Connect with us

Latest

Analysis

News

The Turkish Emerging Market Timebomb

Turkish President Recep Tayyip Erdoğan’s populist economic policies have finally caught up to him.

The Duran

Published

on

1,879 Views

Authored by Jim O’Neill, originally on Project Syndicate:


As the Turkish lira continues to depreciate against the dollar, fears of a classic emerging-market crisis have come to the fore. Turkish President Recep Tayyip Erdoğan’s populist economic policies have finally caught up to him, and sooner or later, he will have to make nice with his country’s traditional Western allies.

Turkey’s falling currency and deteriorating financial conditions lend credence, at least for some people, to the notion that “a crisis is a terrible thing to waste.” I suspect that many Western policymakers, in particular, are not entirely unhappy about Turkey’s plight.

To veteran economic observers, Turkey’s troubles are almost a textbook case of an emerging-market flop. It is August, after all, and back in the 1990s, one could barely go a single year without some kind of financial crisis striking in the dog days of summer.

But more to the point, Turkey has a large, persistent current-account deficit, and a belligerent leader who does not realize – or refuses to acknowledge – that his populist economic policies are unsustainable. Moreover, Turkey has become increasingly dependent on overseas investors (and probably some wealthy domestic investors, too).

Given these slowly gestating factors, markets have long assumed that Turkey was headed for a currency crisis. In fact, such worries were widespread as far back as the fall of 2013, when I was in Istanbul interviewing business and financial leaders for a BBC Radio series on emerging economies. At that time, markets were beginning to fear that monetary-policy normalization and an end to quantitative easing in the United States would have dire consequences globally. The Turkish lira has been flirting with disaster ever since.

Now that the crisis has finally come to pass, it is Turkey’s population that will bear the brunt of it. The country must drastically tighten its domestic monetary policy, curtail foreign borrowing, and prepare for the likelihood of a full-blown economic recession, during which time domestic saving will slowly have to be rebuilt.

Turkish President Recep Tayyip Erdoğan’s leadership will both complicate matters and give Turkey some leverage. Erdoğan has  constitutional powers, reducing those of the parliament, and undercutting the independence of monetary and fiscal policymaking. And to top it off, he seems to be reveling in an escalating feud with US President Donald Trump’s administration over Turkey’s imprisonment of an American pastor and purchase of a Russian S-400 missile-defense system.

This is a dangerous brew for the leader of an emerging economy to imbibe, particularly when the United States itself has embarked on a Ronald Reagan-style fiscal expansion that has pushed the US Federal Reserve to raise interest rates faster than it would have otherwise. Given the unlikelihood of some external source of funding emerging, Erdoğan will eventually have to back down on some of his unorthodox policies. My guess is that we’ll see a return to a more conventional monetary policy, and possibly a new fiscal-policy framework.

As for Turkey’s leverage in the current crisis, it is worth remembering that the country has a large and youthful population, and thus the potential to grow into a much larger economy in the future. It also enjoys a privileged geographic position at the crossroads of Europe, the Middle East, and Central Asia, which means that many major players have a stake in ensuring its stability. Indeed, many Europeans still hold out hope that Turkey will embrace Western-style capitalism, despite the damage that Erdoğan has done to the country’s European Union accession bid.

Among the regional powers, Russia is sometimes mentioned as a potential savior for Turkey. There is no doubt that Russian President Vladimir Putin would love to use Turkey’s crisis to pull it even further away from its NATO allies. But Erdoğan and his advisers would be deeply mistaken to think that Russia can fill Turkey’s financial void. A Kremlin intervention would do little for Turkey, and would likely exacerbate Russia’s own .

The other two potential patrons are Qatar and, of course, China. But while Qatar, one of Turkey’s closest Gulf allies, could provide financial aid, it does not ultimately have the wherewithal to pull Turkey out of its crisis singlehandedly.

As for China, though it will not want to waste the opportunity to increase its influence vis-à-vis Turkey, it is not the country’s style to step into such a volatile situation, much less assume responsibility for solving the problem. The more likely outcome – as we are seeing in Greece – is that China will unleash its companies to pursue investment opportunities after the dust settles.

That means that Turkey’s economic salvation lies with its conventional Western allies: the US and the EU (particularly France and Germany). On August 13, a White House spokesperson confirmed that the Trump administration is watching the financial-market response to Turkey’s crisis “very closely.” The last thing that Trump wants is a crumbling world economy and a massive dollar rally, which could derail his domestic economic ambitions. So a classic Trump “trade” is probably there for Erdoğan, if he is willing to come to the negotiating table.

Likewise, some of Europe’s biggest and most fragile banks have significant exposure to Turkey. Combine that with the ongoing political crisis over migration, and you have a recipe for deeper destabilization within the EU. I, for one, cannot imagine that European leaders will sit by and do nothing while Turkey implodes on their border.

Despite his escalating rhetoric, Erdoğan may soon find that he has little choice but to abandon his isolationist and antagonistic policies of the last few years. If he does, many investors may look back next year and wish that they had snapped up a few lira when they had the chance.

Liked it? Take a second to support The Duran on Patreon!
Advertisement
7 Comments

7
Leave a Reply

avatar
7 Comment threads
0 Thread replies
0 Followers
 
Most reacted comment
Hottest comment thread
7 Comment authors
VeeNarian (Yerevan)CheviHelga FellayAM HantsMarc Landreville Recent comment authors
  Subscribe  
newest oldest most voted
Notify of
VeeNarian (Yerevan)
Guest
VeeNarian (Yerevan)

This is a very limited and blinkered analysis. Listen to Erdogan: Turkey does have other partners. Then the US/EU/NATO gangsters will be well and truly stuffed.

Chevi
Guest
Chevi

who the heck is this guy Jim ???????? the EU is bankrupt………usa is kaput………. end of story……..

Helga Fellay
Guest
Helga Fellay

This author seems utterly clueless. Turkey has – finally – realized that its future lies with the new alliances that are gaining power as the old order, the western alliance, is going down fast. Quatar has already offered a bailout, and while the transition period is painful, Turkey will rise again, without the help of that sinking ship, the EU, which will go down alongside its master, the USA.

AM Hants
Guest
AM Hants

Sorry, this is off topic, but, might be of interest.

BREAKING: Ukrainian Army & Blackwater Prepare Use Of Radiation Weapon On Donbass (DOCUMENTS, MAP)
Major development, Cyber-Berkut reveals all… https://www.fort-russ.com/2018/08/breaking-ukrainian-army-blackwater-prepare-use-of-radiation-weapon-on-donbass-documents-map/

Wonder if they will time it, to kick off the mid-term elections, whilst blaming Russia?

Remember, the Blackwater mercenaries, who are now run by Monsanto, back in February 2014, over in Ukraine? Isn’t Eric Prince’s sister, the Education secretary, over in the US? So why is he heavily involved with Soros funded organisations, or does brother Eric, just follow the money, no matter who pays the bills?

Marc Landreville
Guest
Marc Landreville

The US thinks that it can influence Turkey’s future economic development. What they have trouble realising is that the US economic dominance is waning. Turkey may switch to China/BRICS rapidly developing economic infrastructure. The US thinks that Turkey is tied and committed to NATO and will eventually cede to US demands. However, under previous governments, Turkey wanted to become part of Europe, and many decades ago, the EU told Turkey that joining NATO was the first step. In the last decade, it has become clear to Turkey that Europe doesn’t want them. Therefore, there is little benefit for Turkey to… Read more »

John R Balch Jr
Guest
John R Balch Jr

It seems the United States wants to be the only “Super Power” in the world and now “Outer Space” so they can tell other countries who they can trade with and who they can not trade with and what they can trade and what they can not trade. They even have a White House Adviser who wants to kick China out of the World Trade Organization because China won’t bow down to the United States will on trade. The United States are now trying to become like the former Roman Empire, the former Ottoman Empire or the former British Empire,… Read more »

Poovizhi arasan
Guest
Poovizhi arasan

You seem to have forgotten history, in writing this essay, Mr Zuesse . On August 15, 1971, US defaulted on its international obligations, making it the first sovereign default post war in post WW II history. So defaulting on its international obligations is potential answer. But it could damage credibility. Credible alternatives, would be to abrogate the Incrilik treaty arrangements, and insist that rentals on the base be made in Gold or Euros or any other non dollar currencies. Since Yuan comprises at least 10 per cent of the trade basket, it could also be an alternative ! Simultaneously hike… Read more »

Latest

Clinton-Yeltsin docs shine a light on why Deep State hates Putin (Video)

The Duran – News in Review – Episode 114.

Alex Christoforou

Published

on

Bill Clinton and America ruled over Russia and Boris Yeltsin during the 1990s. Yeltsin showed little love for Russia and more interest in keeping power, and pleasing the oligarchs around him.

Then came Vladimir Putin, and everything changed.

Nearly 600 pages of memos and transcripts, documenting personal exchanges and telephone conversations between Bill Clinton and Boris Yeltsin, were made public by the Clinton Presidential Library in Little Rock, Arkansas.

Dating from January 1993 to December 1999, the documents provide a historical account of a time when US relations with Russia were at their best, as Russia was at its weakest.

On September 8, 1999, weeks after promoting the head of the Russia’s top intelligence agency to the post of prime minister, Russian President Boris Yeltsin took a phone call from U.S. President Bill Clinton.

The new prime minister was unknown, rising to the top of the Federal Security Service only a year earlier.

Yeltsin wanted to reassure Clinton that Vladimir Putin was a “solid man.”

Yeltsin told Clinton….

“I would like to tell you about him so you will know what kind of man he is.”

“I found out he is a solid man who is kept well abreast of various subjects under his purview. At the same time, he is thorough and strong, very sociable. And he can easily have good relations and contact with people who are his partners. I am sure you will find him to be a highly qualified partner.”

The Duran’s Alex Christoforou and Editor-in-Chief Alexander Mercouris discuss the nearly 600 pages of transcripts documenting the calls and personal conversations between then U.S. President Bill Clinton and Russian President Boris Yeltsin, released last month. A strong Clinton and a very weak Yeltsin underscore a warm and friendly relationship between the U.S. and Russia.

Then Vladimir Putin came along and decided to lift Russia out of the abyss, and things changed.

Remember to Please Subscribe to The Duran’s YouTube Channel

Here are five must-read Clinton-Yeltsin exchanges from with the 600 pages released by the Clinton Library.

Via RT

Clinton sends ‘his people’ to get Yeltsin elected

Amid unceasing allegations of nefarious Russian influence in the 2016 presidential election, the Clinton-Yeltsin exchanges reveal how the US government threw its full weight behind Boris – in Russian parliamentary elections as well as for the 1996 reelection campaign, which he approached with 1-digit ratings.

For example, a transcript from 1993 details how Clinton offered to help Yeltsin in upcoming parliamentary elections by selectively using US foreign aid to shore up support for the Russian leader’s political allies.

“What is the prevailing attitude among the regional leaders? Can we do something through our aid package to send support out to the regions?” a concerned Clinton asked.

Yeltsin liked the idea, replying that “this kind of regional support would be very useful.” Clinton then promised to have “his people” follow up on the plan.

In another exchange, Yeltsin asks his US counterpart for a bit of financial help ahead of the 1996 presidential election: “Bill, for my election campaign, I urgently need for Russia a loan of $2.5 billion,” he said. Yeltsin added that he needed the money in order to pay pensions and government wages – obligations which, if left unfulfilled, would have likely led to his political ruin. Yeltsin also asks Clinton if he could “use his influence” to increase the size of an IMF loan to assist him during his re-election campaign.

Yeltsin questions NATO expansion

The future of NATO was still an open question in the years following the collapse of the Soviet Union, and conversations between Clinton and Yeltsin provide an illuminating backdrop to the current state of the curiously offensive ‘defensive alliance’ (spoiler alert: it expanded right up to Russia’s border).

In 1995, Yeltsin told Clinton that NATO expansion would lead to “humiliation” for Russia, noting that many Russians were fearful of the possibility that the alliance could encircle their country.

“It’s a new form of encirclement if the one surviving Cold War bloc expands right up to the borders of Russia. Many Russians have a sense of fear. What do you want to achieve with this if Russia is your partner? They ask. I ask it too: Why do you want to do this?” Yeltsin asked Clinton.

As the documents show, Yeltsin insisted that Russia had “no claims on other countries,” adding that it was “unacceptable” that the US was conducting naval drills near Crimea.

“It is as if we were training people in Cuba. How would you feel?” Yeltsin asked. The Russian leader then proposed a “gentleman’s agreement” that no former Soviet republics would join NATO.

Clinton refused the offer, saying: “I can’t make the specific commitment you are asking for. It would violate the whole spirit of NATO. I’ve always tried to build you up and never undermine you.”

NATO bombing of Yugoslavia turns Russia against the West

Although Clinton and Yeltsin enjoyed friendly relations, NATO’s bombing of Yugoslavia tempered Moscow’s enthusiastic partnership with the West.

“Our people will certainly from now have a bad attitude with regard to America and with NATO,” the Russian president told Clinton in March 1999. “I remember how difficult it was for me to try and turn the heads of our people, the heads of the politicians towards the West, towards the United States, but I succeeded in doing that, and now to lose all that.”

Yeltsin urged Clinton to renounce the strikes, for the sake of “our relationship” and “peace in Europe.”

“It is not known who will come after us and it is not known what will be the road of future developments in strategic nuclear weapons,” Yeltsin reminded his US counterpart.

But Clinton wouldn’t cede ground.

“Milosevic is still a communist dictator and he would like to destroy the alliance that Russia has built up with the US and Europe and essentially destroy the whole movement of your region toward democracy and go back to ethnic alliances. We cannot allow him to dictate our future,” Clinton told Yeltsin.

Yeltsin asks US to ‘give Europe to Russia’

One exchange that has been making the rounds on Twitter appears to show Yeltsin requesting that Europe be “given” to Russia during a meeting in Istanbul in 1999. However, it’s not quite what it seems.

“I ask you one thing,” Yeltsin says, addressing Clinton. “Just give Europe to Russia. The US is not in Europe. Europe should be in the business of Europeans.”

However, the request is slightly less sinister than it sounds when put into context: The two leaders were discussing missile defense, and Yeltsin was arguing that Russia – not the US – would be a more suitable guarantor of Europe’s security.

“We have the power in Russia to protect all of Europe, including those with missiles,” Yeltsin told Clinton.

Clinton on Putin: ‘He’s very smart’

Perhaps one of the most interesting exchanges takes place when Yeltsin announces to Clinton his successor, Vladimir Putin.

In a conversation with Clinton from September 1999, Yeltsin describes Putin as “a solid man,” adding: “I am sure you will find him to be a highly qualified partner.”

A month later, Clinton asks Yeltsin who will win the Russian presidential election.

“Putin, of course. He will be the successor to Boris Yeltsin. He’s a democrat, and he knows the West.”

“He’s very smart,” Clinton remarks.

Liked it? Take a second to support The Duran on Patreon!
Continue Reading

Latest

New Satellite Images Reveal Aftermath Of Israeli Strikes On Syria; Putin Accepts Offer to Probe Downed Jet

The images reveal the extent of destruction in the port city of Latakia, as well as the aftermath of a prior strike on Damascus International Airport.

Published

on

Via Zerohedge


An Israeli satellite imaging company has released satellite photographs that reveal the extent of Monday night’s attack on multiple locations inside Syria.

ImageSat International released them as part of an intelligence report on a series of Israeli air strikes which lasted for over an hour and resulted in Syrian missile defense accidentally downing a Russian surveillance plane that had 15 personnel on board.

The images reveal the extent of destruction on one location struck early in attack in the port city of Latakia, as well as the aftermath of a prior strike on Damascus International Airport. On Tuesday Israel owned up to carrying out the attack in a rare admission.

Syrian official SANA news agency reported ten people injured in the attacks carried out of military targets near three major cities in Syria’s north.

The Times of Israel, which first reported the release of the new satellite images, underscores the rarity of Israeli strikes happening that far north and along the coast, dangerously near Russian positions:

The attack near Latakia was especially unusual because the port city is located near a Russian military base, the Khmeimim Air Force base. The base is home to Russian jet planes and an S-400 aerial defense system. According to Arab media reports, Israel has rarely struck that area since the Russians arrived there.

The Russian S-400 system was reportedly active during the attack, but it’s difficult to confirm or assess the extent to which Russian missiles responded during the strikes.

Three of the released satellite images show what’s described as an “ammunition warehouse” that appears to have been completely destroyed.

The IDF has stated their airstrikes targeted a Syrian army facility “from which weapons-manufacturing systems were supposed to be transferred to Iran and Hezbollah.” This statement came after the IDF expressed “sorrow” for the deaths of Russian airmen, but also said responsibility lies with the “Assad regime.”

Israeli Prime Minister Benjamin Netanyahu also phoned Russian President Vladimir Putin to express regret over the incident while offering to send his air force chief to Russia with a detailed report — something which Putin agreed to.

According to Russia’s RT News, “Major-General Amikam Norkin will arrive in Moscow on Thursday, and will present the situation report on the incident, including the findings of the IDF inquiry regarding the event and the pre-mission information the Israeli military was so reluctant to share in advance.”

Russia’s Defense Ministry condemned the “provocative actions by Israel as hostile” and said Russia reserves “the right to an adequate response” while Putin has described the downing of the Il-20 recon plane as likely the result of a “chain of tragic accidental circumstances” and downplayed the idea of a deliberate provocation, in contradiction of the initial statement issued by his own defense ministry.

Pro-government Syrians have reportedly expressed frustration this week that Russia hasn’t done more to respond militarily to Israeli aggression; however, it appears Putin may be sidestepping yet another trap as it’s looking increasingly likely that Israel’s aims are precisely geared toward provoking a response in order to allow its western allies to join a broader attack on Damascus that could result in regime change.

Liked it? Take a second to support The Duran on Patreon!
Continue Reading

Latest

“Transphobic” Swedish Professor May Lose Job After Noting Biological Differences Between Sexes

A university professor in Sweden is under investigation after he said that there are fundamental differences between men and women which are “biologically founded”

Published

on

Via Zerohedge


A university professor in Sweden is under investigation for “anti-feminism” and “transphobia” after he said that there are fundamental differences between men and women which are “biologically founded” and that genders cannot be regarded as “social constructs alone,” reports Academic Rights Watch.

For his transgression, Germund Hesslow – a professor of neuroscience at Lund University – who holds dual PhDs in philosophy and neurophysiology, may lose his job – telling RT that a “full investigation” has been ordered, and that there “have been discussions about trying to stop the lecture or get rid of me, or have someone else give the lecture or not give the lecture at all.”

“If you answer such a question you are under severe time pressure, you have to be extremely brief — and I used wording which I think was completely innocuous, and that apparently the student didn’t,” Hesslow said.

Hesslow was ordered to attend a meeting by Christer Larsson, chairman of the program board for medical education, after a female student complained that Hesslow had a “personal anti-feminist agenda.” He was asked to distance himself from two specific comments; that gay women have a “male sexual orientation” and that the sexual orientation of transsexuals is “a matter of definition.”

The student’s complaint reads in part (translated):

I have also heard from senior lecturers that Germund Hesslow at the last lecture expressed himself transfobically. In response to a question of transexuallism, he said something like “sex change is a fly”. Secondly, it is outrageous because there may be students during the lecture who are themselves exposed to transfobin, but also because it may affect how later students in their professional lives meet transgender people. Transpersonals already have a high level of overrepresentation in suicide statistics and there are already major shortcomings in the treatment of transgender in care, should not it be countered? How does this kind of statement coincide with the university’s equal treatment plan? What has this statement given for consequences? What has been done for this to not be repeated? –Academic Rights Watch

After being admonished, Hesslow refused to distance himself from his comments, saying that he had “done enough” already and didn’t have to explain and defend his choice of words.

At some point, one must ask for a sense of proportion among those involved. If it were to become acceptable for students to record lectures in order to find compromising formulations and then involve faculty staff with meetings and long letters, we should let go of the medical education altogether,” Hesslow said in a written reply to Larsson.

He also rejected the accusation that he had a political agenda – stating that his only agenda was to let scientific factnot new social conventions, dictate how he teaches his courses.

Liked it? Take a second to support The Duran on Patreon!
Continue Reading

JOIN OUR YOUTUBE CHANNEL

Your donations make all the difference. Together we can expose fake news lies and deliver truth.

Amount to donate in USD$:

5 100

Validating payment information...
Waiting for PayPal...
Validating payment information...
Waiting for PayPal...
Advertisement

Advertisement

Quick Donate

The Duran
EURO
DONATE
Donate a quick 10 spot!
Advertisement
Advertisement

Advertisement

The Duran Newsletter

Trending