Hayri Kozanoğlu: The increase in interest rates does not point to a better future for those who live from their work

The question of what kind of policy will be pursued in the Turkish economy with the changing economic management after the elections is being discussed.

What kind of changes will be made in the economic policies of the Minister of Finance Mehmet Şimşek and the President of the Central Bank of the Republic of Turkey (CBRT) Hafize Gaye Erkan, if the policy rate, which is 8.5 percent percent, will be raised at the CBRT Monetary Policy Committee (PPK) to be held next week.

Economist Hayri Kozanoğlu assessed the expected evolution of interest rates and the course of the Turkish economy. Kozanoğlu, describing Şimşek’s policies as an ‘austerity policy’, stated that these policies do not point to a better future and that there is no idea of ​​a future that makes people smile.

‘THEY KEEP THE DOLLAR EXCHANGE BELOW 20 UNTIL THE ELECTIONS’

Kozanoglu said:

The Turkish economy is largely caught up in the Monetary Policy Committee’s interest rate decision, which will take place on June 22 next week. To remember, the policy rate currently applied by the Central Bank is 8.5 percent. It is very clear that this has nothing to do with the realities and realities of the economy, with Mehmet Şimşek’s expression ‘rationality’.

Even according to TURKSTAT inflation figures, which are not convincing enough for the general public, inflation is in the 35-40 percent range. Food inflation is around 55 percent. Core inflation is higher than headline inflation. On the other hand, the policy rate stands at 8.5.

In fact, if TL returns were that low in one economy, one would expect a bigger attack on the foreign currency. In fact, the number one element of the AKP’s economic policy was to keep the dollar below 20 lira until the May 14 elections and then on May 28. They have succeeded to some extent.

At the point where they couldn’t succeed, they tried to discourage currency purchases by raising the banks’ dealing spread by as much as 10 percent. Therefore, there has been an influx of foreign exchange reserves into the Tahtakale over-the-counter market, which has not been seen in Turkey in the last 20 years. Somehow, the supply and demand of currencies is outside the control of the monetary authorities. Therefore, it was not possible to maintain these interest rates.

THE SYSTEM HAS BEEN UNSUSTAINABLE

This system became unsustainable after the elections and foreign currency interventions were relaxed. In a short time, the price of the dollar exceeded 23.5 and the price of the euro exceeded 25. In reality, this will return to the economy as inflation in the next period.

Somehow, the pent-up inflation and price increases will be reflected in people’s lives in no time. People will have bought goods and services at a much higher price in bazaars, markets and markets.

Deposit rates have already been adapted to market conditions. With the injection of cheap money from the Central Bank, banks were able to afford higher deposit rates and lower lending rates for a time.

With interest rates rising at the upcoming Central Bank meeting, President Erdoğan announced today that he somehow gave way to Şimşek. It also means this. “I still insist on my opinion that ‘interest is the cause, inflation is the result, what is the interest’, but I gave Mehmet Şimşek a loan.” If these policies work, since Erdogan is already president and sees himself as the main person in charge of the economy, he too will have succeeded.

If you see Mehmet Şimşek as a failure, even if he does not perform according to his goals, other Treasury ministers in the past, one of whom was Berat Albayrak, his son-in-law, will give way to him as the presidents of the Central Bank.

“ALL THE BALANCE SHEETS OF THE ECONOMY IN INVITATION TO FOREIGN CAPITAL”

As is known, the main purpose of the regulations is to ensure that hot money and foreign capital enter Turkey. It is also believed that the liberalization of exchange rates paves the way for them to enter at the rate they consider to be suitable for them. Because when the price of the dollar is 20, you can buy 20 liras with your dollar, and when it is 25 liras, you will receive 25 liras with your dollar. If you find interest rates of 25-30-40 in front of you, you’ll earn significant returns in TL.

When you think about going out, if the exchange rate has been maintained and has touched little, your own money provides you with very serious returns in dollars and euros. That’s why he wants speculative money and security. In other words, all equilibria in the economy are based on the invitation of foreign capital, which is actually different from the past.

Because interest rates in the world were very low for a long time. In the US it was in the range of 0-0.25. In that sense, the fact that they provided a 3-4-5 percent return in a country like Turkey was attractive to speculative capital. However, now interest rates in the US are in the range of 5 to 5.25 percent. It is even possible to go a little higher today.

In such an environment, if they do not see the possibility of income below 10 percent from Turkey, they will not enter. But the conditions they enter push inflation over a high course, and the economy and demand slow accordingly.

We can even find inflation (stagflation) in a recession. In other words, the increase in these interest rates and the austerity policies implemented by Mehmet Şimşek do not point to a better future in terms of ordinary citizens and those who make a living from their hard work in Turkey.

‘THE FUTURE SOLUTION WITH ŞİMŞEK, ERKAN CANNOT SMILE AT PEOPLE’

But you can ask: You say that if interest rates stay low, it is also irrational. Yes, that’s true. Because the situation caused by the AKP’s economic management in the Turkish economy is unfortunately intractable, a state of serious chaos, and all published statistics show that the distribution of income and wealth in Turkey is gradually deteriorating and the level of life of the people who make a living is diminishing. S

With makeup such as the prominence of the tendency of people to vote in elections due to cultural, political and ideological concerns, the increase in the minimum wage in parallel with inflation, the increase in the lowest pensions from 5,500 liras to 7,000 500 lira, the conclusion of collective agreements of public workers with rates that are not bad before the elections, somehow managed to absorb the reactions of the lowest people.

In general, they risked alienating middle-income groups, mostly white-collar urban segments, who were less inclined to vote for the AKP and, more broadly, for the Popular Alliance. But unfortunately, with or without Mehmet Şimşek, Gaye Erkan, there is no easy solution, no idea of ​​a future that makes people smile, in a situation where the economy is now stuck.

Kozanoğlu gave the following answer to the question about what citizens who live from their work should do:

‘BOOTS ARE NOT THE ONLY GROUND OF SOCIAL AND POLITICAL STRUGGLE’

“It is clear that neither Mehmet Şimşek nor Gaye Erkan intend to improve the lives of ordinary citizens who earn a living from their work, but to renew the net reserves of the Central Bank, which has hit rock bottom in the Turkish economy, to ensure certain macro balances, and reopen the doors of the Turkish economy to foreign capital.

Employees also have to fight with those who live from their work, expressing their own demands, in the workplace, on the streets, in schools, with general demands on society and special demands on their own lives.

We already know that the ballot box is not the only arena for social and political struggle. We have left behind another electoral period. In the next 5 years, people should allow their rights to be taken away and their standard of living to decline.

They must voice their demands and objections with their unions, professional organizations and social movements wherever they are and continue their fight if they cannot achieve the desired result or make concessions. I don’t see any other solution than this.” (PHOENIX)