Troubles In Turkey

[BansheeOne]

Erdogan has solved the problem.

 

Turkey is blaming social media and 'fabricated news' for the collapse of its currency

 

Will Martin, Business Insider

 

1h

 

The Turkish government is launching an investigation into social media posts it believes exacerbated the recent collapse of the lira, blaming what it calls "fabricated news" for the currency's plunge.

 

According to a report from the Financial Times, which cites Turkey's state news agency, the chief prosecutor in Istanbul has launched an investigation into "persons who are involved in actions that threaten social peace, domestic calm and unity, and confidence in the economy," citing false or manipulative statements in news programmes and on social media.

 

Separately, Turkey's Capital Markets Board, the country's central bank and financial regulator, said it plans to seek fines and even prison sentences for those who spread "erroneous and fabricated news and statements" about the ongoing crisis that has seen the lira lose more than a quarter of its value in just a week.

 

The TCMB said it will seek prison sentences of two to five years for people who use news or social media to try to "affect the prices and valuations of capital market vehicles or investors’ decisions through their statements, reports, news stories, and analysis."

 

The Turkish currency's slide comes amid rising tension with the US over trade. US President Trump authorised increased tariffs against Turkey on Friday.

 

"This perception operation is a part of the economic war confronting our country," Erdogan's communications advisor Fahrettin Altun tweeted after a speech by the president on Sunday.

 

"Nowhere in our president’s statement did he say there was a situation in which bank deposits would be seized. His words were aimed at strengthening Turkey’s economy and reflect our state’s determined stance, and had the tenor of a warning to prevent the flight of foreign exchange from our country," he added.

 

https://www.businessinsider.de/turkey-blames-social-media-fabricated-news-lira-collapse-2018-8?r=UK&IR=T

[Josh]

"Just the Tayyip" I think truly believes he knows economics better than anyone else, based on his coercion of the central bank. The fact that he set his country up for economic vulnerability to the US and then went out of his way to piss off the US seems to completely escape him.

[Markus Becker]

If the reporting is true, a deal was made and agreed to. One side fulfilled their end and Turkey reneged and is now looking to renegotiate. Trump's telling them to fulfill the original deal or drop dead. Turkey shouldn't benefit from being a backstabbing cheat. If Erdogan thinks his new BFF Putin is going to give him better terms than the US and the EU, he's a bigger fool than I thought. Though, if he's planning on going full despot them Putin may be his only play.

The little sultan screwed himself pretty good. If Trump gave in he'd look weak in the eyes of everybody including Iran's. Amazing miscalculation by Erdogan but it might help sending a strong message to Iran.

[Tim the Tank Nut]

freefall for the Turks

couldn't happen to a better group

[Roman Alymov]

freefall for the Turks

couldn't happen to a better group

Turkey is regional counterweight for Iran. Weaker Turkey=stronger Iran. Practical result of this Trump policy is Caspian sea countries (including Iran and Turkey client Azerbaijan) signing declaration on joint use of the sea, after 20+ years of useless talks

https://www.dw.com/en/russia-iran-and-other-states-agree-on-caspian-sea-access/a-45051799

Russia, Iran and other states agree on Caspian Sea access

The five countries bordering the inland sea have been at odds over the waterway since the fall of the Soviet Union. The deal could pave the way for the development of valuable oil and gas projects.

[Tim the Tank Nut]

we shall see.

I think you will be surprised at what comes next (or maybe I will be!)

President Trump has Turkey lined right up and it is a bright warning flare for Iran.

[Roman Alymov]

we shall see.

I think you will be surprised at what comes next (or maybe I will be!)

President Trump has Turkey lined right up and it is a bright warning flare for Iran.

Of course in our days everything is possible – we have seen President Erdogan’s two U-turns in relations with Russia not so long ago, but it is big question what is his limit in u-turns as he is in complicated internal political situation. Will see.

[Markus Becker]

"Turkey is regional counterweight for Iran. Weaker Turkey=stronger Iran."

 

That would be true if Iran wasn't facing even worse sanctions. But they do and they and they have a much, much weaker economy to being with.

[Tim the Tank Nut]

I think President Trump may break them both.

There is no reason to trust the Turkish Government, for us or for Russia

[Panzermann]

Actually he already did yesterday saying "they have their dollars we have our allah".

 

No kidding.

 

 

 

 

Maybe I ought to become caliph instead of the caliph!

[Mistral]

Its down another 9% at the moment, 85% down in 12 months, it seems the son in law went on a little trip to Qatar to see if he can get some change for the Sultan.

[glenn239]

News suggests that Turkey will seek to trade internationally using the Chinese Yuan for payment instead of the dollar. We buy from a company in Turkey so I'll know if and when that happens. Given that Russian banks might be sanctioned too, and that Iranian oil to China can't be paid in US dollars, this second international payment system based on China is probably going to expand in the next few years. Overall, anyone thinking the US will "break" Turkey or Iran with sanctions must be betting on either domestic turmoil leading to regime change or international unity to keep them isolated. Neither seems likely, so some muddled mess of an outcome looks more likely.

Edited August 13, 2018 by glenn239

[Tim the Tank Nut]

the Yuan has its own problems

 

There is certainly a risk in driving markets toward China but NOBODY does business with China and comes out ahead. If you get in with China, they own you completely and forever and segments of the market know that

[Josh]

News suggests that Turkey will seek to trade internationally using the Chinese Yuan for payment instead of the dollar. We buy from a company in Turkey so I'll know if and when that happens. Given that Russian banks might be sanctioned too, and that Iranian oil to China can't be paid in US dollars, this second international payment system based on China is probably going to expand in the next few years. Overall, anyone thinking the US will "break" Turkey or Iran with sanctions must be betting on either domestic turmoil leading to regime change or international unity to keep them isolated. Neither seems likely, so some muddled mess of an outcome looks more likely.

The problem isn't that Turkey can't do business as usual trade wise. The US hasn't even threatened to push Turkey out of the dollar market or involve SWIFT in any way. The problem is that unless Recep allows his central bank to be more independent, foreign investors will continue to back out and locals will continue to convert to other currencies whenever they can. Meanwhile all of the debt Turkey has, both private and public, becomes more difficult to service because something like 90% of it is in foreign denominations - which just got dramatically more expensive to pay down. It doesn't matter who they deal with economically, this will still be a problem and it was a pre-existing one. US sanctions are exerting even more pressure on a currency that had already lost a third of its value beforehand anyway.

 

There are ways to manage this crisis (giving Trump his pastor back would be a great step in the right direction, obviously) but Erdogan is completely unwilling to implement them, and arguably his government would lack the talent and honesty to do so even if he had a mind to. I think minimally he will be forced to increase interest rates by the end of the week and I think Turkey goes into recession regardless of what happens next.

 

Good article that makes historical comparisons to Korea, Malaysia, and Argentina:

 

https://www.nytimes.com/2018/08/11/opinion/partying-like-its-1998.html?rref=collection%2Fsectioncollection%2Fopinion-columnists

Edited August 13, 2018 by Josh

[Roman Alymov]

"Turkey is regional counterweight for Iran. Weaker Turkey=stronger Iran."

 

That would be true if Iran wasn't facing even worse sanctions. But they do and they and they have a much, much weaker economy to being with.

Thanks to US&Co crashing Iraq, and US&KSA crashing Syria, Iran and Turkey are left the only local powers standing in the region – like they were for centuries. Surely they are much weaker then it could be without US sanctions. But now they are not facing each other as main rivals – Trump is giving them common enemy (first time since crusades). How it will end up we will see in near future, taking into account USA is also seeking more troubles with China and Russia. Joint efforts of US President and his opponents in USA are doing their best to push all US opponents into alliance unsinkable couple of years ago.

[Roman Alymov]

I think President Trump may break them both.

There is no reason to trust the Turkish Government, for us or for Russia

It is next to impossible to talk about trust between Turkey and Russia after history of wars and alliances going back to dark ages. It is shaky cooperation based on temporary interests.

[glenn239]

the Yuan has its own problems

 

There is certainly a risk in driving markets toward China but NOBODY does business with China and comes out ahead. If you get in with China, they own you completely and forever and segments of the market know that

 

I've seen reports that Europe is also thinking of relying less on the US dollar for international trade - at some point the Euro might become a trading currency as well.

[Tim the Tank Nut]

the Euro has to contend with the inequity of strong and weak member states, with Germany cutting a deal on energy with Russia the Euro is going to be in bad shape. The dollar is the go to currency for now.

It's unsettling to watch the US participate in economic war because we aren't used to seeing it but the other parties involved have been at war through economics for some time.

The difference is that Turkey has an economy smaller than Florida and Iran is less than New York. We have the leverage and now is the time to use it.

In the end it will be cheaper than shooting war and less bloody.

[Markus Becker]

"But now they are not facing each other as main rivals Trump is giving them common enemy (first time since crusades)."

 

Turkey did violate the Iran sanctions already. Part of the deal for the release of the US hostage in Turkey was about that. Plus the choice between Erdogan and the Mullahs is like one between cancer and aids.

 

And Turkey's economic boom has been made possible by heavily borrowing for years. A lot of that needs to be repaid soon and in dollars.

[Roman Alymov]

 

The difference is that Turkey has an economy smaller than Florida and Iran is less than New York. We have the leverage and now is the time to use it.

In the end it will be cheaper than shooting war and less bloody.

Not so long ago budget of Russia was smaller than one of NY City (and is still not so much bigger now). In 1950th this ratio was even worse. But having big economy is not enough to win in conflict – as history repeatedly demonstrated. That is what Erdogan was referring to when saying “They have their dollars – we have our people, we have our right and we have God”. (quote by Mistral on previous page was not complete http://www.tank-net.com/forums/index.php?showtopic=41877&p=1381842 , here is translation into Rus from Azeri news https://haqqin.az/news/133987) another translation

“We will work a lot and we will try to make our country more modern with all of its 81 provinces, God willing. Just know that we are better than yesterday now, and tomorrow we will be better than today. Don’t worry,” Erdoğan said.

“There are various campaigns. Don’t care about them. And don’t forget that if they have their dollars, we have our people and our God ... I want your patience and ardour,”

http://www.hurriyetdailynews.com/if-they-have-their-dollars-we-have-our-people-and-god-erdogan-says-135654

How all this going to work in reality – will see….

[Josh]

Russia never borrowed half their GDP in dollars nor did it rely on foreign investment for its economic growth. Erdogan bought economic growth through foreign borrowing and that's what maintained his popularity. That policy, along with forcibly keeping interest rates low to encourage easier credit, are precisely why Turkey was already in deep trouble even before the US said anything. They likely would have gone through a recession just with their continued economic policy regardless; the US is just accelerating what would have happened anyway.

 

Also remember politically Turkey as at least as divided by the US and nearly half of its citizens, primarily the more urban populace, never like Erdogan and his islamist policies in the first place.

[Colin]

He has to spend a lot to keep his political opponents in check, and that will get harder to do, then there are the Kurds.....

[bojan]

Nobody GaF about Kurds and as long as Turkey can use methods it used so far they can deal with them indefinitely.

[Roman Alymov]

Russia never borrowed half their GDP in dollars nor did it rely on foreign investment for its economic growth. Erdogan bought economic growth through foreign borrowing and that's what maintained his popularity.

Yes it is true – and I was repeatedly told here Russia badly need Western investments and borrowing. Turkey got all this for years if not decades – and now it is the trouble? I think reality is somewhere in the middle: yes foreign investment was good for Turkey (as they got lots of hew roads, airports and so on now), but – like Russia – they could still do without it (as Russia also got lots of hew roads, airports and so on). Recession? Quite likely. Will recession make Turtkey into policy change, or to deeper confrontation against US? I do not know.

 

 

Also remember politically Turkey as at least as divided by the US and nearly half of its citizens, primarily the more urban populace, never like Erdogan and his islamist policies in the first place.

Yes it is also true. When Turkey was in confrontation with Russia after Su-24 shot down, lots of Turks from coastal areas were telling Russians they do not support Erdogan etc. But is this internal divide enough for political changes, or just will cause outbreaks of civil war and repressions against pro-Western forces? No idea.

[Josh]

Foreign investment can be a double edged sword; it depends on how you handle it and to what degree you allow it. A good case could be made that Turkey very heavily over extended itself. Also the fall of the lira originated in Erdogan's control of the central bank, new presidential powers, and his refusal to allow interest rates to go up. The lira (and the payment of said foreign loans) probably would have been fine if he just let normal economics play out.

 

I don't see any way there are political changes until at least the next presidential election, assuming Recep allows one (which I personally doubt). There likely will be some civil unrest in the future however, and I believe the AKP does not have control of parliament - although I believe that Recep can now unilaterally dissolve parliament, which I think we will see happen if his party loses any more power in the body.,

 

I admit that I think I was wrong in that Recep seems dead set against giving the pastor over even if it means the Turkish economy tanks. Trump and Congress have moved to block the F-35 sale, which is a happy circumstance to come out of the whole mess and one that likely won't be reversed until Recep gives in, which again, mea culpa, it seems like he will not. To the contrary, he seems to be taking the opportunity to use US sanctions as the scapegoat for his own failed economic policies. He has sufficient power now that I don't see him being at all threatened, but presumably his pet projects and military spending will ultimately have to be curtailed.