The Turkish lira took another battering last month, with January inflation hitting a whopping 48.7% – leading some crypto advocates to point the finger at the ultimate failure of central banks’ monetary policies.
The Turkish government, led by President Recep Tayyip Erdogan, has resolutely stuck to its guns on a much-derided policy that involves slashing – rather than raising – interest rates. And the latest financial numbers, released by the Turkish Statistical Institute and reported by media outlets such as CNBC and the Financial Times, make grim reading.
Erdogan has claimed that inflation, which plagued Turkey last year, was temporary and argued that skyrocketing living costs would soon be abated by rate-cutting measures.
But data compiled by the Turkish Statistical Institute indicated that not only has inflation hit a new 20-year high, but that the prices of consumer goods leaped up 11.1% last month. The figure outstripped analysts’ predictions, which ranged between 9% and 10%.
Last year was a torrid one for Turkish savers. They saw the lira lose 44% of its value in 2021.
“What happens next will shed light on the government’s unconventional interest-rate approach,” mused the economist Mohamed El-Erian, the President of Queens’ College at Cambridge University, on Twitter. He asked: “Will goods availability increase or inflationary expectations worsen?”
The answer, from many respondents, was clear: crypto.
Some are convinced that the picture is actually a lot bleaker: The Economist’s Turkey correspondent wrote that the “vast majority of Turks are convinced actual inflation is much higher,” noting that “replacing the head of the statistics agency, as Erdogan did days ago, hardly inspires confidence.”
The Turkish Inflation Research Group (ENA) claimed the figure could actually be closer to 115%.
Media outlets have noted that the inflation crisis in Turkey has – as has been the case in other inflation-struck nations such as Argentina – led citizens to crypto-buying in a bid to safeguard the worth of their savings.
Last month, the Guardian reported that inflation had sparked a bitcoin (BTC) “boom,” while the Wall Street Journal last month claimed that Turkish citizens were “piling” into both BTC and tether (USDT) as alternatives to the “plunging” lira.
The WSJ doubled down on this sentiment with a fresh report yesterday, talking of how Turks were now “ditching the lira” and “pivoting” to “cryptocurrencies.” A journalist noted that Turkish streets were now “flooded” with crypto exchange offices and ads for crypto-related services.
Yesterday, there was a report that media outlets claim Lebanon plans to forcibly freeze funds and convert its citizens’ foreign currency reserves into fiat as part of an extreme monetary policy.
Crypto advocates claimed it was “only a matter of time” before “crypto dollarization becomes the default” – a move that would “rob” central banks of “their prime weapon.”
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