TEHRAN, IRAN – JANUARY 8: Protests have continued since December, sparked by rising inflation and the collapse of the rial, and have expanded into broader demands for political change. (Photo by Anonymous/Getty Images)
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The collapse of Iran’s currency sparked the uprisings that may yet topple the ayatollahs. Will the Trump administration take note?
Last June, over the course of 12 days, Israel and the US destroyed Iran’s nuclear facilities. When it became clear that despite the disaster, Iran’s extremist regime would continue to pour money into its nuclear and terrorist operations, its currency completely collapsed. A desperate population, long crushed under a murderous and corrupt tyranny, rose up on a scale never seen before. The mullahs responded by killing thousands of protesters and arresting thousands more, most of whom will be executed if the regime survives.
If the US provides the necessary assistance and makes the necessary moves, the ayatollahs may well be consigned to the hell of history.
This surprising turn of events highlights a factor that historians will recognize but underestimate its profound significance: the role played by inflation and a corrupted currency in changing history. This is because monetary policy completely lacks the excitement of battles or uprisings and the drama of high-level diplomacy.
There are many examples:
• The junk money of revolutionary France during the 1790s was critical in creating the conditions that led to the rise of Napoleon and two decades of war.
• The collapse of the ruble during World War I fatally undermined the three-century Romanov dynasty.
• The disastrous hyperinflation of the German Weimar Republic in the early 1920s set the stage for the rise of Adolf Hitler.
• Severe inflation in the late 1940s that destroyed China’s anti-Communist urban middle class helped Mao’s Communists triumph in that country’s civil war.
• Yugoslavia’s hyperinflation and currency crash in the late 1980s and early 1990s broke that country into seven separate nations. The process involved ugly acts of ethnic cleansing and a war that led to US-led NATO intervention. We still have troops stationed in Kosovo and Bosnia and Herzegovina.
Of course, the inflation the US is experiencing today is well below the highs during the Biden presidency. But President Trump is flirting with the idea of weakening the dollar to address our trade deficit. The dollar is already swinging against other currencies and has fallen sharply against gold, which is the best barometer of monetary inflation. If the trend is not reversed, the weakening dollar will undermine Trump’s presidency. The same thing happened to President George W. Bush in the early 2000s, when he and his economic team were seduced by the supposed benefits of a weaker dollar. A weak dollar also marked the presidencies of Richard Nixon, Gerald Ford, and Jimmy Carter.
A dollar of stable value is critical to real prosperity. Will President Trump and his team recognize this before we do unnecessary harm to ourselves and the world?
