Moon of Alabama Brecht quote
December 16, 2021

Turkey's Inflation Is Erdogan's Hail Mary Move To Save Himself From IMF Interference

Turkey is in for a wild ride. High inflation and negative interest rates are eating away people's income and savings.

The cause is a Hail Mary move by President Erdogan to save his political legacy. He is currently engineering a devaluation of the Turkish lira to establish a positive balance of trade. If he manages to achieve that Turkey can avoid to beg the International Monetary Fund (IMF) for a loan. High inflation is the price that he is willing to pay for that.

Today Erdogan reinforced his move:

Turkish Central Bank on Dec. 16 has lowered 1-week repo rate by 100 basis points to 14%, in accordance with the market expectations.

The Turkish central bank blamed consumer price increases on "developments in exchange rates and supply side factors such as the rise in global food and agricultural commodity prices, supply constraints, and demand developments."

It said it would reassess "all aspects of the policy framework" over the first three month of 2022.

The Turkish central bank interest rate is now at 14% while the latest official inflation rate is at 21%. The real inflation rate is higher.

It is disingenuous for the central bank to blame consumer price increases on "developments in exchange rates". The exchange rate of a freely traded currency is determined by the real interest rate, the difference between nominal interest rates and inflation:

In order to understand the so-called lira crisis, you have to understand the basic mechanics of currency and bond markets. The most important fact about currency and bond markets is that interest rates and exchange rates are jointly determined. The Turkish central bank can control either the exchange rate or the interest rate — it cannot control both in a world of free capital flows.

The lira has been falling gradually since 2014, before plunging precipitously this year.


In February 1 Turkish Lira was worth 14.5 U.S. cent. Today its value is 6.4 U.S. cent. Turkey has to import all the oil and gas it needs. These are valued in U.S. dollar. Today a Turkish taxi driver needs to pay double as much to fill his gas tank as he had to pay a year ago. Energy price increases leak into all other goods and services. Wheat needs to harvested, dried, transported, milled and backed to become bread. The bread prices in Turkey are regulated but bakeries can not afford to subsidize their product. They go bankrupt:

When it comes to bread, a hallowed staple that Turks traditionally eat with every meal, the government has intervened significantly, pressuring bakeries to sell the traditional white loaf at a price lower than it costs to make, hoping to short-circuit the inflation that Mr. Erdogan fears could sow discontent and dim his election chances 18 months from now.

Grocery stores have been forced to stick to a fixed price for selling bread that is set by the Chamber of Bakeries, a trade association, but most bakers said the order came from the central government.
Yet, in a sign of the depth of the economic crisis, bread sales are down and bakeries, forced to keep prices to the level set by the Chamber of Bakeries, warn that they are facing bankruptcy.

“I cannot turn around the business,” said Ahmet Ucar, 39, whose bakery stood up the hill from the government kiosk. “The price of flour keeps increasing.”
Mr. Ucar said he had gone 100,000 lira into debt during the pandemic and now, with the currency crash, was struggling with the uncertainty caused by price fluctuations. “You cannot understand what the government is going to do next,” he said.

Turkey's President Recep Tayyip Erdogan wants lower interest rates. He claims that high interest rates cause inflation and cites religious reasons against them. That is nonsense. What Erdogan really wants is pure mercantilism, to lower the value of the Turkish lira to increase exports:

Erdogan has sought and achieved a permanent devaluation of the lira, effectively lowering unit labor costs in Turkey thereby making Turkish workers more competitive relative to Germans. It’s what economists call a ‘beggar thy neighbor’ policy. [..] [Y]ou cannot understand what Erdogan is up to unless you appreciate the governing logic. Financial investors may be dumping lira assets but, with a weaker lira, Turkish products do become more competitive at home and in European markets, and Turkey does become a more attractive destination for FDI by global production firms looking to harvest lower unit labor costs.

The logic is hardly new. Americans have long claimed that China was intervening in currency markets to make Chinese products more competitive. The same allegation was made against the Japanese when Japan was threatening to become ‘number one’.
[T]here is nothing new about a medium-sized country pursuing a weaker currency to become more competitive. As a matter of doctrine, economists are loath to say that such a policy could ever be effective. But the proof of the pudding is in the eating. Countries pursue competitive devaluations because they work. Indeed, Turkish exports have responded enthusiastically.

Turkey - Exports (10 y)


Via Trading Economics:

Exports from Turkey surged 20.1 percent from a year earlier to record high of USD 20.79 billion in October 2021, amid a further global demand recovery and the falling lira. Sales grew for manufactured products (20.3 percent), agricultural goods (12.5 percent), and mining and quarrying (19.9 percent). The main export partner was Germany, followed by the US, the UK, Iraq and Italy.

Despite an increase in export and tourism, which also brings U.S. dollars, Turkey's balance of trade in October was still at a negative -1437.90 million US$. But that was better than the -2591.34 million US$ deficit in September. Turkey has only a few billion U.S dollar left in its central bank reserves and can no longer afford a trade deficit. Erdogan is therefore trying to get to a positive trade balance where Turkey exports more than it imports and also attracts additional tourist revenue: Decrease the value of the lira -> increase exports and tourism -> balance the trade.

Turkey - Balance of Trade (10 y)


If that does not work soon Turkey will run out of U.S. dollar and will have to go to the IMF and ask for a large U.S. dollar loan. It would come, as all IMF loans do, with stringent political demands. That would be the ultimate humiliation for Erdogan. In 2013, at the hight of his success as politician and shortly before he became president, Turkey was immensely proud to have paid back its last IMF loan:

Turkish Deputy Prime Minister Ali Babacan pushed the button for paying off the last installment of its debt to International Monetary Fund (IMF) on Tuesday, and Turkey additionally committed IMF to extend USD 5 billion loan.

The last installment of Turkey's debt to IMF was transferred by Babacan and the Undersecretary of Treasury Halil Canakci at Turkish Central Bank in Ankara. Babacan emphasized that Turkey should be proud of paying off the debt to IMF, with whom Turkey made 19 Stand-By agreements.
Turkey paid off its 52-year-debt with IMF --with whom Turkey affiliated in 1947-- thanks to political stability and fiscal discipline.

Asking for new IMF support would bring shame over Erdogan. It would also reopen the door to U.S. meddling in Turkey's policies. It is no wonder then that he is trying all he can to avoid that.

But there is of course a huge risk in what he is doing:

The main risk is that inflation may get out of hand. Some of the recent spike is simply ‘pass-through’ of the higher price of imported commodities as a result of the weaker lira. That’s by definition transitory. The real risk is an expectations spiral. If economic actors expect higher and higher inflation, things may well get out of hand.

It seems to me that the expectation spiral is already happening. This chart below is the inverse of the currency chart above. It shows a hockey stick like increase of the number of Turkish lira needed to purchase 1 U.S. dollar. Since mid November the value of the lira has slumped with ever increasing speed.


Erdogan could have stopped the lira slump today:

In order to contain [the expectations spiral] threat, the Turkish central bank will eventually have to raise interest rates, which would also stabilize the lira. Paradoxically, we will know Erdogan’s wager has succeeded precisely when he capitulates. By allowing the policy rate to rise, thereby stabilizing the lira and containing inflation, he would have secured a permanent devaluation and restored macroeconomic stability. The key is knowing when to fold.
Erdogan has shown himself capable of such tactical flexibility. As the FT notes, he’s ‘a wily pragmatist’ who let the central bank ‘raise interest rates during previous episodes of currency volatility’. This time, however, he ‘appears determined to follow through on his ideological commitment to low interest rates.’

By directing the central bank today to again decrease its interest rate Erdogan has achieved the opposite of stability. At a negative real interest rate of more than -7% the lira has now nowhere to go but down.

To stop the slump and to decrease inflation would now need a huge increase in interest rates. It would then put a brake on new economic activities as domestic loans in Turkey would suddenly become prohibitively expensive. Turkey's economy would go into recession.

This ride between Scylla of high inflation and IMF Charybdis is the long term consequence of Erdogan's economic policies. Erdogan became prime minister in 2003. In 2014, after a change in the constitution he became president.

Turkey - Balance of Trade (25 y)


In 2003 Turkey had a small and manageable negative trade balance. Throughout his time as ruling Sultan wannabe Erdogan has stood for cheap credit and large government projects. Both have cost a lot of money and increased the trade deficit. His war on Syria since 2011 was also very expensive. The trade deficit exploded but Erdogan tried to project economic stability. In 2019, when the lira began to drag down, Erdogan's son in law, then finance minister, spent $130 billion of Turkey's currency reserves to stabilize the lira. That left the government's war chest empty.

With no more funds available to defend the value of the lira Erdogan changed strategy and began the current Hail Mary move of intentionally dragging the lira down to thereby lessen the trade deficit. But the resulting high inflation is now a political burden which will make it difficult for him to win another election. To increase the interest rate early next year to stop the lira slump will likely be too late to repair the serious damage inflation is now causing.

But there is really little else that Erdogan can do if he wants to avoid a demeaning begging tour to the IMF.

The people of Turkey are in for a wild ride and an ever increasing inflation that will make all of them even more poor than most of them already are. Political instability in Turkey will increase as despair sets in. It is unlikely though that it will be sufficient to lead to Erdogan's ouster before the elections in 2023.

A new government will by then have a politically really difficult task to right the half sunk ship without causing more peoples' ire.

Posted by b on December 16, 2021 at 16:08 UTC | Permalink


Thanks B. Usually, economic mumbo-jumbo leaves me looking for other news to read. This piece I could understand. Again, thanks

Posted by: rgl | Dec 16 2021 16:43 utc | 1

'Erdogan is a thief'
-President Asad

Erdogan, and by association the Turkish population, will suffer the fate of a thief- one-day upswing and 99 days downswing.

Posted by: nme | Dec 16 2021 17:07 utc | 2

There is a chance the gambit might actually work. If the brutal devaluation is combined with an advantage in energy cost compared to EU, then it will surely result in favorable prices for industrial, chemical, and agricultural exports to EU.

There is also the age-old fraud standardized by oligarchs in countries experiencing a currency crisis. They figure out the game early, move their money out to a third country/currency (perhaps in EU or the Gulf region). Then, based in that third country, they "lend money" back to their home at wildly profitable interest rates, and/or re-purchase at a massive discount assets capable of "repaying" themselves. You can be sure that is happening.

At the same time, IMO there must necessarily be a deal with one or more energy suppliers to make it add up. There are many others now with deep pockets besides the IMF.

Posted by: ptb | Dec 16 2021 17:08 utc | 3

FYI 60% of the bank savings in Turkey are in $/€...
I don't think there is any other country like that in the world...

The people of the country are getting poorer everyday while a few are getting richer simply because they hold $ in the bank (350.000 people = 0.4% of the population)

Posted by: SysATI | Dec 16 2021 17:09 utc | 4

nobody ever asks who benefits from high interest rates from developing countries and of course politically charged commentators will never mention manipulations by big institutions who make their earnings by playing with currencies

Many such cases

Posted by: Bob | Dec 16 2021 17:26 utc | 5

The great economist, Dr. Michael Hudson, has recently stated that Erdogan has given its' citizens the option of keeping their Lira where it is, OR, placing that money in the US$$. Hudson states, that given the US$$ problems, Erdogan "is committing economic suicide." Moreover, Erdogan has dismissed the last three financial experts who understand the system far more than he does.

Given the present circumstances of the US$$ as a predatory monster; via trade deals, many nations are using each other's currencies that are NOT pinned to the US$$. Those nations include: Russia, China, much of Eurasia, some Middle Eastern/African, Central Latin American and others. In turn the US/EU financial markets are being strained as the value of the US$$ is weakening.

Just reporting this news.

Posted by: Rubicon | Dec 16 2021 17:45 utc | 6

Is THAT what is actually going on? Even the first sentence of the article doesn't pass the smell test and sounds untrue.
As we all know, a currency CAN and is manipulated by outside forces; meaning other countries such as US can decide to destroy a currency by simply not buying it. That is what the West has been doing to the ruble for while now. I think the The reality is much simpler: the USA has forced other countries to NOT buy the lira to crash it so they can get influence over Erdougan.

As usual, b' economic articles sound uneducated, he should stick to writing articles about political events.

Posted by: Hoyeru | Dec 16 2021 17:51 utc | 7

buying S-400 made USA furious. And USA is spiteful and vengeful and WILL attack with everything they got. And qwhat they got is economic power. Putin still hasnt learned that lesson yet. But he is learning. Not fast enough though.

Posted by: Hoyeru | Dec 16 2021 17:55 utc | 8

Erdogan, and by association the Turkish population, will suffer the fate of a thief- one-day upswing and 99 days downswing.

Posted by: nme | Dec 16 2021 17:07 utc | 2

Interestingly, Ali Baba and 40 robbers were all Kurds -- mind you, those were fictitious characters not meant to resemble any actual persons.

Posted by: Piotr Berman | Dec 16 2021 17:58 utc | 9

I would think that China (and perhaps Russia) could lend plenty of dollars, probably in the form of swap lines negotiated between central banks.

These also would come with strings attached, like Erdogan leaving Syria and ending his support for those seeking regime change there.

Posted by: Feral Finster | Dec 16 2021 18:11 utc | 10

Erdogan seems to not be doing good for Turkish citizens but he is operating in a world in which the delusion of "free capital flows" as the correct alternative to his strategy is bankrupt social strategy as well.

This myth that Hand, The Invisible does not have any agenda is total BS. When you print money from nothing and it represents the Reserve Currency for the world, any commodity, nations currency or free capital flows can be manipulated at will.

Just because we don't get to see the actors moving Hand, The Invisible's levers does not mean free capital markets exist. Humanity lives in a POLITICAL economy, not the Hollywood created only purely economic one. Manipulation of nation's economies are done for global political reasons and the current civilization war about public/private finance is the central crux of the battle.

Posted by: psychohistorian | Dec 16 2021 18:15 utc | 11

I really dont know why this gentleman (Erdog anish) sultan is sooo the hell out scared desperate about his inflation.
This has a rather simple solution,Mr spare time Sultan.
Just frame, tie up and put the entire Turkish economy in an across the board Indexation plan.
Yeah, index it all.
Wages, taxes, interest rates (with a ceiling), debts in general either trade or fiscal, every day scaled payments get under a s m a l l, daily or weekly devaluation rate. According to which all the above rights or obligations will act in practice. You will know in advance how much the T Lira will be worth next
January 14th, 15th etc. Everything, every single Lira received or paid for...
And last not least the Exchange rate will be progressively over time percentage if preferred, be deescalated against the green backs, the yuan or whatever the Sultan pleases best.
How to do that? there are dozens of top notch economists who know the process.
It was done in Brazil for over a decade with , in the 80ties and early 90ties, with good results. Their economists and operators are still alive.
And when the average Turkman-woman gets tired or the inflation fades away [nothing is forever] simply put an end to it by des-indexing the whole monster.
---Oh, you re welcome.

Posted by: augusto pita | Dec 16 2021 18:20 utc | 12


I have a little problem with your CONCLUSION, that there is a plan behind.

a list of counter-ops, interventions and PR-reports though the last years, as you mention one:

- "erdogan's son in law, then finance minister, spent $130 billion of Turkey's currency reserves to stabilize the lira. That left the government's war chest empty." happend often, constantly!

- his kindly askings of turkey people to spend foreign currency, also limitation of buying it or hiding it - by new laws.

- his pr-shows: like, its unpatriotic to hold foreign currencies - etc...

why such a slow death - why got depended on IMF in future - why becomming endangered by a default? by Occam's razor I suggest stupidity paired with incompetence.

as I remember correctly - there is an idea how to devalute, make it hard, but fast - till the wished exchange rate is set and only then intervene. there is no strategic sense to do it constantly, but slowly!

Posted by: prneost | Dec 16 2021 18:21 utc | 13

Russia has dollars coming in, more every day. However, for policy reasons they convert them almost immediately into gold. Maybe Turkey could borrow some bullion.

Posted by: jhill | Dec 16 2021 18:24 utc | 14

Wow,b! Do you also believe the US is the greatest force for good and a beacon of democracy in the world??

"The most important fact about currency and bond markets is that interest rates and exchange rates are jointly determined. The Turkish central " Unbelievable.

Markets are not free and never have been. Exchange rates were fixed by the US and Brits at the end of WW II.
Rates have been and continue to be 'fixed'.

All was well with the Turkish lira 2011-2016 as long as it did the Empire's bidding in Syria. The war funding and plunder led to rampart- even by Turkish standards, corruption. Which is OK for the Empire as long as the $ trickle/flow up the right direction

Erdogan subverted that flow and ever since has been subject to western regime change efforts

Now Erdogan simply knows too much about CIA/Block ops, is too big a risk and like Saddam, Cheny's old pal, must disappear.

So first there was the failed (thanks to Putin) color revolution, and since then an economic war that is just short of the open sanctions that would create a wave of unwanted refugees.

Posted by: Les7 | Dec 16 2021 18:32 utc | 15

thanks b.... but, i am in agreement with @ 3 ptb and also @ 11 psychohistorian....

my problem is as much as i would like to see erdogan capsize and lose control, i put the dynamics here in a much broader context... fiat currencies mean nothing at this point.. it is all a game of charades and the wall st types continue to clean up.. until the world financial system is redesigned - this kind of stuff will continue.. thanks for your post!

Posted by: james | Dec 16 2021 18:53 utc | 16

It looks like Erdogan's dream of a new Ottoman Empire is toast. It always looked wildly optimistic, so no real surprises there. Bring the Turkish troops home from Libya, stop trying to steal Syrian land and get over any idea of extending Turkish influence all the way into Siberia. Good.
One serious downside for Turkey is what in the world will she do with all those Takfiris, not to mention the refugees, she has been hosting?
And what will this do to the proposed new Bosporus canal?
The cautionary tale of Icarus comes to mind.

Posted by: Hal Duell | Dec 16 2021 18:57 utc | 17

Turkeys beating will continue until Erdo closes the Bosporus to all Russian military and civilian ocean traffic.

Here's a good read..

Confessions of an Economic Hit Man

And some he makes some interesting statements in this vid ( and also some climate junk )

An Economic Hit Man Confesses

Anyone who thinks that Turkey is not under attack is'nt thinking clearly.


Posted by: nobody | Dec 16 2021 18:59 utc | 18

Well, bread prices at the local Bakkal's have gone up 25% the last two weeks. They are supplied by the small bakers. The larger markets with bagged breads have experienced bread price rises of at least 30% in the last week. This is in ıstanbul where I live and shop.

We have known that Erdoğan has been sinking the Lira to increase exports and increase the balance of payments and we have suspected he was also hoping to do a Putinesque import substitution game to increase local production over foreign. the problem is Russia has energy, Turkey does not. Well, it has dirty coal, but that won't get it done.

Turkey has weathered much higher inflation rates in the eighties, but whether Erdoğan can keep the lid on it and still dodge the hyperinflation explosion. Well, it will be interesting. Bought a big back pack for the increased amount of Lira needed to buy a loaf of bread in the near future.

Posted by: Blue Dotterel | Dec 16 2021 19:19 utc | 19

Thanks, b. Can extend your analysis to look more closely at the winners and losers, i.e. the export-oriented companies and everyone else? How does this play out in the AKP? Won't it drive a rift between its more petty bourgeois elements and the big players?

Posted by: dadooronron | Dec 16 2021 19:38 utc | 20

Reading in b's article that "Turkey has only a few billion U.S dollar left in its central bank" / "If that does not work soon Turkey will run out of U.S. dollar"

I couldn't help but wonder: isn't this effectively a form of defacto de-dollarization?

From a 2018 article "Turkey Repatriates All Gold From The US In Attempt To Ditch The Dollar":

"After Venezuela, Germany, Austria and the Netherlands prudently repatriated a substantial portion (if not all) of their physical gold held at the NY Fed or other western central banks in recent years, one month ago Turkey announced that it too has decided to repatriate its gold stored in the US Federal Reserve and deliver it to the Istanbul Stock Exchange"

"According to the latest IMF data, Turkey’s total gold reserves are estimated at 596 tons in May, up 5 tons since April, and worth just under $23 billion, rising 40% over the past year. This makes Ankara the 11th largest gold holder, behind the Netherlands and ahead of India."

"Meanwhile, Erdogan has taken a tough stance against the US currency, criticizing dollar loans and stating that international loans should be given in gold instead.

“I made a suggestion at a G20 meeting. I asked: Why do we make all loans in dollars? Let’s use another currency. I suggest that the loans should be made based on gold,” Erdogan said"

"In what some saw an appeal for a gold standard by the Turkish president, Erdogan added that “with the dollar the world is always under exchange rate pressure. We should save states and nations from this exchange rate pressure. Gold has never been a tool of oppression throughout history."

Looking at the chart at (choose longer time frames) it looks like Turkey's gold reserves went from around 100 tonnes before 2017 to almost 600 tonnes in 2020, before declining to around 400 tonnes this year, but still up almost 4-fold from before 2017.

Posted by: Canadian Cents | Dec 16 2021 19:56 utc | 21

Somewhat related from a June article reporting that a "20-ton gold reserve worth $1.2 billion" was discovered in Turkey:

"Turkey, which in the early 2000s was unable to produce even one gram of gold, last year produced 42 tons of gold in 18 active mines despite the pandemic," Varank said, highlighting mining accomplishments under the AKP, which came to power in 2001.

While before 2001, all of Turkey's gold needs were met by imports, now Turkey’s gold production reduces the country’s current deficit by $2.4 billion annually, he noted, adding:

"But we don’t consider these efforts enough, we’re going forward with many new projects that will take the sector even further."

Varank said that through most of the republic’s history, it never prioritized mining.

He explained: "Until the early 2000s, gold was not produced (in Turkey). Is that because there’s no gold (here)? Of course not. Turkey ranks 12th in the world in terms of proven gold reserves, and when we look at the potential, it’s among the top five."

Posted by: Canadian Cents | Dec 16 2021 19:58 utc | 22

Anybody who hates the IMF can't be all bad.

Antoinetta III

Posted by: Antoinetta III | Dec 16 2021 20:29 utc | 23

gosh. it's really scary. I thought the orwellian Americanism narrative was the most corrupt, but no one, so far, has argued that high interest rates cause inflation. Conceivably there are worst things than being ruled by a brain-damaged corporate militarist.
I suppose we will see them in the near future.

Posted by: Mathew | Dec 16 2021 21:09 utc | 24

vk's analysis is missed on topics like this.

Posted by: S.P. Korolev | Dec 16 2021 21:18 utc | 25

@ Blue Dotterel | Dec 16 2021 19:19 utc | 19... are you in turkey at present? thanks..

@ Canadian Cents | Dec 16 2021 19:58 utc | 21 / 22.... so are turkeys gold reserves up, or down? sounds positive, especially your last link @ 22...

@ Antoinetta III | Dec 16 2021 20:29 utc | 23... ditto that!

here is a related article for anyone interested -
Will The Multinationals Leave Ireland?

Posted by: james | Dec 16 2021 21:22 utc | 26

Is this the result only of economic incompetence or is Erdogan pursuing, a bit like Trump, a policy of accelerationism? That is, bring to ruin what there currently is in order to build something else in its stead?

Because I would understand having second thoughts on your economic advisors (for example, if they partake in the criminal dogmas of the Washington Consensus) but simply following a "hunch", which is what Erdogan seems to be doing, is not really the most appropriate way.

Meyssan says Erdogan is an old member of the Muslim Brotherhood, perhaps they have a hidden interest we are not seeing? Or is it really just incompetence?

Posted by: lyy | Dec 16 2021 21:24 utc | 27

Is this the result only of economic incompetence or is Erdogan pursuing, a bit like Trump, a policy of accelerationism? That is, bring to ruin what there currently is in order to build something else in its stead?

Posted by: lyy | Dec 16 2021 21:24 utc | 27

I think he's playing chicken, with "Biden", but you could be right. In any case, I would be reluctant to bet against him.

Posted by: Bemildred | Dec 16 2021 21:40 utc | 28

...strings attached, like Erdogan leaving Syria and ending his support for those seeking regime change there.

Posted by: Feral Finster | Dec 16 2021 18:11 utc | 10

I was thinking along the same lines. Xi et al. could also insist that Turkey stop supporting separatists in the western part of China.

Posted by: farm ecologist | Dec 16 2021 22:04 utc | 29

james @26, based on, Turkey's gold reserves have been dropping in the past year and half since a peak in mid-2020, but they are still up about 4x from where they were before 2017. This view makes it easier to visualize.

So their gold reserves are up a lot compared to before 2017, while their USD reserves are - going by b's post - going toward zero.

Wasn't the coup attempt against Erdogan in mid-2016?

So looking at the same graph again, pretty much right after that coup attempt a big climb in Turkey's gold reserves started ... Maybe no connection.

Might be interesting to superimpose a graph of Turkey's USD holdings over the same time.

Posted by: Canadian Cents | Dec 16 2021 22:12 utc | 30

El dinero le llegará de Qatar que es el pagador final de sus aventuras bélicas, no necesita al FMI para nada.

Posted by: Frasco | Dec 16 2021 22:20 utc | 31

This is good news for Syria, in that a broke Turkey has no money for war and will have to withdraw. But Syria may end up with instability at the northern border.

Posted by: Passerby | Dec 16 2021 22:20 utc | 32

The analysis is sound but incomplete.
In particular, the role Turkey plays in natural gas transit from Azerbaijan and potentially UAE/Qatar is not considered.
A second major oversight is what Turkey can extract from 3rd parties: whether Russia, China, The US, and the EU over issues ranging from Turkstream to S400 to Incirlik to refugees flooding Europe.
Turkey has played this fan dance many times before - it is not at all clear they cannot do so again.
Then there is Iran. Turkey can access Iranian oil simply by helping Iran evade sanctions.
All this discounts the domestic benefits the incumbent government can reap by becoming the buyer of last resort for businesses.

Posted by: c1ue | Dec 16 2021 22:52 utc | 33

Indeed as others are pondering this: is Erdogan actually trying to be forced to choose to beg money from US or from China, to have a good excuse to fully jump ship? Of course it's an insane strategy that will hurt a lot of Turkish people, but you never know.

Posted by: Clueless Joe | Dec 16 2021 23:00 utc | 34

The exchange rate of a freely traded currency is determined by the real interest rate, the difference between nominal interest rates and inflation

Lulz, there's no such thing as "freely traded" financial assets any more (including currencies) because central bank are pressing their thumbs on the scales to stop everything imploding.

How long they'll succeed is another matter.

Posted by: Observer | Dec 16 2021 23:55 utc | 35

They're getting the screws put to them over the purchase of military systems from Russia. There've been progressively more trade sanctions over the last two years to starve their system of foreign exchange reserves. If not for currency swaps with some of their oil suppliers, the reserves would already be in a negative net position.

Posted by: Les | Dec 17 2021 0:11 utc | 36

Posted by: Canadian Cents @ 22

The costs of mining gold have risen worldwide. The question is, is Turkey's gold alluvial, open pit or underground? Water is the critical factor.

"Metals Focus says the global average all in sustaining cost for gold miners hit its highest level since 2013 in the September quarter, rising 3.6% quarter on quarter to US$1123/oz...."

Meanwhile Australian gold and copper miner Alkane Resources continues to make huge discoveries:
"Alkane announces intersection of further high-grade mineralisation at the Company’s Boda Prospect in Central New South Wales. Boda is a landmark porphyry gold-copper system, within the Northern Molong Porphyry Project, (NMPP) which the Company believes has the potential to be a large, tier one gold-copper project. Alkane also operates the nearby Tomingley Gold Operations (‘Tomingley’).

Gold-copper mineralisation is now outlined over a 3km strike length from Boda Three to Kaiser...."

Posted by: Paul | Dec 17 2021 0:48 utc | 37

I am not an economist or investor but live locally here and can say - the analysis is correct, yet, there are few issues weren't covered in this article:
- the trade agreement between China and EU that was failed lately resulted in the diversification of outsource to outside of the China, where Turkey was one of the possible candidates. Up to some point.
- Erdogan's latest visit to Katar and contact attempts with SA kingdom are also signaling that he is not going to the IMF
- There are some rumors about digital currency going on, and possibly, dual currency (export, internal) to reduce dollar influence and use it purposely only for the internation trade, yet achieve the dedollarizaiton through the digital and gold. I think gold production will be boosted and possibly trade deficit of this precious metal will be closed due to local mining. For gold his team thinks of allowing investment with interest rates through the precious metal market.
- Amount of dollars kept in the country is about 150-180 billions (both companies and individuals). He is trying some by printing money.
- The digital currencies are already banned, though more strict measures can be imposed to stop money leaking through borders.
- Yet there are tother reserves he can use.

Incresing interest rates won't give anything, is just another continuation of increasing debt with no good end, in spite of the current development and chance of FED will increase interest rate, so all money will flow to USA.

Posted by: Asa | Dec 17 2021 2:12 utc | 38

@30 Canadian Cents
Interesting factor. Around 400 tonnes at mid-year this year. At $58M/t, that was around $23 billion worth. Won't last long at the rate it's being consumed.

Posted by: ptb | Dec 17 2021 2:31 utc | 39

@ Canadian Cents | Dec 16 2021 22:12 utc | 30...yes, the erdogan coup was in 2016 as memory serves... indeed it was summer of 2016... thanks for the additional info!

Posted by: james | Dec 17 2021 3:35 utc | 40

Posted by: Asa | Dec 17 2021 2:12 utc | 38

the trade agreement between China and EU that was failed lately resulted in the diversification of outsource to outside of the China, where Turkey was one of the possible candidates.

Who were the other countries that won trade orders?

Who owned the companies that successful won orders?

In the SEA countries, as many are aware, Chinese companies have a presence. Investing in local plants, local employees and taking advantage of technological and inducements provided by the host countries.

Posted by: Atiya | Dec 17 2021 4:12 utc | 41

Low to middle income countries with a successful economic policy usually experience years of very high growth rates that eventually start to flatten at some point. Usually the first sign is a crisis at the real estate market. At that point - ideally already before that point - the central bank has to reduce the money supply (= increase interest rates). If it doesn`t the very high growth will continue but only in the form of nominal growth. That is: speculation bubbles and inflation pressure. When the bubble burst the economy drops back to the level where it would habe been with an early increase in interest rates (in fact in most cases even lower).

When after many years of very high growth the Turkish economy did eventually grow slower Erdogan order his central bank to keep the interest rates low and use it`s foreign currency reserves in order to stabilize the exchange rates and prevent inflation.

Modern economies are characterised by a very high degree of division of labor. They need a financial sector that works and a functioning currency in order to make that high degree of division of labor possible. High inflation rates interfere with the financial sector in such a manner that the real economy is affected negatively as well. Eventually the economic performance will experience a decline due to inflation (on top of the decline due to other factors).

Turkey could by now have a stable currency, sufficient foreign currency reserves and low economic growth. Instead it has high and increeasing inflation, next to no foreign currency reserves and faces recession (due to inflation).

Erdogan could have prevented the current Turkish economic crisis easily years ago if he had permitted the interest rates to rise. If he wanted to alleviate the Turkish trade balance deficit by devaluation he could have done so in a controlled manner when Turkey still had sufficient foreign currency reserves. (That`s what Putin did in 2014.)

Why does Erdogane introduce price controls?

No, this is not all part of some kind of master plan. Erdogan just doesn`t know what he is doing.

Posted by: m | Dec 17 2021 7:59 utc | 42

Posted by: Hoyeru | Dec 16 2021 17:51 utc | 7

Nonsense. There is no reason ever to buy lira in any meaningful quantities. Most trade Turkey does is in dollars. Yes, there might be Forex actions by speculators but in general b is right.

Posted by: RJB | Dec 17 2021 8:17 utc | 43

- I can imagine that Erdogan is using the situation to become a dictator/Sultan (again).

- @B: No, right now Turkey is suffering under DEFLATION !!!! But to see that one has to ook beyond those rising prices.

Posted by: Willy2 | Dec 17 2021 8:24 utc | 44

I am puzzled by b's use of the word mercantilism. Mercantilism implies aiming for huge trade surpluses. Yet the only thing Erdogan does is aiming for a more balanced trade balance.

An IMF "cure" would do the same. Only it would aim to do so by reducing imports by driving the economy into a recession.

Posted by: Wim | Dec 17 2021 9:42 utc | 45

Posted by: RJB | Dec 17 2021 8:17 utc | 43

you should nit pay any attention to clowns, last time Hoyeru stated that Russian are clumsy , if you take look around, most of world class gymnasts and Ballet dancers are Russian, these activities needs reflexes of feline, and they have to be fast as greased lightening! The other one that trolls around here and blames everything gone wrong on Putin, is m, these two operate hand in gloves, the above post 42 by the m, cut and past crap about division of labour etc, the problem with Turkey is that the elites are trying to balkanize it, there was a map of Turkey posted by NATO, been dived in to three, among those present in NATO meeting were 2 Turkish officer, that walked out of the meeting in disgust. This why he bought Russian S400, any time he does something that they don't like within a minutes Lira comes under attack, and dwindles in value! I monitor Lira on daily basis!

Posted by: Grishka | Dec 17 2021 10:32 utc | 46

RE: Posted by: Grishka | Dec 17 2021 10:32 utc | 46

“The other one that trolls around here and blames everything gone wrong on Putin, is m, these two operate hand in gloves, the above post 42 by the m, cut and past crap about division of labour etc,  “

War is not restricted to things that go bang, all data-streams have utility for those with facility, and the velocities of a thousand cuts are often increased through co-ordinating multi-interacting vectors.

Some attempt to conflate co-operation with division of labour, and co-ordination with control.

Analyses of “trolling” data-streams have utility for those with facility: faeces being an example of data-streams, the analyses of which can establish the diet of the “producer”, and inform register and vectors of intervention to encourage purpose, the half-lives of “crap” often affording opportunities of fertilisation.

It is always unwise to dismiss the value of “waste products” and hence waste them, thereby limiting multi-interacting vectors which in varying degree can be co-ordinated..

Posted by: MagdaTam | Dec 17 2021 11:36 utc | 47

Posted by: Asa | Dec 17 2021 2:12 utc | 38
Who were the other countries that won trade orders?
Who owned the companies that successful won orders?
In the SEA countries, as many are aware, Chinese companies have a presence. Investing in local plants, local employees and taking advantage of technological and inducements provided by the host countries.

imo, India, Vietnam and other countries in that region who are natural competitors to China will favor from current situation. Yet, from EU perspective geographically closer manufacturing locations are more preferred in case if tensions over China will be increased up to full blown trade wars and military cold war style confrontation, to mitigate possible logistic disruptions (e.g. Taiwan). That is where Turkey suits though but Turkey demands fair aggrement since West influence over the Turkey is greatly decreased (after West guided failed coup attempt), and has own plans to achieve in parallel.
in my understanding, negotiations there are ongoing behind closed doors and we can observe only indirect signs of that.
China still doesn't have full hitech tech stack ready (microelectronics, military tech, space ...) and puts enomous efforts to close that gap and achieve fully independent technological cluster state to offer a complete alternative to what the West is best in, as China has to due to West rediness to use the tech embargo as a weapon against competitors. So, while China allies take an advantage of that, yet their dependance on West is still there, but it is rapidly decreasing. The Rubicon is almost crossed.

p.s. yet, in my understanding, the natural gas fields recently discovered in Black and Mediterranian seas could help Turkey to achieve fully energy independence, which is by surprise is quite close to the Turkey's trade defficit ... it requires time though.

Posted by: Asa | Dec 17 2021 11:37 utc | 48

I have a personal opinion and then the facts behind that opinion from multiple sources - but the hard work is already done by b and some others around the world. So I will add my tuppence in this format. I will note that Erdo, as a Caliphate builder failure in Syria is now in a squeeze as the Nato Imperialists use of his Turkey shoot conscript army has failed and the deadline approaches for them to clear out of Iraq in two weeks. He needs to save face and what better way than to turn to the good Muslim model of hating usury interest. But what is he going to do with the 15,000 Uyghur head choppers and their families in Idlib?

‘The FX component of central government debt reached 60 per cent of the total last month - up from 39 per cent in 2017. That means that as the currency slides it becomes more expensive for the Treasury to service its debt burden.’

‘. Foreign currency deposits make up 55 per cent of all deposits in the country’s banking sector – around $260 billion (€231.8 billion) – compared with 49 per cent in 2018.’

‘Turkey’s overall debt-to-GDP ratio is still low compared with that of its emerging market peers, at around 40 per cent of GDP.’

‘A full-blown run on the banks, when customers lose confidence and rush to withdraw their deposits, was last seen in Turkey in 2001. In such a scenario, the government could choose to impose capital controls, such as measures to make it harder to withdraw hard currency, although it has previously insisted it would not do so.’

“Banks “have significant foreign currency liquidity buffers to cover a brief market closure of around a year”, he said, but warned: “A prolonged market closure could carry significant risks.”” From a Fitch analyst.


‘08 December ,2021: 02:54 PM GST
Qatar and Turkey have announced they agreed to extend a currency swap deal between their central banks, as Ankara’s lira has plunged in value fuelling an economic crisis.’
‘Turkey and Qatar, a close US ally, have become economic and political partners in recent times.’

And how China sees it.

Posted by: D.G. | Dec 17 2021 13:02 utc | 49

the US Fed has signalled it will raise interest rates to target levels across two years. (timetable is delayed I think to accomodate Brandon's midterm elections. they don't want the market to plummet before then.)

interest rate hikes are always followed by capital flight to US shores, alongside non-US currencies falling, then the US dollars flow back later to harvest foreign assets on the cheap, taking advantage of the exchange rate disparity. the Asian financial crisis was exemplary but not exceptional, as this regular harvesting is built into the hegemony of tbr US dollar. financial conquest.

against this semi immanent timetable, Erdogan has to get his house in order before turkey is harvested in a firesale.

Posted by: mastameta | Dec 17 2021 13:15 utc | 50

I apologize for not having read any of the comments (my ability to read has become limited), since I haven't I can't say whether anyone has already voiced a similar opinion.

If anyone has then I'm simply joining in.

Despite my antipathy to Erdogan and current Turkish politics etc. and despite how unlikely any success of this "intentional inflation" may be economically I can't help but understand and sympathize.

Who wouldn't want to avoid the IMF etc.?

Who wouldn't want to create and export about the same or a little more in value than they import?

So at least in this case such ultimate goals seem sound (if they indeed are the actual goals).

If Erdogan could manage to get on the straight and narrow with Russia and Syria and Armenia and Greece and Cyprus and Saudi Arabia and Egypt and... well they could make it work, and in such a case everyone would win (except the worst of the US and similar).

Turning the wheel to follow the road should never be an embarrassment :)

- - - - -

The very best to you all! :)

Posted by: Sunny Runny Burger | Dec 17 2021 14:08 utc | 51

Finance is not B's strong point (likewise medicine). Rather perversely, he always seems to argue finance issues in terms of the neoliberal bankster point of view.

I am no economist, but my gut feeling is that Erdogan is playing his cards right in this instance. It will probably cost him political points, yes, but following neoliberal bankster policies would ultimately cost him 10 times more political points - any loss is due solely to long-standing historical pro-dollar policies which are already water under the bridge - he can't alter the past. If Erdogan is willing to tackle uncomfortable policies like Lira devaluation head-on, then my congratulations to him for it, as long as it is combined with policies aimed at cutting dollar dependence, increasing exports, and substituting imports. Canadian Cents points out that gold reserves have increased four-fold since 2017 - that is the way to go. I would guess the recent drop in gold rates since mid 2020 levels is likely to relate to the effects of the Covid-19 measures on the economy, and therefore not reflect non-covid19 related policies (i.e. without covid-19 the gold reserve increase would have been nearer 6-fold).

I am also suspicious of the inflation argument. Devaluating the Lira would have a one-time effect in increasing prices (for each devaluation of course), but it would not be compounding, unlike interest. B mumbles about "real" interest rates as the "difference between nominal interest rates and inflation", but that is a heavily pro-finance concept. Ordinary working class people who don't have much savings and small businesses with debts to service will see things totally different - to them high interest rates are a compounding cost, that increases the costs of doing anything else, and therefore has an inflationary effect that necessarily increases over time. Whereas a single devaluation has a single one-time effect on costs, a single increase in interest rates has a compounding effect on costs that continually increases costs over time as long as the interest rate increase lasts. Therefore Erdogan is absolutely right to describe high interest rates as inflationary.

If bankruptcies and dollar debt defaults resulting from bad dollar-based loans result in a net reduction of dollar exposure, that would be a good thing in the long term (although, whether it reduces net dollar exposure will depend on the dirty details - who is lending the dollars, what is the security and is the security of strategic importance, will the security end up in US hands, will a Turkish dollar lending bank then default to a foreign bank, ... etc).

My understanding is that a large part of the bad dollar debt is related to supporters or potential supporters of Erdogan's party, who did very well out of Erdogan's earlier successes. If they default, that will hurt Erdogan's support base. It is to Erdogan's credit that he is willing to take on a policy which has that effect, a policy which is likely to improve Turkey's long term stability by increasing exports and reducing dollar dependence, and reduce the very US-based exposure that is the prime cause of instability in Turkey.

Turkey has to import all the oil and gas it needs. These are valued in U.S. dollar.

Not necessarily. Turkey can and definitely will buy oil and gas from Iran, at a discounted rate, and will not use dollars for that (more likely gold). Maybe Turkey can do a special deal with Russia also - buy oil and gas with gold at a heavily discounted rate, in return for withdrawing from Syria! (Erdogan won't do that though, unfortunately). I also think it is highly implausible that Erdogan will ever again borrow from the IMF. There are other sources of finance available, as long as he can get his geopolitical cards in order.

I will also mention that I read something recently about Turkish gold reserves, which implied that they weren't what they seem to be. Unfortunately I can't remember the context, maybe another barfly can remember something more specific. The implication of the claim (which of course may or may not be true) as far as I remember was that volumes of gold allegedly mined by a specified mining company were allegedly far greater than the amount of gold in the mineral reserves of that company, i.e. the accounts were fraudulent and the gold actually came from somewhere else (that somewhere else was implied in the article - stolen from Syria or Iraq, or money laundering, or something else, I cannot remember - maybe a mixture of stolen Marcos gold, stolen Japanese World War II gold, stolen Nazi gold, etc, see below). So whether there is something in that claim I do not know. I do have just a faint inkling it might have been in an article on illegal funds financing the US economic attacks on the Soviet Union in the 1980's, and the laundering of the refinancing of the stock market bonds they were dependent on that came to term in September 2001, allegedly involving the destruction of the records of the two biggest bond brokerages in the US and the destruction of bond certificates in the basement of the World Trade Centre. I am not certain the Turkish gold allegation above was related to the 9/11 bond matter, but I probably got the link to the article in question from MoA so maybe someone remembers something.

Posted by: BM | Dec 17 2021 14:54 utc | 52

the beginning:

Turkey Halts All Stock Trading As Currency Disintegrates, Central Bank Powerless To Halt Collapse


Posted by: prneost | Dec 17 2021 15:07 utc | 53

No one has mentioned b’s choice of the term “Hail Mary”. So… is Erdogan looking for help from… the Vatican?

Posted by: Bruised Northerner | Dec 17 2021 15:13 utc | 54

@3 myself, @53 prneost

Yep looks like they might take the devaluation all the way. Hopefully they will be able to stop it.

Posted by: ptb | Dec 17 2021 15:18 utc | 55

Posted by: Bruised Northerner | Dec 17 2021 15:13 utc | 54

"Hail Mary" there comes from "Hail Mary pass", an USA-ian Football term for a desperate pass play when you are behind near the end of the game, and by extension, any desperate last-chance effort.

Posted by: Bemildred | Dec 17 2021 16:12 utc | 56

NYT spoonfed diplomatic details to build a public case against reasonable Russian proposals.

Posted by: Somness | Dec 17 2021 16:39 utc | 57

Antoinetta III @ 23 :-"Anybody who hates the IMF can't be all bad."

Ha! That stood out for me also!

Plus I am wondering at the cards Turkey holds, and a biggie is Hagia Sophia. I know it has been turned back into a mosque, but that could be a positive for Russia, something negotiable perhaps? I daren't say where it would lead, but there is a rather magnificent mosque in Moscow already... both being people of the Book...

Yes, you could say I'm a dreamer....

Posted by: juliania | Dec 17 2021 17:11 utc | 58

Thanks Bemildred! So Turkey wants help from the NFL? Maybe to host a new franchise if the league expands?? (Just kidding.)

I did take a quick look at Turkey-Italy relations out of curiosity and found this article from Dec. 1 in the Daily Sabah. It mentions the East Mediterranean Gas Forum, of which Italy is a member and Turkey is not. According to the ambassador, Italy did a favour or two on Turkey's behalf.

Posted by: Bruised Northerner | Dec 17 2021 17:20 utc | 59

Posted by: Bruised Northerner | Dec 17 2021 17:20 utc | 59

That is an interesting article, I was reading earlier today that Turkey is one of the alternatives to China for cheap manufacturing labor. And that would seem to be the case, since Turkey already makes lots of things, if not at world class level yet, so they are well situated for it. And that fits nicely with the point of this thread, Erdogan wants to lower his cost basis for manufacturing. We are likely to have to do that too, if we want to become a manufacturing powerhouse again. You need a low cost of living for your working class, the people who do the work.

Posted by: Bemildred | Dec 17 2021 17:33 utc | 60

As usual, b' economic articles sound uneducated, he should stick to writing articles about political events.

Posted by: Hoyeru | Dec 16 2021 17:51 utc | 7

Hoyeru could spend more time reading business sections as well. In my opinion, they are more reliable than economics textbook.

The most glaring mistake of Turkey was to engage in futile defense of the currency. That make the foreign currency reserves go poof. This is something that Russia never did. And Russians did not whine that rubble is under attack -- unfriendly foreign manipulations are a given, not a reason to whine.

Turkish economy and budget had a number of weaknesses, and Erdogan economic and foreign affairs policies became increasingly erratic. I would say that Erdogan had a good start, and some policies were laudable. But at some point he became increasingly erratic in every direction. Aging, excessive vanity associated with the length of being in power, etc. Now he may have a perfect storm.

On the actual topic at hand, setting the interest rate and the currency exchange rate that is being defended both require specialist knowledge and careful analysis of the current circumstances, inclusion unfriendly or vulture-like speculation. At his age and background, Erdogan should have a trusted competent specialist to help him -- as they do it in Russia. People dispute policies of Russian central bank, but few ridicule them.

Posted by: Piotr Berman | Dec 17 2021 17:38 utc | 61

RJB #43 (Hoyeru #7)

As I understand it, not having any Lira is no obstruction to banks selling them indefinitely anyway. I think Hoyeru #7 is correct. And Hoyeru #8 is correct about the US but his hostility to Putin makes no sense to me. Putin clearly understands he has been under attack for decades, and only the greatest statesman of his generation could have come out of it stronger than before. Having said that, the rose tint on my Putin glasses is beginning to wear thinner

Posted by: Tim | Dec 17 2021 17:44 utc | 62

I'm sure China will be willing to help, Erdogans dilemma may well be IMF or China. China is without doubt the better bet.

Posted by: Geraldo | Dec 17 2021 17:56 utc | 63

Having said that, the rose tint on my Putin glasses is beginning to wear thinner

Posted by: Tim | Dec 17 2021 17:44 utc | 62

When it is very sunny, I bike in dark green glasses "for seriously photophobic" grass looks like silvery when you were them, at night, always transparent. What is the tint on your Erdogan glasses?

Posted by: Piotr Berman | Dec 17 2021 18:38 utc | 64

ZH has a posting up that says equity trading was halted today for a bit in Turkey because it went down enough to trigger a pause. The posting is not entirely clear but it looks like the market came back online but ended down they reported 9%

As I wrote before, Hand, The Invisible is not liking Turkey playing footsie with the opposition....that is not to say that Erdogan is not a schmuck on his own but, IMO, empire is the bigger schmuck.

Posted by: psychohistorian | Dec 17 2021 19:11 utc | 65

There will be no elections in 2023. Erdoguan will call a national emergency and "postpone" the elections.

Posted by: BraveNewWorld | Dec 17 2021 21:00 utc | 66

If you want to devalue your currency you don't waste your foreign currency reserves defending it, that is quite strange. Much more effective to slam on capital controls and then announce a much lower target exchange rate (backed up by lower interest rates). That way things don't become a rout and overshoot, due to citizens trying to get into foreign currencies. Just let your friends know before the exchange controls go into place.

Turkeys gold reserves took a big hit already this year, looks like they are selling the gold to meet the current account deficit and "defend" the lira. Only data up to July it seems.

If Erdogan goes to Russia and China with the begging hand he will have to stop his adventures in Syria, kiss the Russian ring and maybe also pull out of NATO. He needs to stop attempting to balance and pick a side. The US will only be happy with Turkey as a vassal.

Posted by: Roger | Dec 18 2021 7:39 utc | 67

2021 Virtual Illinois Farm Economic Summit- farmdoc webinar, “Farm Income Outlook for 2022,” presented by Gary Schnitkey, Dale Lattz, and Krista Swanson (December 1, 2021).

Hard to paste the table. Nitrogen fertilizer will go from from 430 to 1400 (USD per acre in Illinois, 2021 growing season compared with 2022 projections), potash from 337 to 887. Other costs like seeds will go down, because farmers plan to plant fewer acres, hence the surplus of seeds.

What we see are economic tsunamis. Nitrogen fertilizer shot up because of natural gas, the feed material, in countries with a shortage of NG, nitrogen fertilizer plants closed. With less planting in USA and EU, food supplies will go down, food costs up.

The cost of feeding workers in Bangladesh will exceed the revenue from their production... workforce will decrease. Expect shortage of textiles in subsequent several years (my private projection, probably wrong). However, there are serious production bottlenecks and inflationary drivers that cannot be removed by monetary policies. Fans of such essential books like "Biblical Prophecy for Compleat Idiots" will recognize this reference:

When He broke the third seal, I heard the third living creature saying, "Come." I looked, and behold, a black horse; and he who sat on it had a pair of scales in his hand. And I heard something like a voice in the center of the four living creatures saying, "A quart of wheat for a denarius, and three quarts of barley for a denarius; but do not damage the oil and the wine."

BTW, one explanation was that the "four living creatures" were spot marker traders, and that while basic staples will become too expensive for laborers to avoid death from hunger, oil and wine (explained as luxury goods) will remain abundant.

Posted by: Piotr Berman | Dec 18 2021 13:45 utc | 68


Some interesting prophecies on this topic (of gold) + Turkey and near by areas...

1. The Prophet Muhammad said: "The Hour will not come to pass before the river Euphrates dries up to unveil the mountain of gold, for which people will fight, Ninety-nine of every hundred will die [in the fighting], . and every man among them will say, 'Maybe I'm the only one to remain alive'."

Allah's Messenger (ﷺ) said, "Soon the river "Euphrates" will disclose the treasure (the mountain) of gold, so whoever will be present at that time should not take anything of it." Al-A'raj narrated from Abii Huraira that the Prophet (ﷺ) said the same but he said, "It (Euphrates) will uncover a mountain of gold (under it).

Turkey's water policies have a direct link to the current state of the Euphrates. The River Euphrates starts in Turkey and runs through Syria and Iraq. The Euphrates dries with the help of Turkey and a mountain of treasure is revealed close to Turkey?

Ninety-nine dead of every hundred = Nuclear War?

2. The Prophet (ﷺ) said: The flourishing state of Jerusalem will be when Yathrib (Madinah) is in ruins, the ruined state of Yathrib will be when the great war comes, the outbreak of the great war will be at the conquest of Constantinople and the conquest of Constantinople when the Dajjal (Antichrist) comes forth. He (the Prophet) struck his thigh or his shoulder with his hand and said: This is as true as you are here or as you are sitting (meaning his companion Mu'adh ibn Jabal).

Great War = Armageddon

3. ’Isa, son of Maryam (Jesus, son of Mary), will descend at the white minaret in the eastern side of Damascus, wearing two garments lightly dyed with saffron and placing his hands on the wings of two Angels. When he would lower his head, there would fall beads of perspiration from his head, and when he would raise it up, beads like pearls would scatter from it’.

The Prophet (ﷺ) said: The place of assembly of the Muslims at the time of the war will be in al-Ghutah near a city called Damascus, one of the best cities in Syria.

The Prophet (ﷺ) said: The time between the great war and the conquest of the city (Constantinople) will be six years, and the Dajjal (Antichrist) will come forth in the seventh.

Damascus ~ Constantinople = Cities that will play a very important role in the end times.

Posted by: Anon | Dec 18 2021 16:23 utc | 69

- Bollocks. The article is the usual nonsense from the socalled "Monetarists" who blame everything bad on the government & the central bank. A central bank can neither control interest rates nor exchange rates in a world with free floating money flows.

- Agree. The turks/Turkey are/is suffering under PRICE inflation.
- But this is the result of money fleeing the country (= DEFLATION). Money fleeing the country means that people are selling Lira and buying e.g. US-dollars, resulting in a falling Lira/USD.

- Turkey had/has a Trade Deficit and a Current Account Deficit. This is the result of (domestic) consumption being (much) larger than (domestic) production. The difference between consumption and production has to be imported AND financed by foreigners. But now those foreigners are pulling their money out of Turkey.
- Consumption can also be made larger by increasing one's debts. And that's precisely the reason why so "many turks have been lifted out of poverty". Turkish households are now much deeper in debt than 20 years ago. That will make the current economic crisis much worse than without those accumulated debts from the past 20 years.

As a result of wages remaining flat and rising prices consumption will shrink. This will make the Trade Deficit shrink, disappear and it could even turn into a Trade Surplus. That's how the economic system works. And that system will be "in play", at work even with or without IMF. Even without the IMF the PRICE inflation and rising interst rates (= DEFLATION) will (help to) shrink the economy. Even without the IMF Turkey will feel A LOT OF "economic pain".

Erdogan is right. A falling currency is indeed very helpful to help increase the competitiveness of the turkish economy. A falling currency means that the only benefit for the turkish economy is that turkish wages will be more competitive. But all the other "economic components" in the turkish economy also have to be beneficial to an economic recovery. Turkey indeed can increase its exports to e.g. the EU or Russia. But then those countries must be able to import as well.

But again: interest rates are set by the free markets not by the turkish central bank or the government. The problem is that interest rates can stay (much) higher than anticipated. This has NOTHING to do with the complete absurd notion/idea of "inflation expectations". It has to do with the broken trust with foreign investors. Remember the saying "Once bitten twice shy" ?? Erdogan has to regain the trust of foreign investors and that can/will take A LOT OF time to repair that trust/confidence.

Posted by: Willy2 | Dec 18 2021 19:03 utc | 70

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