Turkey Is Sustaining Major Inflation. Something Has to Give
Bloomberg reports that price inflation in Turkey was more than 60 percent in September. The 61.5 percent reading was released by the Turkish government’s statistical office. Being on the ground in Turkey for Hans-Hermann and Gülçin Hoppe’s Property and Freedom Society meeting, I can say the vibe was not hyperinflationary. The shelves are not empty and the port city of Bodrum is booming. Professor Hoppe told the crowd Bodrum has grown from a population of fifty thousand to a million for the whole peninsula. No matter the destruction to the Turkish lira, money keeps pouring into peninsula real estate, watercraft, and businesses.
“According to statistics by the Turkish Statistical Institute, the average property price in Bodrum in 2021 was around $490 per square foot,” wrote Spencer Elliott for Forbes this past summer. “Over the last decade, property values have increased dramatically, with the total valuation of the real estate transactions in Bodrum rising from $892 million in 2010 to over $2.1 billion in 2020.”
I wrote in 2011, “In 1966, one US dollar bought 9 lire. By 2001, a dollar bought 1.65 million lire. Four years later, six zeros were lopped off the lira and a dollar equaled 1.29 new Turkish lire. Today, a dollar can be traded for around 1.60 lire.” This year (2023) a single US dollar fetches twenty-five lire at the currency shops in Bodrum.
Government jiggery-pokery with the currency is a way of life in Turkey. Numerous episodes are mentioned by the eminent scholar the late Norman Stone, who was a frequent speaker at the Property and Freedom Society, in his book Turkey: A Short History. But it was not paper and zeros that were manipulated. Writing about Constantinople in 1651, Stone explained that the one hundred thousand local civil servants “were paid in copper money and were expected to pay their taxes in silver . . . [which] brought about a revolt of the guilds.”
But today’s Turkey, which now wants to be known as “Türkiye,” is not Venezuela or Zimbabwe. A trip over the hill from Bodrum to Merkez Mah, Çökertme Cd, Yalıkavak Marina revealed Dior, Gucci, and other high-end shops a sidewalk away from one multimillion dollar yacht crammed next to another. Dinner at Salt Bae’s Nusr-Et Bodrum was had amongst beautiful people, with amazing cuisine, tableside flair bartending, and an unforgettable sunset into the shimmering waters of the Aegean Sea.
Hyperinflation seemed pretty good.
Turkish restaurant cuisine has changed subtly over the seventeen years of the Property and Freedom Society. Döner kebab was once offered everywhere. It is a type of kebab using a vertical, constantly rotating spit to slow-roast the meat. The meat is sliced off of it in chunks as it rotates.
Now there are fewer Döner kebabs, and restaurants in the Bodrum harbor area are advertising hamburgers. American burger darling Shake Shack even has a location in the Istanbul airport amongst the duty-free shops that appear every few steps. And at the new, immense Istanbul airport, a passenger must take plenty of steps.
As always, I indulged myself in the Turkish haircut experience, going to the same neighborhood barber I’d patronized on previous trips. Of course, the price reflected the inflation, three hundred Turkish lire. In 2012, the same haircut, nose and ear waxing, and shoulder massage went for twenty Turkish lire, which was twelve dollars at the time. Today’s three hundred lire equals that same twelve dollars.
Other conference goers found a barbershop down near the docks and were charged fifty dollars for the above-mentioned services plus a straight-edge shave. One wonders if it was a bit of selective pricing. I’ve never noticed barber service pricing being posted in a Turkish barber shop so a deal should be made up front.
According to Bloomberg, “Turkey’s inflation print for September sets the stage for a front-loaded move from the central bank to tame price gains. Underlying price pressures signal a higher trajectory for inflation, which we now see peaking at 73 percent in 2Q24, up from our earlier call of 70 percent.”
One knowledgeable Bodrum local confidently said the actual inflation rate was more like 160 percent. The national minimum wage was raised 34 percent in July to $483 (11,402 lire) monthly, Reuters recently reported. Labor minister Vedat Isikhan said, “The minimum wage assessment commission completed its work with an agreement between the workers and employers.” The minimum wage was raised 100 percent last year.
The Turkish central bank bumped its benchmark one-week repo rate by 5 percentage points to 30 percent late last month to slow down the inflation rate. The rate rise came just weeks after President Recep Tayyip Erdoğan, who once called high interest rates the “mother and father of all evil,” publicly embraced “tight monetary policy,” reported the Financial Times.
Inflation always hits low-income earners the hardest, as they must spend most of their income on food, gas, and rent. Remember the monthly minimum wage from above—it is enough to buy eighty-two gallons of gasoline, which currently goes for 138.849 lire per gallon, and nothing else.