Muslim Communists are the Facilitators of Inflation Part One

Muslim Communists are the facilitators of inflation Part One

Yaser Jebraeili and Seven False Claims

Muslim Communists are the facilitators of inflation Part One According to Iran Gate, Yaser Jebraeili recently made claims on the Islamic Republic of Iran Broadcasting that were inaccurate and unscientific, prompting reactions from many experts and social media users. Apart from proving the falsity of the images and so-called graphs he presented in this program, it must be said that Jebraeili also made strange claims that are not only unscientific but are also evaluated as caricature-like and ridiculous even by the standards of what we know as pseudoscience.

Last week, a program was broadcast on the Islamic Republic of Iran Broadcasting that drew reactions from many economists and experts in this field. This program, hosted by Amirhossein Sabeti, a super-revolutionary presenter close to the Islamic Revolutionary Guard Corps, and featuring Yaser Jebraeili, was aired on the Ofogh network and dealt with examining the roots of economic problems and policy-making in this area.

This report attempts to examine his seven claims in the field of macroeconomic policy-making. In this program, he frequently contradicted himself and even distorted basic economic principles in a fraction of a second. In a three-part series of reports, the truthfulness of seven strange claims by Seyed Yaser Jebraeili, head of the Center for Strategic Evaluation and Oversight of the Implementation of the General Policies of the System, has been examined, with three of these claims being reviewed in the present report.

First Claim: My Discussion is not Economic

At the beginning of this program, Jebraeili correctly states that his education is not in economics and he has no expertise in this field, but immediately makes an incorrect and strange claim, saying that the topics he intends to discuss in this program are not economic at all. However, he quickly proceeds to discuss topics such as types of inflation, the role of oil and currency in creating inflation, and also offers solutions to control inflation.

Just seconds before making these statements, he had said that making comments in the field of economics is not within his competence, but it becomes clear that he has essentially appeared on the program to provide solutions for controlling inflation, the country’s biggest economic problem. It is evident that Jebraeili has already contradicted himself at the very start of the discussion.

Second Claim: Reversed Analysis of the Quantity Theory of Money

In part of this program, Jebraeili refers viewers to the Quantity Theory of Money and explains that the growth of liquidity has no connection with the increase in inflation rates. Before expanding on his strange and unscientific discussion, he states that he intends to simplify the Quantity Theory of Money so that all viewers understand it. The problem starts exactly here because his simplification is fundamentally based on erroneous and misleading assumptions. Therefore, Jebraeili’s conclusions cannot have scientific validity. But where is the problem with his claims?

In the explanations Jebraeili provides, the most important part of the Quantity Theory of Money is deliberately or ignorantly ignored. What we know as the velocity of money, represented by the symbol v in the Quantity Theory of Money, is not addressed. In the example he provides, it is assumed that if the price of gold increases, other prices will also increase proportionally. However, he does not mention the non-constant nature of the velocity of money or the constant changes in rentier economies like Iran’s.

When the fluctuations of variables are ignored in the analysis of the Quantity Theory of Money, ultimately, the ratio of liquidity growth to production will not be calculated correctly. As mentioned, due to not considering the fluctuations in the velocity of money, the analyst will conclude that the ratio of liquidity growth to production cannot represent a meaningful relationship. Ultimately, it is speculative activities that maintain market price equilibrium. In simpler terms, Jebraeili, by reversing a well-known and credible scientific theory, tries to sell his erroneous yet intentional assumptions to the viewer who does not understand the concepts and is probably confused.

Third Claim: Liquidity Growth is not Inflationary

Jebraeili continues by citing the situation of liquidity growth in developed countries like Japan, Germany, and the UK to persuade the viewer that printing money does not cause inflation. He claims that the rate of liquidity growth in developed countries is much higher than in Iran, but this money enters the industry and productive sectors of the economy in the mentioned countries, whereas in Iran, the class he calls brokers devour this money, and this issue exacerbates inflation.

As stated in the section reviewing Jebraeili’s second claim, Iran’s economy has many fundamental differences from other world economies, whether developed or developing. In this regard, it should also be noted that liquidity growth or the expansion of the monetary base in developed countries is done with the aim of meeting the liquidity needs of the productive sector of the economy.

In other words, production in these countries is so dynamic and fertile that the amount of money in circulation in these economies cannot meet the liquidity needs of the productive sector. Therefore, central banks directly expand the monetary base, and for this reason, the rate of liquidity growth in these countries is relatively high. However, because this money enters the productive sectors of the economy, inflation is never exacerbated, and the pressure of printing money is not placed on the people.

On the other hand, it should be noted that the higher the accumulation of money in ordinary people’s current accounts or the increase in investment in productive sectors, the lower the velocity of money. This also requires the development of financial instruments in an economy and the level of public trust in the banking system or investment in the industrial or service sectors.

Yaser Jebraeili is undoubtedly aware that banking sanctions over the past two decades have caused financial instruments in Iran’s economic system to face extreme backwardness. He certainly knows how much the investment rate in Iran and the level of trust of capital owners in productive activity have decreased. However, he still compares Iran’s economy with super-economies like Japan and paints a caricature-like and childish picture of macro-management and policy-making in the economic field for the audience.

However, this principle cannot be true for Iran’s economy. It should be noted that in the fragile economic structure of Iran, the goal of expanding the monetary base, which causes liquidity growth, is by no means to meet the liquidity needs of the productive sectors. Rather, the reason is the budgetary imbalance of governments. In fact, governments print money to cover their budget deficits and pay their employees’ salaries. But because this money does not enter the production cycle and productivity, and is directly injected into the markets, it ultimately leads to ever-increasing inflation.

Now, Jebraeili claims that if we direct the money we print towards production, we will certainly not face exacerbated inflation. This claim of his is correct, but he deliberately does not mention that before printing money, the government has dug a deep hole that is supposed to be filled with the newly printed money, which is the payment of employees’ salaries and benefits. In other words, the goal of printing money in Iran is not the Central Bank’s decision to meet production needs, but it is forced to expand the monetary base under government pressure.

An example of this was seen in the delay in paying teachers’ salaries in Nowruz 2023. Yousef Nouri, the former Minister of Education, when faced with criticism about the non-payment of cultural workers’ salaries, made a strange statement that he would go to the Central Bank overnight and solve this issue. It is clear that Nouri’s intention with this statement is that he wants to force the Central Bank Governor to print money to pay the overdue salaries of teachers.

Therefore, it is said that this claim by Yaser Jebraeili is also completely false and merely paves the way for the government to print money more easily than before. Otherwise, he too is well aware that this money, once issued, will have no way of being directed towards production, and this claim is completely false.