Confidence in the Turkish lira has been completely lost as a result of the counterproductive monetary policy that President Recep Tayyip Erdogan is pushing through. According to the proponents of cryptocurrencies, Bitcoin can further manifest itself as an alternative for Turkish families who no longer want to see the value of their money melt away.
The Turkish families are currently seen doubly. Due to the sky-high inflation of about 20 percent, they can buy less and less with their money. On top of that, the lira takes a big hit on the exchange markets, so that you can exchange the currency for less and less dollars or euros.
The lira even had a real flash crash, with the dollar value falling up to 18 percent from a day earlier. At one point, the exchange markets demanded 13.44 lira for 1 dollar. By comparison, barely a month ago you could get that same dollar for less than 10 lira. For Turkish residents, a foreign purchase or trip is therefore quickly becoming more expensive.
The same evolution is noticeable against the euro. Since the beginning of this year, the lira has already lost 38 percent of its value against the European single currency. It indicates that confidence in the Turkish currency continues to crumble.
Bizarre monetary policy
The reason is not far to seek. Turkish President Recep Tayyip Erdogan is a strong supporter of lower interest rates, because lower interest rates stimulate economic growth. However, economists have been pointing out for months that Turkey currently does not need interest rate cuts, but interest rate hikes to cool down the economic engine a bit and counter the depreciation of money.
Erdogan, however, does not want to hear about such money-draining policies and dismisses any governor at the central bank who thinks otherwise. The president defends the perverse theory that higher interest rates lead to higher inflation and says he wants to “compete with the currency traders”. But those currency investors just keep dumping the lira.
“We must give up this irrational experiment, which has no chance of success, and return to a quality policy that will protect the value of the Turkish lira and the well-being of the Turkish people,” tweeted economics professor Semih Tümen, a former deputy governor of Turkey. central bank.
Bitcoin
The crypto world is closely following developments in Turkey. Microstrategy CEO Michael Saylor, one of the best-known Bitcoin believers, recently advised the Turkish central bank to stock up on Bitcoins en masse. “As a result, the underlying collateral for the lira will rise, which as a Bitcoin derivative will also appreciate in value.” He calls Bitcoin “the hope for Turkey”.
