Turkish lira plunges to record low as Erdogan doubles down on economic policy his critics call ‘insane’

The Turkish lira suffered a historic crash, dropping by more than 15 percent against the dollar after President Recep Tayyip Erdogan gave an evening speech in which he defended an unorthodox economic policy that economists have dubbed “insane” and “irrational.”

The lira, which had already lost 45 percent of its value over the year, fell to 13.45 to the dollar in the late afternoon, though it later clawed back some losses. Many laid the blame on the policies of Erdogan, who has pushed Turkey’s central bank to keep interest rates low, despite the havoc it’s played on the country’s currency.

In his remarks Monday evening, Erdogan framed the economic crisis as another foreign plot against Turkey, comparing it to a 2016 coup d'etat attempt that failed to push him from power.

“With the help of Allah and the support of our nation, we will emerge victorious from this war of economic liberation, just as we brought our country out of all these traps and calamities,” Erdogan said after leaving a meeting with his cabinet.

Erdogan’s insistence on low interest rates is driven by the view that Turkish businesses should have easy access to cheap loans. He argues that high interest rates not only slow the economy but cause prices to increase.

That second theory flies in the face of conventional economic wisdom. And so far, reality has flown in the face of Erdogan, with inflation nearing 20 percent in October, exacerbated not only by economic mismanagement but by global woes amid the pandemic recovery.