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 Rial and Dong

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Mission1st
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PostSubject: Rial and Dong   Tue Aug 09, 2016 10:23 am

I know the emphasis in here is the Dinar, especially ripping the hype away from what is a symphony of collective BS. However, I have a question about both the Iranian Rial and Vietnamese Dong.

Both countries have functioning governments, type notwithstanding, and are about to emerge from long and harsh sanctions. Both countries have large interest from outside entities that want to do business with them, and both are ordering "stuff" that has, until recently, been extremely costly or impossible to obtain.

I have read numerous articles on why a country, especially Vietnam has an interest in keeping the currency depressed,with regard to wages and price points on goods for export.

However, the question is (finally), how can these countries pay for imported goods and services if their currencies are so low? Am I erroneous to assume the very wide gap between a Rial and a Dollar(Euro, Pound, Yen) makes buying stuff out of the reach of their normal consumers? If I do some fuzzy math, a can of coke to a visiting Vietnamese tourist would be about 30,000 Dong, or most of a day's wage. It seems to me that either country has to have a better rate to intermingle with the real business world.

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PostSubject: Re: Rial and Dong   Tue Aug 09, 2016 10:38 am

Thank you for posting and asking the question. I hope someone has some answers that can help you.

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PostSubject: Re: Rial and Dong   Tue Aug 09, 2016 3:05 pm

If I were to choose one over the other I would choose Vietnam. Vietnam has had no real sanctions for many years, only some minor ones having to do with money laundering. Iran on the other hand has had some very real sanctions some of which remain in place. On the other hand, their population is more educated with a much higher GDP per capita. Still there are indications that like Russia in the late 80's, the stability we see is only the result of ruthless persecution of any opposition.

But what are the realities? Iran has a repressive government which controls the vast majority of what little industry they have. Like Iraq, the only export they have of significant value is oil. Their economy remains stagnant, with relatively high unemployment rates. Vietnam is more diversified, with exports in a number of areas. They are also rich in natural resources, much of which have not yet been fully developed. That is assuming of course that China allows them to keep them.

As far as an increase in value of the currency being necessary, noting can be further from the truth. There are actually competitive advantages in keeping it low as it allows them to sell their exports for less. Ultimately however, it all balances out import/export wise. Yes, raising the value would reduce to price of imported goods, but it will also mean fewer units of currency brought in by exports, and, if they are to remain competitive, lower wages.

In summary, there are no real compelling reason for either nation to significantly raise the value of their currency, and some very real reasons to keep it low. In fact we have seen Vietnam do just that a couple of times in the past year, lowering the value of their currency. I will be very surprised to see either country raise the value of their currency anytime in the near future, but perhaps the biggest question is why would you invest in a country (Iran) that is a sworn enemy of western civilization not to mention the largest exporter of terrorism in the world?

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PostSubject: Re: Rial and Dong   Tue Aug 09, 2016 4:10 pm

I agree with all of that, and that was the essence of the question: But, again, to buy things, like oil, or airplane parts, there is a disproportional expenditure out, even though it is more than balanced on a wide scale, than in.
Why do I have Iranian Rial? Irony mostly. I think it would be sweet if I made a profit off of a repressive shitbag regime, especially if it devalued later. Revenge is a dish best served cold, or in my case, on a beach with salt around the rim.
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