The very characteristic of laissez-faire economy is its sinusoidal functioning every 7 to 11 years. First, there is prosperity and then recession and ultimately a crisis and then after a while once again prosperity.
This functioning, in fact, stems from the attitude of the people involved in the economy. Some trade cycles are so huge that they can bring about poverty and unemployment worldwide. The good example of this is the Great Depression of 1929. Economic crises are rooted in a phenomenon that is strongly negated in Islam. Profit rates are determined by the monetary market, which fluctuates more than the production sector, in which the capital recovery rate is established. The norm is that transfer of capital immediately affects the profit rate and this in turn impacts the production sector. Apart from the notion that the hike or reduction of supply or demand changes the trade cycle, the main parameter behind the establishment of the cycle is the fluctuations in profit rate, which directly affect the real economic sector, that is production. If production is to proceed with greater stability, the banking system, which is the very source of profit rate, must be regulated in such a manner that profit and capital recovery rates are directly tied to each other.

Islam sees the solution to the global crunch as elimination of interest rate and the participation of the party extending the loan in the profit.

Islam sees the solution to this phenomenon as elimination of interest rate and the participation of the party extending the loan in the profit.
The global economy reached a position in 1929 wherein the profit rate was lowered significantly and for all practical purposes investors had no incentives to chip in money. This implied that there had to be negative profit rates to motivate potential investors. It is obvious that negative profit rates never emerge on the economic scene and this phenomenon is referred to as cash flow trap in economic jargon. This means that no matter how much money is injected to the market to lower the profit rate, investors found no incentives to invest. Therefore, under the circumstances, resorting to monetary policy could not overcome the crisis either. What economic expert John Keynes proposed in those years was to pursue monetary expansion policy.
The situation in recent years is analogous to the crisis of 1929, as real estate is experiencing a slump in the US and the profit rate has been lowered all over the world. Western banks have been suffering substantial losses--a situation similar to the one that existed in 1929.
Moreover, oil prices are record high and the cost price of goods and services in the US has also been on the rise. Prices of essential commodities have even increased due to drought.

Central Bank of Iran has said that it cannot implement the decision to cut interest rates until several problems are addressed, Press TV wrote.
“One part of the plan that the CBI has authority over has been drawn out and must be enforced,“ CBI Governor Tahmasb Mazaheri said on Wednesday in reference to the bank’s three-pronged plan.
“Money and Credit Council has delegated its authority on the matter to the government’s economic commission and some amendments have been made on behalf of the Council,“ he added.
According to Mazaheri, certain parts of the plan favored by the economic commission and provided to the CBI contained both contextual flaws and contradictions.
The CBI governor added that he had explained the problem in detail in a letter to President Mahmoud Ahmadinejad. “I am waiting for the president to order a review into the issue, so that necessary changes can be made,“ he said.
He asserted that the draft of the plan sent by the commission to CBI regarding interest rates was in contradiction to Ahmadinejad’s announcement on the previous day.

Steel production capacity of the northeastern province of Khorasan Razavi will increase by four million tons once the three provincial steel projects go on full production, said deputy industries and mines minister.
Speaking to IRNA during a visit to Sabzevar Steel mills, Ahmad Harati-Nik said that Khorasan Razavi province has three steel mills located in the cities of Sabzevar, Neishabour and Torbat Heidariyeh.
“The nominal capacity of Sabzevar steel plan is 800,000 tons and this will reach one million tons,“ he added.
The official noted that Neishabour steel mills comprised of two units which produce over two million tons of steel annually. He added that Torbat Heidariyeh steel plant is the third provincial steel factory which produces one million tons of steel per annum.

Given its special location in the region, Iran can link Central Asia and the Caucasus to other parts of the world via the Persian Gulf.
This is indeed an economic advantage for the Islamic Republic, as it can become an important transit point given its relatively inexpensive and talented workforce, oil and gas resources, rich mines as well as political and economic stability.

Iran can link Central Asia and the Caucasus to other parts of the world via the Persian Gulf.

The reason for the problematic nature of the economic system of the country is that it is located in the Middle East which itself is an unstable region with abundant oil and gas reserves.
“Among the weaknesses of the economic system, one can refer to the perpetual practice of trial and error and the administrative changes, politicization of most state affairs, the non-prevalence of meritocracy and non-abidance by the principle of incentives and penalties in the administrative system,“ former representative of Central Bank of Iran (CBI) in the International Monetary Fund (IMF), Ali Yasseri told FNA.
Profiteering, which is basically due to the large size of the government, weak private sector and the government monopoly over petro dollars, is one major obstacle to downsizing of the government and empowering the private sector.
Turning to the prerequisites for improving the status quo, Yasseri contended, “No micro and macro policy will be successful unless economic, sociopolitical and cultural conditions have been prepared accordingly beforehand.
“Citizens must feel confident about the long-term future economic and political conditions. This must be in such a manner that people feel they can all contribute to the country’s advancement equally. In fact, real privatization is contingent upon meeting this target.“
All in all, it must be asserted that the economic system can and will improve provided that fixed short-, mid- and long-term strategies are devised so that the people, either potential investors or mere consumers, know what they are in for and are rest assured that it would not change with changes in the administration.
“This strategy should contain economic liberalization, privatization and meritocracy and above all ways of conforming to the prevailing conditions.
“Moreover, the administrative system must be rectified so that the government’s supervisory role, and not involvement, is clarified. Red tape must be minimized and all economic entities must be held accountable. Not to mention that financial corruption in both governmental and private sectors must be confronted and uprooted,“ commented Yasseri.
It must be understood that as long as the government exercises monopoly over oil revenues, it cannot be downsized. To tackle this, the government should divide oil revenues among the people every year.
“If oil revenues are distributed among the people, each citizen will get $1,000 based on current global prices,“ Yasseri pointed out.
“We need to actively interact with the global economy, as otherwise, there will be no sustainable development.
This in itself implies that we should endeavor to comply with the globalization campaign as much as possible,“ he concluded.

Iran should focus on Asian energy markets, particularly India and China, to increase the security of energy supplies from the Middle East, director of the Caspian Sea Studies Center told MNA.
Abbas Maleki said that unstable oil price is linked to the events in the Middle East and this is a matter of grave concern as it can threaten global energy security.
“By 2030, Asian countries--India and China in particular--will be the major markets for liquefied natural gas, so we should develop long-term plans to export LNG to such regions,“ he said.
On expanding energy markets in Europe, he added that special attention should be paid to the KTI (Kazakhstan, Turkmenistan, Iran) and the Nabucco pipelines to materialize the goal.
Iran holds 137 billion barrels of proven crude oil deposits, which is second to Saudi Arabia. In terms of natural gas reserves, Iran is second to Russia.

Feasibility studies are underway to generate 17,000 megawatts of hydroelectric power nationwide, a top advisor to energy minister told MNA.
Speaking at the opening ceremony of the Second National Conference on Dams and Hydropower Plants, Abbas Aliabadi added hydroelectric power can meet 30 percent of the country’s energy demand.
Water and energy shortage will be the two major predicaments facing societies, he noted.
He added that Iran is among the semi-arid countries of the world and annual precipitation rate is lower than world average, but the country also has mountainous regions suitable for constructing hydroelectric power plants.

Iran’s Eighth International Petrochemical Forum (IPF) will focus on global competition in the petrochemical market as well as challenges in the energy sector.
According to PIN, the forum, which is to be held in Tehran’s IRIB Conference Center on Saturday and Sunday, will also address issues affecting the petrochemical industry in Iran and the world.
Iran’s petrochemical output will reach 35 million tons this year. According to the National Petrochemical Company (NPC), in the last Iranian year to March 2008, some 12 petrochemical projects with a total nominal capacity of over 15 million tons went on stream. The projects were valued at $5.8 billion and the output increased to 23 million tons.