That planned economy stuff

The P3 insists that governments can beat the markets. They can control their own money supply, interest rates and the FX rate all at the same time. This might not be so:

The Turkish lira plunged as much as 15pc after President Recep Erdogan declared he would win an “economic war of independence” and praised low interest rates.

The central bank cut rates last week from 16pc to 15pc despite inflation soaring to almost 20pc last month, which mainstream economists would usually try to control with higher interest rates.

It tends to be a bit more like engineering, faster, better, cheaper, where you have to pick two of the three, you can;t have it all.

Which is going to make that launch of the Bawbee a little fraught, no?

8 thoughts on “That planned economy stuff”

  1. Plenty of governments do/have done it. Helps if they are run by autocratic despots or are a totalitarian dictatorship.

  2. Hmm. Didn’t realise that Turkish inflation had collapsed so dramatically after 1998. Around the same time as various events culminating in LTCM.

    Any ideas as to why that happened?

  3. “It tends to be a bit more like engineering, faster, better, cheaper, where you have to pick two of the three, you can;t have it all.”

    And like with engineering: Your Opinion does not trump the Laws of Physics. Or compensate for positive feedback loops. Or make a 60’s Lada compete with an F1 missile-on-wheels.
    Just little things, but still…

  4. The P3 insists that governments can beat the markets. They can control their own money supply, interest rates and the FX rate all at the same time.

    Cannot comment on P3 views.Never know what he is up to. This, I think, is fairly standard policy advice:

    MMT – They can control their own money supply – Tick
    MMT – interest rates – Tick
    MMT – FX rate – Never – it floats at all times

  5. Otto/MikeW

    Up to a point, Lord Cu.

    With strict exchange controls a government/state can fix an official exchange rate but this is an artificial construct and only works one way. The official exchange rate between the Ostmark and the DEM was parity so as a visitor to the workers and peasants paradise you had to fork out DEM and buy Ostmark at so and so many for each day of your visa and any unofficial exchange was verboten.

    If as an Ossie you wanted to buy hard currency (amusingly called valuta), for example from someone who had received cash from a relative in the west, in order to buy something from an Intershop you would be paying a great deal more in Ostmarks.

    In other words the exchange rate for exports can be controlled but not the rate for imports.

  6. TMB

    Yep did that on trip to Ost Berlin and also in Soviet Union. Also experienced fixed exchange rates in the Middle East. Strict price controls were also imposed so that there was “no inflation”.

    And the common factor in all these places was that the currency was worthless in the outside world.

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