Remember how, on Sunday, Turkish Sultan (a man who’s never met a “good” Kurd or a rate hike that he liked) Recep Tayyip Erdoğan suggested that he might just need to force CBT to cut rates after he gets this farcical “election” out of the way next month?
Erdogan: Interest Rates to Be at Different Levels After June 24
— Walter White (@heisenbergrpt) May 13, 2018
Specifically, this is what he said in Istanbul before leaving for a visit to the U.K.:
I called for lower interest rates before and I will do so again. Especially after the June 24 election the form and levels of rates will develop differently.
That came less than 48 hours after he called interest rates “the mother and father of all evil.”
As I wrote elsewhere over the weekend, every time he says something like that, the market (and analysts) lose more faith in the increasingly far-fetched prospect of him conceding that his “theory” about rates, FX, inflation and the economy more generally, doesn’t make any goddamn sense.
Simsek’s attempts to play down the central bank’s helplessness notwithstanding, it is abundantly clear that they do not have the leeway to do what’s necessary to stop the bleeding. That LLW hike was a joke and the subsequent effort to provide banks with $ liquidity was even more impotent and underscored the notion that CBT is not in a position where they can act decisively.
Hilariously, the lira and Turkish assets in general rallied once Erdogan made it official that elections will be held early. The excuse for the fleeting respite was that there would be “less uncertainty” once the election was over and that having consolidated power officially, Erdogan wouldn’t need to keep acting like a crazy person.
As multiple analysts were quick to point out, there was never any “uncertainty” in the first place when it comes to the vote – he can’t fucking “lose” precisely because it isn’t really an “election”. The only “uncertainty” emanates from his brain, in which higher rates cause inflation, so the more power he has, the more likely it is that he’s going to keep pushing for lower rates and more stimulus and on and on. That, in turn, meant that anyone buying the lira or Turkish bonds the day he announced the official date for the elections was stupid. Plain and simple.
Well fast forward to Tuesday and Erdogan was out reiterating what he said on Sunday about the likelihood that he’ll simply commandeer the central bank following the election. In a hilariously blunt interview with Bloomberg TV on Tuesday, Erdogan made it abundantly clear what’s going to happen here, come hell or high Gulen.
Watch as an incredulous Bloomberg anchor asks the following:
So… so, you will play a bigger role in monetary policy after the elections, is that the big change?
To which Erdogan looks him straight in the face and says:
I mean, you’ve gotta hand it to him – it takes some real balls to say that in the middle of run on the currency.
It’s also hilarious how he acknowledged that effectively making himself head of the central bank “may make some uncomfortable,” before basically saying that’s just too damn bad for whoever those “uncomfortable” people are.
Well as you can imagine, the lira hit a new record low on Tuesday because, well fuck me folks, because did you read everything above or didn’t you?
I could annotate that chart to death with all of the hilarious things have happened over the past month and if you want those charts, you can find them at some of the posts linked above, but the bottom line here is that he is the central bank now. Any semblance of independence is out the window, so if you were counting on that to save the lira, well you can just go ahead and forget it.
And you know, what the hell did you expect?
— Walter White (@heisenbergrpt) May 14, 2018