4 ms·

Faced with rising hyperinflation -- that's what it is -- Erdogan has repeatedly ordered Turkey's non-independent central bank to cut interest rates, making mone

by cs702 4y ago

Faced 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 ago
Erdogan 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 ago
  This 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.
  - agumonkey 4y ago
    I've read that a few times, there are economic incentives to keep money weak to accumulate pricey assets.
  - johnthewise 4y ago
    It has risen to over 12B recently[1] and they are covering it all with 'net error omissions' aka money of unknown origins[2]. 1: https://twitter.com/ali_hakan_kara/status/1575759533053313024 https://twitter.com/ali_hakan_kara/status/157575953305331302..., orange is import and blue is export. 2: https://twitter.com/ali_hakan_kara/status/1569227497467699200 https://twitter.com/ali_hakan_kara/status/156922749746769920...
- yorwba 4y ago
  Except there's an election coming up and polls suggest he's going to lose to the opposition: https://en.wikipedia.org/wiki/Opinion_polling_for_the_2023_Turkish_presidential_election https://en.wikipedia.org/wiki/Opinion_polling_for_the_2023_T... Unless he plans to ignore the election results and stay in power anyway, it's soon going to be over for him and his loyal flunkies and goons.
  - zhoujianfu 4y ago
    I think he probably does plan to ignore the election results?
  - johnthewise 4y ago
    Well, the game plan seems to be : 1- Increase fiscal spending 2- Increase wages 3- Give out very cheap credits from governemnt controlled banks at negative rates. and you will get increase in consumer spending(happy people) and employment which will cause increase trade deficit to explode[1] unless you have some money of unknown origins(the net errors omissions) to pay the bill[2]. If they have a stash of approx. $60 B parked somewhere, which seems they do, they may succeed in 'buying' the elections coming up. Need to take a closer look at the polls in the coming months to gauge voter sentiment, which has started turning in favor recently. This is a crystal clear example of why non-independent central banks and monetary policy is dangerous for democracies, you can basically try to buy the elections... 1:https://twitter.com/ali_hakan_kara/status/1575759533053313024 https://twitter.com/ali_hakan_kara/status/157575953305331302... 2:https://twitter.com/ali_hakan_kara/status/1569227497467699200 https://twitter.com/ali_hakan_kara/status/156922749746769920...
Waterluvian 4y ago
Raising rates and creating a potential recession seems, on its surface, like the absolutely wrong way to handle an economy with inflation. And yet after 5 minutes of an economist explaining it to me, it becomes the obvious right move. Kind of amazing that world leaders can be so foolish. And yet typing that sentence made me feel foolish.
ramesh31 4y ago
>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. He knows that worst case scenario means a bailout from the West. Turkey is a nuclear power and a key NATO ally. They will not be allowed to fail.
- WmWsjA6B29B4nfk 4y ago
  Turkey is not a nuclear power
- jeffbee 4y ago
  In what sense is Turkey a nuclear power?
  - cmrdporcupine 4y ago
    I suppose only in the sense that NATO has nuclear weapons stationed there.
    - arethuza 4y ago
      Interestingly the following article suggests that while there are US nuclear weapons stored in Turkey the Turkish air force hasn't had any capabilities to deliver these weapons for two decades and the US doesn't have any nuclear capable aircraft based there either (although obviously easy to fly them in): https://theconversation.com/why-the-us-has-nuclear-weapons-in-turkey-and-may-try-to-put-the-bombs-away-125477 https://theconversation.com/why-the-us-has-nuclear-weapons-i...
      - blitzar 4y ago
        I cant be the only person who wonders if the US quietly moved the 50 remaining bombs somewhere else a long time ago - having a bunch of 60's era nukes in a basement on the boarder with syria seems a) no deterant at all to anyone, b) a massive liability. My read is they are not there, and havent been there a while. When two NATO allies, Greece and Turkey, were on the cusp of war in 1974, the United States secretly removed all of NATO’s nuclear weapons from Greece and cut the arming wires of every nuclear weapon stored in Turkey, rendering them inoperable. https://www.newyorker.com/news/news-desk/the-h-bombs-in-turkey https://www.newyorker.com/news/news-desk/the-h-bombs-in-turk... “It is U.S. policy to neither confirm nor deny the presence or absence of nuclear weapons at any general or specific location,” said Air Force Lt. Col. Uriah Orland, a Pentagon spokesman. “The U.S. does not discuss the movement of nuclear weapons, the capability to store weapons at U.S. or foreign locations or planning for any of these activities.” https://apnews.com/article/ap-top-news-donald-trump-syria-turkey-international-news-182a2170a1d24ac6b4f0c7242d8ff514 https://apnews.com/article/ap-top-news-donald-trump-syria-tu...
snarf21 4y ago
There was a Planet Money podcast in the spring that went into this in more detail. I don't have all the details on full recollect but I think the gist was that in the past, he grew up where interest rates were too high for small business to grow or access capital. He saw these small business have to raise prices to create capital or shutdown because of no capital and has locked in this perspective. He is all in on easy money for businesses to grow is key to preventing inflation. But obviously he doesn't get the part of too much money chasing limited supply.
caeril 4y ago
> Remarkably, Erdogan and his cronies do not think they have made a mistake! This is not an Erdogan/Turkey problem. See how the BoE panicked and relaunched QE despite 10% inflation in order to rescue the bonuses of pension fund managers. If Credit Suisse goes insolvent and threatens to take Deutsche Bank with it, I guarantee you'll see the ECB cut rates and put Pan-Eurozone QE on hyperdrive, regardless of prevailing inflation. This is, as it always is, a human problem. If crisis A hurts everyone, but crisis B hurts your buddies worse, you're going to fix crisis B at the cost of exacerbating crisis A every time. It's how power works, everywhere.

by cs702 4y ago

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 ago

Erdogan 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 ago
This 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.
- agumonkey 4y ago
  I've read that a few times, there are economic incentives to keep money weak to accumulate pricey assets.
- johnthewise 4y ago
  It has risen to over 12B recently[1] and they are covering it all with 'net error omissions' aka money of unknown origins[2]. 1: https://twitter.com/ali_hakan_kara/status/1575759533053313024 https://twitter.com/ali_hakan_kara/status/157575953305331302..., orange is import and blue is export. 2: https://twitter.com/ali_hakan_kara/status/1569227497467699200 https://twitter.com/ali_hakan_kara/status/156922749746769920...
yorwba 4y ago
Except there's an election coming up and polls suggest he's going to lose to the opposition: https://en.wikipedia.org/wiki/Opinion_polling_for_the_2023_Turkish_presidential_election https://en.wikipedia.org/wiki/Opinion_polling_for_the_2023_T... Unless he plans to ignore the election results and stay in power anyway, it's soon going to be over for him and his loyal flunkies and goons.
- zhoujianfu 4y ago
  I think he probably does plan to ignore the election results?
- johnthewise 4y ago
  Well, the game plan seems to be : 1- Increase fiscal spending 2- Increase wages 3- Give out very cheap credits from governemnt controlled banks at negative rates. and you will get increase in consumer spending(happy people) and employment which will cause increase trade deficit to explode[1] unless you have some money of unknown origins(the net errors omissions) to pay the bill[2]. If they have a stash of approx. $60 B parked somewhere, which seems they do, they may succeed in 'buying' the elections coming up. Need to take a closer look at the polls in the coming months to gauge voter sentiment, which has started turning in favor recently. This is a crystal clear example of why non-independent central banks and monetary policy is dangerous for democracies, you can basically try to buy the elections... 1:https://twitter.com/ali_hakan_kara/status/1575759533053313024 https://twitter.com/ali_hakan_kara/status/157575953305331302... 2:https://twitter.com/ali_hakan_kara/status/1569227497467699200 https://twitter.com/ali_hakan_kara/status/156922749746769920...

Waterluvian 4y ago

Raising rates and creating a potential recession seems, on its surface, like the absolutely wrong way to handle an economy with inflation. And yet after 5 minutes of an economist explaining it to me, it becomes the obvious right move. Kind of amazing that world leaders can be so foolish. And yet typing that sentence made me feel foolish.

ramesh31 4y ago

>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. He knows that worst case scenario means a bailout from the West. Turkey is a nuclear power and a key NATO ally. They will not be allowed to fail.

WmWsjA6B29B4nfk 4y ago
Turkey is not a nuclear power
jeffbee 4y ago
In what sense is Turkey a nuclear power?
- cmrdporcupine 4y ago
  I suppose only in the sense that NATO has nuclear weapons stationed there.
  - arethuza 4y ago
    Interestingly the following article suggests that while there are US nuclear weapons stored in Turkey the Turkish air force hasn't had any capabilities to deliver these weapons for two decades and the US doesn't have any nuclear capable aircraft based there either (although obviously easy to fly them in): https://theconversation.com/why-the-us-has-nuclear-weapons-in-turkey-and-may-try-to-put-the-bombs-away-125477 https://theconversation.com/why-the-us-has-nuclear-weapons-i...
    - blitzar 4y ago
      I cant be the only person who wonders if the US quietly moved the 50 remaining bombs somewhere else a long time ago - having a bunch of 60's era nukes in a basement on the boarder with syria seems a) no deterant at all to anyone, b) a massive liability. My read is they are not there, and havent been there a while. When two NATO allies, Greece and Turkey, were on the cusp of war in 1974, the United States secretly removed all of NATO’s nuclear weapons from Greece and cut the arming wires of every nuclear weapon stored in Turkey, rendering them inoperable. https://www.newyorker.com/news/news-desk/the-h-bombs-in-turkey https://www.newyorker.com/news/news-desk/the-h-bombs-in-turk... “It is U.S. policy to neither confirm nor deny the presence or absence of nuclear weapons at any general or specific location,” said Air Force Lt. Col. Uriah Orland, a Pentagon spokesman. “The U.S. does not discuss the movement of nuclear weapons, the capability to store weapons at U.S. or foreign locations or planning for any of these activities.” https://apnews.com/article/ap-top-news-donald-trump-syria-turkey-international-news-182a2170a1d24ac6b4f0c7242d8ff514 https://apnews.com/article/ap-top-news-donald-trump-syria-tu...

snarf21 4y ago

There was a Planet Money podcast in the spring that went into this in more detail. I don't have all the details on full recollect but I think the gist was that in the past, he grew up where interest rates were too high for small business to grow or access capital. He saw these small business have to raise prices to create capital or shutdown because of no capital and has locked in this perspective. He is all in on easy money for businesses to grow is key to preventing inflation. But obviously he doesn't get the part of too much money chasing limited supply.

caeril 4y ago

> Remarkably, Erdogan and his cronies do not think they have made a mistake! This is not an Erdogan/Turkey problem. See how the BoE panicked and relaunched QE despite 10% inflation in order to rescue the bonuses of pension fund managers. If Credit Suisse goes insolvent and threatens to take Deutsche Bank with it, I guarantee you'll see the ECB cut rates and put Pan-Eurozone QE on hyperdrive, regardless of prevailing inflation. This is, as it always is, a human problem. If crisis A hurts everyone, but crisis B hurts your buddies worse, you're going to fix crisis B at the cost of exacerbating crisis A every time. It's how power works, everywhere.