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The Turkish Emerging Market Timebomb

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

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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.

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VeeNarian (Yerevan)CheviHelga FellayAM HantsMarc Landreville Recent comment authors
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VeeNarian (Yerevan)
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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
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Chevi

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

Helga Fellay
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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
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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
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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
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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
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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 »

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Vladimir Putin visits Serbia, as NATO encircles the country it attacked in 1999 (Video)

The Duran – News in Review – Episode 171.

Alex Christoforou

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The Duran’s Alex Christoforou and Editor-in-Chief Alexander Mercouris discuss Russian President Vladimir Putin’s official visit to Serbia.

Putin met with Serbian President Aleksandar Vucic to further develop bilateral trade and economic relations, as well as discuss pressing regional issues including the possibility of extending the Turkish Stream gas pipeline into Serbia, and the dangerous situation around Kosovo.

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Via RT


Russian President Vladimir Putin got a hero’s welcome in Belgrade. The one-day visit to the last holdout against NATO’s ambitions in the Balkans may have been somewhat short on substance, but was certainly loaded with symbolism.

Even before he landed, the Russian leader was given an honor guard by Serbian air force MiGs, a 2017 gift from Moscow to replace those destroyed by NATO during the 1999 air campaign that ended with the occupation of Serbia’s province of Kosovo. Russia has refused to recognize Kosovo’s US-backed declaration of independence, while the US and EU have insisted on it.

Upon landing, Putin began his first official trip of 2019 by paying respects to the Soviet soldiers who died liberating Belgrade from Nazi occupation in 1944. While most Serbians haven’t forgotten their historical brotherhood in arms with Russia, it did not hurt to remind the West just who did the bulk of the fighting against Nazi Germany back in World War II.

After official talks with Serbian President Aleksandar Vucic, Putin visited the Church of St. Sava, the grand Orthodox basilica set on the spot where the Ottoman Turks torched the remains of the first Serbian archbishop back in 1594, in an effort to maintain power.

Sava, whose brother Stefan became the “first-crowned” king of medieval Serbia, was responsible for setting up the autocephalous Serbian Orthodox Church exactly eight centuries ago this year. For all its own troubles, the Serbian Church has sided with Moscow in the current Orthodox schism over Ukraine.

Russian artisans have been working on the grand mosaic inside the basilica, and asked Putin to complete the design by placing the last three pieces, in the colors of the Russian flag.

Whether by sheer coincidence or by design, Putin also weighed in on Serbia’s culture war, giving interviews ahead of his visit to two daily newspapers that still publish in Serbian Cyrillic – while the majority of the press, whether controlled by the West or by Vucic, prefers the Latin variant imported from Croatia.

Western media usually refer to Serbia as a “Russian ally.” While this is true in a historical and cultural sense, there is no formal military alliance between Moscow and Belgrade. Serbia officially follows the policy of military neutrality, with its armed forces taking part in exercises alongside both Russian and NATO troops.

This is a major source of irritation for NATO, which seeks dominion over the entire Balkans region. Most recently, the alliance extended membership to Montenegro in 2017 without putting the question to a referendum. It is widely expected that “Northern Macedonia” would get an invitation to NATO as soon as its name change process is complete – and that was arranged by a deal both Macedonia and Greece seem to have been pressured into by Washington.

That would leave only Serbia outside the alliance – partly, anyway, since NATO has a massive military base in the disputed province of Kosovo, and basically enjoys special status in that quasi-state. Yet despite Belgrade’s repeated declarations of Serbia wanting to join the EU, Brussels and Washington have set recognition of Kosovo as the key precondition – and no Serbian leader has been able to deliver on that just yet, though Vucic has certainly tried.

Putin’s repeated condemnations of NATO’s 1999 attack, and Russian support for Serbia’s territorial integrity guaranteed by the UN Security Council Resolution 1244, have made him genuinely popular among the Serbs, more so than Vucic himself. Tens of thousands of people showed up in Belgrade to greet the Russian president.

While Vucic’s critics have alleged that many of them were bused in by the government – which may well be true, complete with signs showing both Vucic and Putin – there is no denying the strong pro-Russian sentiment in Serbia, no matter how hard Integrity Initiative operatives have tried.

One of the signs spotted in Belgrade reportedly said “one of 300 million,” referring to the old Serbian joke about there being “300 million of us – and Russians.” However, it is also a send-up of the slogan used by current street protesters against Vucic. For the past six weeks, every Saturday, thousands of people have marched through Belgrade, declaring themselves “1 of 5 million” after Vucic said he wouldn’t give in to their demands even if “five million showed up.”

The opposition Democrats accuse him of corruption, nepotism, mismanagement, cronyism – all the sins they themselves have plenty of experience with during their 12-year reign following Serbia’s color revolution. Yet they’ve had to struggle for control of the marches with the nationalists, who accuse Vucic of preparing to betray Kosovo and want “him to go away, but [Democrats] not come back.”

There is plenty of genuine discontent in Serbia with Vucic, who first came to power in 2012 on a nationalist-populist platform but quickly began to rule as a pro-NATO liberal. It later emerged that western PR firms had a key role in his party’s “makeover” from Radicals to Progressives. Yet his subsequent balancing act between NATO and Russia has infuriated both the NGOs and politicians in Serbia beholden to Western interests, and US diplomats charged with keeping the Balkans conquered.

Washington is busy with its own troubles these days, so there was no official comment to Putin’s visit from the State Department – only a somewhat pitiful and tone-deaf tweet by Ambassador Kyle Scott, bemoaning the lack of punishment for $1 million in damages to the US Embassy during a 2008 protest against Kosovo “independence.” Yet as far as Western media outlets are concerned, why Moscow seems to be vastly more popular than Washington on the streets of Belgrade nonetheless remains a mystery.

By Nebojsa Malic

 

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Curious Bedfellows: The Neocon And Progressive Alliance To Destroy Donald Trump

The neocon metamorphosis is nearly complete as many of the neocons, who started out as Democrats, have returned home, where they are being welcomed for their hardline foreign policy viewpoint.

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Authored by Philip Giraldi via OffGuardian.com:


The Roman poet Ovid’s masterful epic The Metamorphoses includes the memorable opening line regarding the poem’s central theme of transformation. He wrote In nova fert animus mutatas dicere formas corpora, which has been translated as “Of shapes transformed to bodies strange, I purpose to entreat…”

Ovid framed his narrative around gods, heroes and quasi-historical events but if he were around today, he would no doubt be fascinated by the many transformations of the group that has defined itself as neoconservative.The movement began in a cafeteria in City College of New York in the 1930s, where a group of radical Jewish students would meet to discuss politics and developments in Europe. Many of the founders were from the far left, communists of the Trotskyite persuasion, which meant that they believed in permanent global revolution led by a vanguard party. The transformation into conservatives of a neo-persuasion took place when they were reportedly “mugged by reality” into accepting that the standard leftist formulae were not working to transform the world rapidly enough. As liberal hawks, they then hitched their wagon to the power of the United States to bring about transformation by force if necessary and began to infiltrate institutions like the Pentagon to give themselves the tools to achieve their objectives, which included promotion of regime change wars, full spectrum global dominance and unconditional support for Israel.

The neocons initially found a home with Democratic Senator Henry “Scoop” Jackson, but they moved on in the 1970s and 1980s to prosper under Ronald Reagan as well as under Democrat Bill Clinton. Their ability to shape policy peaked under George W. Bush, when they virtually ran the Pentagon and were heavily represented in both the national security apparatus and in the White House. They became adept at selling their mantra of “strong national defense” to whomever was buying, including to President Obama, even while simultaneously complaining about his administration’s “weakness.”

The neoconservatives lined up behind Hillary Clinton in 2016, appalled by Donald Trump’s condemnation of their centerpiece war in Iraq and even more so by his pledge to end the wars in Asia and nation-building projects while also improving relations with the Russians. They worked actively against the Republican candidate both before he was nominated and elected and did everything they could to stop him, including libeling him as a Russian agent.

When Trump was elected, it, therefore, seemed that the reign of the neocons had ended, but chameleonlike, they have changed shape and are now ensconced both in some conservative as well as in an increasing number of progressive circles in Washington and in the media. Against all odds, they have even captured key posts in the White House itself with the naming of John Bolton as National Security Adviser and Mike Pompeo as Secretary of State. Bolton’s Chief of Staff is Fred Fleitz, a leading neocon and Islamophobe while last week Trump added Iran hawk Richard Goldberg to the National Security Council as director for countering Iranian weapons of mass destruction. Goldberg is an alumnus of the Foundation for Defense of Democracies, which is the leading neocon think tank calling incessantly for war with Iran.

Meanwhile, the neocon metamorphosis is nearly complete as many of the neocons, who started out as Democrats, have returned home, where they are being welcomed for their hardline foreign policy viewpoint. Glenn Greenwald reports that, based on polling of party supporters, the Democrats have gone full-Hillary and are now by far more hawkish than the Republicans, unwilling to leave either Syria or Afghanistan.

The neocon survival and rejuvenation is particularly astonishing in that they have been wrong about virtually everything, most notably the catastrophic Iraq War. They have never been held accountable for anything, though one should note that accountability is not a prominent American trait, at least since Vietnam. What is important is that neocon views have been perceived by the media and punditry as being part of the Establishment consensus, which provides them with access to programming all across the political spectrum. That is why neocon standard-bearers like Bill Kristol and Max Boot have been able to move effortlessly from Fox News to MSNBC where they are fêted by the likes of Rachel Maddow. They applauded the Iraq War when the Establishment was firmly behind it and are now trying to destroy Donald Trump’s presidency because America’s elite is behind that effort.

Indeed, the largely successful swing by the neocons from right to left has in some ways become more surreal, as an increasing number of progressive spokesmen and institutions have lined up behind their perpetual warfare banner. The ease with which the transformation took place reveals, interestingly, that the neocons have no real political constituency apart from voters who feel threatened and respond by supporting perpetual war, but they do share many common interests with the so-called liberal interventionists. Neocons see a global crisis for the United States defined in terms of power while the liberals see the struggle as a moral imperative, but the end result is the same: intervention by the United States. This fusion is clearly visible in Washington, where the Clintons’ Center for American Progress (CAP) is now working on position papers with the neoconservative American Enterprise Institute (AEI).

One of the most active groups attacking President Trump is “Republicans for the Rule of Law,” founded by Bill Kristol in January 2018, as a component of Defending Democracy Together(DDT), a 501(c)4 lobbying group that also incorporates projects called The Russia Tweets and Republicans Against Putin. Republicans Against Putin promotes the view that President Trump is not “stand[ing] up to [Vladimir] Putin” and calls for more aggressive investigation of the Russian role in the 2016 election.

DDT is a prime example of how the neoconservatives and traditional liberal interventionists have come together as it is in part funded by Pierre Omidyar, the billionaire co-founder of eBay who has provided DDT with $600,000 in two grants through his Democracy Fund Voice, also a 501(c)4. Omidyar is a political liberal who has given millions of dollars to progressive organizations and individuals since 1999. Indeed, he is regarded as a top funder of liberal causesin the United States and even globally together with Michael Bloomberg and George Soros. His Democracy Fund awarded $9 million in grants in 2015 alone.

Last week, the Omidyar-Kristol connection may have deepened with an announcement regarding the launch of the launch of a new webzine The Bulwark, which would clearly be at least somewhat intended to take the place of the recently deceased Weekly Standard. It is promoting itself as the center of the “Never Trump Resistance” and it is being assumed that at least some of the Omidyar money is behind it.

Iranian-born Omidyar’s relationship with Kristol is clearly based on the hatred that the two share regarding Donald Trump.

Omidyar has stated that Trump is a “dangerous authoritarian demagogue… endorsing Donald Trump immediately disqualifies you from any position of public trust.”

He has tweeted that Trump suffers from “failing mental capacity” and is both “corrupt and incapacitated.”

Omidyar is what he is – a hardcore social justice warrior who supports traditional big government and globalist liberal causes, most of which are antithetical to genuine conservatives. But what is interesting about the relationship with Kristol is that it also reveals what the neoconservatives are all about. Kristol and company have never been actual conservatives on social issues, a topic that they studiously avoid, and their foreign policy is based on two principles: creating a state of perpetual war based on fearmongering about foreign enemies while also providing unlimited support for Israel. Kristol hates Trump because he threatens the war agenda while Omidyar despises the president for traditional progressive reasons. That hatred is the tie that binds and it is why Bill Kristol, a man possessing no character and values whatsoever, is willing to take Pierre Omidyar’s money while Pierre is quite happy to provide it to destroy a common enemy, the President of the United States of America.

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Nancy Pelosi tries to deplatform U.S. President Trump over the wall (Video)

The Duran – News in Review – Episode 170.

Alex Christoforou

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In response to Pelosi’s disgusting act of censorship, Trump trolled the Speaker of the House in epic fashion by forcing the cancellation of a trip to Afghanistan, Brussels and Egypt by Nancy Pelosi and her massive entourage.

In a letter addressed to Pelosi, U.S. President Trump told House Speaker Nancy Pelosi…

“I am sorry to inform you that your trip to Brussels, Egypt, and Afghanistan has been postponed. We will reschedule this seven-day excursion when the Shutdown is over.”

“I am sure you would agree that postponing this public relations event is appropriate.”

According to a congressional aide, Pelosi and several other politicians were already on buses preparing to leave the U.S. Capitol when the U.S. President cancelled their trip.

Trump suggested that Pelosi fly commercial to Afghanistan and elsewhere should she wish.

The Duran’s Alex Christoforou and Editor-in-Chief Alexander Mercouris discuss how Nancy Pelosi is trying to censor Trump and prevent the U.S. President from delivering the State of the Union to the American people, in what is clearly another liberal left deplatforming ploy.

Instead of debating the issues about the wall and immigration with fact, logic, and policy positions, Pelosi (out of fear) is trying to silence Trump and squash debate and political discourse.

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Via The Gateway Pundit

Speaker Nancy Pelosi (D-CA) sent a letter to President Donald Trump on Wednesday asking him to postpone the State of the Union Address to a Joint Session of Congress scheduled for January 29.

Pelosi cited security concerns over the partial government shutdown.

Pelosi said both the U.S. Secret Service and the Department of Homeland Security have not been funded for 26 days now – with critical departments hamstrung by furloughs. Therefore, they would not be ready for the speech.

Pelosi posted her letter to Trump on Twitter, saying, “Today, I wrote to  recommending that we delay the State of the Union until after government re-opens, as the , the lead federal agency for  security, faces its 26th day without funding.” (Text version of letter below tweet.)

The Department of Homeland Security refuted the Speaker’s claims — The Secret Service is ready for the SOTU.

And on Thursday FOX News reported that Speaker Pelosi was using “all kinds of security” manpower for her pricey trip with Democrats to Belgium and Afghanistan.

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