Authorized reprint of article from Bullpiano Author: Bullpiano
Türkiye in China is really amazing. In any case, Türkiye’s latest move shocked the world again.
Because the new Finance Minister Himsek suddenly announced that Türkiye would follow international practices and return to “rational” economic policies.
Other countries can say this without any suspense. But the key, this is Türkiye!
Before that, economists all over the world had been thinking hard because of Türkiye: whether it was Türkiye that was wrong or the western economics they learned was really wrong.
Why?
Because Türkiye’s inflation rate is very high, it once exceeded 85% last year, the highest in 24 years; Even now, it is still over 40%.
We say that inflation is stronger than a tiger. The people naturally complain a lot, what should we do?
It is almost a common practice in the world that once inflation intensifies, the central bank will immediately raise interest rates, tighten market liquidity and quickly reduce inflation.
The Western countries did this, and the Eastern countries did the same. Back then, China’s inflation skyrocketed and roughly followed this approach.
But Türkiye is Türkiye, which does not raise interest rates.
Not only will interest rates not be raised, but they will be lowered instead, and they have been slashed five times since August last year.
The key figure of this “divine operation” is naturally the governor of Türkiye’s central bank; The person behind the governor of Türkiye’s central bank is Türkiye’s President Recep Tayyip Erdogan.
According to Erdogan, the higher interest rates, the higher inflation, and the worse the economy. The correct approach is to lower interest rates in order to have investment and stimulate the economy. “We have been deceived by Western economics for a long time.
In the past, the central bank of Türkiye did not agree, and the solution was simple. If you do not agree, then leave. Anyway, in the past three or four years, Erdogan has fired three central bank governors and replaced a large number of senior financial officials.
Western economists are deeply affected by Türkiye. Finally, they draw an important conclusion: Türkiye is launching a comprehensive challenge to classical economics.
Many people believe that Western economics and Türkiye’s economy can only survive in this way.
What about the results?
In any case, Erdogan was elected President of Türkiye again. In the past three years, Türkiye’s currency lira has depreciated by 67% against the US dollar, and Türkiye’s foreign exchange is almost spent.
What should we do?
Erdogan invited Himsek back again.
Simshek was once the Finance Minister and Deputy Prime Minister of Türkiye. During his tenure, Türkiye’s economy developed rapidly. After his resignation in 2018, Erdogan began to rage, changing three finance ministers successively, and finally Türkiye became like this.
If it goes on like this, Türkiye’s economy will be in danger.
So, the veteran came out again.
It is said that before Himsek returned to the mountain, he proposed three conditions to Erdogan:
1. I have the right to make my own decisions in my work;
2. I will lead the establishment of Türkiye’s economic policy team;
3. Give me enough time to solve the economic problem.
Erdogan is said to have readily agreed to this three chapter agreement.
Therefore, Simshek took office and said in his first public speech: “Transparency, coherence, predictability and compliance with international practices will be the basic principles for us to achieve the goal of improving social welfare… Türkiye has no choice but to return to the rational basis.”
He also said that he has two major goals: first, “we will prioritize macroeconomic stability… The main goal will be to establish fiscal discipline, ensure price stability, and achieve sustainable high growth”; Second, “It is vital for our economy to reduce inflation to single digits in the medium term… and accelerate structural reform to reduce the current account deficit.”
What does it mean?
The lira can no longer depreciate, inflation can no longer surge, and we still need to follow international practices.
Turn everything upside down again!
After such a big circle, Türkiye came back.
Finally, what do you think?
First, Türkiye is really amazing.
Others raise interest rates, but I tend to lower them. That’s the tone of contention. Of course, Erdogan is Erdogan, and there is not a single path that goes dark. Upon seeing that the situation was not right, he quickly changed his approach, so he invited veteran General Himsek back.
As a result, Türkiye’s economic policy took another 180 degree turn. The magnitude of the movements made many economists blink and make us Chinese people wide eyed.
Erdogan? I can’t say that either. It should be said that he is still very persuasive.
It’s just that Türkiye has done such a dramatic thing concerning a country’s economy.
Secondly, we must still follow economic laws.
How to say it? Erdogan’s original intention should also be good: to significantly reduce interest rates and force everyone to invest, which will increase employment and promote exports, right? It’s uncertain, the economy will naturally improve and inflation will also come down.
But the economic law is the economic law, which is not transferred by human will. As a result, Türkiye falls into a vicious circle: inflation ? interest rate reduction ? depreciation ? panic buying ? inflation ? interest rate reduction
The value of the lira has plummeted, foreign exchange reserves have almost been depleted, inflation remains high, and the economy is on the verge of collapse
When it comes to economic issues, we must not meddle blindly, we must follow the laws of the economy.
Third, Türkiye needs to compete economically.
In the end, after a big turn, Erdogan still invited veteran Himsek back, to return to rational decision-making and make every effort to fight the economy.
The difficulty is not small, the next 100 days are crucial, testing not only Himsek’s ability but also Erdogan’s tolerance. I don’t rule out that Erdogan can’t keep watching midway, Himsek, get out of here.
But at least for now, Erdogan still has the drive and determination for change. After all, the more the international situation changes, the more one needs to settle down and work hard for the economy, in order to have greater confidence and confidence. And financial work is even more careless.
Don’t forget, we Chinese people are well aware that finance is the core of modern economy, and we need to fully leverage the decisive role of the market in resource allocation.
But there is also a slight regret. Originally, Türkiye has declared war on western economics, and has taken the lead in exploring new economic laws in the world. Now it seems that it has suddenly turned around and is ready to go back. Erdogan, there really is you.