Thursday, June 30, 2011

Turkey's Inflationary Boom

While both its western (Greece) and southern (Syria) neighbors suffers from various kinds of serious problems, Turkey is seemingly at "the top of the world" right now with increasing influence and a very strong economic boom.

Economic growth was an impressive 11% in Turkey during the first quarter.

However, this boom is largely based on an unsustainable 31% increase in money supply. The symptoms of this inflationary boom is not only high growth but also high price inflation and a sharp increase in the current account deficit to more than 10% of GDP.

The fact that the central bank of Turkey is, pathetically enough, in denial about this by claiming that "aggregate demand conditions do not indicate an overheating" means that the boom will probably go on for a while longer-but that the bust will become even deeper when it inevitably come.


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