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    Central Bank shall reconnect with the reality as soon as possible
    Güven Sak, PhD 08 January 2009
    The world has changed. This was what the International Monetary Fund (IMF) chief economist Olivier Blanchard and Director of Fiscal Affairs Department Carlo Cottarelli were mentioning in the joint statement they delivered recently, "What kind of an expansionary fiscal policy do we need?" If you wish, you can find the transcript of the statement in English in the IMF web site or in Turkish in the TEPAV web site. As the world is changing, everyone is trying to adjust, including the IMF. Only the Central Bank of the Republic of Turkey is still living in yesterday's world. However, it is crucial for the Central Bank to reconnect with the reality. If you are wondering why, please go on reading. [More]
    Favorable indicators of yesterday do not give good news anymore
    Güven Sak, PhD 06 January 2009
    2009 will be year different from those we are used to. Before 2009, it was easier to understand which was a right step and which was a wrong step. The economy was operating within the framework we are familiar with. This year, however, things are different. The changes in indicators, which we would deem as favorable in the past, do not point a favorable state of affairs now. Therefore, confusion is inevitable. We are in a period where we have to look back on the things we know. The economy is shifting from one phase to another and in the meanwhile, main problem of the economy is changing. Set of concepts and indicators valid back then do not mean anything today.  Let us see towards what direction the binding constraints of yesterday move and what does this mean for the economy. [More]
    Bubbling bubbles
    Fatih Özatay, PhD 05 January 2009
    Since the bubble that emerged in the housing market of the US has burst, we are covered by 'tiny bubbles' all around. Everyone keeps saying "bubble is growing in Turkey", "keep out; the bubble will burst", "this is the result of 'false monetary policies'" and so on... [More]
    Unusual certainty
    Fatih Özatay, PhD 01 January 2009
    It is a custom that - though I do not know whether it is so, or if it is, why it is so - calculations are made on the eve of the New Year; what was said about the year left and to what extent they were realized and so on. On the last day of 2008, the day I wrote this column, I skimmed over old columns with a bit of hesitation; because, throughout the year I have asked questions meaning 'Who has the control' and criticized the ongoing inertia. Yes, but what did I say throughout the year? What if one says: "You keep on criticizing, but, what about you?" [More]
    2009 will be the year of easy decisions for the economy
    Güven Sak, PhD 01 January 2009
    Happy New Year! I wish that 2009 brings richness and happiness for everyone living on this beautiful blue planet. In fact, a year in which we will need patience the most has come; not only for the residents of this country, but for everyone living on this planet. Our destinies have never been this interlocked before. We have never encountered such synchronized disasters. For the first time, the world is starting a year with common grieves and concerns. This is as well valid for Turkey. Then, what shall we expect from the year 2009? 2009 will be the year of easy decisions for the economy. Do not get me wrong, naturally hard decisions will also be made. This year will be a hard one for the Turkish economy. However, those hard decisions will be made easily without constantly postponing the is [More]
    ‘If you are in debt, you are in trouble’ period begins for the corporate sector
    Güven Sak, PhD 30 December 2008
    Honorable businessman Mr. Tuncay Özilhan said "Ankara residents do not feel what goes on in Anatolia". He was right. The subject was on the headlines of this daily yesterday. Today let me examine the problems the corporate sector encounters in daily life. The topic is 'if you are in debt, you are in trouble'. [More]
    Who helped Bernard Madoff?
    Güven Sak, PhD 27 December 2008
    Bernard Madoff shock in the capital markets take place on December 11, 2008. According to the statement of the website of Securities and Exchanges Commission (SEC), Mr. Madoff, founder of Bernard L. Madoff Securities Investment and board of executors of the company for 48 years, was arrested. The cause of investigation was the statements Madoff made to his sons, who are senior executives in the company. Our successful businessman said his fellow colleagues: "What we are doing is nothing but fraud; you can only call this Ponzi financing". And the fellow colleagues, without wasting time, reported their father/boss to the SEC. [More]
    What does ‘no money circulation in the market’ mean?
    Güven Sak, PhD 25 December 2008
    Last Tuesday we said "Let go the empty talks and see what we should do." In this context, we first focused on the corporate sector. It seems that the current conditions will first affect the corporate sector regardless of what we want. Until today, we in a polite and technical manner said "It is critical to prevent any obstruction in the credit channel"; but no one understood anything. Therefore, today it is time to explain what is going to happen concretely. Do you remember the first example? The question we asked was quite simple: What happens if banks tell companies 'The collateral you supplied for the credit you received is not sufficient anymore. Either supply additional collateral or return the part of the credit not covered by the collateral'? The answer was that bad things happened [More]
    How can resources be transferred to the corporate sector?
    Güven Sak, PhD 23 December 2008
    IMF Managing Director Dominique Strauss Kahn underlined three points in his speech in Spain: first is the banks shall be recapitalized in a coordinated way to re-ensure the operation of the banking system. Second is that it was time for expansionary fiscal policy to tackle the approaching depression. Any country that has the capacity should expand public expenditures. Third, emerging market economies should be provided with liquidity support without questioning. The aforesaid statement of the IMF Managing Director in fact shall make us sweat suddenly and profusely. We are not used to hear this kind of statements from the IMF. However, this makes sense as we are faced with unusual conditions. In such a period where no one has time to think for any other, everyone shall start evaluating his [More]
    Would the IMF lend the US?
    Güven Sak, PhD 20 December 2008
    Central Bank of the USA, FED cut down the interest rates to zero. Furthermore, it announced that the expansion in its own balance sheet is a long-term trend. Balance sheet of the FED has tripled times in the last year. Now, they announced that this was not a short-term step and the trend would continue. Instead of asking "What does this mean", we will assume another approach. We will ask: If the US government applied to the IMF and enumerated the steps taken, would it be able to sign an agreement? The answer is, no it would not. Then, if the US was not monetizing and was dependent on the IMF for foreign funds, what would be done in such hard circumstances? It should have first taken the steps initiated today and then apply to the IMF. And this brings us to the topic of today: In the recent [More]