Despite inflation edging above 80 percent in August, Turkey’s central bank cut its benchmark one-week repo rate last week from 13 percent to 12.

The country’s lira currency took yet another step down after the announcement, to 18.387 against the dollar. The lira has lost almost a third its value against the greenback so far this year.

The new interest rate paired with inflation means that lira-denominated investments are currently losing 68 percent of their value.

Recep Erdogan, Turkey’s president, has stocked the central bank’s executive suite with loyalists who continue to act on his insistence that low interest rates tame inflation, a notion at odds with economic theory and Turkey’s own data.

Erdogan has declared Turkey is pioneering a “new economic model,” in which a worthless currency will make the country’s products cheaper abroad, igniting an export boom that will fire up job growth and reverse Turkey’s economic tailspin. 

Despite that claim, the country’s unemployment rate has hovered between 10 and 11.5 percent through this year, even though the central bank has steadily reduced its rate.

However, with a presidential election due next summer, Erdogan has been unwilling to change policies, which would amount to an admission of his incompetence.

Erdogan’s policy also has driven away investors, one reason the lira is tanking: no one wants to own it.

As a result, the central bank has poured billions of the country’s foreign currency holdings into the economy to prop up the lira.

Now, with $182 billion in foreign debt coming due before October 2023, the country has little foreign currency left to cover the bill.

The government has tried schemes to hold the lira’s value, including guaranteeing to pay losses on savings accounts held in lira and requiring exporters to convert 40 percent of their foreign currency revenues back to lira.

The government claims Turkey’s GDP rose 7.6 percent in this year’s second quarter, but it is unclear to what extent the gain is a product of inflation.

PUBLISHER’S NOTE: We have documented Erdogan’s long, losing battle with reality in a series of articles, including:

We expect the list to grow longer in the months ahead.

TREND FORECAST: Erdogan has become so deeply invested in his economic policy that he will not abandon them with his campaign for re-election approaching.

Instead, as next year’s election nears, we expect Erdogan and his hand-picked sycophants at Turkey’s central bank to put up new short-term measures that will loot the bank’s reserves to give the lira CPR.

As he becomes more desperate, domestic protests will increase. This will give Erdogan a pretext to find “terrorists” and “foreign troublemakers” among his critics, cracking down even more on personal freedoms and increasing the chances of a rigged election in his favor next year.

Ultimately, Erdogan may seek to distract his nation with military action. As Gerald Celente often says, “When all else fails, they take you to war.”

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