The fundamental problem is that Erdogan has no clue about economics. He is envious of US and EU countries because they have both low interest rates and low inflation. Interest rates can be controlled directly by politicians, so he thinks that by controlling one variable the other one will follow. He got it exactly backwards, interest rates are primarily determined by the market and the central bank is trying to follow the market rate, which theoretically is unknowable but usually inflation + some is good enough. This is why central bank independence is considered the primary predictor of low inflation, because the central bank can actually do its job.<p>You have to look at the total investment rate and the total savings rate. Over the long term they should not drift apart and for low inflation you want the savings rate to exceed the investment rate. When people decide to cut back on consumption .i.e. they want to save, they will save regardless of what savings vehicle they end up choosing. The real interest rate (interest rate minus inflation) is way too low for the Lira. A bank account with Lira deposits is simply an extremely bad savings vehicle. People just stop saving, or they put their savings elsewhere, mostly USD, EUR and sometimes Bitcoin. Banning foreign or cryptocurrencies doesn't really do anything, it's akin to pointing a gun at someone and saying they should put their money into a bank account anyway.<p>Ok, lets assume a perfect savings vehicle called SV exists (0% yield and 0% volatility). We can benchmark the yield of currencies against this savings vehicle. For the sake of the argument assume that Lira has 10% inflation and 0% interest then it will have -10% yield. Picking SV will grant you 0% yield, which is 10% more than the Lira.<p>If you raise the interest rate to 10% then the Lira will have 0% yield. It will be equivalent to SV but SV is considered more trustworthy. SV has effectively set a lower bound for interest rates. Any lower and people will just run away from the Lira. Therefore the interest rate must be higher than inflation and this premium depends on how confident "savers" are. You are basically pricing in the default rate.<p>Let's apply this to a different market. The US (corporate) savings rate is so high that negative interest rates are necessary, the problem is that treasury bonds put an effective 0% interest lower bound. Interest simply cannot shrink lower than that because lower interest rates will simply lead to purchases of treasury bonds. The answer in this case is to raise inflation instead because it acts as negative yield on excess savings. The easiest way is to simply print money and hand it out to those who plan to spend it, the increased spending will drive unemployment down. Another solution is to just increase the investment rate so that excess savings are being soaked up and interest rates will rise naturally.