Currency manipulation, the main policy of the central bank to control the market
One of the important parts of the statements of the Governor General of the Central Bank in the unveiling of the Siyaq system, which was held last week, was the discussion of economic stabilization policy and money laundering. Farzin considered the control of exchange rate and liquidity as the main axes of the stabilization program and explained that the control of liquidity and imbalance of banks is on the agenda of the central bank to create peace in the government’s economic indicators. He also pointed to the issue of money-sprinkling about economic growth and emphasized that production growth is not done by money-sprinkling.
This is despite the fact that, according to many economic experts, the examination of the central bank’s actions both in the currency market and in the money market shows that currency exchange and money exchange are the main policies to control these markets, and there is a big difference from Farzin’s words to his actions. Ali Saadoundi, an economic expert, investigated this issue in an interview with TejaratNews.
Stabilization policy means throwing money
At the beginning, Saadoundi explained the economic stabilization policy and said about it: Stabilization policy means throwing money; When the price of a commodity is controlled, the unit that produces it will eventually go bankrupt, and in order to save this unit from bankruptcy, we have to inject resources into it, and these resources are provided by the central bank.
He continued: A clear example of this is the car market. Why car manufacturers are not afraid of fixing car prices? Because the sources are received by the banking system. Why does the banking system provide them with these resources? Because in the end they overdraw their deficit from the central bank. Why does the central bank not object to this issue? Because the central bank itself is the cause of this issue with these claims of stabilization policy. This is why we have unfortunately entered a vicious circle.
Stabilization policy in the currency market
This economic expert went on to criticize the policies of the central bank in the currency market and explained: Mr. Farzin was like a fireman who, when he entered the central bank, set the currency market on fire. When inflammation occurs in the currency market, inflammation must be controlled; So considering a stabilization policy in the currency market at that time was the right action and should be done.
He further told Tejarat News: Nevertheless, when the fire subsided, we should have searched for its causes and rebuilt this building, but the Central Bank continues to pour water on the building whose fire has been extinguished, and this caused the destruction of this building. The building will be in the future.
He also added: Therefore, the time of currency manipulation has passed, but Mr. Farzin is still currency manipulation and emphasizes the policy of stabilization. In this policy, financial resources must be provided, and these resources are ultimately provided from the central bank. Therefore, stabilization policy will turn into its opposite.
Reverse use of open market operations
Another important criticism directed at the central bank is the policies of this institution towards the money market. Because for a long time, the interest rate between banks and deposits has been suppressed in this market due to the injection of money by the central bank. Saadoundi also pointed out this point in his remarks and said: Unfortunately, the central bank uses open market operations in the opposite direction. All over the world, open market operations are used to control inflation, but in Iran, these operations are used to create inflation. Unfortunately, the interbank interest rate is fixed and on the other hand, the resources of the central bank are regularly injected into the central bank through open market operations.
It is not possible to have a good vision for the future
At the end of this conversation, Saadoundi noted: Central Bank has not done anything wrong in throwing money and currency and has injected both money and currency as much as it could. It seems that these statements and actions of the central bank do not have a scientific basis, but they are liked by politicians and Mr. Farzin is also on this track. Currently, he is not looking to please the people and he is looking to please his managers, and it is not possible to imagine a good perspective for the future of this situation; Unless there is a policy change.
Source: Tejarat News