Turkey’s economy has been thrown into renewed turmoil after the president, Recep Tayyip Erdoğan, sacked the head of the country’s central bank days after raising interest rates to tackle soaring inflation.
The Turkish lira plunged by almost 15% on Monday, while the Istanbul stock exchange shed a 10th of its value after the president shocked global investors by replacing Naci Ağbal with a party loyalist.
Outsiders believe in that independence of the central bank. Perhaps they shouldn’t. Even, perhaps it should be – as the P³ says – righteous that the central bank not be independent so that government can do whatever the hell it wants. That is, after all, democracy.
It’s just the folks do get to make up their own minds over what happens when politicians get to spend all the money they want.
You can control the money supply, sure you can. You can also at least try to control inflation, target the exchange rate even. But you can’t control all three at the same time because at least one of the three is an output from the other two. You don’t, in fact, have freedom of action of all three at the same time that is – you cannot spend all you want through money printing and also control inflation and the FX rate.