Turkey’s inflation soars to 73%, a 23-year high, as food and energy costs rise
cnbc.com
cnbc.com
It's impossible to not get affected even if you are paid in foreign currencies. As the economy spirals down, everything gets heavily taxed by the government trying to save itself (and only itself).
So the price increases are MORE than the devaluation of the currency itself, which is extremely devaluated already.
That number will probably be much more than 73% if normalized to actual purchasing power.
For example: I could fill my car's tank ~550₺ (Turkish Lira) around October.
Last month, it was ~1600₺. There are tons of more examples, and without any actual production in the country, I don't see any bright future here.
And for those in Turkey who worry about economy and banks failing there are crypto exchange on every corner. You can turn USDT into USD cash and other way around for 2-3% fee.
I don't use cryptocurrencies, could you explain how corner crypto exchanges work? I didn't even know that was a thing.
There also like 3-4 points close to Grand Bazaar with BTC and USDT ads on them.
Probably they're in İstanbul.
On the other side, I remember seeing one Bitcoin ATM in Istanbul.
Though I keep a significant portion in crypto hard wallets anyway.
The other option is if the parliament decides to have early elections which requires opposition parties to vote in that direction too - which they might. The constitution allows him to be a candidate in this case. They might just do it. There are examples of them doing dumb things or maybe they are colluding with him. Who knows.
If he can't run, any other AKP candidate has basically zero chance of being elected.
It's as if they knew their system was fragile, and they can't let any small thing fall out of place, otherwise an immediate danger would be posed.
Ergodan’s course is not changing, for now
Every war has horrible tragedies and innocent lives lost or harmed, but to suggest invading a stable democracy to annex it is even remotely the same as supporting a locally led uprising against a murderous dictator like in Syria is absurd and offensive.
To be clear, I don’t agree we shouldn’t sanction Russia. EU should remove its dependence on Russia since Putin doesn’t seem to be going any where and if he does, we don’t know what that means
But our politicians are fucking up that too... just look at the german fight against nuclear power, while being happy to buy coal-generated power from poland.
We have a nuclear powerplant in slovenia, and we're talking about expanding it for literally 30 years now, and all the arguments against it are "this will take 10years, that is too long, we need power now". ...well, and austrians protesting against it.
From the very beginning the "locally led uprising" was 50% Islamists.
And by the way, Turkey is essentially annexing Syria right now. Unlike Ukrainians, the Syrians can't meaningfully fight back because Turkey is in NATO, so their forces have absolute safe harbor.
Beyond this, there is no reasonable moral argument that an annexation is any worse than installing a puppet dictator.
NATO won't protect Turkey if they are the aggressors. NATO is a defensive alliance.
NATO means that Turkey doesn't have to worry about any retaliation from Syria's allies. That is to say, impunity. On the other hand if Israel invaded Syria and IRGC troops fired a missile onto a base in Israeli territory, the US wouldn't invade Iran, but they would if it was into Turkey. That's a significant chilling effect.
Preventing allies from retaliating
The Serbs are still stirring things up in Bosnia. Stop now and embrace Tito's genius.
You learn something new every day...
Did the US want to annex that country into the US? And convert its citizens into obedient Americans? And murder everyone who resisted?
The benefit the US gets from protecting Poland is that in doing so it helps keep Russia boxed in, it keeps great influence over the EU (Poland is a pivot of US influence on the EU), thereby greatly helping curtail 2 out of 3 threats to the US's position as the most powerful country on Earth. It's not done out of benevolence but it's quite great for Polish people.
That's, by the way, a result of a 12 year period, compared to the list you gave that's over 80 years.
Those aren't great lives by any means, but avoiding Iran-Iraq V2, or Turkish invasion of most of Syria, a complete Azerbaijani victory, or complete subservience to China, is genuinely a positive. On the greater balance, simply existing as a counterbalance to the US is something that's useful for most of the world, which explains indifférence over Ukraine.
So no, it’s not the same at all as NATO intervening in an actual ethnic cleansing campaign.
Somehow we treat those wars and those agressors differently.
We really don't. There's been much acknowledgement that the Iraq war was a mistake and wasn't justified, since no weapons of mass destruction were found.
I think it would have been great for countries to sanction the US over it, but at the time, part of Europe also thought that if Iraq had nuclear weapons they'd be a threat to them. But Russia should have sanctioned US and Europe, they should have cut their supply of oil for example. I'd have been for it.
Just as the US should have been sanctioned then, and the war in Iraq should have not happened or been prevented, so is the war in Ukraine.
Normally we should learn from past mistakes, Iraq was a mistake, the world should have acted different back then and didn't. Now Ukraine is a chance to do better and act as we should have in Iraq.
Note: The other distinction is that Iraq was a clear and obvious dictatorship, so there was hope that it could improve the lives of the people of Iraq and lift them into more individual rights and prosperity.
Ukraine is not as clear, in appearance it seems they are on a good path to have more individual rights and prosperity, and it looks like Russia's trying to stop them from doing so. Is that completely accurate, hard to say, but probability wise it is a possibility.
So from the angle of picking a side as well, it's easier to side with Ukraine, which appear to support individual rights and democracy, and against Russia, which appears to oppose individual freedoms and seems to be moving towards full on dictatorship.
But we didn't sanction them. We're still friends with them. We even helped them.
> but at the time, part of Europe also thought that if Iraq had nuclear weapons they'd be a threat to them.
I'm pretty sure 'we' (our leaders, who sent our armies there) knew that iraq had no such weapons... Tony Blair even half admited it.
> Normally we should learn from past mistakes, Iraq was a mistake, the world should have acted different back then and didn't. Now Ukraine is a chance to do better and act as we should have in Iraq.
So, we knew iraq was a mistake, and we stopped? After the first time? Or after the second time? What about syria? Libya? What about somalia? Didn't biden just send more troops there? I won't even mention afghanistan... US basically armed the terrorists for the next few decades with their pull-out.
> Ukraine is not as clear, in appearance it seems they are on a good path to have more individual rights and prosperity, and it looks like Russia's trying to stop them from doing so. Is that completely accurate, hard to say, but probability wise it is a possibility.
Let's be fair... ukraine has areas where a lot of russians live, and they weren't very nice to those russians (and i mean "nice" in the same way as israelis are not "nice" to palestinians...). Somehow many people have forgot about those things (ukraine) or don't care about the others (isreal).
Yes, we didn't sanction them, and you seem to argue we should have, and I agree. That's why I think with Ukraine this time we're doing the right thing, same thing we should have done with Iraq. Do you disagree?
And before you say “Ukraine”, consider that Ukraine and Russia have a common history going back hundreds of years and together with Russia were part of the USSR. The attack on Ukraine is illegitimate, but at least it makes some logical sense.
Russia going after Romania or Poland which are part of EU and NATO and were never part of the USSR, but instead individual countries in the Warsaw Pact makes no sense at all.
The Baltics are more complicated, but once again - NATO and EU.
We are much closer to this.
Also guess who might have joined Russia after Ukraine? You don't think having Russia suddenly as your neighbor doesn't matter?
So they wouldn’t have had Russia as neighbor, but a Russia-friendly country, just like they did for most of the rather brief time Ukraine existed as an independent country. Or another Belarus, which Poland at least is already neighboring.
I get why these countries are nervous but Ukraine’s very very different from Romania or Poland or any other EU country.
Also, who gives a f*ck what Putin says?!?
While true, I think it’s the wrong criticism in this case, as the necessity of hurt has to be at the target of the sanctions rather than at the one imposing them.
Rather:
The sanctions that appeared after the Russian annexation of Crimea were the painless ones. The current situation is so much worse for EU interests that the EU feels it needs to demonstrate that it is willing to experience at least some discomfort in order to prevent Russian aggression.
The problem here is... are we really stopping the conflict by eg. banning import of russian oil? Russia is just exporting it to eg. India and China, them having cheaper oil is making their economies stronger, russia still gets the money, and europes economy is going down. So, we're hurting our economy to not hurt the russian one while helping china and india.
The EU has about 10x the nominal GDP of Russia. Is a 10% contraction of the EU for one year equivalent to the entire Russian population reverting to subsistence farming for a year?
Also: I should’ve thought of this before, but cost to each party isn’t the right metric — it’s what does the EU gain at what cost to the EU (and likewise for each party), so the question is probably more like:
Q1) does this situation look like a warmongering power trying to rebuilding a lost empire? If so, what’s the cost of sitting back and doing nothing?
A1) let’s say p=0.1, €3T/year
Q2) [insert more hypotheticals, probability estimates, and costs here, a real analysis wouldn’t fit in a comment]
Finally: multiply the chances by the costs, add them all up, that’s what it makes sense for the EU pay.
> If we read between the lines, we're also at the brink of a massive food crisis
We’re not even close to that, despite the breathless headlines and the fact the Russian forces interfered with a significant quantity of food production and are blockading the ports that would normally export it from Ukraine.
Hell, even the UK isn’t that screwed and they’re short of farm hands to pick crops and vets to certify the abattoirs because of Brexit.
They're also friendly with countries like china and india for the rest of the things they need, and have gas to export/sell to them to be able to pay for all that stuff.
I'm more afraid that Janez and Hans and Pierre will have to pick up crops to survive, and not Boris.
> Hell, even the UK isn’t that screwed and they’re short of farm hands to pick crops and vets to certify the abattoirs because of Brexit.
And it's funny, because this is a purely economical issue... pay more and you'll get workers to do the work for you. You cannot pay romanian paychecks to british workers.
I’m not asking you to judge the likelihood of two things, nor their consequences, I’m asking you to tell me if you think they are equivalent. Does A=B, where A is a 10% recession, etc.
> Russia produces enough food, that we (=rest of europe) have problems if they don't export
False.
Russia exported €1.8 billion agricultural products to the EU last year:
https://www.europarl.europa.eu/RegData/etudes/ATAG/2022/7292...
The EU agriculture sector is about 1.5% of its $US 17,000 billion nominal GDP, i.e. $US 255 billion nominal, which at current exchange rates is €237 billion, or to put it another way, what it gets from Russia is 0.75% by value of what it makes itself.
I’m old enough to remember when the EU’s biggest problem was colossal over-production of food, and it’s agricultural policy being called a market-distorting subsidy.
This is also backed up by EU countries having access to more food per person than Russia. Not that it matters because both are about 1000 kcal/day higher than actually needed: https://ourworldindata.org/food-supply (because, in case you skimmed over the bit at the top, hypotheticals about what constitutes “equal harm”).
> they also have enough oil/gas, that again, we have problems, if they don't export it
Yes (hence Hungary realpolitik), but not insurmountable problems, and we should be moving away from those fuels anyway even without this war.
> they also have most of the raw materials available locally plus a lot of companies that produce everything needed for basic infrastructure.
Define “basic infrastructure”.
Then ask yourself why Russian tank production halted.
> have gas to export/sell to them to be able to pay for all that stuff.
Not on the scale they need to keep their economy running.
> pay more and you'll get workers to do the work for you.
Vets are licensed. The number required is greater than all of the ones in the UK.
As for crops, the farmers have tried this and get basically no takers. Can they try again for even more money? Only if the supermarket are willing to pay more for the food, which requires the customers to be willing to pay more for the food, which they can’t because too many are already short of money.
Before the UK left the EU, there was technically one such pipeline from Norway, but it was mainly used to supply an oil export terminal located in the UK, rather than for importing oil into the UK for domestic consumption.
Europe expects to rely on sea transport to import oil after foregoing use of oil from the Russian pipelines. This is why the landlocked countries of Hungary, Czechia, and Slovakia were concerned during the sanction talks, though Hungary's Orban has exaggerated the concern to obstruct sanctions and/or to score dubious Realpolitik points.
Hungary's only alternative is the Adria pipeline that starts at a port in Croatia; it can be used in either direction and has sufficient capacity to meet current demands. Czechia's only alternative is the IKL pipeline that starts at a pipeline junction and tank farm in Vohburg (near Ingolstadt) in Germany. Slovakia's only alternative (if my research is accurate) is to be supplied through Hungary, using the Adria pipeline and a soviet-era connection between Hrkovce and Százhalombatta to be run in reverse mode.
See e.g. https://asia.nikkei.com/Business/Energy/China-turns-to-Russi...
I don’t think sanctions will make Russia stop the war, the only thing that will is a large enough flow of dead soldiers coming back home. But it will impact its ability to finance this war, its military capabilities (replace hardware), and potentially (though not clear to me), create opinion backlash in Russia.
I wouldn’t know.
But I can say the fungibility (or not) of oil is necessarily equivalent for both importers and exporters.
Consider the implications if it were trivial to change markets: Russia losing X units of exports per year to the EU and increasing exports to China and India by a total of X, means China and India are buying X fewer units from not-Russia, which means the EU could buy X more units on the everyone-else marketplace.
Realistically, Turkey China and India are mostly exporters. When Europe and the US go into recession, they won't need as much oil because they won't be exporting as much (they are the dominant importers)... and that likely means that Russia turns off wells when their storage fills up (soon). Those wells are slow to restart. The rest of OPEC replaces their oil (at somewhat higher prices) for the next few years.
What is an immediate concern is food, oil, and fertilizer not being exported from Ukraine (can't plant/harvest or ship) for much of the developing world. Turkey, Egypt, Sri Lanka... Sudan are all very dependent on wheat, sunflower oil, and fertilizer from eastern Ukraine. Even India will be quite affected. See how evil EU starves the poor! Only beautiful Russia can save them!
This seems wrong. 1) Russia cannot be penalized to any great degree with it producing negative consequences. Though I'm open to being wrong in this, and would entertain ideas about alternative sanctions that would penalize Russia equally without being uncomfortable. And 2) The discomfort is a function of EU tying itself too closely to Russia, something about which it was warned repeatedly over the decades even by some of its own members. The discomfort here is not merely necessary to penalize Russia, but also to remedy reliance on a Russian government wielding that clout as a license to act just as it is acting now in the Ukraine.
The EU must be willing to experience discomfort, but they are not doing so right now merely as a hollow signal.
Thanks, I was afraid I might have come across that way. Was aiming more for “we have to show we’re tough and not just talk it”.
Id be more willing to suffer discomfort if diplomatic options were exhausted before this war.
As it is we are made to suffer ultimately, because NATO and Russia are spoiling for a proxy war and because the US has been itching to sell us some overpriced LNG.
The US should be giving us LNG at a discount on prewar levels. This is largely their proxy war, not ours.
If you did, the USA involvement in Vietnam would be a proxy war for the USA, and the American war of independence would be a proxy war for the British — in both cases some other power also had some interest, but I would never call either a proxy war for the USA and British respectively.
The US has a long history of demanding others to sacrifice themselves at the altar of its imperialist struggles, whether it's Australians being sent to die in vietnam or European pensioners being asked to die of cold in dec 2022.
Europe and the US also "foolishly" integrated with China and whole lot of other countries who are not exactly shining beacons of freedom. Either crawl to your own hole and do not deal with anyone or admit that there is a world around us and it sometimes does not conform.
Besides Europe did not become rich just by being nice. It and UK in particular had raped the rest of the world in the process. It does not seem to mind "mass murder" either when it is done by "right" countries to a "bad" ones.
Edit: locals have been at it for yemen in particular.
EDIT: Ok I see now what you took offensively. Most of us Westeners I should have wrote. Most regulars peoples' attention as example diverted much more to the case of Johny Depps' Trial than to the war in Ukraine.
Age of information, not communication and all that
If your country is a member of NATO, i'm pretty sure there are a few countries right this moment, that consider your soldiers on their land as an occupation.
I live in slovenia, and even we have soldiers in places like syria , and I'm pretty sure none of the locals want us there... now we, the occupying force of country X, complain about someone else doing the same to country Y.
But native syrians have had their country basically destroyed by nato (too). So did afghanis, etc., and they're not happy for being occupied (as we saw after the pullout from afghanistan).
Considering turkey is a part of nato, it's interesting that we let them attack the kurds without any sanctions... maybe we have to wait until they annex a part of syria to make it "bad".... but in reality, noone will care.
Europe spent decades of cooperation with Russia instead of working toward complete independence from Russian energy.
Thanks to sanctions, Russia is becoming independent (less/no ties to outside economies)--do not recommend.
A democratic country is expected to be more rational than an autocratic one. The EU was naive in trusting Russia.
America did the same in the 2000's and ramped-up domestic supply of oil.
Keynes wrote that to warn about the risk of inflation in Germany and its potential consequences -- years before high rates of inflation led to the failure of the German mark, the collapse of the Weimar republic, the rise of dangerous ideologues (the Nazis), and ultimately, World War II.
If Turkey doesn't get inflation under control, it will implode.
My comment is only pointing out how destructive high inflation is.
Please don't attack a straw-man.
Please assume good faith, otherwise discussions escalate into accusations.
Their geopolitical significance and NATO membership will prevent this from happening even at the cost of cementing Erdgodan's power. There is also sizable community of Turks economically anchored in Germany.
Economists don’t know everything. Their analyses are too mechanical.
Japan — nobody knows why it grows, and Argentina — nobody knows why it doesn't.
Productivity
https://tradingeconomics.com/japan/gdp-per-capita-ppp
> Argentina — nobody knows why it doesn't
I mean, Argentina's economy has grown a lot since 2002. But for the most part, they've been hurt by a large debt burden and financial mismanagement.
Argentina, on the other hand, has somewhat more varied exports (though soy and corn products are a large portion) and is agriculturally self sufficient. Unlike Venezuela, which had a "export oil, import everything else" mentality, Argentina has a large degree of economic protectionism and so they do have other sectors to help supply domestic demand to some degree.
There's obviously many other factors, but those are the largest ones in my opinion.
The mystery is why it doesn’t grow, not why it doesn’t collapse. Inflation is a beast if people can’t get enough food. But Argentina has never had much of a problem in that respect
"Benítez is one of millions of Argentines who survive largely thanks to soup kitchens and state welfare programs, many of which are funneled through politically powerful social movements linked to the ruling party. Almost a third of Argentine households are estimated to receive some kind of social assistance."
https://apnews.com/article/politics-argentina-buenos-aires-i...
It can weather the storm far longer because it just doesn’t have enough resource pressure as older, poorer countries do
>If Turkey doesn't get inflation under control, it will implode.
As others have told you, Turkey and other countries have seen very high inflation rates for years/decades without collapsing.
Your history of Germany isn't correct, either. The hyperinflation that afflicted Germany in the early 1920s did hurt the Weimar Republic and caused a lot of chaos, but it didn't collapse. Yes, the Nazis were born during the chaotic years, but it remained insignificant as the Weimar government reined in inflation. By the late 1920s Germany was growing again and showed every sign of again becoming Europe's industrial leader. The Nazis took power in 1933, during the worldwide economic depression.
I’m just a random stranger but wish you the best.
It would not have been able to handle the people migration that would have ensued.
We have a globally inflated economy.
Besides, Turkish immigrants are very unlikely to cause real issues in the EU. I will concede that they may cause some imaginary problem and upset some people.
But at some point I'd definitely consider.
If you have plenty of money you can buy a big apartment, or a whole hotel or something.
The problem is how to save a small amount of money for a year. For example save each month to buy next year a new fridge or a notebook.
Instead of buying things to resell, I prefer to buy in advance things I'm going to use. For example enough concentrated laundry soap for 1 year, or tuna cans for two months. They have a good volume to price ratio, and they don't spoil. [I could boy more tuna cans, but it looks too weird.]
This is useful to absorb extra payments, for example we have a bonus half salary in July and December.
Real estate prices are somewhat proportional.
It's profitable if thought in terms of Turkish Lira. But when corrected for inflation, not really.
But, there is a lot of corruption and there's about ~30% of the population which is exteremely uneducated and/or under Stockholm Syndrome and still supporting him.
That percentage + cheating in elections + telling "the west is the reason" keeps him in power.
Sorry, while I'm far (very far) from being a fan of Erdogan. I take a distance quickly when I read someone talking like this about their own people. From experience (from another 3rd world country) we have people that say the exact same words, and they're the most ignorant people on the local politics but they think they are superior and they know better because they are "liberal" and they follow the foreign (usually western) press but they keep loosing most of their political fights because they only see from very narrow angle. I'm not implying you're like that, I just want to say that this is dangerous way of thinking on the local politics of most countries.
But if you were here and see the big picture and how gullible his supporters are you'd probably be at my side.
The opposition (CHP) is liberal yet is definitely very powerless and bad at politics, but I vote for it because that's the only party that is a threat to Erdoğan's party (AKP).
In short, I position myself as liberal and agree with the fact that liberals are sometimes lost in their own echo chamber of feeling superior, yet I don't vote for the liberalist party because that I'm liberal. I vote for it because that's the only possible opposition that can win majority against Erdoğan's party.
If there was a conservative party that would threat the current regime, I'd vote that even as a liberal. There is one (İYİ Party) but their votes are far too low currently to be a threat against AKP.
"The Inflation Research Group (ENAG), an independent group of academics and economists working on key data that map economic performance, however, on Thursday said the country’s month-on-month consumer prices rose 8.68 percent, while annual inflation jumped to 156.86 percent in April."
https://turkishminute.com/2022/05/05/inflation-soars-to-near...
I'd say the reality is around 100%.
But with global gas prices also increasing the cost of transportation almost quadrupled in a year.
Are there other populations where the 30% figure holds up in this context?
In practice the fairness of national elections are in doubt, but more importantly Erdogan willingness to leave office if he loses is the big unknown. Given that he has purged all institutions, including the army, to only have his people everywhere, what happens if he refuses could go from Trump "but at the end he still had to go because enough people kept their sanity" all the way to lukashenko "and then he stopped pretending there were elections".
Until Erdogan came to power, Turkey was arguably more democratic and more secular than the US. In recent decades whenever Turkey occasionally got a leader who began to act too Islamist or too dictatorial, the army would stage a coup, toss the rascal out, and restore democratic rule. This happened in 2016 but for the first time since Ataturk, the coup failed (badly!) and Erdogan emerged even more powerful. I worry for the future of Turkey.
I keep dollars and crypto. Real estate isn't a bad option either. Basically anything that's not practically pegged to TL is a good choice in my opinion. And this includes almost anything: foreign currencies, crypto, real estate, cars, gold, stocks (foreign) etc.
At the end of the day it's all just multiplication, and you can multiply by any number.
I noticed that only some prices are so badly expensive for person earning USD and it's mostly electronics. Though Turkey has 35% tax when buying from Amazon so yeah it's due to taxation and local regulation.
Can you please share some examples of what's got specifically expensive in last couple of years?
Fruits and vegetables I mostly buy on local markets and they're damn cheap considering that $1 == 16.5 Lira: tomatoes 5-10TL, cucumbers 2-8TL, Strawberry 10-15TL, oranges 2-4TL, apples 7-8TL, etc. Meat and sunflower oil kind of a pricey. Yeah at this point I get it's kind a pointless to list any kind of prices as they do in fact change with inflation.
I understand that for most of people outside of IT it's very unlikely to have salary higher than $800 in Turkey, but over 3+ months I live here prices stay mostly the same in USD.
None of that helped in Afghanistan — where the locals defeated the US via persistent warfare.
Such tactics will work even better when insurrectionists can directly attack US production facilities, ambush data centers and technical staff, assassinate politicians, and attack solder’s families.
And that’s before considering whether some portions of the military would side with an uprising.
Fleeing countries has an ancient history, and it's naturally always been easier for higher classes with access to resources.
I live in a part that was already separated back then, but I'm still a billionaire, since I have quite a few >1billion dinar notes at home.
Also in the list:
- Zimbabwe reached 98%/day in 2008.
- Hungary reached 207%/day in 1946.Surprising for a random Brit, but less so given he was a significant member of the Rhodesian Study Circle.
Still, a Z$1 dollar coin was an amusing thing to find in 2014.
This makes capital investments cheaper. This is just one example.
It's now 16 to the dollar, up from 8 to the dollar a year ago.
The old Lira was 15 to the dollar in 1975, by 1985 it was 500 to the dollar (devaluing 42% a year), 1995 was 43,000 to the dollar (56% a year), and by 2001 it reached 1.3 million to the dollar (77% a year)
From 2001 to 2005 it was relatively stable, and the new lira came in and only lost half its value from 2005 to 2015. Things have been getting worse since 2015 though.
> Key Points - Turkey’s inflation for the month of May rose by an eye-watering 73.5% year on year,
by should be to, if the headline and rest of article is true.
The latter puts the focus in a slightly different place, but they both seem to communicate the same essential fact, so I don’t see why the latter would be more accurate than the former?
What am I missing?
Edit: never mind, I understand now. “By” would be referred to a percent raise in the rate of change of inflation
10%->73% (to)
I thought this was to be expected.
What I thought was interesting was that there was a major deployment with armored vehicles in a well to do neighborhood off the tourist trail. Literally outside the Carrefour Gourmet where I bought overpriced European ingredients, in fact.
IDK if they were extra sensitive coz expats were there, coz they were feeling extra protective of the upper middle classes or even coz they were afraid that the upper middle classes would be the ones to riot.
Ive not seen anything like it elsewhere except in altamira, caracas.
I only saw that once before - in altamira caracas.
Ive seen plenty of armed police in Italy but they were focused in highly trafficked city centre/touristy areas. Italy seems pretty excessively militarized but the pattern of deployment is normal.
That's not new, and probably isn't related to mass unrest. My guess is it was related to some intelligence about PKK activity.
Same with Zimbabwe with projects done in USD. Sri Lanka had a project boom last 10 years with USD.
This does not apply to US because the debt of US is either internal or USD. I guess partially the reason jpow is dragging his heels on raising interest rates
Interest/price spirals work in the same way as wage/price spirals
https://new-wayland.com/blog/interest-price-spiral/
Turkey is suffering from a collapse in their terms of trade. They need to stop luxury imports to make room for food and fuel. And they need to put firms with foreign borrowings through administration to get rid of the foreign debt.
Ultimately though government needs to cut its spending because its capacity to tax is probably at the social limit the society can stand.
It’s a mess, but neoliberalism won’t help.
The argument is wrong, mostly because even if deposit and borrow rates were equal (they aren't), central bank offers and charges it on MB, but borrow rate is in the end charged on all loans in existence - much larger than MB.
1. someone borrows (new) $100 from the central bank at the variable central bank rate - currently 0%
2. someone buys something for that $100
3. that $100 is loaned to yet another person at the variable rate
4. that person buys something with it, the buyer deposits $100 to the central bank
At the end there's: $100 in the central bank. Loans for $200. Increasing the interest rate to 1% increases total liabilities by $2 after one year, but total base money only to $101. That's a deficit of $1. In other words demand for money has increased relative to the supply. This mechanism explains why more advanced economies can function with lower interest rates - because even a small base rate has a high multiplier, while in simple economies the multiplier is low. There are more implementation details in practice but the fundamental mechanism stays the same.
The BoE debunked this nonsense years ago and yet you’re still trotting it out? Why?
Bankers are people - they earn the interest and spend it with firms who then pay the banks. Bank Interest is funded by paying the interest.
What that means is interest is simply the wages of bankers who are paid for making collateral discounting decisions.
The central bank pays reserve holders and banks create money out of nothing.
Erodogan has not cut spending nor diverted the import of gold to the import of food and fuels for his population. Or done anything I suggest.
[0]: https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
The mechanism is very simple. Central banks lend money and that's how money is created. They do it by accepting various collateral. Whether they lend directly as debt or by purchasing assets via a reverse repo is a detail. Banks remain liquid by either holding money directly, or assets that are accepted as collateral by the central bank to generate new money instantly. Sometimes that liquidity runs out, which may then require a special central bank intervention (like relaxing collateral rules during a wide crisis), or even a firesale of assets, which can lead to insolvency. They remain solvent by owning more assets than liabilities. The difference between all short term liabilities (deposits) in the banking system and central bank money is the total money multiplier.
Fortunately, unlike confused writers of that article, people actually making decisions in almost all central banks still know that's how it works - which is why they know that rising interest rates reduces inflation (although not instantly). Erdogan, in comparison, appears to believe that high interest rates create inflation - results are visible for everyone.
It isn't is it.
Central bank reserves are an asset of a commercial bank. Deposits are liabilities of commercial banks.
Suggesting people at the Bank of England don't know how banking and central banking works is a bit hubristic don't you think.
The process they are talking about is the one that causes the central bank interest rate to bind [0]
[0]: https://new-wayland.com/blog/why-banks-pay-interest-on-depos...
The central bank simply threatens to operate as a wholesale depositor at a particular price.
"Central banks lend money and that's how money is created. "
They don't. They merely threaten. Commercial banks rarely borrow from the central bank.
Central banks discount assets into their own liabilities - just like every other bank. They just tend to stick to government securities. They do that reflexively at a particular price, because if they tried to do it at a quantity they would lose control of their interest rate and cause the payment system to collapse.
That's what QE is - additional discounting of government securities into bank reserves. Which then requires there to be a support rate paid on reserves or the interest rate would drop to zero or thereabouts.
Those reserves come from government spending more than it taxes, and that's what the central bank is discounting.
In technical terms the commercial bank lends to the central bank, not the other way around. The commercial bank has the asset, and the central bank the liability.
Just like a deposit at a bank lends to the bank. Hence why you are 'in credit'. Credit being the accounting term for a liability.
There is no such thing as a money multiplier and never has been. Loans create deposits. Deposits which are then used, in part, to swap for bank equity and bonds which creates the 'assets > liabilities' buffer in the banks. It's back filled, not front run.
Reserves have no quantity controlling power, and are merely an optimisation. You don't need them at all to do banking.
Though I totally understand the idea, I however think it is easier said than done.
Turkish ( or any other country) companies have the same issue: low us interest rates and common sense applied here: they took advantage of the situation by borrowing in US dollar.
There was nothing much the Turkish government could do about that.
They can. They can change the "trading while insolvent" rules so that it is in all currencies the firms deals with, not just the reporting currency.
Then if you can't get the forward swaps, the firm is insolvent and has to be put through administration - which will wipe out the dollar debt rather than cause a wave of Lira for dollar selling.
Capitalism without bankruptcy is like Catholicism without hellfire. It stops the control system working.
To be clear, raising interest rates to appropriate levels curbs inflation as evidenced by all of financial history. Turkey kept rates low exactly as you suggest, and this massive inflation is the result
Except for the ones analysed by the Fed.
> We show that a nearly 90 percent reduction in inflation volatility is possible even without any changes in monetary policy when the economy transitions from equal shares of power between workers and firms to a new balance in which firms dominate. In addition, we show that the decline of trade union power reduces the share of monopoly rents appropriated by workers, and thus helps explain the secular decline of labor share, and the rise of profit share. We provide time series and cross sectional evidence.
[0]: https://www.federalreserve.gov/econres/feds/files/2022028pap...
Every country that has tried to combat inflation with lower rates has led to an inflationary spiral.
In a perfect world inflation would be controlled primarily via fiscal policy, but this is non-viable in the US political system. E.g. despite the Democrats being savaged in the polls due to inflation, they have yet to actually propose any package to help address inflation. Instead they just tried to convince people that BBB was inflation fighting, when in reality it's structured as a highly inflationary set of legislation.
The Fed can't be as targeted as fiscal policy can, so their mechanism to combat inflation naturally leads to recessions. Fiscal could be much more targeted, e.g. temporary taxes on discretionary goods etc.
It just so happens to be that sensible policy to curb inflation would also be highly unpopular to most
They had an economic collapse due to the exodus of people, corporations, and capital at the end of their civil war.
The currency becoming worthless was a symptom of all that, not the cause.
It was because of land invasions where land was stolen from productive white farmers (and later mines) and the resultant collapse of the agricultural sector and therefore loss of foreign currency which they tried to solve with money printing.
Pray tell us, how did white farmers come to own land in Zimbabwe?
> Many of the white farmers bought the land (from other farmers) and didn't take it by force.
Knowingly buying stolen goods is not much better than stealing.
For instance Zimbabwe made a lot of foreign currency by exporting tobacco.
Btw much of the stolen land was given to government chronies and many of them took multiple, large and successful farms worth millions of dollars for themselves.
Knowingly buying stolen goods is not much better than stealing.
The land wasn't legally considered or treated as stolen goods and was available on the open market to all races for multiple decades.
The current government has basically acknowledged that the land was stolen because they've now promised to compensate the white farmers.
https://www.reuters.com/article/us-zimbabwe-farmers-idUSKCN2...
Hyperinflation has a lot more to do with the fact the government irresponsibly printed ridiculous amounts of money.
Farm confiscation and land redistribution happened in 2000 and 2001. Hyperinflation peaked in 2009.
> The land wasn't legally considered or treated as stolen goods and was available on the open market to all races for multiple decades.
Right. Because the colonial rule left all races at the same socioeconomic standing and there actually was a free market.
> The current government has basically acknowledged that the land was stolen
That's a very creative interpretation:
> The agreement signed at President Emmerson Mnangagwa’s State House offices in Harare showed white farmers would be compensated for infrastructure on the farms and not the land itself
Yes but why did they do that?
I already said twice why.
People think their country is immune to hyper inflation. They're not. You're in for a surprise.
Until we think communally about inflation, this cycle will keep repeating.
We were told food prices would skyrocket after border controls were implemented in 2020/1.
Russia definitely screwed the world with the war and energy costs though.
At least Gold is up 4% on the 6 month so that’s a small hedge.