Confessions (1)
Fatih Özatay, PhD
23 November 2013
It is time for self-criticism. But please hear my version of story first and then decide. To be continued. If I were you, I had long ago asked myself if it a waste of time reading this column. True, it takes about five minutes to read it, but it’s not just reading. I am sure some of you, particularly after pieces that I talk big about economic prospects, spend some more time thinking on my claims and theories. The year is about to end and I feel the urge to talk about the prospects for 2014. But first I have to give an account of my claims for 2013; without doing that, I think there is no point in talking about 2014.
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It’s Gangnam Style to have dershanes
Güven Sak, PhD
23 November 2013
Have you read Murakami’s 1Q84? One of the main characters of the novel, Tengo, is a cram school math teacher by day and a wannabe novelist by night. I did not get the feeling that he hates what he does for a living. Yet nowadays, that is the ongoing debate in Turkey. The government says they would like to phase out dershanes and reinvent them as private schools. This is a big ongoing debate without any information around it. First of all, the terms for the transition from dershanes into private schools are nowhere to be found. Secondly, the government is advancing its proposal as part of an education reform package, of which the details are yet to be seen. So the debate continues without information being exchanged between the government and the public. This is typical for polit
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Innovate something and we will pay for it, my dear brother
Güven Sak, PhD
22 November 2013
If I had a good idea, I would make use of the entrepreneurship support programs in Turkey and launch my company in the US. That’s the wisest option, if you ask me. Last week, Vint Cerf, who is recognized as one of the two fathers of the Internet together with Bob Kahn, was in Turkey. He currently is the vice president of Google. When he was a program manager for the United States Department of Defense, he led several project to develop TCP/IP technology. His reputation as father of the Internet dates back to that time. During a meeting in Ankara, a university student asked Cerf if he should open a business in Turkey or the US. In response to this practical and meaningful question, Cerf said, “Open it in Turkey so that your country can get wealthier.”
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Partly back to the conventional
Fatih Özatay, PhD
21 November 2013
The CB’ decision will increase the predictability of short term market interest rates. From one perspective, this in a sense indicates a return to a more “conventional” policy framework. The Central Bank of Turkey (CB) declared that the interest on overnight interbank operations (short term market rate) will be kept at a level close to the upper limit of the interest rate corridor at 7.75 percent. The CB has the tools and the authority to do this. The banking system is in liquidity shortage and it has to borrow from the CB. Despite this statement, however, the common view is that due to certain technicalities, the average cost of the CB’s lending to banks will stand around 6.75 percent.
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Turkey is not as good as Uruguay
Güven Sak, PhD
19 November 2013
In countries that are governed well, the decisions are made in the capital cities. In the others, the decisions are made in other capital cities. All economies are in slowdown lately. The IMF has been revising its growth estimates downwards. Although economic slowdown is everywhere, it is more alarming in some countries. In China, the GDP growth diminished to 7 percent. In times of rapid growth, China’s foreign trade surplus was around 10 percent of the GDP. With a sharp fall, it is now 2 percent. Turkey’s GDP growth also has decreased swiftly from 10 percent to 3 percent. Yet, the current account deficit has eased only from 10 percent to 8 percent. China’s growth is driven by external surplus, while Turkey’s is driven by external deficit. When the Chinese economy slowed down a little bit,
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Success = Talent + Luck
Fatih Özatay, PhD
19 November 2013
Does Turkey implement any anti-inflationary policy that we expect a “permanent” drop in inflation rate? ‘Success = Talent + Luck’ ‘Great success = a little more talent + a lot of luck’. Years ago, the editor of a journal asked a group of scientists to write down their favorite equations. The ones above are Nobel economy prize winner psychologist Daniel Kahneman’s favorites.
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The past is gone
Fatih Özatay, PhD
16 November 2013
There is a regression to the mean. This is not the fate of Turkey, of course. What we need is to realize that the past is gone and make a fresh new start. It is the middle of November already! How time flies. It feels like just a few days ago that I was planning the year 2013. How is that possible? How did I spend the entire year? Columns, classes, conferences, revisions for new editions of my books Financial Crises and Turkey and Monetary Economics (contains advertisement), a couple of articles, and etc. True, time appears to have run fast for everyone in my age group, but wasn’t it far too fast this time?
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Turkey still does not speak English
Güven Sak, PhD
15 November 2013
The domination of the English language is not going to decrease; it’s going to keep growing. In order to understand the world correctly and not struggle with the spirit of the time, learning English has never been so important.
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As net capital inflow decreases...
Fatih Özatay, PhD
14 November 2013
A significant decline in net capital inflow implies hikes in exchange and interest rates and drops in domestic credit growth rate. Turkey spends a large proportion of its national income. With the low domestic savings rate, Turkey has to borrow from abroad at large amounts even to sustain a moderate level of investment at global scale. Here lies the source of vulnerability against net capital movements. This is also the very reason why we talk extensively about the potential decisions the Federal Reserve is to take: those will (and already started to) determine the level of net capital inflow to Turkey.
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Angry Birds has overthrown the cinema
Güven Sak, PhD
12 November 2013
The Angry Birds era asks for quality, not quantity. Finland, the country of the creators of Angry Birds, performs well in OECD’s PISA tests. Coincidence? The structure of the entertainment industry has been changing. Have you noticed? I have just noticed it. Now I also understood why all of the young people in entrepreneurship accelerator programs are going into game development. I missed the change because I wasn’t looking around myself. The annual turnover of the videogames industry has reached around 70 percent that of the movie industry. And considering that the latest movies look more and more like videogames, we might assume that they have taken over movies, too. The most-watched five movies in the world feature digitally strengthened visual effects. World War Z, Avatar, and Star Wa
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