Is There a Method to Erdogan’s Madness?

Pakistani economist DMKM (he tweets as @2paisay) tries to find out why Erdogan is keeping interest rates low in Turkey. Add your thoughts in the comments. Original article is on his blog here

TL;DR – The answer to the questions posed in the title/subtitle is “I don’t know”.

Someone sent me the below BBC article.

I read the article keenly, hoping to find the answer to the question posed in the title of the report, but I couldn’t. It is a very good question: what is Erdoğan really trying to achieve?

Keeping the interest rate low is severely affecting the Turkish currency. The value of the Turkish Lira has almost halved since Jan 2021. It was around 7 Turkish Lira to a dollar, and now it is almost 14 Turkish Lira to a dollar. That is a huge decline in less than a year.

Turkey’s youth compare their living standards with those in other countries and do not like what they see.

“For a young person in the US or Europe, it’s easy to buy an iPhone with their salary,” says one 18-year-old. “Even if I work for months and months, I cannot afford it. I don’t deserve that.”

This generation is poised to play an important role in politics in Turkey, ruled by Mr Erdogan’s Justice and Development Party (AKP) since 2002.

Almost nine million Turks born since the late 1990s will be eligible to vote in the next election in 2023 and that could spell trouble for the AKP.

What reason does Erdogan provide for the low rates? Continue reading Is There a Method to Erdogan’s Madness?

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