matter.

Iran sells oil and gas to Turkey, with payments made to state Iranian institutions. U.S. and European banking sanctions ban payments in U.S. dollars or euros so Iran gets paid in Turkish lira. Lira are of limited value for buying goods on international markets but ideal for a gold buying spree in Turkey.

ROUTING VIA DUBAI

In March this year, as the banking sanctions began to bite, Tehran sharply increased its purchases of gold bullion from Turkey, according to the Turkish government's trade data.

Direct gold exports to Iran from Turkey, long a major consumer and stockpiler of gold, hit $1.8 billion in July - equivalent to over a fifth of Turkey's entire trade deficit in that month.

In August, however, a sudden plunge in Turkey's direct gold exports to Iran coincided with a leap in its sales of the precious metal to the UAE.

Turkey exported a total $2.3 billion worth of gold in August, of which $2.1 billion was gold bullion. Just over $1.9 billion, about 36 metric tons, was sent to the UAE, latest available data from Turkey's Statistics Office shows. In July Turkey exported only $7 million of gold to the UAE.

At the same time Turkey's direct gold exports to Iran, which had been fluctuating between $1.2 billion and about $1.8 billion each month since April, slumped to just $180 million in August.

The Dubai-based trader said that from August, direct shipments to Iran were largely replaced by indirect ones through Dubai, apparently because Tehran wanted to avoid publicity.

Perhaps US imperialist policies will backfire in the context of the degeneration of the US dollar as the world’s foreign currency reserve.

Possible Complications from Turkey-Syria Clash

Politicians easily indulge in war without understanding the possible complications from their actions.

Turkey’s recent border clashes with Syria risks opening open of the old wounds which could further sow fissures and destabilize the region. The skirmishes could be used as casus belli or a prelude to a broader theater of conflict which includes the US and Israel.

Historian Eric Margolis explains,  

Turkey's neighborly love-fest ended soon after Syria erupted in civil war. For reasons that still remain murky, Erdogan dropped his "love-thy-neighbor"policy and began actively supporting Syria's insurgents.

Until the Syrian uprising, Turkey had enjoyed good trade and political relations with Damascus. Syria had more or less dropped its claims to Turkish-ruled Hatay province, and told its Kurdish minority not to make trouble for the Turks. Hatay, and its strategic port of Iskenderun, were part of historic Syria (as was Lebanon and Palestine), but passed with French help to Turkish rule in the last century. If relations between Ankara and Damascus continue to worsen, this thorny issue may again heat up.

Turkey blundered into Syria's civil war soon after it erupted in March, 2011. Ankara allowed Syrian insurgent groups, funded and armed by Saudi Arabia, France, Britain, the US and Qatar, to operate from its soil. CIA established an important logistics and communications base for the insurgents at the US air base at Incirlik, Turkey. US, British and French special forces based in Turkey discreetly joined in the war to overthrow the Assad regime in Damascus – all part of Washington's undeclared but very real and intensifying multi-dimensional war against Iran, Syria's closest ally.

Each passing day of Syria's brutal civil war raises the risk that Turkey will send its armed forces into Syria, either to create so-called "civilian corridors"or no-fly zones to ground the Assad regime's air force. All-out NATO intervention led by the US could occur after American presidential elections.

Meanwhile, the besieged Assad regime in Damascus has lost control of a northern border region inhabited by 2 million ethnic Kurds who have become autonomous. Ankara, which faces a virtual independent Kurdish state in northern Iraq and its own long-simmering uprising by its Kurdish minority, is deeply alarmed by the specter of Kurdish nationalism.

The war in Syria has accentuated Turkey's serious Kurdish problem. This writer covered the Turkish – Kurdish conflict in eastern Anatolia a decade ago, in which over 40,000 had died by 1992 alone. Turkey thought it had put an end to the Kurdish PKK insurgency by capturing its leader, Abdullah Ocalan, in 1999. The PKK's main base was in Syria.

Ocalan remains in prison. But the Kurdish independence movement has sprung again to life. Syria will very likely resume aiding Kurdish PKK fighters to exact revenge on Turkey for abetting anti-regime guerillas. This is a huge problem for Turkey as Kurds make up 15-20% of its population.

By fueling Syria's civil war, Erdogan has kicked the Kurdish hornet's nest.

The conflict in Syria is pitting its minority Alawites (an offshoot of Shia Islam), who dominate the Assad regime, against the long-repressed Sunni majority. As Syria's Alawites fight for what some believe is their lives, their struggle is reverberating in Lebanon, where Shiites make up the largest religious community. Turkey's long-marginalized Alevis, who are another distant offshoot of Shia Islam and close to Syria's Alawis, and who are looked down on by the Sunni majority as heretics, are also feeling the reverberations of the Syrian conflict. Alevis may make up as much as 15% of Turkey's population of some 74 million.

Recent revelations of a massacre of Alevis in 1938 at the end of the era of Turkish strongman Ataturk has inflamed Alevi emotions in Turkey and deepened their sense of persecution and historic injustice.

So the Syrian conflict is reopening some of the deep fissures in Turkey's body politics just at a time when its zesty economy was enjoying a 7% growth rate – not far from China's – and Turkey had become the Mideast's cock of the walk.

Now, Syria bodes ill for all involved.

Read the rest here.  

If domestic political situation in Turkey deteriorates due to its present belligerent acts against Syria, then it is not that history repeats itself, but rather the impetuous acts by politicians reignites hostile relationships which had been long buried in the past.

As Prof Joseph Salernon points out, 

As a human endeavor like any other, war making is the product of reason, purpose and choice.

Hyperinflation in Iran

From Cato’s Steve Hanke:

Since the U.S. and E.U. first enacted sanctions against Iran, in 2010, the value of the Iranian rial (IRR) has plummeted, imposing untold misery on the Iranian people. When a currency collapses, you can be certain that other economic metrics are moving in a negative direction, too. Indeed, using new data from Iran’s foreign-exchange black market, I estimate that Iran’s monthly inflation rate has reached 69.6%. With a monthly inflation rate this high (over 50%), Iran is undoubtedly experiencing hyperinflation.

When President Obama signed the Comprehensive Iran Sanctions, Accountability, and Divestment Act, in July 2010, the official Iranian rial-U.S. dollar exchange rate was very close to the black-market rate. But, as the accompanying chart shows, the official and black-market rates have increasingly diverged since July 2010. This decline began to accelerate last month, when Iranians witnessed a dramatic 9.65% drop in the value of the rial, over the course of a single weekend (8-10 September 2012). The free-fall has continued since then. On 2 October 2012, the black-market exchange rate reached 35,000 IRR/USD – a rate which reflects a 65% decline in the rial, relative to the U.S. dollar.

The rial’s death spiral is wiping out the currency’s purchasing power. In consequence, Iran is now experiencing a devastating increase in prices – hyperinflation.  As Nicholas Krus and I document in our recent Cato Working Paper, World Hyperinflations, there have been 57 documented cases of hyperinflation in history, the most recent of which was North Korea’s 2009-11 hyperinflation. That said, North Korea’s hyperinflation did not come close to the magnitudes reached in the recent, second-highest hyperinflation in the world, that of Zimbabwe, in 2008, nor has Iran’s hyperinflation – at least not yet.

Since hyperinflation destroys the division of labor and causes social disorder, the risks of another Middle East war is looming large.

By the way, one can’t discount that the US economic warfare policies could contributing to Iran’s hyperinflation through the CIA’s surreptitious counterfeiting of the rial.