The Turkish Way – OpEd – Eurasia Review

By Doug French*

The the wall street journal reported on September 22 that Turkey’s central bank had cut that country’s benchmark interest rate to 12% from 13%, pushing the Turkish lira down as much as 0.4% against the dollar to a new all-time high after the decision. One US dollar recently bought 18.3866 lira.

Prime Minister Recep Tyyip Erdoğan’s bank made its move the week after Drs. The sixteenth annual Hans and Gülçin Hoppe Property and Freedom Society fair in booming Bodrum, the port city on the Aegean Sea that was once home to a summer population of 170,000 that has since exploded to 700,000.

A conference attendee, noting that Bodrum was lively, quizzed Saturday’s panel of speakers with a question to the effect “Why not go the Turkish way (referring to inflation with an official rate above 80 %, but a real rate closer to 170%) , there are no riots in the streets?

After a few less than aggressive retorts, Thorsten Polleit sternly insisted that “inflation ruins the common man”. Government money printing will destroy an individual’s savings while decimating a country’s capital.

Like all serial blowers, the Turkish dictator lays the blame elsewhere. Erdoğan blames “fictitious online money conspiracies” for his monetary debauchery and constantly claims that high interest rates cause higher price inflation. Interest rates are “the mother and father of all evil”, according to Erdoğan.

It is debatable whether Erdoğan received an education in commerce or economics. In high school, he “distinguished himself by his talents as a speaker, developing a penchant for public speaking, and excelling in front of an audience. He won first place in a poetry reading contest.

Barber Omar Akar provided this writer with a report on inflation from the field via master guide and translator Jay Baykal, while providing a must-have Turkish haircut.

Omar’s sparkling clean shop in Bodrum’s harbor area was a one-man operation this Saturday morning. He had none of the usual tools of the trade and products on the counter. Inflation has led to an increase in thefts. While he was able to double the price of a haircut, his expenses increased by 400%. For example, his electricity bill rose this year by 10-15% each month until a 50% jump last month.

A Turkish haircut is pure indulgence for a man and for fifteen dollars I was treated like a Kardashian, even one who is now in the private equity business. My ears tingled just seeing the foil-wrapped minicrock jar filled with bubble-gum colored wax that would pull hair out of places American barbers refuse to tread.

In the past, Turkish barbers had an apprentice, sweeping behind the master of scissors, washing their hair, and performing other tasks while learning a craft that would sustain them throughout their lives. Omar told us that no one would take apprenticeship jobs, with the government forcing potential barbers to attend more years of school. He started as an apprentice after dropping out.

Omar has a Belgian truck driver who travels to Bodrum for one of his haircuts. He says he has received offers to travel to different European countries to open a shop but prefers to stay in Bodrum. It’s riskier in other parts of Europe where husbands ask their wives to cut their hair, an example of inflation destroying the division of labour.

The entrance fee to the ruins of Aphrodisias has risen from 24 lira to 70 lira this year, a 192% increase, proof revealed by peeling off the price sticker. Our guide Mr. Baykal struck up a conversation with a rugged looking guard at the entrance to the museum. The guard said he received raises totaling 68% this year, but he is still drowning in debt. He would like to buy a house but does not see how he will ever be able to afford it. As is always the case, wages never keep up with price inflation.

In his new book The Price of Time: The Real Story of Interest RatesEdward Chancellor’s story includes modern Turkey beginning with the point “when the United States embraces easy money, it unleashes a ‘global monetary plague'”.

The Chancellor writes that Erdoğan’s empire has joined the rest of the world in an easy-money housing bubble. “A leading real estate agent in Istanbul called [the real estate market] a “grand Ponzi scheme”.

In a July article for Mansion Global, India Stoughton said: “House prices in Turkey have risen sharply since the start of the pandemic, ‘crossing the rarefied triple-digit threshold’ with nominal growth of 110% in year to March, the highest of any country, according to the Knight Frank World House Price Index for the first quarter. Istanbul experienced even greater nominal growth at 122%.”

But, quickly followed by “The surge in inflation makes the numbers a little more complicated to interpret.”

Yeah, the Turkish way, complicated for the rich, disastrous for the common man.

*About the Author: Douglas French is President Emeritus of the Mises Institute, author of Early Speculative Bubbles and Money Supply Increasesand author of Walk Away: The Rise and Fall of the Ownership Myth. He obtained his master’s degree in economics at UNLV, studying with both Professor Murray Rothbard and Professor Hans-Hermann Hoppe.

Source: This article was published by the MISES Institute

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