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Erdogan Fires Another Central Bank Chief As Lira Falls For Eleventh Straight Week
Turkey careened into one of its regularly scheduled currency crises last month, when a laundry list
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The word autocrat any longer is a trigger word to instill insecurity in otherwise passive, peace seeking, nature-loving readers who prefer to bask in the warm sun than worry about being confronted by a drunk with a carry permit. But, you got to call Erdogan as you see him.
Just checked the Fed site to make sure we didn’t have USD swap lines with Turkey. (Didn’t think there’d be any way, but wanted to check.)
Turkey is an example of how the next, global, financial crisis could start. It seems so long ago that we had a currency crisis. Turkey is a meaningful country given given the gift of geography, squandered, for now, perhaps just trying to make up for the lost empire from more than 100 years ago. This could be where the dominoes start to fall. First Turkey, then Argentina (goes without saying but I felt like typing out the letter), South Africa, Brazil, Nigeria, Ukraine. (Mexico and no Asian currencies in the list for now.) In the midst of a pandemic and weak economic conditions across the Western world, we really don’t need any more crises. If Erdogan is going to need help, he better be straightening up or Lael Brainard might just say no.
I wanted to load the Turkish Lira exchange rate data into my R interpreter to see what the curve of the exchange rate is over the years. Waste of time. The Lira exchange rate looks exponential like a COVID outbreak in an upper Midwest state after a motorcycle rally.
Back in the dark age of 1978 I landed as a trainee in the Middle East Division of a major NY bank. My first task was to calculate outstandings on defaulted CTLDs (Convertible Turkish Lira Deposits, the financial poison of the day). Over the next 34 years I got to be involved with every Turkish encounter or near miss with financial disaster. Conclusion: even though the political/financial elites have changed from cosmopolitan Istanbul to Anatolian businessmen, the problem remains the same – Turkey doesn’t save, it borrows. Erdo should know this – a currency crisis brought him to power. But he was tempted by power and graft and now ironically finds himself in the same box as his predecessors. There’s no reason to expect he’ll do the right thing – he will hang on to the bitter end. Don’t expect reform.
buy the dip