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Israeli newspaper: Will the Turkish lira topple the throne of the “Ottoman Emperor”?

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Israeli newspaper: Will the Turkish lira topple the throne of the “Ottoman Emperor”?

It is not the first time that the Turkish lira has collapsed by tens of percentages in a month, but it is now an economic crisis to weaken the Turkish president’s control over the reins of power.
The Turkish lira fell 25 percent in the last month, and has fallen to a historic low by the day. After it crossed the 10 lira barrier to the dollar, its fall accelerated. Yesterday morning it was sold at 13 pounds to the dollar.
The Turkish currency lost two-thirds of its value in three years. The yield on Turkey’s government bonds in the aforementioned ten years rose to 21.1 percent, the highest yield since May 2019.
The repercussions of the collapse of the lira on the economy in Turkey is serious. But in addition to the economic impact, it would tell us about changes in government. The economic situation could lead to serious instability in the large country which lies at a critical crossroads between Asia, Europe and the Middle East.

The central bank is separated from the economic reality

Turkey’s economy under President Erdogan has experienced rapid growth, accelerated by debt. But there is also a rapid decline and collapse of the currency, including a 30 percent devaluation within a month in 2006, which caused a huge loss for the Israeli businessman, Eliezer Fishman, and another collapse in 2008.
Gradually in recent years, it has become clear that mega-projects and consumption-centric growth will not lead Turkey to healthy growth. The goals set by the Muslim president, who loves palaces and ostentation, are now more distant than they were at the beginning of his path considering that he is the greatest reformer of the Ottoman Empire.
Erdogan has a fundamental problem with the economy; Contrary to everything that is known to economists, investors and consumers, it is believed that high interest rates are not the solution to inflation. Official inflation in Turkey has been 20 percent in recent months, but the central bank, under pressure from Erdogan, cut interest rates this month by 3 percent, and reached 15 percent. This is another nail that Erdogan is hammering in the coffin of the Turkish economy. For years, he has been asking the central bank to cut interest rates, regardless of economic reality. He not only asked, but also dismissed a number of bank governors who did not bow before him, until he appointed one of his close associates to this position last March, Shehab Kavgiolo, who cut the interest rate.
This year, Erdogan dismissed more senior bank officials because they opposed the interest rate cut. He believes that low interest rates will encourage growth and employment, but his intervention in the activities of the Central Bank has made foreign investors flee, pulling the rug out from under the lira and from under the economy.

lose elasticity

According to estimates, real inflation in Turkey is 50 percent. And if we take into account a 25 percent reduction in the price of the lira in the last month, the prices have almost doubled within a year. For Turks who make a living by their ethnicity, this is a disaster, and the reason their continued support for Erdogan has ceased.
Erdogan, as is well known, survived a dramatic coup attempt in 2016. He succeeded in making political gains from it. He has dismissed hundreds of thousands of public servants and academics who were not his supporters, closed media outlets and newspapers, enacted religious laws, and changed the constitution so that he could rule Turkey without restrictions.
The fall of the lira sparked a few protests in Istanbul and in the capital, Ankara, against a failed economic management in the government and against inflation. Police erected barricades in the capital, popular support for Erdogan began to wane, and his opponents in the elections to be held in 2023 began to build up steadily.
“The latest tremor will push the floating voices affected by the economic situation into the ranks of the opposition,” said Jan Selcocki, general manager of the Turkish polling company, Roboro Libloomberg. “The odds of the ruling party not reaching the 30 percent level of votes required to win it, have increased.” In the previous elections in 2018, Erdogan’s party had the support of 43%, but now, according to Mehmet Ali Bulat, general manager of the polling company “MAC”: “60% of Turks have lost hope in the government’s ability to solve Turkey’s economic problems in the coming year “.

Much more discount required

“Turkey’s pain threshold is higher,” said Bencks Kaelen, a strategist at Societe Generale. “The possibility of a potential reversal is slim to Erdogan’s determination to hold off on a rate hike. A much more reduction is required before there is an intervention to prevent it from falling.” According to the Central Bank’s statement last week, the fall of the lira was exaggerated, but no response was announced. “The Central Bank of Turkey applies a floating exchange rate policy, and has no obligation to a specific exchange rate,” senior bank officials explained.
Written by: Dafneh Meor
Haaretz/The Marker 11/25/2021

in details

It is not the first time that the Turkish lira has collapsed by tens of percentages in a month, but it is now an economic crisis to weaken the Turkish president’s control over the reins of power.
The Turkish lira fell 25 percent in the last month, and has fallen to a historic low by the day. After it crossed the 10 lira barrier to the dollar, its fall accelerated. Yesterday morning it was sold at 13 pounds to the dollar.
The Turkish currency lost two-thirds of its value in three years. The yield on Turkey’s government bonds in the aforementioned ten years rose to 21.1 percent, the highest yield since May 2019.
The repercussions of the collapse of the lira on the economy in Turkey is serious. But in addition to the economic impact, it would tell us about changes in government. The economic situation could lead to serious instability in the large country which lies at a critical crossroads between Asia, Europe and the Middle East.

The central bank is separated from the economic reality

Turkey’s economy under President Erdogan has experienced rapid growth, accelerated by debt. But there is also a rapid decline and collapse of the currency, including a 30 percent devaluation within a month in 2006, which caused a huge loss for the Israeli businessman, Eliezer Fishman, and another collapse in 2008.
Gradually in recent years, it has become clear that mega-projects and consumption-centric growth will not lead Turkey to healthy growth. The goals set by the Muslim president, who loves palaces and ostentation, are now more distant than they were at the beginning of his path considering that he is the greatest reformer of the Ottoman Empire.
Erdogan has a fundamental problem with the economy; Contrary to everything that is known to economists, investors and consumers, it is believed that high interest rates are not the solution to inflation. Official inflation in Turkey has been 20 percent in recent months, but the central bank, under pressure from Erdogan, cut interest rates this month by 3 percent, and reached 15 percent. This is another nail that Erdogan is hammering in the coffin of the Turkish economy. For years, he has been asking the central bank to cut interest rates, regardless of economic reality. He not only asked, but also dismissed a number of bank governors who did not bow before him, until he appointed one of his close associates to this position last March, Shehab Kavgiolo, who cut the interest rate.
This year, Erdogan dismissed more senior bank officials because they opposed the interest rate cut. He believes that low interest rates will encourage growth and employment, but his intervention in the activities of the Central Bank has made foreign investors flee, pulling the rug out from under the lira and from under the economy.

lose elasticity

According to estimates, real inflation in Turkey is 50 percent. And if we take into account a 25 percent reduction in the price of the lira in the last month, the prices have almost doubled within a year. For Turks who make a living by their ethnicity, this is a disaster, and the reason their continued support for Erdogan has ceased.
Erdogan, as is well known, survived a dramatic coup attempt in 2016. He succeeded in making political gains from it. He has dismissed hundreds of thousands of public servants and academics who were not his supporters, closed media outlets and newspapers, enacted religious laws, and changed the constitution so that he could rule Turkey without restrictions.
The fall of the lira sparked a few protests in Istanbul and in the capital, Ankara, against a failed economic management in the government and against inflation. Police erected barricades in the capital, popular support for Erdogan began to wane, and his opponents in the elections to be held in 2023 began to build up steadily.
“The latest tremor will push the floating voices affected by the economic situation into the ranks of the opposition,” said Jan Selcocki, general manager of the Turkish polling company, Roboro Libloomberg. “The odds of the ruling party not reaching the 30 percent level of votes required to win it, have increased.” In the previous elections in 2018, Erdogan’s party had the support of 43%, but now, according to Mehmet Ali Bulat, general manager of the polling company “MAC”: “60% of Turks have lost hope in the government’s ability to solve Turkey’s economic problems in the coming year “.

Much more discount required

“Turkey’s pain threshold is higher,” said Bencks Kaelen, a strategist at Societe Generale. “The possibility of a potential reversal is slim to Erdogan’s determination to hold off on a rate hike. A much more reduction is required before there is an intervention to prevent it from falling.” According to the Central Bank’s statement last week, the fall of the lira was exaggerated, but no response was announced. “The Central Bank of Turkey applies a floating exchange rate policy, and has no obligation to a specific exchange rate,” senior bank officials explained.
Written by: Dafneh Meor
Haaretz/The Marker 11/25/2021

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