Iranian Currency Collapse 10/5/12

Previously we have seen the Asian currency crisis. Then the Russian Rouble collapsing. Now it is the Iranian Rial’s turn. I hope that we in the US get our fiscal house in order or else it will happen to us one day because of our growing debt…we must protect ourselves from this type of scenario. 

Rial is the Iranian currency.

In 1979 70 rials = US $1
> > 2012 last week 24,600 rials = US $1
> > 2012 earlier this week in Iran 34,800 rials = US $1
> > Inflation 24% per year but some say it is more like 50%.
> > Currency has lost 80% of its value since 2011.

What has happened to Iran’s currency? Perhaps the US sanctions and US banks cutting of the Iranian Central bank and Iran not having planned for this attack by hoarding dollars or Euros have finally caused the Rial to break.

Dark pools, hi frequency trading, high volatility, flash crash, Procter and Gamble becoming a penny stock for a short while; all these are now a real part of the global trading markets. So much money can be moved so quickly, triggering computer algorithms to kick in, compounding effects. Most of the population is completely unawares. This is one reason why I prefer to have put options as protective tools and gave up mostly using sell stops. 

I can see that future wars will be fought on an economic basis, and that powerful countries such as the US, Russia, Israel, UK and China that have heavy think power, will need to prepare for attacks from foreign soil, or from within. Not a bomb will burst; but livelihoods and not lives will be lost. Much later, people may find out what really happened. This could be happening now to Iran. It begins with a crack. A small weakness. Then prying open that crack. Or perhaps as a flood. Huge. Overwhelming in a short massive onslaught.

Well worth thinking about as to how to protect yourself. Diversification, insurances, technical systems that are emotionless, and currency hedging are the tools for survival. Maybe keep an open buy order for a major stock or three at ridiculously low levels as a limit order. Might make you rich in an unexpected way one day. Some would also suggest buying low when the vultures are feasting. I find that hard to do, unless there is an established uptrend. Low can go lower and eventually disappear. You can do that with a portion but not all your portfolio.

But who knows. No one has the golden key. But we have been warned…