What Happens to Savings?

The record dollar rate raises a fundamental question for Iranian households:

How can people preserve their savings when the domestic currency is losing value?

There is no universal answer.

Different households have different financial needs and risk tolerances.

Some may hold foreign currency.

Others may purchase gold.

Others may invest in property.

Some may buy durable goods.

Businesses may hold inventories rather than cash.

These behaviors can reduce the amount of money circulating as ordinary savings and increase demand for alternative stores of value.

This phenomenon is often associated with currency substitution or dollarization.

Even when the dollar is not officially used as domestic currency, people can begin mentally pricing goods in dollars.