People are suffering at present in Turkey. But this is not just a recent thing. People have been suffering for quite some time. And unfortunately, the way I see it, they will continue to do so for the foreseeable future. I’m afraid to say that there isn’t going to be any respite for them. In fact, it’s my belief that the situation is likely to get a whole lot worse.
As for the present, according to the government, inflation in the country is running at about 20%. The cost of everyday items are rising. Essential goods are getting more expensive. Tomatoes, for instance, have risen by 70% in a year. I should say that the inflation rate that I gave is an average figure. Some items will be more expensive than others. And also, this figure might be an underestimation. Real prices might actually be higher than this figure published by the government.
But, before we go any further, I should point out that in my opinion, it’s incorrect to think in terms of rising prices, or things being more “expensive”. Thinking in these terms is not the best way to think about the situation. Rising prices are the final effects of inflation.
I refer you to two videos I did entitled “Inflation” and “The Impacts of Inflation – rising prices” to give you a better idea of what I mean by this.
Anyway, as I have said, inflation in Turkey is supposedly running at about 20%. So, the questions we need to ask are … Why is this? What has caused this inflation?
There is a simple answer to these questions. The inflation is caused by the situation with the currency. The Turkish currency, the Lira, is in crisis. It’s lost half of its value this year. What is more, the situation is getting worse and worse as time goes by. It’s lost 35% of its value in 30 days. That’s seriously bad.
Make no mistake, this situation has been created as a direct result of the policies of the Central Bank in Turkey and President Erdogan. The monetary policy that they have followed is the problem. The Central Bank has been increasing the money supply - basically money printing. And this has been done on a massive scale.
Increasing the money supply is not good for a currency. It devalues the currency. A devaluation is a loss of value. To put it another way, the currency loses its purchasing power. Purchasing power is the ability of a currency to pay for goods and services. So, when the purchasing power decreases, the ability of that currency to pay for goods and services decreases.
It must be understood that the products themselves don’t change – tomatoes are still tomatoes – they don’t change. What changes is not the product, but the value of the currency – its purchasing power. The currency has depreciated in relation to the product. The loss in purchasing power then means that takes more currency to buy that same product. This is why things become more “expensive”. We have to bear in mind that everything is relative – so we have to look at the currency in comparison to goods and services.
The Lira
