The Turkish Central Bank surprised markets this week with a 125-basis point (bp) rate hike. The Bank had already hiked the rate 300-bp two weeks ago. Can this move now sustainably boost the value of the Turkish Lira against the dollar? I don’t think so.
Turkey and Argentina were like economic twins back in the 1980s. They shared many stories about the balance of payments, currency crises, and International Monetary Fund (IMF) conditionality. They later diverged, with Turkey seemingly outperforming its twin. But recent events brought them back into the same fold, and this time, Argentina appears to be in a more advantageous position. Let me explain.
The Turkish Lira is in free fall, and the entire Turkish economy is reeling from its effects, suffering in silence, praying for deliverance.
Remember what Robert Reich, President Bill Clinton’s labor secretary, said about the Republican-led government shutdown in 1996? “You know, much of what the federal government does in the United States... is to provide what is almost a large insurance policy for people. And it’s only when you get in trouble... that you realize that the insurance policy has effectively been cancelled. And that’s what’s happened now,” he said.
When asked about the situation in Turkey, I have recently been quoting Austrian-British philosopher Ludwig Wittgenstein: “You cannot draw the seed up out of the earth.
Turkey is heading into snap elections in less than two months. A glance at the headlines tells us one thing: Afrin is out, elections are in. You can tell a lot about a country by headlines alone.
President Recep Tayyip Erdoğan surprised everyone this week by rushing Turkey into early elections on June 24. Why this rush? I think the unbearable and uncontrollable plunge of the Turkish Lira is the major culprit.
Turkish President Recep Tayyip Erdoğan, Russian President Vladimir Putin and Iranian President Hassan Ruhani were in Ankara last week to talk about Syria.
Turkey had a record growth rate of 7.4 percent in 2017. But as of April the Turkish Lira has depreciated by 8 percent in 2018. This trend, it seems, will continue. Can we say that record growth has made the lira more vulnerable? If so, why?
