The rich fuel inflation

Two The government, which implemented policies that disrupted income distribution and condemned large segments of the population to year-round poverty, made a U-turn after the elections. When insistence on low interest rates for two years caused exchange rates to get out of control, this time Protected Exchange Deposits (KKM) were put into effect. However, while the KKM increased the wealth of the rich, large sections of society were doomed to high inflation. While the economic leadership increases interest rates to control inflation in the new period, the bill is once again passed to citizens. While interest rates on loans and credit cards are increasing to reduce demand, the highest income group, which constitutes a small segment of the population, continues to spend unaffected by these developments. The Central Bank expects annual inflation, which rose to 61.53 percent in September, to peak in May 2024.

TRANSFER OF CREATED RESOURCES

Stating that “the period of high inflation created a social resource transfer mechanism,” Prof. Dr. Sadi Uzunoğlu states that 47 percent of consumer spending is carried out by the top 20 percent of the income group. Uzunoğlu points out that almost 70 percent of transportation expenditures and 62 percent of education expenditures are made by the top 20 percent income group. TÜSİAD Chief Economist Gizem Öztok Altınsaç said that consumption in Turkey still feels very strong and that imports of consumer goods have not yet given the signal that it has “started to cool down,” he said in a statement to a television channel that inflation in services reached 86 percent annually in September and inflation in education reached 30 percent monthly. Drawing attention to his spending, he pointed out that people with a certain level of income continue with their spending.

‘The car doesn’t stop immediately when you step on the brake’

According to TÜSİAD Chief Economist Gizem Öztok Altınsaç, Turkey’s inflation situation is a problem that goes far beyond the question of “let’s reduce lending and raise interest rates.” “Consumer loans have slowed down, vehicle loans are already expensive, but vehicles continue to be sold. So somewhere, there is an income level and inflation expectations remain negative, so people continue to buy vehicles. Therefore, I think the most important question is ‘can this problem be solved by only reducing loans?'” he commented. Altınsaç said: “Household appliances, automobile sales and imports of consumer goods in the subcomponents of the import item have started to cool down partially, I don’t think it can be achieved in the period of 3 months. The interest on cash advances increased from 1.36 percent to 4 percent. It is an important step, but in the last period, a lot of money has been distributed to this side; in these 6 months. It went to the currency and the car. There was tremendous production, an excess of demand. The car does not stop immediately when you step on the brake. “Domestic demand does not is slowing as much as we think, above inflation and enough to absorb the bubble,” he said.

They don’t want inflation to go down

The professor maintains that there is a large transfer of resources during periods of inflation. Dr. Sadi Uzunoğlu said: “In periods of monopolization, those who determine the price use inflation as a resource transfer mechanism. In reality, it is a conscious choice. “They don’t want inflation to go down,” he says. Stating that the inflationary process we are experiencing has incredibly distorted the distribution and distribution of income, Uzunoğlu noted that inflation in Turkey has been in double digits since 2017, and especially after 2021, “no matter where the exchange rate goes , let’s lower interest rates.” interest rates, we will beat inflation with low interest rates.” According to him, this logic leads to a significant transfer of resources from the pockets of large segments of the population. Explaining that the mechanism favors large companies during periods of inflation, Uzunoğlu points out that as citizens’ savings melt in an environment of negative real interest rates, companies’ debts decrease in real terms and their dominance of the market increases due to its power to determine prices. .