I am putting this under politics because I think Turkey is large enough if it collapses it will have world wide repercussions. The Turkish Lira fell 20% in one day against the dollar and some are saying their is no end in sight.
A graph showing the Lira vs USD. It took $3.71 lira to equal a dollar just 4 years ago. Now it takes $12.23 to make a dollar. Several big retailers including Apple shut down their app store to the citizens of Turkey on uncertainty if it will go full blown Weimar republic.
Turkey was much more than a tourist country. Before Erdoğan bought the Russian Air defense missiles, they were a real F35 partner, with in-country collaboration with Lockheed Martin.
The attempted coup didn’t help Turkey. The mess on the Syrian border didn’t help Turkey. The heavy handed incarceration of journalists and suspected coup participants isn’t helping either.
Erdoğan is a smart guy and was responsible for much of the good things that happened to Turkey in the past 10+ years. In 2012 I spent alot of time there and the Turkish Lira was worth more than 50 cents the entire year. But Erdoğan is strongly influenced by the Muslim brotherhood ( or some similar quasi-civilized Islamicist political organization.) And the more he displays the influence and the associated heavy-handed government, the more economic trouble Turkey seems to have.
I wish them well. They actually share alot of traits with Americans … I think because they watch alot of TV… including American shows but ( at least in 2012) some high quality indigenous shows as well. Early Turkish TV was embarrassing to watch it was so bad. But they learned well from us.
The Turks are 95% Muslim but they arent the pedophile versions of Muslims . Marriage laws are reasonable. And you would have to look hard to find a full burka in Turkey…and it would likely be an Arabic visitor wearing it. They had a very secular government since the 1920s and were pretty friendly to Americans when they were not involved in world wars .
So… I hope they pull it together. The drop in Turkish Lira value is certainly hurting them . Maybe another coup attempt could get rid of Erdoğan and they can get back to a secular democratic government again.
That’s what I am worrying about we could be see something spreading from all the covid closures and disruptions. The article shows states how fast it can happen in just one day 20% gone.
Low interest rates discourage capital investment in debt securities. This makes the currency the investment is denominated in loose value against other currencies. Turkey has a bunch of debt denominated in US dollars. So they have to pay that debt in dollars. By cutting central bank rates on Lira denominated debt they are already devaluing the currency against the dollar. But that pressure is all coming from the Lira side of the equation. If US rates go up there will also be pressure in the same direction from the dollar side.
There is a pecking order in risk valuation. Someplace like Turkey already has to pay a premium to attract capital for lending. Cutting rates just makes lending less attractive and probably means they are printing money. I’d expect China to be hovering over them like a vulture, seeing opportunity in their weakness.
