Islamic economics: cut zeroes to stop inflation

Nobody likes inflation.  But Muslims really don’t like inflation.  They have a saying that one silver dirham (coin) during the time of Muhammad would buy one chicken, and that one dirham today would buy you… one chicken.  That is why the movement within the Islamic world to buy gold coins has skyrocketed, as I have blogged about here.

Iran’s rial is supposedly pegged to the dollar, so the mullahs can’t quite figure out why they would experience inflation.  No matter.  Just behead the zeroes from the currency itself.  That will solve it.  Here’s the news from AP, via MSNBC:

TEHRAN, Iran – President Mahmoud Ahmadinejad said Wednesday his government is planning to lop off zeros from its currency in an apparent fight against Iran’s double-digit inflation.

Ahmadinejad’s government is preparing to enact a law in April that would sharply slash energy and food subsidies. The move could provoke more unrest in a country already struggling under international sanctions, high inflation and a government crackdown on the opposition.

“It is planned to remove zeros off currency and make the rial value real,” Iran’s government website quoted Ahmadinejad as saying. “The value of rial, under the law, is calculated on the basis of the price of gold. For some reason, the rial has been devaluated and we have to return its value to the one existing in the law.”

The Iranian rial is now traded at 10,000 rials to one U.S. dollar. That compares to 70 rials against the dollar in 1979, the year an Islamic revolution toppled the pro-Western Shah Mohammad Reza Pahlavi.

The governor of Iran’s Central Bank, Mahmoud Bahmani, last month said three or four zeros will be removed from the currency, depending on the results of the government’s subsidy cuts.

But don’t worry.  Sharia finance and Islamic economics are more ethical, equitable, and sustainable than Western capitalism.  That’s what we’re told, anyway.