Moon of Alabama Brecht quote
November 18, 2021

Turkey - A Crazy Economic Theory Is Ruining The Country

The wannabe Sultan is in trouble. The Turkish President Recep Tayyip Erdogan believes in an economic theory that few others support. He has argued over and over again that high central bank interest rates are causing inflation.

The more accepted theory is that inflation is caused by too much money chasing too few goods (among other reasons). An increase of interest rates above the level of inflation lessens the amount of available money to buy goods and will thereby, over time, lower inflation.

Erdogan has been told that over and over again but he sticks to his personal theory. Over the last 18 months he has fired three central bank governors because they would not lower the interest rates as much as he had wanted them to do.

Şahap Kavcıoğlu, a banker and columnist from Erdogan's own party, had defended his policies. In March Erdogan elevated him to be governor of Turkey's central bank. Interest rates were promptly lowered from 19 to 16% while inflation in Turkey was running up to 20%.

Yesterday Erdogan demanded another interest rate drop:

Turkish President Tayyip Erdogan said on Wednesday he will continue his battle against interest rates “to the end”, sending the lira currency to new depths a day before the central bank is expected to slash rates further.
A day before a central bank policy meeting at which it is expected to ease again, the president repeated his unorthodox view that higher rates were the cause of inflation and questioned why some of our “friends” defended tight policy.

“We will lift this scourge of interest rates from people’s backs. We certainly cannot allow our people to be crushed by interest rates,” he told lawmakers from his ruling conservative AK Party in parliament.

“I cannot and will not stand on this path with those who defend interest rates,” Erdogan said.
The central bank has bucked expectations and cut its policy rate by 300 basis points since September, even as inflation climbed to near 20%, delivering the stimulus long sought by Erdogan.

Unfortunately for Erdogan the policy of keeping interest rates below the inflation rate has the side effect of lowering the value of Turkey's currency. Yesterday the Turkish lira had already dropped 1.5%. Today, after the central bank lowered the interest rate to 15%, the lira dropped further.


Nine months ago it took seven Turkish lira to buy one U.S. dollar. A month ago it took nine Turkish lira to buy one U.S. dollar. Today it takes more than eleven lira for one dollar.

Turkey's real interest rate is now at a negative 5%.

The country is not rich. It has only few domestic hydrocarbons and must buy nearly all energy from abroad. Oil and gas are paid for in U.S. dollar. Energy prices have already risen globally. The effects of the lira loosing much of its value plus higher import prices for energy will have a harsh impact on Turkey's people. Prices for everything will increase sharply and the current inflation rate will shoot up further to reach hyper-inflationary territory.

Another problem is the low amount of foreign currency reserves the central bank is still holding:

The Turkish Central Bank also lacks foreign reserves due to past policies under previous governors who have intervened in the markets to keep the Turkish lira stronger by burning US dollars through backdoor methods

The policy backfired and melted the bank’s net reserves below zero. Excluding swaps with other financial institutes, the Central Bank’s foreign deposits are currently minus $35bn

Meanwhile, Turkish companies and the government have to repay $13bn in external debt in the next two months, according to Bloomberg. More than half of the debt, which stands at $8bn, must be repaid in November. 

Turkey has some agricultural exports and a decent but still somewhat rudimentary export industry. But many of its factories depend on imports of raw materials, semi-finished products and on credit from abroad. While the lowering of the lira makes their end-products more competitive in global markets the now higher costs of importing the necessary parts, machines and energy may well erode that advantage.

Erdogan and his AP Party have been recently been losing in polls and the opposition to him is now more united. But the next election is only in 2023 and until then much can still happen.

To divert from the economic situation Erdogan had planned for an additional incursion into Syria to fight the U.S. supported Kurdish 'Syrian Democratic Forces' and to take more Syrian land. It was supposed to happen this month but neither Russia nor the U.S. would allow him to do it:

Turkey has suspended its potential military operation against northeast Syria, as a result of the continued refusal from Russia and the U.S. and the absence of any consensus in this regard.
Over the past period, the Turkish army and its affiliated Syrian opposition factions mobilized along the contact lines with the SDF in the west and east of the Euphrates, which indicated that a large-scale military operation was about to begin.

Turkey launched a series of drone attacks targeting civilian cars in several areas in northeast Syria, causing deaths and injuries.
The Russian side [..] stressed its rejection of any Turkish military operation against northeast Syria, in order to prevent the expansion of the Turkish influence in a region that Russia is trying to expand in as well.

Russia’s rejection was expressed through carrying out exercises in the northwestern countryside of Hassakeh, east of the Euphrates River, with the Syrian government forces and the SDF, each separately.

The Russians went a further step by sending a Sukhoi Su-57 fighter to Qamishli Airport, not far from the Syrian-Turkish border, in a clear indication of Moscow’s dissatisfaction with Ankara’s carrying out any military operation without its consent, according to observers.

Erdogan will have to look for other ways to distract the public from his disastrous economic policies.

Erdogan's AKP is in a coalition government with the ultra nationalistic MHP. Yesterday the head of the MHP, Devlet Bahçeli, gifted Erdogan a map which shows the Turkic world which in either mind should be Turkey's true extension.


So much to conquer, so many ideas, but little time and, most importantly, no money.

Posted by b on November 18, 2021 at 15:49 UTC | Permalink


The Central Bank of Turkey is tied in to the western group of central banks, most notably the privately owned Bank of England and privately owned Federal Reserve Bank. These banks, from their inception, have been lending money to their governments at various interest rates ie usury. I assume the Turkish central bank is the same: ie privately owned and lending money to the governent at various levels of interest. Does anybody know if the turkish CB is privately owned? More to my point: I understood that Erdogan and his party are Islamic so why lending money to their citizens and businesses at interest, which is usury and banned by Islam?

Posted by: SoMuchToLearn | Nov 18 2021 16:18 utc | 1

What will it take to oust him? He's long past his shelf-life.

Posted by: Maracatu | Nov 18 2021 16:46 utc | 2

A fair amount of the loans in Turkey are dollar denominated. Lots of pain coming.
Oh, and Erdogon could not pass Econ 101...
Try not to be close/affected by to this disaster in the making.

Posted by: horatio | Nov 18 2021 16:52 utc | 3

What, have all the factories and infrastructure looted from Syria been sold off already?

Posted by: Biswapriya Purkayast | Nov 18 2021 16:55 utc | 4

@1 SoMuchToLearn:

Interest is essential to modern commerce for obvious reasons, and even Islamic financial systems recognise this. They have found workarounds. One way is to not charge interest as interest but get the money anyway under another name. Suppose you want to borrow money from an "Islamic" bank. The bank doesn't lend you money; it "buys" a certain amount of an unspecified good from you for the amount you are borrowing, with the provision that after a specific period you'll "buy" the same good back from the bank at a higher rate. By a total coincidence the difference in the two rates is the same as what any more usual banking system would charge as interest.

Posted by: Biswapriya Purkayast | Nov 18 2021 17:01 utc | 5

The Bank of England was once private, but the socialist government of Prime Minister Atlee nationalised it in the late 1940s. You are a bit out of date.

Posted by: Paul Cockshott | Nov 18 2021 17:31 utc | 6

Sorry for the Ot but a usual must read very well done analysis by Crooke on JCPOA and Iran nuclear program in case you guys haven’t seen it.

What if the 29 November JCPOA Talks Fail?

Posted by: Kooshy | Nov 18 2021 17:32 utc | 7

I Googled: Erdogan's revised map of Turkey 2021.
The search revealed a cornucopia of differing pipe dreams.
His mouth would have to stretch from ear to ear if he wanted to smoke all of them at the same time.
Not very practical, but it would make an hilarious cartoon...

Posted by: Hoarsewhisperer | Nov 18 2021 17:44 utc | 8

Inflation is not conrolled with interest rates, raising them just benefits banksters. Too much money in circulation is corrected by raising taxes, which directly drains money out of the economy.

Of course this is only effective if the economy is controlled by a strong central bank and not manipulated by foreign interests.

Posted by: Black Cloud | Nov 18 2021 18:02 utc | 9

@Black Cloud #9
You are so utterly wrong as to be impossible to believe.
Banksters have been pushing for lower interest rates since forever.

Posted by: c1ue | Nov 18 2021 18:07 utc | 10

thanks b... but i think you conclusions are off... the way i see it, turkey has fallen out of favour.. the currency traders smell blood and are succeeding... unless turkey changes course, it is going to get screwed over.. that is the bottom line.. and of course currency traders don't care about foreign policy.. they are just looking for an opportunity to make a shit ton of money...

@ Paul Cockshott | Nov 18 2021 17:31 utc | 6.... they might call it a nationalized thing - bank of england, but i think if you examine how the city of london works outside the reach of gov't - you will see that nothing has changed and those in power are still controlling the levers of power over the plebs... it is always as it has ever been... in fact the city of london is an ugly reality that more brits need to wake up to...

The Spider's Web: Britain's Second Empire this is worth watching for getting more informed..

Posted by: james | Nov 18 2021 18:09 utc | 11

i guess part of what i am trying to say is the financial powers on the planet are going to screw turkey over for not staying within the western - usa/uk etc fold..

on a related note.. i wish the cost of turkish cymbals would come down... the middle men are not passing off the savings..

Posted by: james | Nov 18 2021 18:20 utc | 12

Sir, I’m sorry but your monetary theory is old fashioned. Modern monetary theory right off the bat would focus on the “not enough goods” rather than the too much money to understand inflation.

Next you didn’t tell me enough to understand the problem in Turkey. Export manufacturers selling in dollars can use those dollars to buy the needed import materials. So for them the exchange rate doesn’t matter. It matters for people who have to buy dollars with Lira yes. But that’s good. You want them spending internally keeping the exchange rate down not externally buying dollars.

Now for what you didn’t explain. Are the central bank interest rates for deposits or loans? Are they the same for dollars and lira.

You want dollar deposit rates down. Remember the interest is money leaving the dollar economy when it’s time to pay back the dollars you borrowed as a deposit. But if you (the central bank again) loaned lira you also want low rates (even negative) as you are investing in the Turkish economy. High deposit lira rates just suck lira money out of the economy. You don’t want that. Unless you have lira inflation as well as dollar inflation. Again you didn’t say.

So far Erdogan may be right. The real issue is where is the lira money going. If Productive uses then fine. To buy dollars? Then no you would rather they deposit (park) the lira locally at higher interest rates. Maybe the local bank will help find a local productive use for those lira.

So I can’t tell from your report whether Erdogan is right or wrong headed here. Perhaps even the war works for him as maybe it is bringing in Saudi dollars.

I tend to think you are right though. I doubt that Erdogan is using Modern Monetary Theory (MMT) to manage the Turkish economy. Putting lira into the right hands is important. Cheap lira loans are good. Pulling lira out of hands that would spend them on dollars is good. Having a good if nascent manufacturing economy is good.

But I can’t tell from your report. Perhaps if you brushed up on modern monetary theory to explain it to me that would help. Stephanie Kelton’s “Deficit Myth” is a good starter book on Modern Monetary Theory.” But just saying “too much money chasing too few goods” is simplistic and just plain old fashioned theory.

Posted by: Jeff Wegerson | Nov 18 2021 18:21 utc | 13

The 1970s inflation was supply-driven, as the cost of oil rocketed twice due to the OPEC boycott and then the Iranian revolution - the price of oil affects pretty much every good in the economy. Paul Volcker was appointed by Jimmy Carter to run the Fed and immediately starting using the excuse of monetary theory (assumes that velocity is static which has been empirically proven to be complete bullshit in the past 40 years and quietly forgotten) to ramp up interest rates even though inflation was already falling - Volcker knew that monetarism was bullshit (the book "Secrets of the Temple" is excellent on this - US$3 used on Amazon!). The real reason was to help crush the unions through major unemployment, same as in the UK. Once the unions were crushed and the capitalist elite were predominant the central bank could spend the next four decades reducing interest rates to close to zero, and provide the "Greenspan put" to the capitalist financial casino. The Canadian central bank did the same in the early 1990s, seeing inflation where it wasn't; long enough to force austerity (massive cuts to federal government transfers to states), then off we went on the journey to zero interest rates.

The Chinese have a very different philosophy, that the state should control the prices of basic products to keep the cost of living reasonable for the majority of society; the state would keep large stocks of basic goods and buy/sell then to maintain prices at levels to provide reasonable profitability for the providers. They would also manage regional price discrepancies this way as well, so no local hoarding could be used to drive up prices. The Chinese text "The Discourses on Iron and Salt" from 81 BC shows how far back such understandings (and debates about the efficacy of state intervention and free markets), the impact of these conceptualizations on more modern Chinese policy is covered very well in the book "How China Escaped Shock Therapy" by Isabella Weber. This is exactly what Xi is doing now, pulling back Chinese policy to this philosophy after the go-go years of the first decade of this century - removing corruption, monopolistic and rentier practices, and deflating the housing market to bring property back into the price range of the average person. Lets remember that real wages are increasing every year in China buy 4-5%, so a 20-30% drop in house prices over a few years when combined with increasing wages will quickly balance out the market without a complete crash (in the long run house prices tend to follow wage trends).

The ideology that inflation is a purely monetary phenomenon exists to benefit the elites, as it stops any discussion of taxation (which can be progressive as the rich consume the most, or could even have a reverse dividend for the poorer members of society - e.g. "fee and dividend"), and state intervention to reduce prices and deal with economic bottlenecks/inefficiencies (e.g. price fixing cartels, oligopolies). The Chinese Party-state has all these tools at its disposal as it is not dominated by a capitalist elite. The West, especially the UK and white settler colonies do not.

Posted by: Roger | Nov 18 2021 19:03 utc | 14

Erdogan needs to cut spending on war and completely withdraw from Syria to keep Turkey's economy from tanking. It's important to recall that much of Erdogan's political support is bought via social subsidies that are also inflationary. In many respects, he's duplicating the path taken by the Outlaw US Empire during the 1960s that led to the Stagflation of the 1970s but without having the dollar as a prop. His coalition partners won't like leaving Syria, but there're only a few choices to be had and withdrawal is the easiest politically. There's also the massive wastage of monies by Erdogan's continuing support for Idlib's terrorists at NATO's behest that he also ought to halt.

One wonders if Erdogan smokes a pipe to enable his dreams.

Posted by: karlof1 | Nov 18 2021 19:19 utc | 15

@james #11
This isn't Turkey's first rodeo with falling lira exchange rates and high inflation.
The primary cause is external debts: the huge loans in dollars and euro taken out by Turkish companies and individuals.
A high interest rate can stabilize the exchange rate, but this is irrelevant if the debts are so high that they can't be paid anyway. Furthermore, austerity whether country-wide or "just" among the borrowing comapanies/individuals affects overall growth hence ability to repay. This is the death spiral which a loan shark interested in acquiring cheap assets wants.

Posted by: c1ue | Nov 18 2021 19:37 utc | 16

@Jeff Wegerson #13
Perhaps you can provide some evidence of the "not enough goods".
This isn't Turkey's first time with falling lira exchange rates and high inflation, nor was the last bout that long ago.

Posted by: c1ue | Nov 18 2021 19:40 utc | 17

@Roger #14
While some of what you reposted is true, the actual proximate cause of the 1970s energy crisis was the US abrogation of the Bretton Woods international gold standard.
The oil sheikhs weren't short of oil - what they were, was angry over what they (rightly) saw as the devaluation of value received for oil sold, past as well as present.
It wasn't until the Iranian Revolution that the US was able to make a deal to protect the Saudis, Qatar and the UAE against internal/external revolutions in exchange for the petrodollar standard.
So again - the Oil Embargo era had nothing to do with true supply issues; it had everything to do with monetary policy.
Look at the timeline:
1973: Gold window closes
1973-1976: Oil Embargo and slow roll
1979: Iran Revolution
1982: Volcker shock and awe

Posted by: c1ue | Nov 18 2021 19:44 utc | 18

People here don't seem to know the history of Turkey's currency.
The present lira didn't come into being until 2008, 2005 to 2008 was a period where the previous lira was devalued by removing six (6!) zeroes into the "new lira"
The present lira is just the "new lira" with "new" removed.
Nor was the Turkish lira prior to 2005 performing great: exchange rates were in the 5 digits in the 1990s before going into the 7 digits in the early 2000s.
So we're not talking ancient history here.
The idiocy of allowing domestic companies and individuals to borrow in foreign currencies is very well documented by Dr. Michael Hudson - and in Turkey, the birds (turkeys?) are coming home to roost.

Posted by: c1ue | Nov 18 2021 19:50 utc | 19

"So much to conquer, so many ideas, but little time and, most importantly, no money."

No problem for the US: print money, pillage a country, make other countries pay the bill, repeat.
But no such printing option for Turkey (or the rest of the world).

Posted by: fx | Nov 18 2021 19:51 utc | 20

No Vassal of the Anglo-American-Ziomason KleptOchlarchy comes out ahead against the USD.

No One.

HKG+TWN+KMT are Parasites to USA, CHN, and JPN, so they're only profiteering financially so far by playing all sides - until CHN's Consumers grow enough to sustain themselves separately from exporting to the USA/EU.

Posted by: IronForge | Nov 18 2021 19:56 utc | 21

Countries with an expansionist military policy are all in trouble, none more so than those in the Middle East. Turkey in Syria and Saud Arabia in Yemen being the most prominent. And, of course, the U.S.A.
On the other hand, countries without an expansionist, but with a defensive, military policy are not in trouble, or at least not in trouble of their own making. Iran and China and Russia come to mind.
Food for thought...
"Narrative trap" is such a useful concept. I think it was Alastair Crooke who first mentioned it, or where I first encountered it.

Posted by: Hal Duell | Nov 18 2021 20:22 utc | 22

@19: thank you for making this point about the folly of borrowing in foreign currencies. Hudson knows what he is talking about. So do you.

Posted by: Coldish | Nov 18 2021 20:22 utc | 23

What is happening with Turkey right now is exactly what should have happened with the USA - was it not for the existence of the USD Standard.

The fact that Erdogan believes lowering interest lowers inflation is irrelevant. The end result is the same as printing money and giving it to the people. The only difference is that, since Turkey does not issue the standard fiat currency, such "printing" must happen through other kinds of financial products (e.g. bonds).

Posted by: vk | Nov 18 2021 20:38 utc | 24

Turkey is controlled by neoliberal central bank global policy

Part and parcel of the whole neoliberal trend in macroeconomic policy. The essential thing underlying this, is to try to reduce the power of government and social forces that might exercise some power within the political economy—workers and others—and put the power primarily in the hands of those dominating in the markets.

That’s often the financial system, the banks, but also other elites. The idea of neoliberal economists and policymakers being that you don’t want the government getting too involved in macroeconomic policy. You don’t want them promoting too much employment because that might lead to a raise in wages and, in turn, to a reduction in the profit share of the national income.

So, sure, this might increase inflation, but inflation is not really the key issue here. The problem, in their view, is letting the central bank support other kinds of policies that are going to enhance the power of workers, and even sometimes manufacturing interests. Instead, they want to put power in the hands of those who dominate the markets, often the financial elites.

This approach, I think, really has contributed to enormous financial instability. Notice that this inflation targeting targets commodity inflation. But what about asset bubbles, that is, asset inflation? There’s no attempt to reduce asset bubbles like we had in subprime or in real estate bubbles in various countries. That is another kind of inflation that could have been targeted.

Posted by: michael lacey | Nov 18 2021 20:48 utc | 25

When the empire goes against you, it doesn’t matter how sound your policy is, they will overwhelm and destroy you by sheer size.

Nicaragua is next on the financial chopping bloc

Posted by: Les7 | Nov 18 2021 20:55 utc | 26

@vk #24
Economic illiteracy doesn't excuse the substitution of reality with fantasy.
The US doesn't borrow in other nation's currencies - its debts are all in its own.

Posted by: c1ue | Nov 18 2021 21:08 utc | 27

@ Posted by: c1ue | Nov 18 2021 21:08 utc | 27


Turkey is doing its thing right now, it's not a fantasy.

Posted by: vk | Nov 18 2021 21:17 utc | 28

Me seems vk and c1ue misunderstand each other, while most probably agreeing. I think vk implied that, had US dollar not been the world standard, US firms might have ended up borrowing in foreign currencies. Which didn't happen to the US. But which is happening to Turkey right now.

As for that map, they are quite a bunch of lunatics. Taking Bulgaria, Azerbaijan (weirdly not Armenia nor Southern Cyprus or, seemingly, Aegean islands), the Stans in Central Asia, Chinese Turkestan / Sinkiang, Irkutsk and the Angara basin, Sakha republic and everything between Ienisei and Lena. They are on crack. Not to mention that it would be wholly undefensible territory, stretched this way and cut in the middle by the Caspian Sea.

Posted by: Clueless Joe | Nov 18 2021 22:00 utc | 29

#6 - you're right, the BOE has been state-owned since 1946. I was sloppy in describing it as privately owned. However, things are not so simple:

With the usual chicanery, 1815 rumours by the Rothschild family to the effect that England had LOST at Waterloo, resulted in the bottom dropping out of the English bond market and Nathan Rothschild then bought as many bonds back as he could at hugely discounted prices and in doing so he multiplied his wealth twenty times in 3 days of trading.

At the same time as becoming immensely wealthy he also became the single largest debtor to the English government which ultimately gave him control over the Bank of England.

Fast forward to 1946: because the government was broke after the second world war they didn't have enough money to buy out all the shareholders so instead they were issued with government stocks.

Although the government now earned money from any bank profits they also had to pay interest on any new stock they issued to pay for the shares they couldn't buy back in the first place.

Even though the Bank of England is now state owned it is important to note that up to 97% of the UK's money supply is privately controlled being in the form of interest bearing loans created by the big commercial banks.

I leave it to the reader to decide who owned the shares in 1946, whether they still have not been bought out and who owns the private UK banks...

The main part of the text in this posting is from an article which is well worth reading in its entirety: Who Owns the Bank of England

Posted by: SoMuchToLearn | Nov 18 2021 22:18 utc | 30

@ c1ue | Nov 18 2021 19:37 utc | 16 - etc..

thanks.. i don't disagree with anything you've said and appreciate you pointing out some of the history... i still believe, aside from the obvious issue of having debt that is not denominated in your own currency, there are other factors at work here that are contributing to turkeys problems.. but as you note having debt denominated in foreign currencies - us$ etc - is also a recipe for disaster, especially when the currency is going down the tubes...

as central banker for turkey, what would you be doing in this role at this moment in time??

@ SoMuchToLearn | Nov 18 2021 22:18 utc | 30

thanks for articulating this part of what is an important conversation to be had on this..

Posted by: james | Nov 18 2021 22:32 utc | 31

Loosing not the same as losing.

Posted by: hestroy | Nov 18 2021 22:37 utc | 32

I seem to recollect that Gordon Brown, the 'no more boom and bust' guy, denationalised the Bank of England as part of the Blair regime's campaign to out-Thatcher, the Thatcherites.
Whoever owns the Bank it is controlled by the City and works exclusively in their interests.

Posted by: bevin | Nov 18 2021 22:53 utc | 33

Forgot to give an important explanation about my first comment.

The reason why the neoliberal policies "worked" or seemed to work in the "emergent" economies (the economic whales: Russia, Brazil, Mexico, Turkey, South Africa, I don't know if India, too) during the 1990s up to the financial crisis of 2008 is extremely simple.

First of all, the USA was actively supporting a suppressive monetary policy worldwide after the rise of Paul Volcker (1980). When the USSR fell, Neoliberalism became even stronger and more prestigious in the Third World - the so-called period of the End of History (which coincides with the birth of the "Washington Consensus"). Long story short, Neoliberalism became the dominant doctrine/ideology in the Third World during that period.

The fact that Neoliberalism was hegemonic in those countries is very important because it explains why the illusion it worked was kept alive: when consumption, industrialization, anything that rose the organic composition of capital of these economic whales threatened to rise inflation to above 3%, a very aggressive monetary policy was enforced so that economic growth could be immediately stifled. Consumption was ferociously crushed, and labor conditions made worse for the working classes of these Third World nations. GDP growth then entered into some small recession until it re-stabilized to a harmless 0.5%-2%.

All of that happened under the narrative of controlling inflation, but the reality was that it was all to sustain the USD Standard. Wealth, in the form of capital flows (FDI) was remitted from these Third World countries to to the USA, which strengthened the USD while keeping the other currencies more or less stable.

So, two factors mattered to make Neoliberalism worldwide "work" during 1990-2008:

1) The unprecedented hegemony of the USA over the world guaranteed strong local elites (comprador elites) in the Third World. These strong local elites, neoliberal to the bone, had the legitimacy to enforce the draconian neoliberal policies needed to keep it alive over the masses of their respective countries both as a result of the unprecedented prestige of the USA and because the USA backed it up at home with its own monetary policy and the IMF (which, up to this day, is really ran from the US Treasury, not its president). Dialectically, one reinforced the other, in a virtuous cycle: prestige brought economic dominance, which brought prestige, and so on;

2) The local elites who served as the regional guardians of the neoliberal order ran on a tight line, and quickly suppressed any movement that threatened the neoliberal recipe. They didn't wait for inflation to reach, say, 20%, to then start acting to crush growth, pay its foreign debt and suppress wages. Once the inflation got anywhere near 3%, brutality immediately descended upon the peoples of the Third World. In other words, the neoliberal system was kept with local elites working 24/7, always monitoring the situation in their respective countries, with the help of a gargantuan and extremely complex liberal-democratic (Western Democracy) machine composed of politicians, comprador elite members, journalists, local MSM, cultural market, a state-of-the-art propaganda complex, an aggressive process of Americanization (mass imports of American entertainment, specially Hollywood and music; adaptation of local entertainment to the American format, etc.).

Neoliberalism certainly collapsed from the center, not the periphery. After the 2008 meltdown, the USA immediately abandoned the neoliberal consensus it had with the economic whales, which were left to dry. Obama started with QE, which ran the credibility of the US T-bonds to the ground, so that he could save American capitalism (bail out the big corporations). The situation deteriorated further when Donald Trump and Joe Biden started to simply print money, to the order of USD 1.2 trn per emission. Such immense Dollar printing is putting pressure on these neoliberal Third World countries to simply devalue their currencies at breakneck speed, inflation, interest etc. etc. be damned, because they have to protect their comprador elites, who are agrarian-exporters.

Posted by: vk | Nov 18 2021 23:19 utc | 34

cont. 34

So, what's happening to Turkey now is that is still try to follow what's possible of the neoliberal tradition (because it is one of neoliberalism's success stories of the 1990s-2000s) but it is now orphan, as the USA abandoned the other end of the circuit. In the absence of its counterweight, they did the next intuitive thing: do the polar opposite, reverse the circuit (lower interest like crazy).

Sure, they could try to suppress the standards of living of the Turkish people right now in order to try to at least stabilize the Lira, but the amount of Dollar printing was simply too great. Even if they could bring the Turkish people to the level of starvation, it is very unlikely the USDs would flow back (FDI) to Turkey - not because of Turkey itself, but because the American capitalist class itself doesn't have the means to keep the Empire together anymore.

The collapse of neoliberalism must be seen as the shrinking of the American Empire. The American capitalist class doesn't have the wealth to keep acceptable levels of FDI to all of its provinces anymore. The alternative would be the next richest nation: China. But the rise of China is bad for the American Empire, so it is blocking its provinces from opening their doors to China. This is the Gramsci's classic "the old is dying, but the new refuses to be born".

Posted by: vk | Nov 18 2021 23:30 utc | 35

The whole problem of cost of currency and credit is eliminated when there is no nation state system.. merge them all into one, and use the same currency.. problem eliminated.. print the money as it is needed and retract it when it is not.. return currency to a use it was intended to serve.

Bankers would crap without the nation state boundaries..and the governed the nation states tax to pay the loans that enable currency..
No one has answered my question on why RICO does not apply to the players in the covid 19 scam..

Posted by: snake | Nov 18 2021 23:50 utc | 36

@Posted by: c1ue | Nov 18 2021 19:44 utc | 18

The reasons for the OPEC oil embargo are a little more complicated than you state.
- Until the late 1960s there was a massive over-supply of oil at the global level. The US actually banned oil imports to support the profits of domestic producers, oil in the US was at a significantly higher price than on world markets.
- The peak of US oil production in 1970 changed things, and US oil imports accelerated. This gave OPEC leverage, as the US could no longer increase oil production to offset any embargo.
- The dollar drop did hurt OPEC exporters, but this is only one factor not THE factor
- There was also a little thing called the Arab-Israeli was of 1973

The US and other countries then practised Keynesian policies in the first half of the 1970s that exacerbated the supply-side inflation. These were reversed in the second half of Carter's presidency.

Inflation is not a purely monetary phenomena, especially when the velocity of money can both slow down and accelerate (the latter a possible problem for the US wrt inflation), and be directed to financial asset inflation as well as retail inflation. Many of the larger hyper-inflation events, such as Weimar, can been some more as exchange rate collapse driven with interactions with monetary; hard to separate the tail from the dog.

The paper "Inflation and Currency Depreciation in Germany, 1920-1923: A Dynamic Model of Prices and the Exchange Rate" by Giuseppe Tullio is a good one with respect to the Weimar hyperinflation - a little technical but not overwhelmingly so. There is never seems to be only one dominant causal factor:

Posted by: Roger | Nov 18 2021 23:55 utc | 37

Jeff Wegerson @ 13, C1ue @ 18:

It might help to know that in the 1980s and especially during the 1990s, when Erdogan began his rise to power as Mayor of Istanbul, Turkey pursued an export-led industrialisation strategy. As MoA notes above, this strategy depended very much on importing raw materials, among other things forcing businesses to borrow from abroad. The strategy mirrored what Japan had done from the 1950s onwards.

At the same time this strategy required suppressing domestic wages and demands for wage rises. This of course meant that over the long term there'd be no mass customer base to demand manufactured consumer goods that Turkish industry could turn to making, in the way that Japanese, South Korean and Chinese industry later turned to serving local mass consumer markets, diversifying away from serving purely export-oriented goals.

Also Erdogan's spending priorities over past decades favoured certain industries, like the construction industry, from which his business and political allies and cronies benefited. These include his son-in-law Berat Albayrak who climbed the career ladder in the Çalık Holding energy / mining / construction conglomverate for several years and was CEO there from 2007 to 2013. Çalık Holding may have been typical of the companies Erdogan favoured: if so, that the company made most of its money by buying up other companies overseas, taking over privatised utilities and investing in hi-tech industries (with high capital investment but low labour investment) and might in turn have attracted funding from the Erdogan government could be part of the context behind Turkey's current economic difficulties.

Here is another example of the type of business entrepreneur crony supported by Erdogan in the past and the industries he invests in:
How an Erdoğan Crony Made a Fortune

Erdogan's government also carried mass privatisations of state industries from 2005 onwards. MoA barflies might reflect on where the monies the government gained from these privatisations went and who benefited from the mass sell-offs.
'President Erdoğan: The world's biggest real estate agent'

One part of the solution to Turkey's economic woes looks stark: Erdogan himself must go. That would probably be at least 50% of the solution done.

Posted by: Jen | Nov 19 2021 0:16 utc | 38

vk #34

If by worked you mean a disaster in the 1990s (50% drop in GDP in Russia, hyperinflation at the start and currency crisis and $41.5 billion rescue package at the end for Brazil, the 1994-95 Peso crisis and $50 billion+ rescue package and 70% devaluation for Mexico, exchange rate and economic collapse for Turkey, mediocre growth for South Africa, and slightly higher growth in India).

The RICS etc. only really took off after 2000, pulled up by the massive increases in commodity demand driven by China's exponential double-digit growth. Then all the crap of the 1990s was rapidly forgotten (Russia crash then default, Brazil crash, Peso crisis, Asia debt crisis, Long Term Capital Management) etc.). The Chinese reserve army of labour then helped keep the lid on goods inflation (as against raw material inflation).

P.S. I remember having to make a change to the foreign exchange trading system at my bank to add more zeroes so that we could deal with the Turkish Lira crash.

Posted by: Roger | Nov 19 2021 0:19 utc | 39

@ Posted by: Roger | Nov 19 2021 0:19 utc | 39

Yes, I simplified the story in my previous comment in order to give emphasis to the neoliberal system and not the experiment.

Neoliberalism as an experiment exists since the late 1970s (Pinochet's Chile). It then spread to the UK (1978) and the USA (1980) and Mexico (1986). The era before the Washington Consensus (1990) I consider the "experimental era" of Neoliberalism, when it was still in its infancy. Neoliberalism as a system (hegemonic ideology and doctrine) only came to be somewhere around the beginning of the 1990s (any year from 1990 to 1993 is acceptable, as an academic exercise).

Russia I think is a special case of Neoliberalism. Yes, it is definitely (to this day) a neoliberal country, but it experienced it in a more fulminating way than the other countries. The reason for this can be no other that it is is the original seat of the Soviet Union, so the Yeltsinite elite had less time to consolidate power. Russia experienced traditional, breakneck speed neoliberalism during Yelstin's seven years of government, then up to the first two years of Putin's government (2000). It then backed out of the system in order to create some kind of "self-sufficient neoliberalism" that has no equal in the world. This system, obviously, was improvised out of sheer necessity, since the American Empire threatens it with complete destruction. But the fact that Russia's neoliberal system seeks to be independent from the USD Standard alone makes it completely different from the traditional, Third World neoliberalism.

Posted by: vk | Nov 19 2021 0:44 utc | 40

@Clueless Joe #29
No, you misunderstand my point completely.
The USD being a world trade currency, petrodollar etc helps the US by increasing the supply of dollars that can be diluted. Dr. Michael Hudson notes that the size of the US "deficit" (i.e. borrowing) is pretty much the same as the US' overspending on its military.

But that has nothing whatsoever to do with the US borrowing immensely in its own currency.

Every sovereign nation has that capability.

China's rise is, to no small degree, because they have borrowed enormously on the RMB.

Huge borrowing isn't automatically a failure if you grow in proportion; but that's not the case either in Turkey or in the US. Turkey borrowing in foreign currency is the core issue; the same amount borrowed in lira would cause internal inflation but would not be a permanent albatross on the country's neck.

Put another way: the infamous Weimar hyperinflation was primarily due to the WW1 debts imposed by the Versailles treaty. So the precedent for massive debts denominated in a foreign currency is literally war.

Posted by: c1ue | Nov 19 2021 2:01 utc | 41

@Roger #37
I've never said inflation can only be due to monetary policy. As I note in the previous post - it can be created due to foreign imposed debts denominated in foreign currency.

As for your view on oil in the 1970s to 1980s period: I disagree.
The Arabs attacked Israel in 1969 - there was no oil embargo then.
The Iran-Iraq war was 1980 - there was not a major effect on oil either.

As for the US "glut" in the 1960s - the US was already importing significant quantities of oil in 1965. US oil production did peak in 1970 @ 10M barrels/day, but US oil consumption was 12M+ in 1965 and more like 14,15M barrels/day by 1970.

So I see zero evidence of an oil glut in the US as you assert.

Lastly the paper: I have so little respect for modelers, particularly economics modelers, as is only possible to imagine. Crap models created by crappier coders envisioned by the crappiest "science" possible: economics.
A model looking backwards, literally 2 generations after the event, is utterly worthless even assuming the data, the assumptions, etc are nominally objective.
No model is worth ANYTHING without testing against real world changes - this is impossible with things like economics or climate science, hence those fields are rife with well meaning but ultimately useless babblers.
The only difference between an economic modeler and a Babylonian temple priest slicing open an animal to read its entrails is that you can at least cook up the animal and eat it.

Posted by: c1ue | Nov 19 2021 2:13 utc | 42

@Jen #38
It is not uncommon for "offshoring" nations to experience growth pains comparable to resource rich mineral exporters.
What you describe sounds not much different than what happened to Taiwan, Hong Kong, etc: early low wage production was priced out as standards of living rose. Taiwan never really recovered but was able to continue under the US' subsidies until TSMC came into the picture.
Hong Kong went financial, Japan continued exports but is the only one that really developed an internal consumption base.
If you have ever visited Taipei vs. Tokyo, you will know what I mean. Even Hong Kong - despite being tiny, there are still virtual slums.
So is there corruption in Turkey? I have no doubt. But there are pretty much no countries outside of Asia that have made the transition from low wage manufacturing to even 2nd world status, so it isn't clear to me that Erdogan is fundamentally worse than all the other leaders/nations that also failed.

Posted by: c1ue | Nov 19 2021 2:46 utc | 43

von Clausewitz said “War is just a continuation of politics by other means.” What he didn’t say is that politics is a continuation of economics by other means.

Posted by: Black Cloud | Nov 19 2021 2:48 utc | 44

@ Posted by: snake | Nov 18 2021 23:50 utc | 36

The elimination of the nation-state wouldn't solve the problem of unequal and combined development in capitalism. Value would still have to flow from the "least industrialized" to the "most industrialized" regions (i.e. with the most aggregate value), whatever their juridical denomination.

Indeed, inflation is unequal within a nation-state's own borders. See this present-day example for the USA:

Where inflation is highest in the U.S.: prices have risen the most in Midwest and South as inflation hit a 30-year high.

This map (by Wall Street Journal - by no means a Marxist publication) perfectly mirrors Marx's theory of inflation, which is based on his theory of value (this one already scientifically proven therefore an absolute truth).

Posted by: vk | Nov 19 2021 3:19 utc | 45

bingo -

"Whoever owns the Bank it is controlled by the City and works exclusively in their interests.

Posted by: bevin | Nov 18 2021 22:53 utc | 33"

see my link @ 11 for a more complete breakdown of this...

Posted by: james | Nov 19 2021 4:26 utc | 46

@Posted by: c1ue | Nov 19 2021 2:13 utc | 42

Back to my viewpoint on oil (all data from the EIA, reference below):
- US oil imports went up in the 1950s from zero to 371,000 barrels/yr in 1960, then increased at a slow pace to 483,000 barrels in 1970.
- From 1970 to 1973 they increased to 1,184,000 barrels, more than doubling in 3 years
- From 1973 to 1977 they increased to 2,414,000 barrels, more than doubling in 4 years

See the pattern here, US oil imports were very low in the late 1960s, then jumped fast after the US production peak in 1970. In 1973 (Yom Kippur war) imports were nearly triple the 1967 (Six Day war - not 1969) level of 412,000 barrels. This is what gave OPEC the leverage. A quote from the CFR article listed below:

"On June 6, 1967, Israel enters into an armed conflict with Egypt, Jordan, and Syria, known as the Six Day War. The next day, Arab oil ministers call for an embargo on countries friendly to Israel. Oil shipments halt to the United States and Britain. U.S. domestic production, however, surges by one million barrels a day and largely offsets the temporary loss of Mideast oil globally. By September, the embargo is lifted, and, for a short time, the world experiences another oil glut."

In 1973 the US no longer had the ability to increase production in this way, and the gap to fill was much larger.

The "Second Oil Shock" is called that for a reason! The price of oil shot up and people were lining up at the pumps in the US to get gasoline. Price of a barrel of oil 1978: $14.95; 1979: $25.10; 1980: $37.42. It was caused by the Iranian revolution 1979 impacting Iranian oil production, then exacerbated by the Iran/Iraq war.

If you are going to throw assertions around you need to back them up and ref. check them properly.

US EIA data:
CRF article:
Historical world oil prices:

From you: "Lastly the paper: I have so little respect for modelers, particularly economics modelers, as is only possible to imagine. Crap models created by crappier coders envisioned by the crappiest "science" possible: economics. A model looking backwards, literally 2 generations after the event, is utterly worthless even assuming the data, the assumptions, etc are nominally objective." WTF man, he is actually doing an empirical analysis to validate different viewpoints, not modelling. But you would maybe have known that if you had read it. Economics is generally a crappy science, but this is actually good empirical analysis - not the usual making up assumptions and calling them "laws".

Its late in North America, I am off to bed, so I will leave you with this and move on to other things in the morning.

Posted by: Roger | Nov 19 2021 4:36 utc | 47

Crap models created by crappier coders envisioned by the crappiest "science" possible: economics.
The only difference between an economic modeler and a Babylonian temple priest slicing open an animal to read its entrails is that you can at least cook up the animal and eat it.

Posted by: c1ue | Nov 19 2021 2:13 utc | 42

My first comment would be that pre-scientific prediction methods were subject of continual progress, and the study of sheep livers or, somewhat earlier, cracks in turtle carapaces were much improved later, e.g. observation of the flight of specially bred birds, au specto in Rome, but most of all, methods that relied on advances in mathematics, discrete -- theory of numbers applied by Pytagoreans and kabbalists and continuous, predicting star positions, Johannes Kepler being perhaps the last innovative astrologer using the latest sets of observation and advancing astrology and mathematics by formulating seven Kepler laws, three of them still being used, and subsequently getting a better explanation from Newton. Kepler's day job was providing horoscopes to the imperial court, but the emperors did not begrudge time spend on basic science that supported those horoscopes.

My second comment is that economics is actually quite exact science. When I was Ph.D. students I had friends in mathematics, and I was told that physicists tend to use mathematics with bold shortcuts and without regards for precise definitions and proofs, while economist are very precise with definition and meticulous with proofs. This is because for physicist, whatever shortcuts they make, it matters only if the results agree with observations. But for economists, the results never agree with observations, so they need solid mathematical basis to get publishable results. (For the confused: to prove something you need to make assumptions, so with garbage assumptions and impeccable logic, you may prove garbage conclusions.)

Posted by: Piotr Berman | Nov 19 2021 5:01 utc | 48

@ Piotr Berman | Nov 19 2021 5:01 utc | 48... very good and entertaining to read! thanks..

Posted by: james | Nov 19 2021 5:12 utc | 49

How long will it take to understand thar Turkey is
for a while now under attack by international
finance cartels — for political reasons.

For some reasons — I cannot quite understand,
ridiculing Turkish leader has become a pass
Turkey is in a giant struggle against the multi-pronged
hydra. It has advice and support from many quarters.

But he is right. Monetary policy propaganda
that higher interest rates curb inflation was useful
in curbing wages. US with 0% interest for all
practical purposes knows that the two are
The inflation US is experiencing now is a result
of choking off imports and slapping outrageous
tariffs. Retailers are running scared, as even cat
food is experiencing shortage due to shortage of
imported materials for cans.

Turkey has moved into Eurasian orbit — and fury
has no end. This is just the latest round.

Posted by: Bianca | Nov 19 2021 7:04 utc | 50

#43 @c1ue

Hong Kong and Taiwan offshored almost all of their manufacturing to the mainland, sending skilled people, expertise, money and equipment into the mainland. Then those companies prospered off the inexpensive and hard-working Chinese labor, allowing the HK and Taiwan people to move up the food chain. As well as giants such as Foxconn, there were lots of smaller companies, with owners apparently a fairly lecherous lot when it came to their employees etc.

Posted by: Billb | Nov 19 2021 7:05 utc | 51

Just look at the FDI that went into Turkey from 2003-2020 compared with earlier times. A large junk of it is financial, i.e. hot money flowing in in order to make a buck from interest rate differential, speculation, etc.
It's quite similar to Lebanon, although not quite as severe. Anyway, it's on shaky ground and ready to explode.

Posted by: v | Nov 19 2021 10:15 utc | 52

Excellent news. But first some background.

The Empire is in retreat and burning its ‘Atlanta’s’ as it does so of which Turkey is the grandest!

Serves Turkey right for falling into buying the Global Robber Banker Barons lies and being conned into decades of Anti Russianism (they used to be allies and resisted the Empire together successfully).

They aligned with these who destroyed their Empire and made lines across these ancient maps - well not ancient just a century or so old.

They were enticed into being nato members and than made to pay for that privilege with US MIC weapons to be paid for in $$.

They were played off with being kept focussed on the ‘Kurdish’ threat by their Masters who also stocked that Kurdish insurgency. And the absurd tension with Greece. Thus diverted they were the base for all the Head Choppers coming from Uyghur lands to any Indonesia and Africa and wherever such mercenaries were recruited with money and propaganda muses of a new caliphate.
The White Helmet praetorians were trained and ran from there and all the Special Forces of their Masters lived and terrorised from there as they happily took over northern Syria and planned to complete the pincer from Iraq and the UAE’s.

They were induced into having nuclear missiles aimed at the USSR which damned near led to the nuclear war in the ‘Cuban’ missile tit for tat by Kruschev.

They were induced into playing the guards of ‘Fortress Europe’ with a vague promise and absolute lie of being able to join the EU! A lie that worked double for the anti migrant, anti Muslim racist political button pushers across Europe in recent decades - most notably by the UKIP and BrexShittery in the U.K. - there was a load of guff of what would happen when Turkey becomes a EU member!

So why is the hyper inflation and the absurdly high interest rates good news for Turkey? Because It means that the fake levers of control are revealed to have been LIES as they have been in every country the stormtroopers of the IMF and the World Bank have put their jackboots in ! To rob these nations of their resources, wealth and public services.

What should Turkey do?

First don’t borrow any more dollars from the World Bank.
Second don’t buy anymore weapons in dollars.
Third don’t buy energy in dollars.
Fourth get out of Nato and stop trying to get into the EU and join the SCO instead - they will make the trade agreement with the EU/Europe.
Stop playing the useful idiots and proxy murderers and enablers for the Bankers interests In the MENA.
Tell the IMF and World Bank to fuck off.
Get rid of their owned by the MIC generals and politicians.
Collect their taxes in own currency and make the dollar illegal as a trading currency in the country.
Turkey can and does earn masses of foreign currency through its great tourism - just make sure that all travellers pay in dollars and euros for their entry to the country ! And make sure that currency makes it to the treasury to deal with any absurd dollar based ‘loans’ - loans for what?

Actually take control of their ‘National Bank’ and tell it what interest rates to charge to provide a safe place to hold the Lira for the commercial bankers. Tax these who have captured the wealth and dollar/Europe debts until their pips squeeze! And they are induced into hands by back their loan notes now for Lira debts or just walk away.

Get some self respect back for the Turkish people and culture as much as their great food.

There are Turks a plenty in the U.K. and Europe they are highly resourceful and have the best restaurants and highly educated peoples with ambition.

I see that there are enough voices here educating about Money as there are plenty who are singing the Empires propaganda, so I will hold fire until have read all the entries. Let’s separate the wheat from the chaff !

Posted by: D.G. | Nov 19 2021 10:27 utc | 53

Great comments by Roger and some others, to Piotr -
as a pure physicist it was lore when dealing with higher mathematics - vital to the study of physics - that pure Mathematics is aimed at 100% accuracy whereas the Physicist will be happy to settle for the nth degree of calculation as long as it gives a practical and MEASURABLE solution.
Einstein’s General Theory fails at the extremes as does most Classical Physics as it has developed - we do not believe in an Ether anymore for instance; however it allows us to put GPS satellites in space with the relative time dilation. Newton and Kepplers work gave us darn good Almanacks and allowed the discovery of the furthest planet in the Solar system.

Economics is not a science and mathematics are largely pointless to it, however Accountancy absolutely relies on it and is a better platform to understand Political Economy.

Economics -The new fangelled, two faced religion of Capitalism/Anti Capitalism invented to counter the scientific method that was quickly reducing God and Church and the supposed elect humans from retaining their ‘God Given’ right to Own and Rule.

@ Posted by: vk | Nov 18 2021 23:19 utc | 34 @ 38 etc

Jeez - not afraid to jump sharks today eh?

“comprador elites” - what’s that when it’s at home?
“Obama started with QE, which ran the credibility of the US T-bonds to the ground,”
“Donald Trump and Joe Biden started to simply print money”

Gosh in all of that I didn’t notice a single mention of the World Bank or the Bush Clinton eras!

‘Turkish people starving’ - these sharks are getting plenty of use by you today. Pray tell us how the Turkish people suddenly starve?

If you weren’t such a heart on the sleeve Marxist you claim to voice , people would think you sound just like the supposed anti-Marxists of the USA who clam the Democrats are such Compardors!


Posted by: D.G. | Nov 19 2021 12:57 utc | 54

After having seen what the high interest on Lebanese lira and creeping dollarisation did to the Lebanese economy, Erdoğan is in panic mode. There are a lot of similarities between the Turkish lira and the Lebanese lira as well as similarities in the economy based on services and importations.
Erdoğan is attempting to do the opposite of what Lebanon did. He wants to have more Turkish lira in circulation instead of been blocked in banks. That causes inflation but he is obviously taking that risk hoping that the country can go though a difficult period of high inflation but that on long term, the lira will stabilize. Another official devaluation will happen and things will be become manageable.
There are numerous parameters that may affect negatively that path and no one can really predict if that path is doomed or not. Erdoğan has shown to be very savvy in transforming negative situations to his advantage.
Will the trick work this time in time for his re election?

Posted by: Virgile | Nov 19 2021 13:27 utc | 55

Erdogan's theory is not mainstream nor consensus, and it may be crazy, but it may not be entirely wrong. Some fringe literature by reputable economists that never got traction (e.g. Clower, 1976) argued that higher interest rates cause higher inflation rates, as interest rates are a cost supported by firms, families, and governments. But perception and propaganda counts for a lot in economics. Remember Planck's dictum that science advances one funeral at a time. In academic economics it just takes many more funerals...

Posted by: R | Nov 19 2021 13:46 utc | 56

@ Bianca # 50 Exactly, and well put.

Posted by: Black Cloud | Nov 19 2021 14:51 utc | 57

@Posted by: vk | Nov 19 2021 0:44 utc | 40

Yep, pretty accurate but I don't like the word "spread to", there's no agency in there; more like an act of God. Chile was definitely one of the first neoliberal experiments, but the fiscal crisis of New York in the mid-1970s was also such an experiment. President Ford intentionally blocked any chance of federal aid and the crisis was used to "assert a modern, technocratic, and market-oriented ethos, rejecting New York's long tradition of a robust public sector aimed at supporting the working classes" (Fear City: New York's Fiscal Crisis And The Rise Of Austerity Politics, Kim Phillips-Fein). Carter's administration went neoliberal mid-through its term, in 1978.

Argentina was also one of the first neoliberal experiments, dating from the military coup of 1976. It is an interesting fact that the IMF refused to help the previous democratic government but could suddenly find the largest loan to date to a Latin American country for the coup-created military government. Much the same with the more recent US$57 billion loan to shore up the right-wing neoliberal Argentinian leader in 2018 (Macri), now having to be dealt with by the somewhat progressive government that won the 2019 elections. Same of course with the US$10 billion IMF loan to Yeltsin just before he was "elected" President for the last time in 1996.

The US and UK economic elites drove the neoliberal revolution and imposed it upon their own citizens and the rest of the world, in a very intentional way after gaining elite consensus in the first half of the 1990s. In the mainstream this is treated like an act of God, just like "globalization" so people don't ask questions like "who made this happen" and "who benefitted" - at least in polite company, the MSM, and mainstream scholarship.

Posted by: Roger | Nov 19 2021 14:54 utc | 58

Erdogan has a way out, but that would mean that he would have to give up his dreams of a greater Turkey, sponsoring Muslim terrorists and attempting to take land from his neighbour, while also accepting a mid-level position in the evolving China/Russia led Eurasia. So he keeps trying to dance between two suitors, but at some point he (or his successor) will have to pick a side. In the interim, the West will continuously escalate its economic and political war against Turkey until it learns to be a good vassal.

I can see the same being the case with India for a decade or so, until it has to accept the regional dominance of China. India is hardly growing faster than China, but from a far lower base so the absolute size of the gap between the two countries will continue to grow. The US may cause a lot of irritations on the way, but cannot stop the impact of China's continued growth and integration with its regional neighbours. Like King Canute trying to stop the tide coming in.

Posted by: Roger | Nov 19 2021 15:11 utc | 59

@ Posted by: D.G. | Nov 19 2021 12:57 utc | 54

"Comprador" is a term that exists since the 1920s, and designates the bourgeoisies from the colonies.

When capitalism didn't exist yet, the bourgeoisie - in Europe - had to do something that Communists convened to call "bourgeois-democratic revolution". The objective of the bourgeois-democratic revolution was to coopt support from the other lower classes and develop the productive forces in order to eradicate feudalism and install capitalism.

However, when this European bourgeoisie first engaged with the rest of the world (Africa, America, Asia), it was not a "revolutionary" class anymore. Capitalism already was a reality, so the Europeans were there to exploit resources, not to do a bourgeois-democratic revolution. They then created the colonial system.

The bourgeoisie that arose from the colonial system is different from the bourgeoisie from Europe. Their source of business was to serve as an intermediary between the colonies and the metropolis, mainly with dealing products already produced. They mainly engaged in perpetuating the colonial system instead of promoting the development of the productive forces. Long story short, the bourgeoisie in the colonies were already born as a reactionary - not a revolutionary - class.

The concept of comprador bourgeoisie/elite is central to Mao's theory. Without understanding the fundamental differences between the colonial and metropolitan bourgeoisies, you cannot understand why he acted the way he acted, and made the decisions he made. It is one of the most glaring differences between Western and Eastern Marxisms - the first urging for a messianic, single strike, world revolution that downs capitalism in one single episode, the second aiming to first develop the productive forces and thus deplete all the options of development of capitalism, to only then transition to socialism.

Yes, Bush caused the 2008 crisis. But it was Obama the man who was sent there with only one mission: bail out the banks.

To understand Bush's sweep under the carpet of the rotten papers that resulted in the 2008 crisis, I recommend reading Gerard Dumenil and Domenique Levy's "The Crisis of Neoliberalism".


@ Posted by: R | Nov 19 2021 13:46 utc | 56

Turkey is indeed doomed, Erdogan's strategy will certainly fail.

My point in the first comment was that Erdogan is not an abortion of History, but the symptom of the final signs of life of neoliberalism.

Posted by: vk | Nov 19 2021 15:26 utc | 60

Posted by: Roger | Nov 19 2021 14:54 utc | 58

It is an interesting fact that the IMF refused to help the previous democratic government but could suddenly find the largest loan to date to a Latin American country for the coup-created military government.

How did you work that one out, you must be a genius!

You must have been owner of apothecary for psychopaths, last time you were recommending various medicines for schizophrenia, wonder if it as rubbed on you. Iran was selling its oil for 1(one) dollar a barrel during Iran-Iraq war, 80% of Japan's import was oil, and was main importer of Iranian oil, it became the second largest economy over night!

The Soviets built Gas Pipeline from Iranian Southern Oilfields at Bid Boland, or BEED BOLAND, to Russia, that gas Iran use to burn , then suddenly was getting money for it and barter trading , When Mullahs took over the first thing they did was shutting down the pipeline, wonder why? Kissinger famously said , either Shah has to change or we will change him!

Posted by: Grishka | Nov 19 2021 15:29 utc | 61

Inflation is practically endemic in Turkey. The people kind of know how to weather it. It has certainly been worse in the 70s, 80s and 90s often 40 or 50% officially. Of course, that doesn't mean it cannot get worse.

I do like the idea of Turkey turning east, and abandoning to some extent the West, but leaving NATO? Why bother? In NATO, one has a certain say in what happens. No point in joining the EU and giving up some sovreignty, though.

Posted by: Blue Dotterel | Nov 19 2021 17:37 utc | 62

@Posted by: Grishka | Nov 19 2021 15:29 utc | 61

WTF are you talking about? My statement is based upon documented history, what parallel universe does your brain operate in? Your mention of schizophrenia may be more one of projection perhaps? You are now officially on my "don't respond to trolls and the delusional" list.

Posted by: Roger | Nov 19 2021 17:53 utc | 63

For any country such as Turkey, exchange controls can work very well. It stops the massive flows in and out of hot money, and stops the elites parking money offshore while starving the government of taxes. It also stops the elites playing the "move my money abroad, then crash the economy while stealing everything I can, then buy everything back way cheaper after the crash that I caused" rinse and repeat process so evident in South America. A lot of those "foreign creditors" are really domestic elites being allowed to use the IMF etc. to their advantage in return for doing the West's bidding. A lot of times those IMF loans are provided to maintain the exchange rate long enough for the elites to get their money out just before the inevitable major devaluation - like the record one for the Macri government in Argentina.

China does it, Iceland did it to stop being turned into a debt-peon of Europe, Malaysia successfully did it to weather the Asian financial crisis. Of course the IMF, World Bank, Europe hate such things, as they help protect others' economies against their manipulation and looting. There may be proofs for the benefit of free trade in goods and services (with limitations) there are none for the benefits of unrestricted international flows of capital - apart for the benefits to the elites. Lets remember that even Ricardo assumed that capital was trapped within its own country of origin.

Posted by: Roger | Nov 19 2021 18:07 utc | 64

@Billb #51
That is both untrue and misleading.
Hong Kong and Taiwan are tiny - moving all of their factories to mainland China would account for maybe 1% of China's productive capacity.
The capital is a bigger factor, but again only as a starter.
There is also a significant time lag between the end of the Taiwan/Hong Kong's heyday as offshore manufacturers and China's rise as the largest exporter in the world. I know this because I was visiting all 3 places throughout the 1980s and 1990s.

Posted by: c1ue | Nov 19 2021 18:22 utc | 65

@Piotr Berman #48
I'm sure at least some Babylonian entrail readers and modern economists are genuinely seeking to do good/be professional, but it doesn't change the fact that they're charlatans.
Ignorance does not excuse fundamentally false premises.
As for economics being an exact science: what a complete load of garbage.
If there is a single profession that is more discredited than Economics - it is Climate Science.
(pseudo) Nobel prize winners in Economics led the largest private investment failure in history up to that point: Long Term Capital Management with both Merton and Scholes.
Every single bubble has failed to be predicted by economists: failed to predict the timing, the severity, the cause, the duration, the list goes on and on and on.
And then there's government policies. Where is the "exactness" of economics where trickle down was pushed (and is still being pushed)?
Where is the "exactness" of pro-monopoly bullshit by Texas A & M economics professors defending the oligarchy of meat processing?
It is a sad day when literal Koch-funded professors of libertarian laissez faire at George Mason are more intellectually honest than the mainstream.

Posted by: c1ue | Nov 19 2021 18:28 utc | 66

@Roger #47
Even ignoring your likely typo (barrels/year vs. per day), 300K barrels per day shortfall is not insignificant. That's roughly 16.5 million TONS of oil a year.
It is quite obvious that you don't understand objective reality.
Whether it is 300K barrels a day or 1M or 5M barrels a day, the shortfall is an enormous sum and one which requires huge investments in shipping, pipelines, processing etc etc.
I also like how you again failed to acknowledge your error: you stated that there was a "glut" in oil prior to 1970 and that "peak US oil" changed the glut to shortfall.
I responded that you were utterly wrong - the US was importing oil at least since 1965 - it is only that oil imports increased dramatically after "peak US oil" in 1970.
But even so - it is irrelevant.
Objective reality still exists: whatever the US oil glut or import status - the US' finances were severely strained by both the Lyndon Johnson Great Society spending and the costs of the Vietnam war.
These led to the closing of the gold window in 1973.
Your basic premise is wrong, your beliefs on the data are/were wrong and you won't admit it.
Nor is your assertion that it is the Arab-Israeli conflict of 1973 that is the trigger particularly convincing. Yes, the Arabs were mad but there were previous conflicts without an embargo. There were conflicts after the petrodollar establishment which also did not result in an embargo.
Nor have I seen any kind of response as to say why the Arabs would be fine with the US devaluing its currency despite their enormous dollar holdings.

Now to the study: You have said you are a "climate scientist". I am sure you are genuine in your efforts, but I am a professional modeler. I have modeled device physics. I have modeled security systems. I have modeled all kinds of other things. I have worked with the best and brightest in a number of fields.
What I can unreservedly say is: models are crap.
I don't care how smart you think you are, or even that you really are - a model is nothing more than the expression of its creator's prejudices.
The most brilliant modelers I have seen have been blindsided by new effects at new process geometries or have baked in fundamentally erroneous assumptions in their models - which are revealed by real world testing and data.
Whether it is a transistor device model or an attack surface estimation - nothing beats reality.
Any "model" which has no way to independently verify its validity via probing of edge cases, which is how cybersecurity and device physics models are tested - by doing real world experiments - is garbage.
Assumptions - as in make an ass out of u and me - will never be detected.
Mistakes will not be found.
Fundamental errors will not be revealed.

Economics is one field like that. All the complicated gobbledygook, regardless of good intentions, is fantastically subject to error and bias which can only be corrected by real world testing.

Failure doesn't mean you tune - any even moderately complicated model can be tuned to do literally anything.
As Neumann said: "with four parameters I can fit an elephant, with five I can make him wiggle his trunk".
Climate models have hundreds to thousands of parameters.
Economic models are no better.
And I have additional experience related to cybersecurity testing: the larger and more complicated a piece of software, the greater the likeliness it has major errors and is simply not understood by its present maintainers.
The former is mistakes: typos, bad programming etc ; the latter is technical debt.
The core of so many even highly funded technology companies like Uber/Lyft consist of 30% to 60% backbone which literally nobody dares touch because they don't actually know how it works and are afraid to break it.
So I have zero, indeed negative faith in untested models based on decades of professional experience creating models which are actually used in the real world to do things which are measurable.

Posted by: c1ue | Nov 19 2021 18:54 utc | 67

I was torn between where I should link this - if here or in the Open Thread. I think its is more fruitful if I link it here:

Whither the global economy?

I highly recommend you all to read it.

Posted by: vk | Nov 19 2021 19:48 utc | 68

I´s just supply and demand. If you need money you can easily get it. Like for anything else there is just a price to be paid for it and the price for money is the interest rate. Demand is determined by the amount of goods and services circulating within the economy. If supply of money grows faster than the economy both interest rates and the value of the currency go down and you have inflation.

Now that`s the tricky part: The state (central bank) doesn`t determine the supply of money directly. Instead it set`s the price for money (the interest rate) and supply then adjustes.

If you keep interest rates low in principle (because you beliefe interest rates are usury and the work of the devil) even when economic growth slows down then you create inflation. The central bank can temporary offset this by buying up domestic currency with foreign currency. But once foreign currency reserves are exhausted there are no options left anymore.

Posted by: m | Nov 20 2021 6:17 utc | 69

Roger @ 47 wrote:

See the pattern here, US oil imports were very low in the late 1960s, then jumped fast after the US production peak in 1970. In 1973 (Yom Kippur war) imports were nearly triple the 1967 (Six Day war - not 1969) level of 412,000 barrels. This is what gave OPEC the leverage.

I think the the thing missing in your analysis is the consumption of oil.
Prior to 1970, for 100 years, the US per capita consumption of oil had doubled every 10 years.
Had the inflation of the 1970's not happened that rampaging exponential growth in consumption of oil by the US would have continued. Without price inflation nothing would have changed and the doubling of consumption would have continued because petroleum consumption was the underlying driver of US economic growth (and not just in the US). Without the price inflation to reverse the trend the dire predictions of the looming end to petroleum reserves would come true. Instead, as a result of inflation in the 70's, the per capita oil consumption by the US barely increased at all and every subsequent decade the per capita consumption of oil has been shrinking.

The rapid increase of oil imports in the 1970's represents the shortfall in US domestic production, but that is only a tiny part of the story. If US oil consumption patterns had not been permanently altered by 1970's price inflation, US oil imports would have have been 10 times higher than they actually were by 1985. OPEC would have within a few years simply not been able to meet the demand.

Posted by: jinn | Nov 20 2021 15:45 utc | 70

"I'm more informed than you" should be the motto of the online-bubble-boy armchair commentariat.

Posted by: Patroklos | Nov 20 2021 21:11 utc | 71

Erdogan is correct even western economists believe otherwise, the more interest rates go up, the more expensive goods are, but the problem with Turkey's money, is the US habit of destroying a country's economy , it did it all over the world including in Russia, local interest rates have zero to do with the value of the money, as the US prints overtly and covertly $$ trillions of USD, money that cost zero, it can short a country's currency to mere pennies, Lebanon is an example, the US ran a fake story that all members of Parliament in Lebanon store the government money and hid the cash in Malta, in Switzerland and other offshore banks, this caused a run of Lebanese banks and caused a distrust in the Lebanese government in the hope to cause a civil way like what the CIA did in the early 70s, however Hezbollah has over 100,000 well armed and experienced fighters that prevent the country from falling into the CIA scheme , if you watch some rioters, they are all have dark skin, yet Lebanese people have white skin, this suggests these few hundred clowns are imports from North Africa, once Hezbollah take care of these clowns, the entire country would go back to peace . in any country where the US regime has a design on a regime change, this seems to me the new method, ruin the economy and start a campaign of riots and blaming the government in place.

Posted by: David | Nov 21 2021 12:49 utc | 72

I was torn between where I should link this - if here or in the Open Thread. I think its is more fruitful if I link it here:

Whither the global economy?

I highly recommend you all to read it.

Posted by: vk | Nov 19 2021 19:48 utc | 68

It seems like an elaborate way to say that the law of diminishing returns applies to capital just like anything else. Everything has its limits. One ignores them at ones own peril.

Posted by: Bemildred | Nov 21 2021 13:23 utc | 73


“ Yes, Bush caused the 2008 crisis. But it was Obama the man who was sent there with only one mission: bail out the banks.”

And there you have it from your fake Marxist personae mouth.

It is what the ‘right’ says about ‘left elite Marxists of the Democratic party’ and Federal Government spending, knowing it is a lie from day one of its conception, from the early years 1800’s when the creed of Capitalism/Anti Capitalism was created to divide the slaves and stop them punching up at the slave owners.

It developed the left/right pantomime, which daily translates into greater ‘public spending’ straight into the pockets of the Owners - The Money.

As it’s approaching Xmas I will refer readers to the Two Santa Claus's actuality.

A fake choice that has endured except for 3 years between 1960-63 (which was stopped spectacularly by brains of the most powerful elected leader being publicly splattered and recorded for posterity on film) - that lets the likes of nonsense you splatter multiple times daily here in a liturgical drone of faith in the absurd created fairytales of Money.

That makes you either a knowing or ignorant proselytiser for the Ancient Powers.

It seems many readers here are finally catching on.

Posted by: D.G. | Nov 21 2021 15:24 utc | 74

Roger # 58

The way IMF loans typically work is the US grants a sum contingent upon hiring US contractors. The money is exhausted by design (fraud, waste, corruption) long before the projects are completed requiring more loans and increased debt service. It is a debt spiral of death that has impoverished much of Latin America (among other places).

Posted by: Black Cloud | Nov 22 2021 17:58 utc | 75

Today the lira/dollar exchange rate jumped from 11.42 in the morning to 12.83 as of now, briefly rising above 13.40 in day trading. In other words, lira lost 11% of its value in one day (39% over the past year). Spontaneous protests took place in Ankara and Istanbul.

Posted by: S | Nov 23 2021 21:05 utc | 76

- In especially the past say 20 to 30 years more and more turks have taken on more and more debt. And rising interest rates are then "NOT good" for the turkish (or any other) economy.

Posted by: Willy2 | Nov 25 2021 17:23 utc | 77

Turkey is NOT suffering under Inflation but is suffering under DEFLATION. But then one has beyond those "rising prices".

Posted by: Willy2 | Nov 25 2021 17:35 utc | 78

Turkey is NOT suffering under Inflation but is suffering under DEFLATION. But then one has to look beyond those "rising prices".

Posted by: Willy2 | Nov 25 2021 17:47 utc | 79

This has helped me a lot in my work word counter

Posted by: pipa haha | Dec 1 2021 2:29 utc | 80

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