Apple stopped sales in Turkey after the lira crashed 15% in a day

How long did it take them? Could you have gone in bought a ton of stock at old prices and gotten at least some of your 15% back? Apple stuff resells pretty well

It's very odd to write CCCP in an otherwise english paragraph in latin alphabet. YOu would be better understood to write USSR or better just write Soviet Union.

(For those unfamiliar, CCCP is SSSR in cyrillic alphabet).

Even here in Europe this is a thing now because they seem intent on making our money worthless with negative interest rates. As a consumer I have very little financial confidence left.

Whats stopping people to exchange their money for euros or dollars? It's a popular tourist destination, after all.

Is the cost of living (food, rent, price of a coffee at a bar ...) in lira going up at the same pace? Or is the inflation only felt in imported goods suchs computers, gasoline ...

Sorry I'm a bit confused. Isn't that a good thing you bought stuff when the TL was worth more?

That is a big ‘if’.

If the currency changes rapidly, it will have effects across the supply chain.

On sales during Black Friday / Black Weekend / Cyber Monday - this type of sales become common across multiple countries, including Turkey. But not nearly as famous.

I mean, it's not Apple's fault Turkey's currency is unstable. Why would it be their responsibility to take the exchange risk? I wouldn't be surprised if in response to future events like this they stopped accepting payments denominated in TRY altogether.

Apple usually lags a bit in both directions. During the previous fluctuations Apple again had a period of extremely cheep prices, then raised the prices to match the dollar value and once the lira stabilised a bit they adjusted the prices again. In general, Apple gives quite a bit of buffer before adjusting the prices.

I don't think so, and I don't remember that ever happening. Turkish Lira has always been devaluating. Black Friday is a thing here (with a different name but basically the same thing) but things were already at a skyrocketed price that only some items just went down to a "still expensive but sane" level.

> will Apple respond as timely to adjust prices cheaper?

Well in one case you have arbitrage and are actively losing money, in the other case you are potentially losing sales due to the product being too expensive. So no I don't expect as Swift of an action.

> if/when the lira rises 15%

(Sure it is just an expression, but: here is a reminder that is something falls 15%, it recovers previous state through gaining ~17.5%; if it falls 20%, it needs to increase 25%; if it falls 50%, it then has to double...)

If Turkey is anything like eastern Europe, I’d be pretty confident that the people buying Apple stuff don’t have their salaries or bank accounts denominated in Lira.

For example in Ukraine anything that matters is priced in USD

The Black Friday is definitely a thing in Turkey. It might surprise you that Black Friday is big even in Iran (Turkey’s neighbor).

> if/when the lira rises 15% (#1), will Apple respond as timely to adjust prices cheaper? Mindful that companies are quick to point to a reason to increase prices yet when that same reason goes the other way, not so quick (if ever) to adjust down.

I certainly don’t ask to have my wage lowered in months where inflation is negative. I’m not sure why anyone would ever negotiate against themselves. Apple will lower prices if their customers demonstrate they are not willing to buy at the offered price.

> if/when the lira rises 15%

Turkey currently have negative forex, it won't happen.

A fiat currency that have lost all market confidence, it's not going anywhere but down.

Companies can’t be competitive, nor reach sales goals when prices are artificially high. Similarly they also lose sales to neighbouring countries - making price consistency important.

Despite it not fitting the evil megacorp narrative, good business requires prices to follow the currency changes - but not super tightly as that’s also harmful to business and consumers alike. Each company establishes their product margin and excess to that is not desirable - lost sales are invariably more costly than a small % gain in margin.

The other issue is that currencies usually drop quickly but recover slowly, it takes time to undo the instability in the currency and then attract investment to strengthen the currency. In the case of Turkey it’s due to their recent decisions to lower interest rates despite soaring inflation (the opposite of good fiscal policy). This will absolutely prevent any kind of bounce happening and psychological barriers to the currency have already been passed - meaning the currency (and with that the population) is likely to suffer further.

They probably just readjust their currency hedges

I think it's a combination of the speed/magnitude this time. The TRY has been plunging for a good amount time now but it has been doing that regularly and with smaller adjustments. Having a 15% single day crash seems to have caught lots of people off-guard.

I still have a 500,000 TL note from Turkey's hyperinflation days in the early 2000s. Back then it was just about enough to buy a loaf of bread. Looks like those days are coming back.

Yes, but price volatility is what matters.

For the same reason that low positive inflation is good, as long as the volatility around the inflation rate is low (so expected value of price is in tight ranges)

So does that mean it would be profitable to short the lira? Not a forex trader but it's where my mind went.

Actually, it was fairly stable between 2003-2013. Then the hardcore political stuff began happening, Erdogan won the political fight to become a popular autocrat assuming all power in 2017 by changing the constitution through a referandum then winning the elections - all fairly.

When he got free from any checks and balances he was free to implement his unorthodox ideas on economics. He put his son in law in charge of the economy, things accelerated but he still had some rebels around him and they took the son in law out of the picture, stabilised the economy just before shit hit the fan. Erdogan proceeded getting rid of everyone not supportive of his ideas and that's when stuff actually hit the fan.

BTW, there's uncovered corruption on a scale unheard in history. Seriously, Turks are no longer impressed by sums less than a billion of dollars. A mayor purchasing insurance from his own son for 10 million $ a year is something that will entertain you for a few seconds as an interesting detail, what keeps coming is the mayor spending 1 Billion $ on dinosaur statues.

After a while, prices will just be in USD and the local price depends on the day's USD rate: https://news.ycombinator.com/item?id=29363260

Similar to this, in non-Euro Romania, apartment rent prices are given in Euro...

Except it is the other way around, currency becomes worth less because people are willing to exchange more of it for the same item (eg ikea table). Demand -> inflation.

I have a solution for you. Buy a table somewhere else

Well there was an incredible increase in the price of wood for a while there (futures tripled normal prices for a while there) from both the supply and demand side (not to mention labor and shipping concerns). If you're Ikea you can either double your prices or severely limit production.

You say "convenient scapegoat", but I think people were going to be mad about something regardless of how Ikea responded.

Not in one day.

And it would be 22% compared to something with a more fixed value (like gold). Value is stable, the USD fell 7% and the lira another 15% for 22% total.

Looks like the lira is down 31% compared to my own currency (gbp) so far in 2021.

How did Turkey find its way to Eastern Europe?

you are thinking about the Ottoman times here?

Is like to hear about this from somebody living in Turkey but maybe shop prices must be in Lira. I don't even know if in my country it's mandatory for physical shops to display prices in Euro or if a price could be only in Dollars.

I worked for an e-commerce site that sold cars in Turkey in Euros. Sometime in 2018 I think it was, Erdogan made a new law that said everything had to be traded in Lira.

Probably some forced course laws that demands prices be defined in local currency.

If you ever lived in countries with irresponsible central banks like Brazil or Argentina you'll notice there are often laws to dissuade you from using the crappy local currency.

> pretty bad, and if you voted for a bunch of dumb assholes who don't care about you or the nation, you're multifucked.

The vote tally and the resulting leader are not necessarily related in these places.

Same reason you cannot pay in euros in US. Lira is a legal tender. Company can peg prices internally to a spot rate to whatever, but if exchange turns to fast volatility, what else can you do?

Soeme of developers in Ukraine are paid in USD or EUR for this reason.

…they would be repricing them almost weekly.

No phone would be sold because transactions take hours.

That's the same thing as pricing in dollars. If you haven't noticed, Bitcoin is as valuable as the usd/btc pair. It's why every bitcoiner knows what the price of Bitcoin is every day.

I paid 500 bitcoins for a pizza once. Will never use Bitcoin to buy things again.

Lira is priced in iPhone.

The Central Bank of Turkey prohibited usage of cryptocurrencies as a payment method back in April.

>What are they doing that’s so different from everyone else? Drop interest rates, print more money.

Having an even more dysfunctional government with leaders that cannot be trusted. Currency is only worth as much as the people using it can produce desired goods/services.

Erdogan has been pushing for lower rates despite high inflation. Also believe he fired a few of the central bank chiefs.

Um. Please go do a little research about Venezuela's situation before proposing a simple, wrong solution. They have badly mismanaged their financial and political situation for a long time and are not equipped to make the necessary changes to remedy this (whether the answer be "print more money").

If you'd like to know more about their situation, I recommend reading "The Prize" and "The Quest". Much of the root of their problems come from nationalizing their oil industry and subsidizing local oil, although that's not the entire explanation.

Lebanon as well.

You're forgetting Lebanon

You can safely add Argentina to the list

In the modern world we primarily have banking systems that are based on fractional reserve banking and currencies without any explicit backing. This means that from a forex point of view the currencies are only worth as much as there is confidence in them. (National currencies often derive power in a practical sense due to taxes having to be paid in those currencies even without any explicit backing of the currencies value). Because of these dynamics if everyone were to try to withdraw their money from the bank at the same time there would be a major problem because the banks don't have the money to cover it. An event that makes people in a country all want to withdraw their money will cause a crisis just about everywhere at the moment. Sure you'll get people from the central bank saying they can create enough money to pay everyone out, which they can pretty easily do due to the fact that most money now is just entries in a database. But the problem in all modern banking crisis situations isn't so much the act of giving people money its what you can buy with that money. (A caveat, when things get really bad like they did in Venezuela the currency degraded so much that the government had problems paying for the printing and transport of new banknotes with even more zeros, but that's a rather exceptional case that occurred very late in a crisis, again the money was buying less)

Banking crisis conditions can come about for a variety of different reasons but they all involve some lack of confidence in the ability to be able to exchange money for goods at a later point in time. This can come about because people aren't able to access their money in the banks (Eg Cyprus crisis) or because the value of the money is rapidly deteriorating (Eg Yugoslavian Hyperinflation) or because there's some event that devalues the currency. This is by no means an exhaustive list, but it shows that different things in different places can cause crisis situations to emerge. There's some interesting work that was done by the Bank of International Settlements about the early warning indicators for systemic banking crises. Seeing what was happening in Turkey inspired me to write about bank bail ins. Along with bail outs this is something that you'll likely see in banking crises. More detail about the early warning indicators and bail in mechanisms here: https://www.lesinskis.com/bank-bail-ins.html

I also talk about this in the article but I don't think it's easy to neatly determine where currency crisis situations "start". There's at least 14 countries in the world that are in what could be the early stages of a banking and currency crisis but it's likely that people will only say they are in a crisis at a much later stage where the problems are so big they are impossible to ignore. Other places like Canada get ignored routinely but the situation there could rather easily turn into a major crisis unless something changes there.

> What are they doing that’s so different from everyone else?

Erdogan thinks that high interest rates causes higher inflation, while it is generally agreed that it's the other way around, so every time that he speaks in public and says that the rates will fall (the Central Bank is nominally independent, but in practice will do what he wants) or the CB follow on his promise, the markets react accordingly. The last crash was one of such cases.

I think the official rates are about 15%, with an official inflation of 19% (in practice it's at least double, so much that when the government announced new prices for a number of taxes and fines, they were increased by more that 35%), and a Lira that lost half of its value in a years, who is going to buy Turkish currency ?

You don't get runaway inflation if the value of your imports is somewhere in the neighborhood of the value of your exports (a fairly large imbalance is fine).

You do get runaway inflation when your import needs far exceed your export ability, you print money but prices rise continually faster than you print, regardless of how fast you print.

Right, because although the Lira is the most volatile currency, a 15% one day move is a black swan. For bitcoin, it happens every couple of months.

Why do it in Bitcoin when you can do it in Lira ?

Hm, Bitcoin appears down 23% in the last 18 days, flailing wildly the whole time.

If your concern was stability you would obviously not pick Bitcoin haha. Maybe a nice USD or EUR price tag.

The Central Bank of Turkey prohibited usage of cryptocurrencies as a payment method back in April.