Turkey’s fall

Turkeys-FallThe Turkish Lira is free falling.

It has been weakening for years (from parity to 12 TRY to the dollar), but the 15% fall on Tuesday is causing a lot of pain and concerns.

 

The causes

  • A rampant inflation, around 20% per year.
  • A president who has concentrated power in his hands: a new constitution bringing the responsibilities of the prime minister and cabinet into the hands of the president, a purge of opposition and judges, selection of technocrats based on loyalty, repression of the press and freedom in general, an active military campaign against minorities (Kurds), and a move towards a religious state.
  • A loss of independence of the central bank, with the sacking of governors who had a different view to President Erdogan’s.
  • Instauration of a low rate policy, underpinned by the Muslim faith, despite the rampant inflation and against the opinion of most economists. The policy inflated a vicious circle of inflation and currency devaluation.

TRYUSD-LongTerm

 

The outcome

 

This cannot finish well, economically or socially…

 

 

References

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Written by Gontran de Quillacq

Gontran de Quillacq is an expert witness and a legal consultant. He is a recognized authority in options, trading, derivatives, structured products, portfolio management, hedge funds, mathematical finance, quantitative investment, strategy research and financial markets in general.

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