Turkish Inflation and Lira Woes Makes Crypto The Great Mitigator
Notwithstanding the Ukraine war, 2022 will most likely go down in history as the year of inflation. Following decades of sub-5% inflation in the United States and the European Union, prices have risen by around 9% in both areas, driven predominantly by supply shocks to energy and food (not to mention quantitative easing).
But as bad as 9% is for economies that have enjoyed 2% inflation or lower for many years, it’s still not as bad as the inflation wreaking havoc on the Turkish economy. Newly published official figures put year-on-year inflation in Turkey at 80%, while unofficial measures suggest real inflation topped 140% as far back as April.
Such eye-watering figures have hit Turkish residents hard, yet many have found one fairly novel means of lessening the impact of inflation: cryptocurrency. Yes, while Turkey’s reputation as an undemocratic nation might imply that crypto isn’t welcome in the Eurasian nation, it boasts one of the highest cryptocurrency ownership rates in the world, showing that bitcoin is used for more than just risky speculation.
Turkey’s official consumer prices index rose by 80.2% year-on-year in August, up from an already high 79.6% in July. This represents the first time official inflation has passed 80% since 1998, and it also represents the highest rate recorded during President Recep Tayyip Erdoğan’s nearly 20-year rulership.
In Turkey’s case, loose monetary policy is generally blamed for rampant inflation, with Erdoğan refusing to raise interest rates to a level where they would potentially suppress price rises. That said, the government is claiming that inflation will begin falling towards the end of the year.
“In the months ahead, we will witness inflation losing speed even more,” Nureddin
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