What will happen if the president knows nothing of basic economic theory?
What happened when an authoritarian took control of an entire country without understanding the basic principles and rules of economic theory?
This is precisely what happened in Turkey.
Turkish Lira is now plummeting nearly 15% at a historically low. Instead of raising interest rates and strengthening its currency to respond to the strong dollar, Mr. Erdogan chose to lower interest rates and depreciate the Turkish Lira in order to boost economic growth.
On top of the above action, Turkey president Erdogan also managed to intervene the operation of central banks, he replaces multiple central bankers and anyone who dares to go against his will be fired immediately.
Consequently, the Turkish central bank has lost its power and independence and ability to facilitate its own policy framework to stable the Turkish Lira. This is what happened in an economic system when its own currency system broke apart: hyperinflation and stagflation.
Hyperinflation and stagflation are the nightmares for all central bankers.
When an economic system has hyperinflation embedded, it will soon erode the entire supply chain. Imagine when you are withdrawing money from the ATM machine, and the currency that you have quickly loses its value. It means your entire saving is ruined.
The only way to defend your wealth against a crazy bank run is to quickly convert your savings into dollars. Unfortunately, in this extreme scenario, there is only a limited supply of dollars. Rich and powerful elites will be the ones who hold dollars, peasants can only hold the melting ice: lira.
Therefore there will be a shadow market trading dollars and hard assets with high premiums. People will try to purchase iPhones and other easy-to-carry products, such as jewelry and watches to maintain their purchase power and wealth.
This is what happened when a president failed to understand the very basic knowledge of the economic system. He who operates the system in ignorance and pride shall destroy and bring down the entire nation along with its people.
Perhaps with this event, people will start to understand, the value of a truly democratic system. Not ruled by one dictator, but by many experts and wise men.
The tragedy of dictatorship is that: for one mistake, billions of people will pay dearly for the price.
