Turkey's Financial Crisis
adamtooze.substack.com
adamtooze.substack.com
During the recent coup calls to resist the belligerents were broadcast over mosque loudspeakers and throats were being slit in the street. Praises to Allah could be heard.
Ataturk strengthened Turkey by moving it away from the regional Islamic influences. He changed the alphabet and implemented laws to guide Turkey toward a secular culture. Islam was acceptable (as Turkey was attempting to be a "free" republic), but not compulsory.
If Erdoğan continues to mold Turkey's future Turkey will soon look more like Syria in terms of culture, and less like Western Europe, which it recently did.
https://en.wikipedia.org/wiki/2016_United_States_presidentia...
In England David Cameron had a parliamentary majority with only 38% of the vote.
On the other hand, the Turkish electoral system can fail even more bizarrely than a simple single-member constituency FPTP system—in 2002, only the CHP and AKP cleared the 10% threshold, so the AKP had ⅔ of the votes.
However, at the moment, the president is directly elected, so anything <50% wouldn’t suffice. (How those votes are obtained, of course, is another matter.)
If you believe in democracy you would celebrate the failure of a coup. Even if you hate the surviving leader, you ought to prefer defeating him within the frameworks of democracy.
You seem to really dislike Muslim culture. If the people of Turkey want their culture to closer to that of Syria instead of Germany, what’s the problem?
You are supposing that the once freely-elected leader will permit a reversion to 'free' democracy. In fact, rigged elections form the basis of stable autocracies. Outright juntas and dictatorships are actually more likely to transition to 'free' democracies.[1]
[1] https://en.wikipedia.org/wiki/The_Logic_of_Political_Surviva...
The current state of affairs has driven a rather large part of the country's population, who share Western ideals and want to pursue them for their nation, prefer a coup over whatever this ongoing messy loss of wealth and human capital is (certainly not 'democracy,' though). That should be telling, but it's hard to have Westerners empathise, I guess?
But seriously, if their "culture" consists of gender theories, Holywood movies, superhero novels and the like, they can keep their culture.
There is a little more to it than that, and a similar style summary of your preferred culture would be pretty dark.
That depends, I suppose. Hitler was democratically elected. Hard to say what might have happened, had one of the many plans to assassinate him had worked, but I'm not sure we'd look at it retrospectively as an attack on democracy.
Not in this case. The military (with its coups) was often the force that kept the turkish democracy alive, or else it would have fallen to many more dictators
https://www.aljazeera.com/news/2016/7/16/timeline-a-history-...
Contrary to popular belief, I do not think that Erdogan will continue to mold Turkey's future. So far Turkey always had 40-50% opposition which could not unit, but now they are all united and next time it is certainly going to tip the scale in the right way. He will do everything to delay the elections or call them at the right time -like now ?- but his plans don't always work out -not far, look to recent Istanbul elections he lost.
This is not true. Raising interest rates would mean raising the cost of funding for the banking system. Under the new saving scheme, since the Treasury pays depositors the extra yield, the cost for banks remains unchanged. As does the marginal cost of borrowing from the central bank.
The new saving scheme is a free dollar call sold by the country's Treasury to depositors. And it will pay it out by printing money.
The higher rate on deposits that the new saving scheme offers doesn't increase funding costs for banks in anyway. The Treasury literally pays the depositors the extra yield, not the banks.
BTW, this week, the interest on private loans increased substantially, not gradually.
And, yes I know interest on loans increased substantially but that has nothing to do with the new saving product and everything to do with the meltdown in the lira that preceded.
Edit: And in any case why would banks raise loan rates if they don't have to bear the cost of the new product?
Access to TL got harder by the actions of the government. This is why interest rates increased.
And all this mind you only IF people move a substantial amount of their lira deposits to the new product AND the lira depreciates more than the rate on the underlying lira deposit account (only then are savers eligible for the kicker rate).
So far, savers have moved around 10b liras into this product, out of a total 4.3 trillion lira of deposits.
You're telling me banks raised rates because of that marginal shift? And even though, I repeat, they don't have to pay for it?
Something it cannot do without increasing its own borrowing costs, and reducing the import purchasing power of its currency. This has been tried and doesn't work: https://en.wikipedia.org/wiki/Black_Wednesday
I've come to realize that there are a significant number of politicians who will happily oversee 100 units of 'destruction' if it means they are able to generate 1 unit of personal profit in the process. When applied to an entire nation state, the results are significant. Look at the corrupt wealth generated by the current US Speaker of the House, for example.
Until Erdogan overturned it, there was a ban on women wearing hijab (the head covering , that the vast majority of Muslims consider a basic tenet of their religion) in universities in Turkey. I leave the judgment to you, but personally I wouldn't consider asking millions of people to choose between adhering to their religion and getting a higher education to be treating their religion as "acceptable, just not compulsary".
If saying "either stop adhering to your religion or you cannot go to university/exist in public" is tolerance, what is intolerance? Is everything short of prison, internment camps, torture, and execution tolerance in your point of view?
Also, if a government tells religious people "we are going to make your life very difficult, but you should really be thankful to us that we are not outright destroying you", they should not be surprised when they don't end up being thankful and instead vote for the other guy. That's one of the reasons Erdogan is now in power.
Why cannot a person wear a headscarf (it does not obscure their mouth or eyes so does not inhibit communication) if they want to? For what ever private reason they feel they want to?
I know people who wear them for non-religious reasons. Will they be exempt from your rules about fashion?
People get told all the time that what they wear is unacceptable by others in power, and it is an abuse of power. This is particularly true for women and a "headscarf" ban another example of blatant misogyny.
What is particularly offensive is it is said it is one for "liberating" those women. Often (usually not always) it is non Islamic people lecturing Islamists.
The fight against misogyny in Islam is a fight for Islamic women. When there is a cry from Islamic women for non-Islamists to set fashion laws for Islamic women to obey (and not just the odd lone voice) then maybe, possible you might have a point. Is that ever going to happen?
I do not think that Islamic women need misogynist, sexist, Islamophobic, theophobic, bigoted, and patronising rules and punishment. To liberate them, no less! Perhaps they need the opposite
What next, enforce a communist uniform on everyone and strictly control their freedom to express their thoughts? Do you realise how ludicrous you sound? I note you're French and your religious expressions laws are not made in the name of secularism, rather specifically intended to discriminate against a sizeable minority.
Presumably your also include a Christian Cross necklace? What about a symmetric cross that's visibly a cross but not a traditional cross? A cross at an angle?
You're entitled to express your point of view, of course, but please be more convincing and informed than a nationalistically ideological charlatan (how ironic).
You're making leaps in logic that don't make sense to me. You're the one being ludicrous, as far as I can tell.
>I note you're French and your religious expressions laws are not made in the name of secularism, rather specifically intended to discriminate against a sizeable minority.
At the time those laws were made, the absolute majority of the country was made of church-going Catholics. That at the present day they're mostly invoked in relation to a religious minority doesn't make any difference.
> Presumably your also include a Christian Cross necklace?
Sure.
> What about a symmetric cross that's visibly a cross but not a traditional cross? A cross at an angle?
Is it a token of belonging to a religious organization ? If so, keep it private. I don't see what's complex about that.
> You're entitled to express your point of view, of course, but please be more convincing and informed than a nationalistically ideological charlatan (how ironic).
I'm informed about the political and religious history of my own country, and as such transversely familiar with the framework Atatürk tried to put in place in Turkey. I'm less familiar with the ways it started breaking down. And frankly, you're not in any position to demand better argumentation on my part if you're not doing as much yourself.
The state in question has "not showing this kind of deference toward religions" as one of its founding principles: in fact, as founding principle number one. It states that certain personal lifestyle choices, such as religion, do not belong the public sphere. In the public sphere each individual should appear as a simple citizen, and not seek to distinguish thenselves from other citizens along religious lines.
Where would you draw the line between religious and cultural? I assume you would have no problem with people wearing traditional clothes? What about traditional amish clothing? Would a buddhist be allowed to wear a rakusu? Could a Scandinavian raise a maypole even though it was a design that was meant to christianize a previously pagan religion but is now not seen as religious? Would file-sharing not be allowed since kopimism is an official religion in some countries? Would symbols not originally rooted in religion but later adopted by them be allowed?
I'd be really interested to know where you draw the line.
Good thing you're not in a position to make such a call then.
> Religious vestment simply has no place outside of ritual occasions
The Hijab is not merely a "religious vestment" as the seculars and atheists foolishly seem to think. It's a way of life, a way of showing purity and piety.
> Acknowledging religion as something that deserves any sort of deference by the State isn't acceptable. And I say that as an otherwise religious person myself (don't take it as the stance of some rabid atheist).
I'm going to assume you're a Christian, and I'm not surprised, your religion has been relegated to the sidelines when it comes to anything relevant in terms of running society. And they convinced you to keep it that way.
Let me ask you this: do you have an issue with homosexuals and transexuals showing their propaganda in public?
The head coverings (various kinds) are associated with modesty. They are often fashionable modesty (?!) in Turkey now, as Armani and others advertise cutting-edge, expensive headscarfs. Some women are using them as a status symbol. They can also be used to signal pro-Erdoğan, pro-Islamist (in a government sense) sentiments.
Now, a woman not wearing a head covering (very many do not) may be called a slut by women wearing them. Rare perahps, but these things happen. There is often a palpable tension between the groups of women who wear them, and the groups of women who do not. It is as I said often a political symbol.
For example in developed English-speaking countries, allowing headscarves is seen as promoting diversity, inclusiveness and tolerance. Wanting to restrict this is generally considered to be somewhere between right-wing and bigoted. In France, views tend to be different. In Iran, where hair coverings are mandatory for women, the connotations are different and they can be symbols of an authoritarian or oppressive government (to certain people at least) instead.
In this case, as well as the culture in Turkey, one must consider:
- changing attitudes to who attends university since the old rules were introduced.
- changing attitudes among Muslims to headscarves since the old rules were introduced.
- changing attitudes towards secularisation (and politics in general) since the old rules were introduced.
It seems to me that most HN readers (myself included) are not in a good position to pass judgement and that this comment benefits from the liberal anglosphere view aligning with its arguments. But I don’t know how that fits in with the way Turks think or used to think.
Today, Syria is being plundered by the same countries that helped the terrorists sell the stolen oil. We all know which country smuggled truckloads worth of oil then, and which country does the same now.
Comparing Turkey's and Syria's cultures is like comparing an ugly frog to a beautiful marmaid.
I am not very familiar with Syria situation. Purely a honest question.
Russia has been supporting the secular Syrian government.
Really? I did not know that. Have you a source?
> The Turkey-backed FSA's wages are paid for by the Turkish government, they operate alongside the Turkish Armed Forces
https://en.m.wikipedia.org/wiki/Syrian_National_Army
As for their terrorist proclivities:. https://foreignpolicy.com/2019/10/14/turkish-backed-forces-f...
To be fair though, they basically took over the CIA operations.
Of course, this would have isolated and aggrovated Russia further, and Assad knew that. Nevermind that Syria is within range of Russia's missiles. He also knew what became of Sadam Housein (once an ally to the US) once he was of no use to the West.
In any case, causing a civil war inside a country just to punish a leader for making calculated, reasonable choice is criminal and evil.
Arguably the only reason Syria didn't collapse like Libya/Iraq is because Russia was there to balance against US interests.
Turkey used to smuggle Syrian oil, but today that "job" belongs to the USA.
It's literally in the Quran:
And the Hadiths:
* https://sunnah.com/riyadussalihin:1615
* https://sunnah.com/bulugh/7/62
This isn't a matter of interpretation.
Then on the night of Dec 20, he introduces a financial instrument where the government offers %14 interest and guarantees to pay the any difference if it happens that the lira devalues. With a coordinated effort, government banks start selling $USD the whole day and whole night when the markets are shallow and Turks are asleep, selling off at least 7B$ of the reserves of the central bank and who knows how much of other banks, lowering the $USD from 18 the night Turks went to bed to 11 at the morning.
Look at that graph: https://twitter.com/tashecon/status/1473065067914702852
Then they continued to sell off the national $USD reserves, conducting a full blown media propaganda operation including advertisement that is obviously produced at least days before the event. Looking back, just the day before the stock market crashed with %10 and there are rumours of certain businessman being informed that the government will change it's stance and intervene strongly.
Then we had the Economy minister bragging how they screwed up the little guy who bought $USD at over 14 in an attempt to protect their savings, adding that no institutional investors were harmed in the process.
It's just a crypto-bros level of shake off organised and executed by the government. They claim that the orthodox economists are to be blamed for the losses, how silly they are for not accounting for the government tricking the people. Imagine FED giving guidance for interest rates decrease then out of the blue dramatically increasing the rates at midnight once the pals of the president position themselves correctly and saying that the public shouldn't have listed to the economists.
At this very moment, Erdogan is having an "interview" that is broadcasted by multiple TV channels and as expected they again started selling off $USD as he began speaking, pushing the dollar from about 12 to 10.
Take a look at that chart: https://imgur.com/a/CxYYfyL
That's %20 daily volatility.
The Fed has done worse, just on a longer timescale. Alan Greenspan may, in fact, be the devil.
Bold move, and a smart one, considering the outright hostile actions by the US towards the country. No dollar reserves, means no more economic bullying by the US.
Russia is already losing their strong engineering force to China, their resources are bought cheaply by China and China is not even remotely investing in Russia. Much to the dismay of Putin.
Turkey next?
China at least doesn't have military bases all over the world to ensure everybody stays in line.
I wonder how many European countries would intentionaly harm their economies by placing sanctions on Russia if the US troops weren't there.
Where China is claiming territory it doesn't have any claims to and is using severe military pressure for it.
Other than that, the ports that China does have is mostly because of loans that countries can't repay. Where they then claim infrastructure for their own.
You don't seem to be informed on the topic?
Should we ask people of Syria what is the US doing on their soil? Or Iraqis, who want them out but they for some reason don't wanna leave.
As for loans...well, maybe don't take them if you can't repay them. The West is lending too, you know. And those credits aren't cheap.
And the loans are done by WHO. Many people benefit from it, but you can't get them while doing stupid things. At least it is manageable to pay back.
While China had some well positioned corrupt loans going on, which they actually want infrastructure/premium ressources and self managed in return. WHO doesn't have those conflicting interests.
I'm not saying WHO is perfect either, but it's obviously superior to the other option.
By the way, I come from a country that was bombed by the US (doesn't narrow it much, I know) and can you guess what the new puppet government did after the war ended?
Yeah, it sold nearly all domestic companies, mines and factories for pennies to the western capitalists. It also dismantled a very efficient domestic financial/accounting system, replacing it with foreign banks.
So, don't talk to me about how the West is somehow different, or better than China.
But I'm pretty sure the problems in the country predate US intervention.
And it doesn't contradict the fact that capitalism has made the world more peaceful than ever because of trade.
Convince me with numbers otherwise.
Ps. Yeah, i said WHO instead of IMF. Obviously, it's the latter.
Okay am I missing something here? Europe has negative rates. The US has negative rates. But when Turkey lowers rates from 19% (!!?!!) to 14% it creates a “crisis”?
There is a big difference between lending at 0% when "natural" interest is .25% and lending at 14% when natural interest is 20%. If inflation is 18% you're effectively giving consumers 4% return on borrowed money, which means everyone will borrow as much money as they possibly can and use it to purchase goods.
In the US, inflation is nearly at 7%, while savings accounts yield around 0.05%. Doesn't that mean Americans are discouraged from keeping money in savings accounts about the same amount as Turks are?
If you believe American inflation will remain there, yes. Few do. (Also, the Fed is tightening.)
The current belief is that the fed will manage inflation appropriately, and that the 7% headline number will vanish in a few months. Housing increasing 20% last year is a sign that the same incentive is there, getting a mortgage at 2% and then earning a free 5% interest is too good a deal to pass up.
Anyways, current Turkish PPI is >50% (and it will only increase in coming months.). The real interest rate in Turkey is in far negative territory compared to US and EU, where they are desperate for inflation.
Well good news, they succeeded beyond their wildest dreams....
And they are still claiming government spending trillions is not the cause, and will not create new inflation..
So no, I dont believe they have acknowledged the problem at all, nor are they really going to address is. Sure the fed says they will wind down their buying, and signaled they might raise interest rates VERY VERY VERY minimally, they are acting as if demand caused by supply chain issues is the root cause
It is not
It is great for those with hard assets, it is TERRIBLE for the working poor.
Funny how many of the same people that claim to want to help the poor (democrats) have no problem with high inflation
Inflation is great for people in massive debt, or hold assets, and the rich
Inflation is terrible for savers, responsible people living with in their means, poor that pay cash for everything, etc etc.
https://fred.stlouisfed.org/series/T10YIE
https://fred.stlouisfed.org/series/T5YIE
(Alternatively you could suppose we’ll have inflation at x for one year and y on average for the next 9. If that’s the case I think the data above implies x=2.22% and y=4.7%, so I still think 6% is too much but maybe not totally crazy)
Proper Islamic finance involves risk from both parties. E.g. one party provides funding, the other provides labor, if the project succeeds, they both reap the rewards. If it doesn't, then the first party loses money and the second the labor.
Islam very clearly calls out schemes to construct loopholes to bypass prohibition. One such transaction is that of the Einah sale: one party sells an item for a certain amount to be paid by installments (say sells a car for $12,000 to be paid $1000 per month over the next year), then the same party buys the same car for $10,000 cash. What ended up happening is that party B owes party A $12,000 to be paid over the year, but they received $10K cash. This is absolutely forbidden. Similarly, any scheme that stitches together a series of individually permissible transactions to come up with an overall transaction that mimics interest is absolutely forbidden as well. We don't have loopholes in Islam.
I'm not very familiar with the mechanics of forex markets, but I'm fairly certain that a small circle of well-connected people has made a killing out of this. Which raises a question...
To what extent was plain and simple greed part of the motive for setting up this unorthodox policy? Insider trading.
In democratic countries, people can rebuild from any crisis, so any dark period is temporary. In theological autocracies darkness has no end, and future gives no hope.
Unfortunately for the Turkish people, you can push people pretty far in a well managed dictatorship - ie Belarus, Venezuela - and continue in power. This is why having dictators is never a good idea, you can’t replace them when they stop having any purpose.
PS: This is a sincere question…
EDIT: some are asking why not real Euros or Dollars? I was thinking convenience and availability. I’m not sure if you could just easily get dollars in Turkey.
https://www.reuters.com/markets/us/exclusive-turkeys-cryptoc...
Just over a year ago (Nov 2020), I bought $100 of BTC and $100 of ETH... on Paypal of all places. Didn't touch it at all.
Today, it is worth $1221.37 (+510.32%).
ETH: $899.22 (+799.22%), BTC: $320.77 (+220.77%)
You're right mentioning ETH over BTC. =)
My plan is to donate this to charity.
The poster above you stated that his/her $100 investments are now worth after 1 year:
> ETH: $899.22 (+799.22%), BTC: $320.77 (+220.77%)
The Turkish lira hasn't changed nearly that much in value.
> PS: This is a sincere question…
No.
PS: This is a sincere answer.
After US refused to sell PAC 3 despite Istanbul pleading for it since even before Erdogun
If US doesn't want to sell weapons to Turkey, its NATO ally, is Turkey supposed to give up and stay defenceless against terrorists that attack its borders?
America is happy to sell to Turkey. Turkey wants to dual source. The U.S., reasonably, doesn’t want its latest stealth tech painted by Russian radars phoning home. Sometimes playing the middle ground helps. Sometimes it gets you a raw deal. In Turkey’s case, the people are losing.
US knows that it cannot keep Turkey on a leash like it can, for example, France or Greece. So it does not want to sell it weapons, in case Turkey ever becomes a "problem" (read too powerful to control).
Is this honestly the line Turks are being fed? The concern is Turkey becoming a failed state and terrorist hotbed, for the U.S. and Russia, and a new migrant source, for the EU. If Turkey could reliably project force in the region, it would solve a lot of American strategic problems.
Of course, there is a real danger of that happening. Turkey can indeed become a failed state...if USA attempts another coup or color revolution.
Look, there are multitude of concurrent attacks, both military (inside Syria by using Kurds/SDF) and economic being made agains Turkey for it's failure to be a "good NATO ally". I don't like Erdogan, and I care not about what happens to him. Turks do, though.
Many people will die if Turkey turns into another Iraq, Libya or Syria. And I don't want that to happen.
The article this thread attached to is about home-grown economic orbital bombardment. If the Anatolian elite can keep the populace distracted by phantom foreign threats, they’ll succeed in extracting their wealth before the house falls.
Russia allowed Azeris to win that war, just to show Armenia how vulnerable it is without Russian help. Plus, they now have troops patroling along the border with Nagorno-Karabah.
This is only one of the many unpublished “dept”s.
The more the Turkish lira devaluates, the more the public has to pay for the PPPs. Hence, when considering for creditworthiness, you need to account for all, not a single number.
Speculation abounds at Wall Street, London stock exchange and other western financial institutions. They are the ones dictating the price of money, the exchange rates and asset bubbles. They have the power to financialy attack any country in the world that does trade in US dollars and euros (almost all countries in the world). As we can see, even their "allies" are not spared.
- Change in foreign reserves.
- Private debt to GDP, particularly denominated in EUR and USD.
- Turkish private bank debt to FX reserves, particularly denominated in EUR and USD.
Turkey's problem is having to pay for inputs in EUR or USD and interest payments in EUR or USD at the same time such reserves and the ability to acquire such reserves are in decline & increasing in cost.
Essentially it's unsubstantiated claims made largely out of thin air. It's useless.