World Turkey: Erdogan monetary amokal ruined Turkey

20:35  03 december  2021
20:35  03 december  2021 Source:   wiwo.de

Turkish lira dives 15% as president defies critics

  Turkish lira dives 15% as president defies critics The currency touched record lows as Tayyip Erdogan defended a controversial plan to cut interest rates.The currency hit a record low of just over 13 lira to the dollar, before recovering slightly, marking 11 straight days of falls.

The Turkish President Erdogan drives the economy with his confused monetary policy in front of the wall. If he does not come to Räson, the country stands in the medium term in front of a currency section.

Can one be based on the economy of a country with the music press? Anyone who has doubted that so far is recommended to the Bosphorus. There, the Turkish President Recep Tayyip Erdogan has been revealing the music press for months as there would be no morning. Three central bank chiefs within two years he has worn, because these were given in view of the inflation on the rudder against the interest rate cuts desired by Erdogan.

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In November, the officially measured rate of inflation in Turkey reached 21.3 percent, the highest value for three years. Economists assume that the actual inflation is even higher. For next year, they expect inflation rates of around 30 percent.

Erdogan represents the glory thesis, inflation could be combed with interest rate cuts and thus puts all economic theories on the head. Presumably, he would prefer to abolish the interest, which is considered an immoral instrument of exploitation in Islam anyway. Interest are "an evil that makes the rich richer and poor poorer," says Erdogan.

inflation hits the poorest in Turkey on the toughest

, however, it is inflation, with the Erdogan overriding Turkey, which makes poor poorer. Inflation acts like a regressive tax. Above all, it meets the poor because they use a disproportionately high part of their income for consumption and do not have the funds to escape over an escape into the assets of destruction of the purchasing power of money. For example, the increase in expensive food, which make up a high proportion of the consumer expenditure of the poorer citizens, was most recently to 27 percent.

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Because the key interest rate, which the central bank on pressure Erdogan of 19 percent in March has been pushed to currently 15 percent, is clearly under the inflation rate and investors thus lose real money, the Turkish currency has lost almost half of their value this year. Higher prices for imports that further accelerate inflation are the result.

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Nevertheless, Erdogan believes to have the "right plan" with lower interest rates and a weak currency to strengthen the Turkish economy. In fact, gross domestic product is likely to increase by more than ten percent this year, expect analysts. This is mainly because many export companies with the tailwind of weak Lira make good businesses. The current account deficit last even trained.

cute poison of lira devaluation

The problem is that a weak currency looks like sweet poison. At first, it tastes good, but it destroys the organism and leads to the exit. Thus, a weak currency reduces the pressure on cost reductions, the export companies sedate and cremates urgently needed measures for rationalization and productivity enhancement. The competitiveness of companies eroded.

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companies that produce for the domestic market can operate thanks to the weak currency that makes the competition more expensive from abroad, as under the protection of imports. Without the pressure of the competition, their efforts also to increase productivity. The growth potential of the economy is shrinking.

This happens that many Turkish companies have recorded high loans in dollars and euros, for whose repayment they need to generate more lira. That should increase the number of bankruptcies.

Still, Erdogan may feel powerful as the sultan. But he does not arrive against the laws of economics. Earlier or later he stands before the election. Either he finishes his monetary amooker and the central bank attracts the monetary policy, which is probably only possible under purchasing a stabilization recession. Or people finally lose confidence in the state institutions, fleeing the Lira and thus force a currency reform. Whether that will take place with Erdogan as a president, is questionable.

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Turkish Economy: Erdogan promotes "Chinese model" .
The Turkish President has recently accelerated the currency of the Lira. Nevertheless, Erdogan wants to stay with this course because the success in China has led to success. The comparison lags, find experts. © Murat Cetinmuhurdar / Turkish Presidency / AA / Picture Alliance Provided by Deutsche Wave For years, the Turkish economy has been sponsored by a turbo inflation. The enormous price increase relies on the population - energy, living space or staple foods are only completely overpriced.

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