Imagine what would happen in the United States if inflation rose from 21.5% last year to an officially estimated 25% next year but is really approaching 70%.  Imagine if our economy grew 2% last year (which it did) but was expected to drop by not less than 0.9% this year.  Imagine if the dollar lost a third of its value over the past month alone!

Even a country with a strong democratic tradition could not survive.  Any nation with a “tin-horn dictator” (as Ronald Reagan used to say) certainly cannot survive.  In fact, the riots have already begun!

Iran is going down but how?

Just as Ronald Reagan crushed the old Soviet economy with an arms race, George W. Bush began slowly crushing the Iranian economy years ago, and President Obama then increased the pressure.  It worked!

Last week, shipping giant Maersk Line announced they had terminated their business with Iran, “making its isolation from the world almost complete.”  The president of Iran has begged his people not to sell their national currency, the rial.  Even more economic sanctions were announced by the European Union just last Friday.

We are often told to be careful of what we wish for, because we may get it.  We are getting the collapse of Iran, as we wished.  However, I’m betting Iranian president Mahmoud Ahmadinejad is not a sane man and, knowing he is on his way out of power, would be even more willing to close the Straits of Hormuz or to drop the bomb on Israel.

I often stress-test the portfolios I manage for possible world events and have recently been more concerned about the Fiscal Cliff, the European Financial Crisis, and the election.  The collapse of Iran must now be factored into any stress test, and I will.