Panicked over the rapid depreciation of its currency against the basic reserve currency a while ago, Iran fixed the value of its currency against foreign currencies and brought restrictions on foreign currency circulation. Back then, I had written that Iran's decision was a historic mistake and that the Iranian administration was doing exactly what the U.S. wanted by "pressuring" it in this way.

As a matter of fact, Iran has been trying to open its economy to the world and engaged in intense trade with many developed countries, including Europe, since the sanctions were lifted. However, Iran's mistake has cost it a pretty penny so far. As the country's economy contains a partially open market, the inflow and circulation of foreign currency continued. However, since the foreign currency became even more precious with the prohibitions, a dual money market emerged and the exchange rate in the real market could not be kept.

As of this week, Iran has lifted the ban on foreign currencies and declared that the central bank will not intervene in the market price, just before the U.S. announced sanctions and the European Union countries announced that they are committed to protecting European companies that legitimately trade with Iran under the EU law and U.N. Security Council resolution. Abdolnasser Hemmati, the governor of the Central Bank of Iran (CBI), said that foreign exchange prices are determined by supply and demand. Most importantly, however, he stated, "The same day you [Americans] impose sanctions, we open our economy."

Now, Iran is doing what it needs to do and giving the best economic response to the U.S. sanctions decision. This decision by Iran, coupled with EU countries' statement that "they stand behind EU companies that trade with Iran," has dealt the biggest blow to the U.S. sanctions resolution. The U.S. does not have sanction power much in the medium term. The free trade between the rest of the world and Iran, the latter's free trade in energy markets and the start of the formation of money and capital markets are the only options that will leave the U.S. to its own devices in the game and keep its decision in the air.

Of course, we also need to ask whether the U.S. is really in favor of free trade all over the world and democracy that is the political reflection of it. Will the isolation of Iran as a closed economy not retard its political international expansion and democratization? If so, will things settle down in the Middle East? The answer to these questions is positive, however, it is not true that the U.S. has been in favor of free trade and democracy throughout its history.

So far, the U.S. has not taken all of its power and the lie of "freedom" that it has sold to the world from freedom in the economy and politics. In well-known documentary filmmaker Michael Moore's words, the U.S. is "a nation founded on genocide," maintained by slavery at home and by neocolonialism abroad. It has never been in favor of a true free market - an open economy for everyone - and politics and democracy.

The economics explains the system in a way that includes the historical context as well. In this sense, it produces its laws and rules. So far, one of the most important laws that macroeconomics have produced in relation to the current functioning of the system is the fact that independent monetary policies, fixed exchange rates and open capital movements cannot be simultaneously maintained in an open economy.

The impossible trinity, also called the Mundell-Fleming trilemma, or simply the trilemma expresses the limited options available to countries in setting monetary policy. According to this theory, a country cannot achieve the free flow of capital, a fixed exchange rate and independent monetary policy simultaneously. By pursuing any two of these options, it necessarily closes off the third.

This law is also called the impossible trinity in open economies. In other words, you can only have two of these three. For instance, you apply the fixed exchange rate syste

m with independent monetary policy, however, the economy cannot be open to capital movements in this case. Or, if you are applying a fixed exchange rate and you are open to capital movements, you cannot talk about monetary independence. If we are to revisit the Iranian case, if you fix the price of your local currency against the price of foreign currencies, you will close the country for capital inflows. So, you will be doing it yourself before the U.S. embargo starts. However, if you free capital inflows and monetary and capital markets, you should not have a concern about the price of the local currency.

In fact, the global system abandoned the gold standard system in 1931 and officially switched to a fiduciary currency system, in which the dollar is the general equivalent, with the Bretton-Woods system in 1944. Since colonies are not independent, we cannot use the definition of an open or closed economy for these countries in the gold standard. For example, British India's openness (which goods to import or which raw materials to transfer to the home country at what price) was entirely dependent on the U.K. In this case, here is a basic thesis: A country that cannot be independent can never be a country which is fully open and in which free market economy operates. Again, while fixed exchange rate systems should be valid in the gold standard, open economies and floating exchange rate systems must be in place in the fiduciary currency system. However, developing countries, including Turkey, implemented fixed or semi-floating exchange rate regimes until recently and kept their local currencies valuable in order to easily borrow, easily import and create an economy outside of the industry.

At this point, we have a Japan that is exposed to the political pressure by the U.S. because it was defeated in World War II, but which has gone its own way followed a different path in the economy, and of course, obtained very different results. I do not recall that the Japanese currency has ever been valuable since the war.

However, as opposed to what the U.S. and its followers claim, those who followed the U.S.' so-called "liberal" impositions, brought the vicious cycle of the non-market, closed and colonial economy. When these economies rapidly opened to the outside and switched to free foreign exchange rate and capital regimes, they faced financial crises (foreign exchange inadequacy) regimes as of the early 1990s due to their inadequate global competitiveness, the disadvantage of competition in export goods and shallow financial markets.

Now, Turkey is overcoming this threshold. Even if painful, we are building an economy which is fully open, in which capital inflows and outflows are absolutely free and in which independent monetary policy is implemented. Of course, the exchange rate cannot be a target either technically or politically. What we need to technically target are a competitive, open, high technology-efficient economy and sustainable growth. In politics, the objective should be a fair distribution of income and welfare which will bring about a new democracy with a high level of participation and the direct power of the nation.