It seems that “greedflation” isn’t just an American false impression, the identical fallacy exists in lots of different nations.  Kürşad Görgen has a weblog discussing Turkish financial coverage points, from a market monetarist perspective.  Final yr, he did a submit discussing some somewhat unconventional views:

After the 2023 elections, Turkey deserted its notorious NeoFisherian rate of interest coverage (which Erdoğan formalized as “curiosity is the trigger, inflation is the outcome“), and adopted a extra typical coverage with a brand new Central Financial institution head (who was not too long ago fired). As of February 2024, Turkey’s rate of interest is at 45%, and inflation elevated to 64.8% in December. In the meantime, the Turkish lira reached a brand new report low towards the US greenback in early January, buying and selling at over 30. . . .

Mahfi Egilmez, a comparatively well-liked left-of-center economist in Turkey, not too long ago found the ideas of greedflation and shrinkflation and determined to make use of them, claiming that there’s a “greedflation downside” in Turkey.

Görgen did a really good job of explaining the fallacy of greedflation, and included this graph of Turkish nominal GDP development charges:

For my part, the easiest way to refute greedflation is to make use of an oblique method.  When somebody insists that greed is the reason for inflation, inform them you’d be glad to debate the difficulty, however first you’d like to debate the position of greed in NGDP development.  After that difficulty has been addressed, it is going to be simpler to see whether or not greed may need something helpful so as to add to the inflation difficulty.

Let’s take into consideration the 110% development in Turkish NGDP throughout 2022.  As you recognize, NGDP is each mixture nominal revenue and mixture nominal spending.  Wages and salaries are an enormous a part of mixture revenue. Is it believable that greed induced Turkish corporations to pay dramatically larger wages in 2022 than in 2021?  I suppose their resolution to pay larger wages was in line with revenue maximization, however I feel it’s truthful to say {that a} agency’s resolution to pay larger wages shouldn’t be typically seen as “grasping” within the bizarre sense of the time period.

Consumption is an enormous a part of mixture spending.  Is it believable that greed induced Turkish consumers to spend twice as a lot as they had been spending the yr earlier than?  Once more, I can’t see how the choice to spend far more cash on roughly the same amount of products might be thought to be “greed”, within the bizarre sense of the time period.  Grasping folks typically choose to not spend numerous cash.

To summarize, it appears inconceivable that greed might present a proof for a pointy acceleration in NGDP development, particularly on condition that we’ve different explanations that don’t rely of the mysterious surge in Turkish greediness between 2021 and 2023:

Tunc Satiroglu factors out that there was a 245% improve within the cash provide because the CBRT began rate of interest cuts in 2021

As soon as we’ve established that greed didn’t trigger the 110% rise in NGDP, we will change over to the inflation query.  We all know that NGDP development is inflation plus actual GDP development (plus a compounding time period.)  What kind of development actual GDP development charge appears believable for Turkey?  I don’t know the exact reply, however I think that almost all consultants would selected a determine between 0% and 10%.  Which signifies that an NGDP development charge of 110% made it nearly inevitable that the inflation charge in 2022 could be extraordinarily excessive.

To summarize:

It appears extremely implausible that greed can clarify very excessive NGDP development charges.

Very excessive NGDP development charges make excessive inflation nearly inevitable.

Due to this fact . . .

Significantly, it’s embarrassing that we have to even talk about this difficulty.  Astronomers found that the Earth went across the solar manner again within the 1500s.  A lot of economics remains to be mired in views which might be the equal of “the Earth is flat” in astronomy.



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