World's Worst Currencies

Chavez made the list, despite having bragged "we're going to end monetary instability in Venezuela." Chavez's reaction? Imprisoning those who violate price controls, introducing a 12.5 cent coin, and arbitrarily removing three zeros from the bolivar. The result? The official bolivar/dollar exchange rate is roughly half the black market rate. Chavez hasn't quite reached Mugabe-like levels of economic mismanagement, but he's on the same path.

Iran didn't make Foreign Policy's round-up, but they are similarly in trouble:

Some 60 economists this week wrote to Iran’s President Mahmoud Ahmadi-Nejad criticising his government for putting “short-term welfare above long-term sustainable development”.

Almost half way through his first four-year term, the letter underlines the acute dilemmas faced by the president in delivering short-term welfare promises as he manoeuvres to bolster political support.

The government’s indecision over two major issues – the price of petrol and bank lending rates – is a particular source of confusion.

More than three weeks after the lapse of the original date for petrol rationing – designed to curb a $5bn (€3.75bn, £2.5bn) bill for importing 35m of the 75m litres Iran consumes daily – the government is still groping its way around any decision it fears might be unpopular. Officials have this week made differing statements over when and how rationing – which was to begin tomorrow – will start....

Private bankers wrote to the economy minister last week demanding a freeze on loan rates to “make survival of private banks possible”.

But even with inflation officially at 13.6 per cent last year, Mr Ahmadi-Nejad is battling with the central bank over his insistence on a 12 per cent lending rate, down from the current 14 per cent in state-owned and 17 per cent in private banks. The Guardian Council, a constitution watchdog, is due to rule this week on a compromise.

“What the government describes as economic policies do not match any professionally-known theories, but are rather populist political policies,” said Mohammad Tabibian, former deputy head of the Management and Planning Organisation, a cross-governmental co-ordination body....

Many observers doubt official figures of 14 per cent inflation and 12 per cent unemployment. One economist told the FT that inflation was above 20 per cent, while unemployment was 25 per cent among university graduates.

There's no need to go to war with Iran; at this rate, they will crumble the same way the Soviet Union crumbled: through economic mismanagement coupled with fickle oil markets.

ht: Daniel Drezner