Perspective: Trump wants to copy the worst thing Turkey does with its economy
President Trump reaches to shake hands with Turkey's President Recep Tayyip Erdogan at the White House in 2017. By Matt O'Brien Matt O'Brien Reporter covering economic affairs Email Bio Follow Reporter April 26 at 2:47 PM If you want a picture of the economic future President Trump wants, imagine a boot stamping on the Federal Reserve’s independence — forever. In other words, something a lot like what is going on in Turkey.
This is a textbook example of what economists Rudiger “Rudi” Dornbusch and Sebastian Edwards called macroeconomic populism: stimulating an already-booming economy out of the false belief this can only help, rather than hurt, your economic situation. Or, maybe more accurately, your electoral chances. See, as much as Erdogan has tried to turn himself into a democratically-elected dictator, he is still democratically elected — and he knows it.
There have still been costs to all these benefits, though. In particular, it has created a natural boom-bust cycle the government has not been able to wish away. Why is that? Well, Turkey’s banks have first had to borrow a lot of money from abroad to be able to lend out so much themselves, which has put a lot of pressure on the country’s currency to depreciate, even before its central bank’s insistence on keeping rates low amid high inflation had done the same.
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