Turkey, the sorcerer’s apprentice from the book

Posted on Jan 6, 2022, 5:00 PM

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It is a vertiginous fall. The Turkish lira lost half of its value against the dollar and the euro in 2021. And most of it happened in just two months. The country is experiencing rampant inflation. Tensions are mounting among the population and the government has announced a 50% increase in the minimum wage to calm them down.

The architect of the situation is none other than President Recep Tayyip Erdoğan, whose action appears as a textbook case of what not to do in a floating exchange rate system. Opting for interest rate cuts to promote growth, but at the expense of inflation. It is spinning now and could reach up to 40% in the coming times.


The collapse of the Turkish currency automatically makes it more expensive to import products from abroad, which is reflected in prices. It remains to be understood why investors massively sold the currency of this vast, rich country of 85 million inhabitants. Difficult to place your trust in a currency that has no floor at this point. The state is raising the threat of lawsuits against those it accuses of manipulating the currency. Pointing to speculators, former central bankers or the press.

The Story is a podcast of “Echoes” presented by Pierrick Fay. This episode was recorded in January 2022. Editor-in-chief: Clémence Lemaistre. Guests: Hervé Goulletquer (strategist in the Management Department at La Banque Postale Asset Management) and Nessim Aït-Kacimi (journalist in the “Echos” Markets department). Director: Willy Ganne. Music: Théo Boulenger. Graphic identity: Upian. Photo: Murad Sezer / Reuters. Sounds: Bulent Aydin “Turkish Lira”, CNBC, France 24, “Tenue de soir” (1986), Middle East Eye.

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