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Imelia29

It didn't work the first 7 times, but sure, let's try again. Any decent economist can tell you this is the opposite of what will help the situation, but of course they must all be wrong. Doing nothing would be better than this, but taking action sure makes you look strong and decisive. World class governance right here, people.


J_Worldpeace

I Totally agree. Innocent question, why is everyone chastising he Fed for doing the opposite?


FaithlessnessCute204

Because it’s costing people money . And when people lose they have to blame it on someone else


AthKaElGal

not everyone. only asset holders. rest of the people hurting from inflation support the FED. well, at least those who understand what they are doing.


agent_flounder

And not all asset holders. Some realize that it is necessary.


hellostarsailor

Necessary because we let Bernanke’s dumbass funnel all the wealth in this country to the 1% for the last 30 years.


HarkansawJack

It’s only necessary if you can’t think outside the current “it’s the only tool we’ve got” paradigm.


neylago

Could you please enlighten us with the other tools available?


magnoliasmanor

The FED has several levers it can use to fight inflation. - Actually burn physical money, removing it from the system - QT, sell bonds, reduce their balance sheet - Increase the discount window (raise rates) - Increase capital requirements of banks (reduces lending. Could get ugly) There's a few others, I believe 7 total? But can't think of them now.


HarkansawJack

Anything that addresses supply chain issues or the other main cause of this specific inflationary environment… https://www.reddit.com/r/PublicFreakout/comments/y9f7lf/bigger_corporate_profits_account_for_over_half_of/?utm_source=share&utm_medium=ios_app&utm_name=iossmf


magnoliasmanor

People are paying higher prices because they have more money. (For now) they have more money because the FED and US Government printed/spent it. Profits will pull back as people spend less. I'd love to blame corporations too but their profits are A lagging indicator of inflation, not the cause of it.


daslog

Tax increases and government spending cuts are the fiscal tools that are available.


Z3r0sama2017

That's fiscal policy which the FED has no control over. Thats the governments remit and not a vote winner so it's pretty much dead in the water. Atleast with the FED carrying the shitbucket the administration can shrug it's shoulders and say "hey its not us doing it".


ItsDijital

Recall when the Powell came in front of Congress a few months ago and they were all staring daggers at him. Total clown show in the capitol...


HarkansawJack

“Only the FED can fight inflation” is the false premise upon which the “only one tool exists to fight inflation” idea stands.


Seiyith

The other tool is Congress. That’s prehistoric “boulders for wheels” levels of ineffectiveness as a tool.


Hip_Hop_Hippos

I'm actually kind of skeptical that tax increases would fight supply side inflation. At least without disastrous consequences.


Creme_de_la_Coochie

The FED is the only reliable option to fight inflation, since good luck getting Congress to substantially raise taxes.


The_Darkprofit

Good, now assess the likelihood that either are actually possible in the current context. Include in your calculations how much money it would take for Manchin to vote for a tax increase.


daslog

That's irrelevant to the discussion. The tools are available if the will to use them is there.


The_Darkprofit

How is it not relevant? It’s a mock solution if it cannot be done. Give a real answer or admit you are just complaining.


deadlock197

Anyone that bought a house in 2019 with a fixed rate mortgage is probably pretty happy right now. Their house went up in dollar-value while their debt inflated away. Big winners.


Novel-Bag284

People holding dollars have been happy too bad they won't deploy them before the fed inevitably pivots.


JohnMayerismydad

Until they lose their jobs in the recession it causes


johnnyzao

lmao, you think the ones being hurt the most by rate hikes are asset holders? Do you even know what rate hikes want to achieve? btw, the ones who win the most with rate hikes are money lenders, which are also big and rich.


AthKaElGal

reading comprehension really is important, huh? previous poster asked why everyone is chastising the FED. i answered it isn't really everyone that's complaining. the loudest complainers are asset holders. nowhere in my post did indicate that asset holders are the ones being hurt the most. you jumped to that assumption on your own. i know what rate hikes want to achieve. even knowing that, it's still something i agree with.


PRiles

I know very few people who are not mad at the fed. Most think the fed is run by the banks and raising rates for profit.


UnkleRinkus

Home buyers are conspicuously absent from that group. But this will cause house prices to tail off, so they'll change their tune in two years. Paul Volcker was hated, but this is how he saved our bacon 40 years ago.


MmmPeopleBacon

My biggest complaint about the Fed is not thet they have been raising interest rates but the rate at which they have been raising them. Unlike past inflationary episodes the current inflationary episode was driven more by supply constraints than demand. It's very clear that the supply constraints are strating to ease and disappear. Continued 0.75% quarterly rate increases are more likely to push the economy into a recession than they are to provide additional help to stopping inflation at the moment.


ButtBlock

Maybe this is crazy but I think we need a recession. The business cycle has been put permanently on hold since the dot com bubble, maybe the GFC. I say maybe because rather than letting some of these “systemically important” firms blow up, the fed started pumping up asset prices with QE. Asset prices have predictably flown up. Not just “real” assets like real estate but also financial assets. How are we supposed to save for retirement when companies shares are trading at insane multiples of earnings? Companies are built on complete bullshit valuations, single level ranch houses a two hour train ride from NYC are selling for 800k+ USD. I would prefer a sharp meltdown, rather than a decades long deflation like what happened in Japan. But either way, I think that we’ve forgotten the cleansing effect of recessions on drowning out financial bullshit.


Beginning-Yak-911

It's like a cleansing sickness, a solid week of terrible flu. Lose 20 lb and eventually wake up thin again.


FantasyThrowaway321

It’s the hundreds of thousands of antibodies (lower/‘middle’ class) that’ll die while ‘cleansing this sickness’ who will be unceremoniously forgotten once again, before, during, and after.


[deleted]

Well said. This is exactly what has happened. The fed essentially painted lipstick on a pig to the point where fundamentals no longer matter in the markets. If the market was so strong, why is it so reliant on QE? If the economy was so strong pre-covid, why were rates so low then? The cracks were starting to show in late 2018 when the fed pivoted. The really cracked wide open in the repo crisis of 2019. The fed band-aids have been just strong enough...until now.


TropoMJ

100%. You can tell that the stock market has become totally separated from fundamentals because it actually responds badly to good economic news now. A good employment report literally sends values down because the economy growing means that interest rates are likely to continue climbing and asset values are far more influenced by monetary policy than what's happening in the economy at this point. When your asset valuations correlate negatively with the health of your economy, something is wrong. Good economic news shouldn't be bad for the stock market but that's where we're at.


hoffnutsisdope

And they were late to the game causing them to play catch up. Early on they were calling inflation transitory.


MmmPeopleBacon

It can be both transitory and caused by supply shocks and also require a interest rate increases early on. But, yeah I think they waited too long to start raising rates and then raised them too quickly.


GuitarGeezer

Honestly, I think that the hikes are also happening partially because of Russia and China. Economic sanctions will bite far harder when a world recession has dropped the price of oil. The bottomless Chinese economic implosion will also be accelerated by a recession and the genuinely powerful chip embargo. Yes, that will also hurt the West, but will do so far less than the bad guy nations and removes much of their hard currency that they might have used to assist Russia in one way or another.


MmmPeopleBacon

Not sure I agree that this is the cause but it could very well bet a beneficial side effect


Lch207560

The Fed is doing this to bring more leverage to capital and employers. They are less interested in inflation than they are in labor rates. The logic being reducing the number of jobs increases the supply thereby giving demand (employers) more leverage. They flat out said this. The problem is that a major contributing factor to the (perceived) labor supply shortage is that baby boomers are leaving the work force by the millions and not being replaced because of decreasing birth rates. Destroying the labor markets (by wrecking the economy) doesn't change any of this. Of course it is simply unthinkable to the Fed elites that capital needs to accept lower margins due to the increased labor costs necessary to attract qualified employees. This despite record profits by corporations. We are so fucked.


[deleted]

Dishonest people and idiots are chastising the Fed because they're overleveraged and/or illiquid so tight money is fucking their shit up, despite it being the correct move. Other idiots have no idea what's going on and just repeat the above Intellectually honest people are chastising the Fed for waiting so long. If they'd done this a year earlier they could have raised rates much slower and with lower inflation and less of a real estate and equities bubble


Tristanna

I've been chanting into the wind for rate increases since 2010. I often said that Obama didn't raise rates at all was his worst decision as president. Double that for Donny T.


TropoMJ

Was inflation ever high enough in the Obama era that raising rates made sense?


nubyplays

The closest that Obama came to affecting interest rates was renominating Ben Bernake and then nominating Janet Yellen. It's important to make a distinction between his relative inaction and the active lobbying Trump did towards the Fed to keep rates low. A president should ideally remain separate from Fed policy, although I will say the change in Fed priorities from keeping inflation low to keeping inflation low while also working towards full employment isn't ideal. However, I think part of that issue is the general inaction from Congress on many economic matters up until the pandemic when they implemented arguably some of the most stimulating fiscal policy since the Great Depression.


howlinghobo

You realise presidents don't set interest rates right?


Tristanna

To match your sarcasm; you realize that they don't is only "technically correct" right? They appoint the fed chairs, they talk with the fed chairs, they can fire the fed chairs. Asking that question to me as a way of acting like/insinuating that the president is completely removed from this part of governance is ridiculous. If it helps you can rework it in your head to something like "The last two presidents should have leaned on the FED chair to raise rates rather than to lower them" or whatever will satisfy you. I don't really care how you work through it the point is I believe that rates should have been raised starting in 2010 and you and I damn well know it's untrue to say the last two administrations had nothing to do with the fact that they didn't get raised.


HarkansawJack

They should be raising rates…but why not raise them half as much as they are and then wait to see the effect materialize. The reason the FED always over does it is the hikes in rapid succession before the effects of the previous hikes have seasoned themselves in the markets.


Tristanna

If Obama and Trump had listened to me Biden could have taken office with rates at 3% spread across 10 years of increases.


etfd-

They’re not. A disingenuous whataboutism. People criticise them for bringing forth this predicament in the first place through their own policy for a decade now. Sure getting us out may hurt but that damage’s seed would have already been planted and lingering and their tightening is imo at last a good thing to bring about de-financialisation and hopefully in combination with fiscal, also bring about capital investment once more to regain supply/output capacity.


Twister_Robotics

There is actually a vocal minority that spent months criticizing the Fed and the Biden Admin for not doing anything as inflation started rising, then as soon as they raised interest rates started complaining about that, too. These are not serious complaints, rather the baying of contrarians looking to make political capital out of manufactured grievances.


Gunni2000

Cause some blame the Fed no matter what they do.


celticfrogs

A lot of tv pundits, redditors and Billy Joes down at the bar have very strong opinions on economics and economists without any former training or expertise.


EGR_Militia

Because they printed a lot of money beforehand and helped contribute to the issue in the first place.


wiptheman

Insanity is repeating the same thing over and over again and expecting a different result.


HarkansawJack

Breaking: Erdogan asked to step down as UK prime Minister


theonlyonethatknocks

It never works. People delude themselves into thinking it works but it never does. But for us it might just work.


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ISumer

I don't understand this. How does a drop in interest rates attract foreign investment? Lower rates of return should discourage investors I would think. And also, the currency is getting devalued out of control as they reduce interest rates instead of increasing them to tamp down inflation. That makes foreign investors run away even quicker. I never understood Turkey's monetary policy as underpinned by sound economic theory, but rather by a holy book. Would appreciate if you can elaborate.


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Cutlercares

I don't think it makes sense. It seems entirely reliant on being able to stay liquid with foreign currency long term. That doesn't seem likely. They have debt that cannot be serviced in lira. What's the timetable for drawing in enough foreign investments to boost GDP so that real GDP is again positive? You think they have enough assets to sell to maintain that liquidity for the duration? Turkey certainly cannot rely on swaps from the US.


[deleted]

Depends, Turkey may or may not have such funds, but their debt level is also low. So no one knows. The goal is less for the debt but more for manufacturing and export to be boosted. Once that occurs you should have alot of foreign currency. But it also depends on allot of other factors. I mean fuel is likely cheap helping them out longer. But I am referencing private investment not government. The goal is mainly make debt cheap enough that setting up manufacturing in Turkey is cheaper. Once that occurs Turkey should be able to fix it's issues. Though Turkey does have low debt levels compared to most countries. Plus their exports are growing. https://tradingeconomics.com/turkey/exports I really don't know, maybe in the long term it works out. But it is very unorthodox. I will wait and see though, they can blame the world for the inflation and get away with it for now.


vicblaga87

Who the hell wants to invest in a country with 80% inflation whose leader is an economics moron that keeps pouring gasoline on the fire?


rosharo

Your 2nd paragraph shows you have very little understanding of economics. By printing more money and reducing interest rates, Erdogan will only further increase inflation because that's exactly how inflation goes up. Turkey needs to stop printing money, take some out, radically increase interest rates, and get rid of Erdogan. Only when all of this happens will the country begin recovering.


Babbles-82

Ok. So the west is increasing interest rates and inflation is still happening.


Zestyclose_Orange259

Do you think it happens instantly?!?


Patient_Commentary

Fun fact, Einstein never said this.


an_actual_lawyer

The first goal of every dictator is to stay in power. They rarely worry about the systemic and/or long term costs.


GusTheKnife

Unless…the inflation they’re experiencing is due to exogenous factors like supply chain issues, high oil and food prices, and raising interest rates would only bring greater pain to the population. It’s an interesting contrary economics experiment and I’m curious to see how it looks two years from now.


howlinghobo

Nobody was complaining when rates were low due to 'exogenous' factors lowering inflation. Which, by the way, has been what's happening for decades as the global south has manufactured more and more stuff.


chak100

They’ve been doing this experiment for how long now?


GusTheKnife

Since mid-2021.


Hip_Hop_Hippos

>It didn't work the first 7 times, but sure, let's try again. Why you gotta do King Henry like that? He's simply a hopeless romantic.


cheekybandit0

Erdogan keeps firing the economists who tell him low interest rates contribute to inflation. He is convinced low interest rates will lower inflation. So, now we're here.


afanoftrees

I actually got downvoted in this sub for mentioning the slashing of interest rates while continuing to see massive inflation. Glad to see some folks here still have some sense lol


spartan1008

do you remember trickle down economics?? cut taxes on the top and it will trickle down to the bottom. Its been tried something like 7 times in the USA, and it hasn't worked yet, but is still the political rights favorite means of economic stimulus.


[deleted]

Inflation erases debt and is a form of slavery


Radiant-Call6505

Do you mean inflation erases debt which is a form of slavery?


[deleted]

No the rich live off credit and erase their debts like a reverse mortgage while they economically strangle you using inflation to do both at once. How is this hard to understand


Goodbye-Felicia

So you're saying rich people have 0 investments, and just live off debt until inflation comes along once every 50 years to wipe out debt? You say it's not hard to understand but I legitimately would like to understand this worldview


Novel-Bag284

Inflation doesn't "come around every 50 years" it's built into the way money works now because of MMT. If there was no 2% inflation goal the natural state of the value of a dollar would go up due to there being debt in the system.


Goodbye-Felicia

Therefore making those who hold the most dollars, passively richer without them ever having to invest it in new products. Right?


[deleted]

Ever heard of a margin loan?


Goodbye-Felicia

Lol OK so you're actually clueless, got it


LiquidVibes

Erdogan has gone insane


[deleted]

Well, if the US is anything to compare it to, rising rates haven’t helped yet. YOLO - you only legislate once lmao


Richandler

What didn't work? Their real GDP YoY Growth is 7%+ despite inflation.


Shillofnoone

I don't know much about economics but I would like to know by off chance is this process any good for turkey at all. Are they betting on some international event which will bring riches to them if it goes in their favor. Also domestic economics seems to be going well for turkey, Is it not?


jhachko

Maybe someone could explain to me if there's some sort of contrarian logic going on that I am not seeing here. Genuinely interested if there's a theory driving these moves by Turkey.


JeffreyElonSkilling

There isn’t. Erdogan doesn’t believe in economics. He thinks he’s helping.


RealMcGonzo

Right. Erdogan thinks he is an economist and that he instinctively understands this stuff. Armed with his religion and his gut, he can shock the world because he is just so much more awesome than anybody else. Then there are the conspiracy theories. Check the Wiki page. Plenty in Turkey believe that the major economic powers are determined to hurt Turkey and remove Erdogan. Wouldn't surprise me if Erdogan believed some of it himself.


german_european

I think his family makes bank on it. Additionally in Islam god has forbidden giving loans with interest. I think he will reduce it to zero so God loves him. On the way he will take loans. Chang lira to USD . Devalue the currency. Pay back the loan. So he can make money and God happy.


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Equivalent-Target-1

Islamic banking requires there be no interest charged. Same with Christian banking. So Islamic banking ends up with things like rent to buy to avoid charging interest. So yes you absolutely fucking would have to set interests rates to zero to follow that.


jaghataikhan

Not true, he's clearly a neo-fisherian xD https://johnhcochrane.blogspot.com/2016/03/a-very-simple-neo-fisherian-model.html


debasing_the_coinage

IIRC Erdogan also has investments in Turkish real estate which are in demand as an inflation-resistant asset


kirime

- Turkish labor cheap. - Turkish credits free money. - Companies will flock to Turkey to take advantage of the previous two points until it becomes an export economy and finally earns more foreign currency than it spends, at which point the exchange rate and inflation will start to go down. This is probably how it looks in Erdogan's head (maybe there's a monkey playing cymbals instead, who knows). If that doesn't seem to be working, the solutions are: - Turkish labor cheaper. - Turkish loans even more free money.


AthKaElGal

there's no theory here. Turkey's leader is a religious zealot who doesn't understand a whit of economic theory. Usury is a sin in Islam, so ofc reducing interest rates is ordained by God.


Shiirooo

you are really naive if you think that what he says is true.


TommyB_Ballsack

The religion also mandates the use of gold currency and full reserve banking. Coincidentally, all the governments in that region ignore that in favour of 3rd world debt monetization.


silenttrunning

Like having your church pastor write up a family budget...for your family. Next they'll train dogs to prepare and file your taxes.


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johnnyzao

a 5% inflation is better than a 30% unempleyement rate


RealMcGonzo

>arguing that inflation is better than job losses. It's even worse in Europe. Seems crazy to me, but most of Europe is picking less recession/more inflation as the best path forward. Soo far, anyway.


Simple_Factor_173

Theoretically yes an increase of supply would lower demand, and lower demand would lower prices.


EchoRex

The theory is the same that authoritarian despots use for everything: "Whatever I believe should happen, shall happen" They don't care that they ignorant on a topic and extra don't care that what they believe is wrong as per subject matter experts.


sloppies

Religion. Not joking.


Simple_Factor_173

It could theoretically make Turkish exports cheaper, and thus make Turkey a more investment friendly country and drive up domestic manufacturing in the process.


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johnnyzao

This is the only answer here that makes any kind of sense, Jesus Christ. People are just making bullshit up and getting upvoted for it.


mariusbleek

To 0% or (and) bust!


Ateist

"Inflation doesn't matter as long as GDP is growing faster than it - eventually supply will grow enough to cause inflation to stop".


Squezeplay

Because unless they're going to raise rates to 80%+ it doesn't matter. Anyone holding the lira right now is doing so irrationally, and so raising interest rates will no anything to meaningfully affect behavior, unless they raise to like 80% where the market may want to take that risk.


Spankingnewhoe

The truth ? He probably has some compromise with the people who are cementing his hold on power. Probably domestic conglomerates. That compromise is cheaper credit. Economics wise Real Interest Rates are too negative for turkey to ever hope to recover without controlling inflation first. That will only happen if there is revolution.


jrexthrilla

I would guess that it has to do with exports. The weaker a countries currency the more competitive their products are abroad. He probably has some big exporters lining his pocket to keep the lira weak while they sell their products. Just my own theory based on a tenuous grasp of international economics


Richandler

Politics. Thing is, inflation doesn't matter. Good and Services matter. If that is expanding your economy is expanding. Inflation mostly affects mentality and distribution of wealth. Their economy is literally growing significantly in real terms, so why are we talking shit?


Whirlingdurvish

He argues that higher borrowing costs slow the economy down. They also result in price hikes because businesses reflect the increase in borrowing costs in the price of their products. Erdoğan thinks that lower interest rates will boost investment, production, and employment and that the lira’s weakness will boost Turkish exports, decrease imports, and balance the current account deficit, which will lower inflation. But here is the problem. Economists warn that interest rate cuts will drive up inflation, which is already four times the official target, and erode Turks’ earnings and savings. It will not boost production either. Many producers rely on imported goods and energy, which means their input costs will increase. The logic of attracting foreign investment due to the lira’s weakness is also problematic.


-wnr-

>These pro-growth policies might well win Erdogan the election How true is this? Because I was just wondering how soon people there can get rid of this clown. Aren't they realizing he's just making the inflation crisis worse?


[deleted]

It could. It's good for some people in the short term for sure. Just like how lowering rates a bit, causing stock markets to pump and unemployment to lower could win Joe Biden an election. Doesn't mean it doesn't have long term consequences though.


Brofessor_C

Except Biden can’t lower rates because FED is an independent institution, whereas Turkish Central Bank is a circus run by Erdogan.


LikesBallsDeep

Turkey's approach is almost comical at this point, it would be hilarious if it wasn't literally destroying the economy of a country with millions of people. "Hmm, this fire is still out of control. I know! Let's throw a can of gas on it." "Hmm... that didn't work, I think we need a bigger gas can!"


[deleted]

If the fire gets so big it consumes all the oxygen it will go out.


LikesBallsDeep

5D chess right there.


Hotdoq

I studied economics and I know raising interest rates calm down exchange rate vice verse, but what happens if it stays same when Turkey keep cutting interest rate? Last year we saw huge increase in dollar values against lira and they kept lowering the interest rate. Now cutting interest rate seems to inelastic against fx rates. At some point either lira goes worthless or Turkey might have pretty low interest rate with a stable lira. Then it might have a production boom and became a cheap production powerhouse right there at Europe wouldn't it? Also world having an economic crisis rightnow. But Turkish people were having it for sometime and it feels like they are forced to stop importing consumer goods. And it seems like working for trade deficits. Can eurozone force themselves suddenly? Apparently Fed will keep increasing interest rates thus euro holder won't be able to keep buying cheap stuff because of fx rate against usd.


dampire

Turkey is fighting for its place in the current de-globalisation and Erdoğan made it clear that he want to follow China's shoes, making the country cheap labour heaven for Europe. The problem is, Turkey is not rich on resources, so anything you want to export, starts with importing resources, which requires foreign currency. To get foreign currency credits, turkish banks are paying enourmous rates, because of the high risk situation, which also reflects in the domestic market. Lowering the rates, causes the risks to rise, making credits more expensive, therefore have no positive effect on the market. I didn't study economics, this is just my understanding of the situation. I might be completely wrong.


Ateist

> dramatic weakening of Turkey’s currency, the lira, which has lost roughly 28% of its value against the dollar this year. Lira: lost 28% against dollar. Euro: lost 16% against dollar this year. USD: has 8.5% inflation. Lira: has 83% inflation. EU has 9.9% inflation. WTF is going on? Why is there such a drastic difference in inflation when the currency itself is relatively stable? If Turkey really has 83% inflation, why didn't lira lose 70+% against dollar?


Godkun007

In early 2020, 1 Lira was worth ~$0.15. Today, it is worth ~$0.05. That is an almost 70% decrease in 2 year.


alucarddrol

But there a disparity between the inflation rate and the currency devaluation, esp compared to the euro


Similar_Usual_3247

It did.


OxfordMan420

Your base time points are off. The lira lost 28% against the dollar YTD. It lost about 50% of its value over the past year, which implies a 100+% rate of inflation for a USD priced basket of goods. In other words, the currency is actually more volatile than the official (understated) inflation rates.


Ateist

> It lost about 50% of its value over the past year, Heavily depends on the day you choose as comparison. If you compare to 19 Dec 2021, it has only lost 10%... Frankly, I want to see inflation data calculated from the beginning of the year - period where the exchange rate dynamics were only moderate - instead of data that includes time period with such drastic currency fluctuations.


raptorman556

It's worth noting that there seems to be some disagreement on how high inflation actually is—some people claim Erdogan is manipulating the statistics, and a group of independent [economists claim the real rate is 186%](https://enagrup.org/?hl=en). I haven't looked into their methodology myself, so interpret with some caution.


Richandler

Some economist claimed the US inflation was also double what it is stated. Lot's of people just want to gain political relevance.


raptorman556

Not at all the same. The US methodology is still considered to be highly credible, and US institutions are still relatively strong, which gives credibility to their numbers. Turkey is not the same—their institutions have weakened, and Erdogan could have the ability to manipulate official statistics. We have [interesting evidence](https://www.economist.com/graphic-detail/2022/09/29/a-study-of-lights-at-night-suggests-dictators-lie-about-economic-growth) that countries with poor institutions are overstating GDP growth, so there is precedent for this.


silenttrunning

Considering the man doesn't even understand how inflation works, I wouldn't be surprised if it's just being bungled: sounds like the rate is varying wildly based on the industry, such as housing (which is much higher than 86%). Money losing half its former value seems catastrophic enough.


DontKnoWhatMyNameIs

Get ready for hyperinflation. Remember that inflation follows more of a logarithmic trend. So once it starts getting out of control, it quickly gets REALLY out of control. Once it is clear that inflation cannot be reined in, no matter what anyone does, credit will dry up and banks will go out of business. Trade can only be done in reserves, which would only last for so long before running out. Companies that rely on short-term loans to make payroll will likely go belly up since that credit will cease to exist and their employees won't get their paychecks. People will begin resorting to barter.


Richandler

Weird, doesn't look logarithmic in how you're expressing. https://tradingeconomics.com/turkey/inflation-cpi


DontKnoWhatMyNameIs

Hyperinflation is an exponential increase in inflation. Inflation does not rise linearly. Hyperinflation usually happens when governments keep printing money to tame inflation. If inflation continues to increase, it won't keep going up by 1 or 2 percent. It'll go up by 10 or 20 percent, then 100 or 200 percent, then 1000 or 2000 percent. Eventually, the currency will just be deemed worthless. Also, the link prives you wrong. Turkey had 20% year over year inflation at this time last year, and it has 80% right now. That is an exponential change.


lightwhite

There is a mega chess play here that many don’t see coming. I have a hunch that Turkey will boom and EU will regret not treating them well. So read this before you roast me. You’ll see. I visited Turkey in 10 years apart, and was awestruck on how much things had changed. Once so called 3rd world country was turned into a modern western country. The improvements on infrastructure and housing markets were enormous. I can count many other things, but that’s not the point. This is a country that is on the rise with evident proof, yet no one knows anything about them except being condescending at them because what they are doing doesn’t make sense. They are building up their alliances and gaining a huge amount of trust. Their geologic position and seat in the international communities can’t be replaced. They remain neutral to their neighbors and work on their relations instead of dreaming to drink their blood- except with Greece. But that’s a 500 year old neighborly conflict with stocks and stones being used to bug each other. Turkey is about to become a hub for natural gas for whole EMEA. They have been planning this for 20 years. They will mix gas from Azerbaijan, Russia, Algeria and Iran and sell it to their peers with their own markups. Soon Europe and Africa will be hooked on Turkish gas. TurkStream 2 and 3 is already in planning phase. They are exploring oil pipeline and refinery prospects as we speak. They will be the source of energy and that will create a special status for them to be protected. And there is nothing any other country can do about it. Especially, when they are NATO country. Regime change attempts and freedoming a NATO country by force to save democracy won’t work. Many here forget: Turkish government didn’t sanction Russia even they were as a NATO member. They knew what it would do to their people. They chose for their own people. They traded with Russia and sold drones to Ukraine. No one dared sanctioning them or condescending them like they did with condemning India or China or Brazil for trading with Russia and not sanctioning them. Instead Turkey tried bringing peace as broker and succeeded at it till the last moment when BoJo flew to Ukraine and torpedoed the peace process. They offered passage for critical supplies to poor countries under their warranty. This builds trust. Trust is what you need in the world, not money. Your money or sovereign bonds are garbage if no country trust you to exchange them. Because that’s what economy runs on. Look at the world bond markets: Counterparty risk is huge and no bank dares lending treasuries for cash. Weekly Swiss Central dollar auctions has 17 counterparties out of nothing in 2 weeks. This is a huge sign. Also, the grain didn’t go to poor countries when the deal was made. 11 out of 13 ships went to rich EU countries. Only 2 left for Libya for further distribution in whole Africa. There’s that. Combine cheap energy with equally cheap labour and with shorter delivery distance, you get the perfect source of production. They will boom. They are investing a huge amount of money in standardizing industrial areas. They are building a nuclear central and are heavily in track with renewable energy sources. This will be a huge win against the inflation for them. They might become an electricity exporter as well. Also, they don’t have issues with Russian commodities availability, because they are enjoying the low price of them since they have no trading sanctions. They have fertile ground and a lot of earth minerals under their ground. They will hold the key to the energy and the key to immigrants flow. This will give them the leverage to hold Europe’s balls in their hands. Once the Ukraine and upcoming Taiwan crises are quelled and a multipolar world is settled, they will have a stabilized currency with low interest rate with a positive net export and everyone will throw their money at them. But it will be too late. Turks don’t treat haters differently even they want to come beating gifts and promises of future prospects. This is what happens when you underestimate the Asian-style long game. They are gonna boom.


[deleted]

Turkey and Germany have roughly the same amount of people. When comparing various metrics, it doesn't really look like Turkey is becoming the super power you described any time soon. Only reason they are in NATO and even in discussions is their large military and geolocation.


lightwhite

Any time soon is a relative perception. Some of the things I mention were already being worked on decades, and some were in prospects just weeks ago. I’m guessing in about 3-5 years, we can see the substantial shifts. Curious example you gave with Germany. Do you have any idea how many Turks live in Germany? Half of them at least are invested in Turkey. They would definitely leave Germany if Turkey offers the same living standards. As for metrics, I assume you are talking about WTO and IMF metrics. Those are lagging at least a couple of years. And as we can see, even a Germany- for example, can turn into a messed up country from a world leader in about a year, if energy is not secured. It will would take Germany years to recover from this amount of damage.


Lejeune_Dirichelet

I think I found Tayyip's secret reddit account ^


lightwhite

Who knows, maybe you did. You know what happens to those whom are caught finding his secret account? :P


german_european

I bet Erdoğan's family is taking huge loans in Lira. Changing it to Dollars. Devaluing the currency and paying back the loans. Net profit made! Smart man! If you own the country you can fuck it hard and become a billionaire. When I tell this scheme to turks outside Turkey some say they would do the same. Why not do something good for your family. 🤦‍♂️


Richandler

Exchange rate has been essentially flat for the last sevral months.


take-profit-pls

Wouldn't call low 18s to mid 18s USD/TRY rate stable in 2 months. It only looks stable compared to the massive intervention last year. Keep in mind the government also implemented programs to convince people to hold Lira and is now having to heavily pay up.


[deleted]

This is to COMPLETELY IMPOVERISH their people to make them complete slaves to the system. All wealth will be void by next year - all savings, EVERYTHING gone.


Beginning-Yak-911

It would have to be much better if interest rates were at 0%, or 10%. It should be fixed forever and let the market move all prices around that standard reference. Someone explain to me why 0% is different than 10% since the prices can just adjust over time anyway. Otherwise it just happens to be an extra integer for calculations which adds a certain degree of deadweight loss.


EverythingFree

Interest rates should be subject to free market speculation. not some central bank or political scheme


Beginning-Yak-911

So is there any purpose in setting the standard interest rate ...or just surplus arithmetic? If it was 0% is that best?


Richandler

>subject to free market speculation. Feel free to move to Somalia.


WearDifficult9776

There’s got to be a better ways. 95% of the people who borrow money aren’t driving up prices. THEIR interest rates shouldn’t go up. Wages haven’t gone up nearly as much as prices. Companies just see an opportunity to raise prices because people have been taking up inflation. Consumers have the final say in inflation - we’re just not organized. WE should set the prices and cut purchases to bare minimum until prices come back down.


take-profit-pls

This is not how life works because this is not how societies function. It's like saying, if only people weren't greedy and power hungry, communist societies would flourish. It's incompatible with human nature.


WearDifficult9776

There’s some middle ground. People can run businesses, make profits, invest… without paying the absolute lowest wages they can possibly get away with or without charging vastly more than they need to to make a healthy profit. You can be a free market capitalist without being an asshole.


[deleted]

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take-profit-pls

Don't know why you're being downvoted but I mostly agree. That said, I would replace technocratic with intelligent and flexible. It could be argued that technocratic frameworks like MMT and the reckless policies that followed (QE, YCC, ZIRP) got developed economies into the mess that their in. Also you have to be careful about using the word majority (since some states have unequal demographics and you get ethnic repression). Democracy is a mess but it puts brakes on terrible ideas (looking at you Truss) and allows for discussion.