What Happens When You Destroy Money: The Challenges of Everyday Life in Turkey

The Flying Frisby

Over the last decade, the Turkish lira has seen declines of more than 95% against the US dollar. It took just ₺1.50 to buy it dollar ten years ago. Now it takes ₺33. The lira has been one of the world’s worst-performing currencies - and in a fiat world, that is saying something - rivalled only by the Venezuelan bolivar and the Argentinian peso.

While in Istanbul last week, I spoke to two young professionals, Emre, 25, and İlker, 27, about life under the lira. Both are bright, articulate, and empathetic young men who speak three languages fluently - English, German, and Turkish - as well as competent French.

Given that the currency has been so bad, I was expecting to see more widespread use of foreign money, but in fact, lira are changing hands everywhere - you see people all over the place with wads of them. “You have to use lira,” they explained. “It is the national currency.” Even with such dire inflation, there is still trade. The economy still functions, albeit badly. (That said everything in the airports was denominated in euros).

Food, energy, travel, housing, consumer goods - everything has gone up in price, but, surprise, surprise, wages have not gone up by nearly as much. The result is that ordinary people have been impoverished.

“The average wage in Istanbul is about £650 per month,” they told me. (One thing that impressed me was how immediately they could translate the lira into pounds, dollars, or euros).

“What about the receptionist in my hotel or a waiter?”

“Maybe £500. A taxi driver working all hours, maybe £800.”

With those kinds of earnings, it is hard to make ends meet.

“That’s why everybody wants to meet a tourist,” they smiled in reply.

“What do you do?” I asked. “Do you spend money as soon as you have it? Before it loses purchasing power?”

“Yes,” they said. “There is no point saving. When we were students a few years ago, you could save for maybe three years and buy a car. Now it would take you 20 years. There is no point saving in lira. We spend the money as soon as we have it.”

“Even on stupid things,” added Emre, pointing to his Casio watch. “You may as well.”

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Everyone is the same, apparently. They spend as soon as they earn. There is no point saving a currency that will soon be worth less. The rates of interest paid do not compensate, especially given that you usually have to tie your money up for one, two, or three years to obtain decent rates, and the inflation risk of doing that is too great.

Interest rates have been quite the issue in Turkey, by the way. Mainstream Islamic finance prohibits interest, something they claimed Turkish President Recep Tayyip Erdoğan exploited. Until 2023 Erdoğan kept a lid on rates (they are now 50%), arguing that high rates cause inflation. He repeatedly replaced central bank governors who resisted low rates.

“How do people save?” I asked.

“Gold,” came the answer straight away. Everyone who can buys gold, even tiny amounts below a gram.

“Silver?” I asked.

“Not so much.”

I asked them if they use Revolut or similar to hold foreign currencies. They had no idea what Revolut was (probably a good thing, given what can happen), but it seems most banks also offer the ability to hold euros, pounds, and dollars, and so citizens tend to convert their lira as quickly as they can.

“What about bitcoin?”

“Not really,” they said. “Some young people.”

I was surprised by that. I saw a few adverts for bitcoin-related products out there. But apparently gold is more common.

“What about saving up to buy a house?”

They both laughed at the impossibility. And there isn’t even a lot of debt in the Turkish housing market. Mortgages, as we know them in the West, don’t really exist, though there are ways to borrow money. Housing is still unaffordable

“So people aren’t starting families then?”

“No, we can’t. Our population growth is starting to turn negative.”

“So you two are not close to starting a family.”

They shook their heads sadly. “What do we have to offer?”

I felt so sorry for these two young men. Both would be good husbands and fathers.

“When people do start families, they rent small flats. Mum works, dad works, grandparents work.”

This is something I saw directly. The taxi that met me at the airport had mum and dad in the front and their two kids asleep in the back, while dad continued working into the night.

A typical one-bed flat might be about £500 per month. There is not really the same culture of flat-sharing among young professionals that we have in the UK, except maybe for students, and most young people stay with their parents until they marry.

I struggled to understand how anyone could make any money in such a situation. All asset owners are doing is protecting their wealth against the currency debasement; they are not actually growing it. “Who’s the richest person in the country?” I wondered.

“Erdoğan,” they both said immediately. “Officially, probably the Koç family. They own Fenerbahçe, the football club. But really it is almost certainly Erdoğan.”

The state of the currency and the political leadership is no doubt a huge deterrent to foreign investment.

What about leaving?, I asked.

That is hard too. The routes into Europe are not as easy as they once were. Far fewer Turks now go to Germany, for example. Even just getting a tourist visa can take two years, and the money they earn lasts barely a few days in Europe. Some illegals travel across the Mediterranean and up through Spain, but the US, via Mexico, is now the most common escape. Very expensive. Most are trapped in their own country.

What a sad state of affairs. Isn’t fiat money a terrible thing? What it can do to a country and its people, how it can make things so hopeless.

The bizarre thing: there is economic activity everywhere. Everyone is hustling. Everyone is working. They all want to better themselves and their lot. People want to trade. That is the natural human way of things.

Imagine if it were all underpinned by sound money.

If you are interested in buying gold, check out my recent report. I have a feeling it is going to come in very handy.

My recommended bullion dealer is the Pure Gold Company. I also like Goldcore.

And one other thing:

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