Islamonomics: how Erdogan crashed the Turkish economy

The Turkish lira sank to an all-time low against the dollar last week. The lira shed 30 per cent of its value in November alone, having lost nearly half its value since the start of the year. Inflation in the country is out of control — reaching over 21 per cent last month.

Traditional economics tells you to raise interest rates to counter inflation. Higher rates make borrowing more expensive and saving more attractive — in theory reducing the amount of spending on goods and services. Indeed the Bank of England, facing inflation at just over 4 per cent, is hinting that it will raise them in the new year.

The Turkish central bank, meanwhile, is busy cutting interest rates — by 4 per cent since the start of September. Turkey’s war on fundamental economics is led by the fundamentalist President Recep Tayyip Erdogan. He has vowed to ‘protect’ Turkey from admittedly high interest rates, now at 15 per cent, saying that ‘God willing, we will not return to this path’.