It has come to light that the concept of “greedflation” is not just a misconception in the United States; it also exists in many other countries, including Turkey. Kürşad Görgen, a blogger focusing on Turkish monetary policy issues from a market monetarist perspective, discussed some unconventional views in a post last year.
Following the 2023 elections, Turkey moved away from its NeoFisherian interest rate policy, famously formalized by Erdoğan as “interest is the cause, inflation is the result,” and adopted a more conventional approach with a new Central Bank head (who was recently dismissed). As of February 2024, Turkey’s interest rate stands at 45%, and inflation rose to 64.8% in December. Additionally, the Turkish lira hit a new record low against the US dollar in early January, trading at over 30.
Mahfi Egilmez, a popular left-of-center economist in Turkey, introduced the concepts of greedflation and shrinkflation, asserting that there is a “greedflation problem” in Turkey. Görgen effectively explained the fallacy of greedflation and shared a graph depicting Turkish nominal GDP growth rates.
To counter the notion of greedflation, an indirect approach can be used. Instead of attributing inflation to greed directly, one can question the role of greed in nominal GDP (NGDP) growth. For instance, the 110% increase in Turkish NGDP in 2022 raises questions about greed’s influence on factors like wage growth and consumer spending. It becomes evident that greed alone cannot explain such significant growth in NGDP.
Tunc Satiroglu highlighted a 245% surge in the money supply since the Central Bank of the Republic of Turkey (CBRT) initiated interest rate cuts in 2021. This factor, along with high NGDP growth rates, points towards an inevitable rise in inflation.
In conclusion, it is clear that greed is not the sole cause of rapid NGDP growth, which subsequently leads to high inflation. By addressing alternative explanations such as monetary policy decisions and money supply increases, a more comprehensive understanding of inflation dynamics can be achieved.
The discussion around greedflation in economics reveals the need to move beyond outdated perspectives and embrace more nuanced analyses. Just as astronomers debunked the notion of a flat Earth centuries ago, economists must challenge and refine their theories to navigate the complexities of modern economic systems.
