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Kyle @HNIJohnMiller
, 23 tweets, 5 min read Read on Twitter
1) @ThomasWictor @Imperator_Rex3 @drawandstrike Iran's banking system, thus the economy, is fucked.

"How fucked is it?!?"

Let a drunk twitter asshole with a passing familiarity with finances, economics, and accounting (econ ba and mba) who hasn't gotten to drink yet explain.
2) First, lets look at their currency, the rial…
3) The 2012 drop in the exchange rate against the US dollar came as sanctions were applied to Iran by Obama. I know we've harped on him pretty bad, but it wasn't ALL kid gloves that he was treating them with. There were a few rocks in the snowballs.…
4) With sanctions hurting the economy, Iran decided to double down, and completely devalue its currency which it was trying to keep pegged against the dollar.… This caused the 2013 PLUMMET into near worthlessness.
5) Now, TYPICALLY, this isn't bad. See, a country which devalues its currency makes its goods cheaper, leading to a rise in exports and an increase in foreign businesses investing in the country.
6) That didn't happen. Their GDP has been taking a rather bad plunge. Over time they may have been able to stabilize, but they're an autocratic regime waging proxy wars against their neighbors. Besides Russia and China, who would invest?
7) Even the relief of sanctions as part of the Iran deal didn't help, partly because they weren't given time, partly because you know the whole funding terrorism and proxy wars and violation of the nuclear deal, with @realDonaldTrump reapplying sanctions.
8) So, their currency is crap, they're economically isolated by sanctions, how could it get worse? Insert the IRGC!!!
9) See, the other part of their economic struggles is that the IRGC controls large swathes of the economy with very little privatization being done. IRGC businesses and banks dot the cities nationwide, and are notorious for corruption.
10) The big government banks are rather notorious for corruption to. People's money that are invested in the banks are being wasted in the millions by corruption. Insert scheme one: toxic loans.
11) The big government banks only loan big sums to the rich senior officials of the country, who'll take out, say, a 60 million dollar loan on a 6 million dollar house, use the house as collateral, not pay it back, and the bank is out 54 million when they repossess the house.
12) Then, the other kind of fraudulent loan, where they take advantage of the country's desperation for ANY kind of economic growth by proposing building a factory or something and taking out a huge loan with low interest rates.
13) Theeeeen sticking it in an account at a different bank with a high interest rate. They pocket all the money, the bank that loaned the money gets virtually nothing.
14) People want to bitch about income inequality? These loan fraud schemes are workable because if you're powerful and connected to the regime you can pull in tens of millions in loans. If you're not? 30,000 USD, tops.
15) So, the government banks are fucked, but because they're backed by the government, surely they'll be insured right? That's why people have been trusting them. Exceeeeept their cash reserves are now dangerously low. Banks kinda depend on most loans getting paid back.
16) So, the banks are now trying to do a fire sale of all of the repossessed property that was used as collateral by the bad loans in desperation, because people might start withdrawing their money. This is going to cause runs on the banks. The government banks will collapse.
17) So what about the IRGC and other private banks? Well, who the hell do you think takes out those absurd loans from the government banks?
18) The IRGC and private banks are mostly ponzi schemes run through shell companies or straight up fake companies. Their owners take out huge fraudulent loans to capitalize THEIR banks because they're either politically connected or high up in the IRGC
19) They then offer absurd interest rates to attract more money, and then after awhile like all good ponzi schemes they collapse and the owner makes off like a bandit, immune to prosecution due to aforementioned connections or being high up in the IRGC
20) Protestors now are targetting the IRGC banks for burnings which are mostly symbolic as there's nothing actually THERE. They're just symbols of the corruption crippling Iran's economy.
21) HOWEVER, if only a few people start withdrawing their money from the government banks, who again are DESPERATE to try to recapitalize by doing a fire sale of their bad assets, and suddenly they're not able to...
22) Chaos. Sheer bloody fucking chaos. People will have had their savings torn from them. Poor, middle class, unconnected rich. IRGC members themselves will have their savings torn from them. The government, who owes money to the government banks from loans, is BROKE.
23) Bank runs happen fast, they happen hard, and when they do if not carefully managed governments fall. I have absolutely no doubt in my mind the IRGC as soon as they find out their next paycheck isn't coming won't help with the 'carefully managed' bit. /end
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