Economic Strife in Turkey
ISTANBUL, Nov 24 (Economy Insider) - Turkey’s national currency, the lira, has plunged more than 15% on Tuesday, with news of the current president of Turkey, Tayyip Erdogan, adamantly defending his decision to slash rates and who has promised to “win his war of independence.”
The lira has lost more than 42% of its value this year, including a staggering 22% decline since this week. Inflation has also been ravaging the national economy of Turkey, with prices of goods and services rising due to an absurd inflation rate of 20%.
Despite increasing cries from the International Monetary Fund (IMF) and macroeconomists, Turkish president Erdogan has refused to raise interest rates of the lira, inflating the supply of the lira while its purchasing power decreases. Erdogan has repeatedly claimed that lowering interest rates (making money cheaper and more abundant) will somehow constrain the economic claws of inflation.
“It’s just crazy, there’s zero justification for this move as there’s been zero justification for the rate cuts we’ve seen so far this year,” an asset manager told the Wall Street Journal. “Erdogan is running monetary policy on his own.”
Turkish Citizens Exchange Lira for Other Assets
Some Turkish citizens have ditched the lira, and are investing in alternative assets, assets claimed to be “hedges against inflation”, the most commonly used assets being gold and Bitcoin.
BTCTurk, one of the local exchanges offering Lira/BTC exchanges, has seen a significant uptick in volume. This increase in volume in the Lira/BTC exchange, following the news of Erdogan’s economic policies against inflation, alludes that Turkish citizens are losing faith in the Lira, and have responded to the Lira’s decline by purchasing BTC with their remaining savings.
Erdogan’s Turkey is becoming a case study of Bitcoin’s potential benefits for citizens of countries with fragile and easily manipulated currencies, or for residents of countries with authoritarian leaders who inflate the supply of their money for short-term political gain. Nevertheless, Erdogan is creating the perfect conditions for Turkey to adopt the major cryptocurrency Bitcoin, whether he intends to or not.