Dear Dr. Başçı,

It has come to my attention that you are starting a Department of Truth, or Deptrue, in the Central Bank of Turkey, or CBT, and I would like to apply for the position of Department Chief. To support my application, I would like to offer a hypothetical speech I would make as head of Deptrue:

We at the Central Bank do not deny that there has been over-borrowing. As we announced in our meetings with economists in early May, we have been tracking the four-week moving average of annualized weekly growth in the value of credit. This figure fell 6 percent to 39 percent in the week of May 20.

We would consider our policies effective if credit growth remained below the average for 2006-2010, and it is 8 percent below that level. As for how we came up with this methodology and benchmark, rest assured: Our Research Department, or Resdep, has found, in unpublished research, that these are the best measures.

By the way, these regular gatherings are so much better than one-on-one meetings, aren’t they? Some economists claim they are eroding confidence in the CBT, but we have a theoretical model that shows this new system is better in terms of market efficiency. You and your clients can now benefit from the questions of your competitors and their clients as well. In short, we are now one big happy family.

Coming back to the topic at hand, lending rates are moving up, further proof that our policies are working. [Note to staff: Have the graphs start from 2011, not 2009; otherwise, someone may point out that lending rates are still very low compared to a couple of years ago]. And if banks use repos, bonds, foreign currency deposits or external borrowing as funding alternatives, we will ask the Banking Regulator to pull their ears.

Moreover, we do not believe that over-borrowing has led to overheating: The purchasing managers index is losing steam, sequential industrial growth is in negative territory and capacity utilization is still below pre-crisis levels.

[Note to staff: I need the headline numbers here. Please do not disaggregate; otherwise someone might note the robust industrial production and capacity utilization numbers in the sectors catering to domestic demand, where credit growth is having an effect.]

Some economists claim that the inflation-neutral level of capacity utilization may have decreased, arguing that utilization figures are down due to the substitution of imports for domestic production, rather than an output gap. But Resdep shows, in unpublished research, that this is not the case.

Similarly, our economists have found that the non-accelerating inflation rate of unemployment is actually lower, not higher, so there will not be any wage and price pressures from the labor market despite the strong employment figures.

Finally, it is safe to say that inflation is tame. While headline and core inflation are heading up, this is mainly due to the rise in consumer durables inflation because of the weak lira, not overheating. In fact, the best way to assess whether over-borrowing is leading to overheating is to monitor services inflation, which is still low.

[Note to staff: Please take out disaggregated data; someone may notice the rise in inflation in domestic demand-sensitive sectors and those benefiting from the credit boom. Send a memo to Resdep, asking them to come up with a sub-services inflation measure that is not moving up.]

Before I close my remarks, I would like to thank the government for the contractionary fiscal policy. I am especially grateful to Prime Minister Erdoğan, as his views on the relationship between inflation and interest rates as well as his insistence on zero real rates have been instrumental in guiding our policies.

* Emre Deliveli is a freelance consultant and columnist for Hürriyet Daily News & Economic Review and Forbes as well as a contributor to Roubini Global Economics. Follow his blog at http://www.economonitor.com/emredeliveli/.