Turks attempting to buy iPhones and other electronics received online error messages on Wednesday, including from Apple’s own website. That happened after a historic 15% plunge in Turkey’s currency on Tuesday caused havoc in Turkey’s economy.
Turkey’s currency, the lira, fell towards its record low on November 24, after President Tayyip Erdogan defended recent sharp interest rate cuts despite widespread criticism and calls for a reversal. Turkey cut interest rates to well below its official 20% inflation rate, first by two percent to 16%, and later by a further one percent to 15%.
The interest-rate cuts were essentially forced on Turkey’s central bank by its autocratic president, Recep Tayyip Erdoğan. He follows a crackpot school of “Islamic economics” that teaches that high interest rates by central banks cause inflation. The reality is just the opposite: such high interest rates reduce inflation by reducing the money supply. In the United States, the Federal Reserve vanquished high inflation in the early 1980s by raising interest rates to well above the inflation rate, shrinking America’s money supply.
The lira lost 43% of its value this year and more than 22% since the beginning of last week alone. As a result, goods priced in the local currency have lost value compared to prices elsewhere, with retailers struggling to keep up with price adjustments amid marketplace turmoil.
Apple’s Turkish website stopped sales of most products, showing a “Not currently available” message. The local prices of phones and computers were over 10% below U.S. prices following the sudden depreciation in the lira.
A salesman at an Istanbul Apple store said some customers were hoarding electronics, viewing electronics as an investment rather than just something to use. So they were buying them up as an alternative to rapidly depreciating currency.
“It is pretty surreal with the economy and all, but people see it as a store of value and flock to stores. They know they’ll be able to sell it a year later for more than what they paid,” he said.
The economic turmoil in Turkey matters because Turkey has more people than any European country than Russia, and it is a buffer against refugee flows from the Middle East into Europe.