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Turkish lira plunges 20% (cnbc.com)
16 points by ksahin 8 months ago | hide | past | web | favorite | 3 comments

So, this is what a Black Swan looks like in real-time ;)

I can recall not even five years ago when $USDTRY was historically stable just below 2.00. It's possible it will go to 8.00 very shortly.

After winning re-election in June, US-Turkey relations became strained over Erdogan's consolidation of power. Including the appointment of his son-in-law as Finance Minister. High inflation and deficits should have triggered a raise in interest rates. Policy experts conjectured a looming threat of sanctions would compel action.

But instead the Central Bank, under authoritarian control of the popular regime, wanted to implement its own brand of capital controls. The result is an historic devaluation. And risk of contagion spreading with highly levered European bank exposure.

Looking at the raw economic numbers. Turkey's GDB is under $1T annually. And outstanding foreign denominated debt approx $500B. The scale is minuscule compared to China and the West. As global debt approaches $50T and rate of growth slows below the the rate at which interest on that debt accumulates. It is not out of the realm of possibility that what is happening in Turkey right now serves as a microcosm for what could happen around the globe. Populist backed government seizure of private capital on an unprecedented scale.

There is no other way to interpret this than as a cautionary tale of the necessity of fiscal policy insulation from political winds of change.

From the article:

"The sharp drop in Turkish assets came after a delegation returned from Washington with no apparent progress on the detention of U.S. pastor Andrew Brunson, who is charged with supporting a group blamed for an attempted coup in 2016."


"Andrew C. Brunson (born January 3, 1968) is an American pastor in Turkey, arrested in October 2016 in the purges occurring after the aftermath of the 2016 Turkish coup d'├ętat attempt, imprisoning tens of thousands of Turkish military personnel, civil servants, educators, academics, dissidents, and journalists.[3][4] Brunson is an evangelical pastor of the Izmir Resurrection Church, a small Protestant church with about 25 congregants."

First time I am hearing about this guy. P.S. the "coup" seemed pretty staged even when it was happening. It was pretty incompetent.

The "reason" for these sanctions is also pretty convoluted.

Is the imprisoned pastor the reason or the excuse for the US sanctions? I have a feeling US/Turkey have other more important reasons to have issues with their relationship now like Turkey's sudden friendship with Russia.

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