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Turkey’s inflation hits 83% as Erdogan vows to keep cutting interest rates
- civilized 4y ago> deviating from the conventional way of controlling inflation "You know Homer, the traditional way to cheat in golf is to lower your score."
- giuliomagnifico 4y agoAnd this is the official reported inflation (from the state agency), some other indipendent agencies claim that the real inflation can be at 150%.
- m00dy 4y agowhat if this guy is right ? then we will study his way of doing economics instead of Adam Smith ? :)
- saargrin 4y agohas anyone basing economics on religion been right before?
- DIARRHEA_xd 4y agoThe Toradic shmita is a half-decent model for the boom-bust cycle of the economy.
- tail_exchange 4y agoWhat part of Turkey's ballooning inflation indicates that he is right? So far, everything has pointed to him being wrong.
- mooreds 4y agoWill be, I'm sure, the source of many research papers. But pretty horrible for people living through it: 150%+ yoy increase in prices! That's positively Argentinian. A strong argument for independent central bankers.
- usdogu 4y agoAs a person living in Turkey, yes it's really, REALLY horrible
- cenkozan 4y agoWell, I was in the same position and then left Turkey... For UK. Heck ^^
- behnamoh 4y agoIt's interesting to see even a Turkish person still writes "Turkey" and not "Türkiye".
- tsimionescu 4y agoWhy would they write anything else in English? We don't write Deutschland or România either, do we? The only strange thing is that CNBC decided to use the Turkish name of the country, probably from some misunderstanding of the recent official UN name change.
- kingofpandora 4y agoLikely political. Opponents of Erdoğan will stick to "Turkey" because the rebrand was his move.
- aaaaaaaaaaab 4y agoWhy don’t Turks do something about it?
- codefreeordie 4y agoMay or may not be much fodder for the research papers. We've done this so many times before that there's really just nothing left to study/learn beyond coloring in the picture of misery with higher resolution. We've known for at least a century (really, about two) exactly how this works. It's just that people are stupid and they keep asking for it again and again.
- parminya 4y ago
- tgv 4y agoThe interest rate (12%) is well, well below the inflation rate. Does it still matter then?
- dom96 4y agoWhat's the theory that says interest rate cuts will _lower_ inflation? There must be something, otherwise they wouldn't do it, no matter how ridiculous it sounds, right?
- seydor 4y agowhat makes us think he wants to lower inflation? afaik his plan is to boost exports
- dom96 4y agoFrom the article: > Turkish officials say that their measures will bring inflation down in the coming months, but many economists disagree and expect consumer prices to rise and the lira to fall further into next year.
- axus 4y agoIt sounds like the Turkish people will be working very hard for the benefit of the people importing from them?
- _Turk_ 4y agoYeah this is his primary belief tbh. I think the Islamic reasoning of interest rates are haram is more of a false flag reason. He genuinely wants to boost exports and thinks this is the way out. Either way both reasonings are not gonna work out well
- DethNinja 4y agoTurkey’s problems goes further than a simple interest rate increase. Even if they increased the interest rates, they would still have substantial inflation. Truth to be told I don’t think such third world economies can ever recover. It is too late for the patient.
- rm_-rf_slash 4y agoTurkey is not just some “third world economy”. It’s manufacturing exports have been doing great with cheap domestic currency and the tourism sector has remained strong, especially with the influx of involuntary tourists from Russia. Turkey is also a NATO member and occupies strategic territory. It will not die on the vine and wither away in silence.
- samatman 4y agoGosh, sounds like the Turkish lira is a poor store of value! Right on the threshold of being a useless unit of account as well. Shortly thereafter, it becomes a bad unit of exchange, unless you like taking wheelbarrows to the grocery store. Turkey is a country of 85 million people. Y'all may scream until blue in face about cyberponzies, but do try to save some breath to explain how else citizens of this country might preserve their liquid wealth as things go pear shaped. For extra credit, let's hear how this could never happen to an economic union that's a whole four or five times larger! I'm all ears and have definitely never heard "we're different" before, and if I have heard it, they were always correct. Edit: worth it. I draw strength from your petulance.
- spywaregorilla 4y agoNobody claims that real currencies are immune to loss of utility as a store of value.
- InitialLastName 4y ago"Could never happen" is different than "has the institutional capability to prevent a single person with a bad idea from collapsing the currency".
- codefreeordie 4y agoIndeed, the Fed Open Market Committee, which is the arbiter of interest rates in the United States is a 12-member body, so it would take at least seven people to do something this destructive here. (Of course, the FOMC members change over time partly via Presidential appointment, so to persist in such a bad idea for many years would take potentially hundreds of people to at least not interfere)
- anotherman554 4y agoIt would take 6 people to do something this destructive here. One president, and 5 Supreme Court Justices.
- CSDude 4y agoWe are a Turkish based startup. Only good thing is that we can be competitive in terms of pricing our product https://www.resmo.com/ https://www.resmo.com/ Reality is that, everything become so expensive that I lost sense of prices for any goods, whether its food, electronics or utility.
- sgt 4y agoHow much would e.g. an iPhone 14 be in percentage terms of typical middle class income in Turkey? Just to give us an idea of typical electronics that we often take for granted.
- CSDude 4y agoCheapest iPhone 14 (not pro) is 30999 TL. Minimum wage is 5500 TL in Turkey. %48 of workforce in Turkey earns Minimum wage. A junior software engineer mostly earns between 10-30k TL. A teacher earns around 8-9K. But there is too much variation, inequality so numbers may be way off.
- sgt 4y agoIf it's 30999 TL there seems to be additional tax added by Turkey. I think that phone is supposed to be cheaper, like maybe half of that. How does this happen - import taxes on foreign goods?
- piva00 4y agoVery likely, Brazil has the same issue. An iPhone 14 is R$ 7599, basically double the US$ 799 price tag.
- rasz 4y agoPhones and cars are bad conversion examples. They are illegal to import and you wont be able to register either.
- 4y ago
- cs702 4y agoFaced with rising hyperinflation -- that's what it is -- Erdogan has repeatedly ordered Turkey's non-independent central bank to cut interest rates, making money cheaper and easier to borrow for everyone, flooding the economy with cheap cash, contributing to greater inflation. Remarkably, Erdogan and his cronies do not think they have made a mistake! They continue to act as if they know better, put on a brave face, reduce rates further, and wait for their idiotic actions somehow to work, as if by magic. Quoting from the OP: "Turkish officials say that their measures will bring inflation down in the coming months." They're so far off in their understanding of monetary matters, they're not even wrong. And yet, they cannot see it. Their blind obstinacy reminds me of a quote by John Kenneth Galbraith: "Faced with the choice between changing one's mind and proving that there is no need to do so, almost everyone gets busy on the proof."[a] -- [a] https://www.brainyquote.com/quotes/john_kenneth_galbraith_109909 https://www.brainyquote.com/quotes/john_kenneth_galbraith_10...
- imtringued 4y ago>Remarkably, Erdogan and his cronies do not think they have made a mistake! Imagine thinking you are Napoleon and this banker or economist tells you to stop waging war. You will think that you need to silence this busy body for your noble mission.
- civilized 4y agoErdogan isn't thinking about what will help the economy. He's thinking about what will enrich his loyal flunkies and goons. A captured national media takes care of the rest.
- Whatboard 4y agoThis is the correct answer. Turkey's ruling elite are converting assets and Turkish lira into EUR, USD, gold, etc., and will be leaving the general population, those without access to foreign currency, holding an empty bag. Turkey recorded a capital and financial account deficit of 7357 USD Million in January of 2022, and I'm certain its much worse now.
- deleted 4y ago[deleted]
- coldcode 4y agoThe thing about having crazy monetary ideas—eventually money will go where it wants, and you are left looking like an idiot. You can make all the claims you want, but an economy is witnessed by everyone, and you can't fool them all.
- roenxi 4y agoLowering interest rates will probably make the situation even worse for the Turks. But to be fair, 12% is a high interest rate relatively so the problem is probably note the rate itself, but that the government has set up some innovative method of printing and distributing money to the people. I really don't understand how these crackpots keep ending up at hyperinflation as a solution to their problems. Even the people who think they are coming out OK through the process are going to be staring at the burned-to-charcoal ruins of an economy. Just stop printing money and let prices settle. Organise food an shelter for anyone in trouble instead of trying to print a path to prosperity. We know what works. When in doubt copy any of the hugely successful Asian economies. Copy Hong Kong from 20 years ago, or Singapore. We're not short on countries going from poverty to wealth, the path is well-trodden. All else really failing, set up some charter cities and experiment. Entire countries don't need to go down every time a bureaucrat tries out stupid ideas.
- cs702 4y agoYes. Hopefully, crackpots and ideologues in other other countries will take note of what's happening in Turkey and avoid the same horrific mistakes.
- jerf 4y ago"I really don't understand how these crackpots keep ending up at hyperinflation as a solution to their problems." Two major factors, I think. One, hyperinflation feels better today at the cost of feeling worse in a couple of months. This is true even when the hyperinflation starts hitting hundreds of percent per day... it's still easier to let it go for another day than to do the now Herculean-levels of work necessary to do the right thing. This is very difficult for politicians to pass up. Some others in this conversation have marveled at how bad world leaders can be with the economy, and part of that is even if they did know exactly what the right thing to do is (itself actually a questionable claim, but let's take it at face value for a moment), they're still constrained by politics. A politician who says "Hey, everyone, let's take some pain for the next six months so our next 10 years will be better!" will be right out on their ear in nothing flat. There isn't a single power center they have willing to do that, not "the people", not their generals, not their rich benefactors, not their civil servants, nobody. Secondly, hyperinflation gives a lot of power to the people in power. Inflation creates a temporal gradient that people usually ignore because it's not that large, but in high inflation environments, the closer you are to the printing press, the richer you are. The printing press prints you fresh new "today" currency. You use it to go out and buy. But a lot of what you're buying is really priced in "yesterday" currency. The act of buying pushes up those prices again, but you got yours. It's everybody else who is dealing in newly-high prices but trying to chase them with yesterday's currency (or worse, last week's currency) who has the problem. (Currency units are not literally labeled like that, of course; they're nominally fungible. But when you have today's print, you've got more to go chase things with.) This works right up until there's nothing left, but then you end up with effectively 100% of that "nothing". I think there's a lot of people in power who find this a very appealing proposition. (In fact I would consider this one of the major unsolved problems in practical economics, if not the major unsolved problem: How do you deal with the existence of the power to create money/currency? Historically speaking, those who have it are completely incapable of resisting the temptation to use it to benefit themselves. There is no known solution. Physical standards like gold/silver get creatively adulterated over time, fiat simply has this capability built in, barter is so fantastically unstable that it can't even progress to the point that you can ask this question. A solution may not even exist, at least with humans as we know them now.)
- deleted 4y ago[deleted]
- HL33tibCe7 4y ago> Türkiye Sorry but this is ridiculous. In any language, we have different names for places than in those places’ native languages, and that’s perfectly normal. “Türkiye” is impossible for a native English speaker to parse - it isn’t even written in our alphabet. Are we to start writing Sweden as “Sverige”, or Kazakhstan as “ Қазақстан”? Should we start pronouncing “Paris” “Pah-reee”? We don’t do either of those, because we understand that languages have their own names for places, and don’t want to insult native speakers by butchering the pronunciation. Rant over.
- krona 4y agoI agree, but it's not as simple as that: https://en.wikipedia.org/wiki/Turkey#Official_name_change https://en.wikipedia.org/wiki/Turkey#Official_name_change
- Ekaros 4y agoI could take that complaining seriously if English had single unified spelling system, but as you do each world different anyway, I don't think it is too much to ask to throw some umlauts there and adopt the official spelling.
- kaesar14 4y agoI don't think the average literate English reader really knows how to parse an umlaut - I sure don't. And while the spelling system isn't necessarily consistent I don't see why we should change words that people do know how to pronounce to ones that we don't?
- HL33tibCe7 4y agoWe don’t have an equivalent vowel sound to “ü” in English at all. It’s something German learners struggle with.
- avgcorrection 4y agoDo you mean to say that a strange character in one word keeps you from tokenizing the sentence? And hence you cannot make sense of the whole sentence because of that one character (syntax parsing → semantics)? Or do you simply mean that you don’t understand what that one single character is supposed to represent (or just sound like)?
- deleted 4y ago[deleted]
- diegoperini 4y agoThat's the biased value, reported by government agencies. ENAGRUP (independent) measures it as 186%. https://enagrup.org/?hl=en https://enagrup.org/?hl=en
- incomingpain 4y agoTurkey is #6 in the world for inflation. Behind, Zimbabwe, Lebanon, Syria, Sudan, Venezuela Not good company for Turkey and their still rising hyperinflation. Erdogan still very popular and likely to win his election next year. Which these financial issues have negatively impacted his popularity.
- neilwilson 4y agoIt's very interesting that Turkey is castigated for cutting interest rates. Yet they never mention the poster child of putting interest rates up. In Zimbabwe, which has followed the World Bank and IMF process, interest rates are 200% and inflation back at 280%. There comes a point when we have to accept that interest rates don't really have that much power to control inflation in the real world. It's a religious devotion to a theoretical model.
- hammock 4y agoThe IMF process is to keep rates above inflation. So it seems Zimbabwe have some more hiking to do
- boole1854 4y ago> In Zimbabwe, which has followed the World Bank and IMF process, interest rates are 200% and inflation back at 280%. > There comes a point when we have to accept that interest rates don't really have that much power to control inflation in the real world. It's a religious devotion to a theoretical model. I don't understand how Zimbabwe's experience is a refutation of the 'theoretical model'. The model says that having nominal interest rates lower than the rate of inflation increases demand for loans, which increases the money supply, which increases inflation. If Zimbabwe's interest rate is 200% while inflation is 280%, then the model says inflation should continue to increase. Which is what it is doing.
- slybot 4y agoI always say the Turkish Lira follows the Argentina pattern with lag -3.5 years. https://www.investing.com/currencies/usd-ars https://www.investing.com/currencies/usd-ars It is all about bad governance and leadership... Look at Argentina with half population and 3x more cultivatable. Don't surprise to see the parity >= 80 TRY / 1 USD in 2 years!
- iex_xei 4y agoAs a Turk, I also see Erdoğan's "fiscal ideas" as "crackpot", but he may be betting on something like "replacing China as a manufacturing engine for Europe", or "staying competitive in slower world economy." Explanations like "he's an Islamist opposed to interest" does not hold water. It's just something he uses to explain the policy to masses. I'm almost sure that the reason behind high inflation / lower interest rates is intentional. He's intentionally making the population poor. He can't tell this straightly, so he's using religious slogans. I'm not sure about the real reason, but I don't think he'll lose the next election in 2023, and he knows to calculate the effects of his policies. "To feed up his cronies" is a lazy explanation. He already had that power, why would he risk that opportunity with crazy politics. Also, most of the savings (>80%) are in USD here. Most of the assets are priced in USD. When you buy/sell a house, you talk the price in USD. Working class with a fixed income is certainly affected direly, but the economy itself is moving. Personally I saw many times he played his cards correctly, despite seemingly unreasonable moves. I'd like him to go, but I doubt the situation will cause him to lose election.