With a friend like Trump, who needs enemies
18 August 2018
There are two types of countries in the world. Countries that have current account surpluses and countries that have current account deficits. The former lend money to the latter. Both and Turkey and the States are in the second category. But Turkey has periodic currency crises, as happened in 2001 and is happening again this week, while the US looks safe. Much of it is because Turks are not able to borrow money in Turkish liras, while the Americans borrow in their own currency. When Turks borrow in dollars and their currency devalues, they have to pay more. This should not be news to anyone. The advantages of having the global reserve currency is referred to as “exorbitant privilege,” a term first used by the French in the 1960s, at the dawn of the Bretton Woods system.
Turkey is part of Europe
11 August 2018
What surprised me most this week was not the depreciation of the Turkish lira against the US dollar. That was to be expected. What surprised me was the simultaneous depreciation of the Euro against the US dollar. The Euro-USD rate was at 1.16 on Thursday, and declined to 1.14 on Friday. Why did this happen?
Eat that frog now
04 August 2018
Mark Twain once said “if it's your job to eat a frog, it's best to do it first thing in the morning.” Why? Because then you can go through the day knowing that the worst thing that can possibly happen to you has already in the past. It’s a perfect way to start a new era. That’s the wisdom to follow in dealing with Turkey’s mounting economic problems. Turkey has procrastinated enough in a rapidly changing world. Now is the time to stop delaying any further.
Something wicked this way comes
29 July 2018
Remember Act 4 Scene 1 of Macbeth, by William Shakespeare? That’s where the witches gather round a smoky black cauldron. “By the pricking of my thumbs/something wicked this way comes” says one. That’s how I feel these days in Ankara. Though we tend not to “open locks, whoever knocks.” We all know that Turkey needs to be ready for what is coming. This week has been about that anticipation.
Desperately looking for positive signs
22 July 2018
“Tell me something positive” said a western friend entering my office, “so that I may tell it to my superiors, for them to make a more informed decision about Turkey.” I have to confess that it is not getting any easier. Our friends in western capitals are now desperately looking for some positive signs. Why? Just have a look at the events.
The Indian moment in Turkish democracy
23 June 2018
This Sunday, voting stations across Turkey are going to set up two ballot boxes: one to choose the president, the chief of the executive, and another to choose parliamentarians, who make up the legislature. Under the new system, a president does not need parliament to form his government, as parliament does not need the president to legislate. A highly likely scenario to come out of this Sunday’s vote is for the president to be elected in the second round and not to have a majority in the parliament. Twin elections will usher in a new era of coalition politics. I see this as the Indian moment of Turkish democracy. Let me explain.
What recent protests in Jordan mean
16 June 2018
There were nationwide protests in Jordan recently. People were out on the streets against plans for a new law to broaden the tax base, as well as high oil prices. The result? As of June 5th, Jordan has a new government. Hani Mulki has gone and Omar Razzaz has come as the new prime minister. This is Jordan’s 6th government since the beginning of the Syrian civil war, which started in March 2011, mind you. Six governments in eight years. I think that is telling. Let me elaborate.
What’s the matter with the Turkish Lira?
09 June 2018
The Central Bank of the Republic of Turkey (CBRT) surprised markets this week with a 125-basis point (bp) rate hike. The bank had already hiked the rate 300-bp two weeks ago. Can this move now boost the value of the Turkish lira against the dollar? I don’t think so.
Turkey, Argentina and that déja vu
02 June 2018
Turkey and Argentina were like economic twins back in the 1980s. They shared many stories about the balance of payments, currency crises, and IMF conditionality. The twins diverged later with Turkey seemingly outperforming its twin. But recent events brought them back into the same fold, and this time, Argentina appears to be in a more advantageous position. Let me explain.
Turkey needs a new story
19 May 2018
The lira is in free fall, and the entire Turkish economy is reeling from its effects, suffering in silence, praying for deliverance. In his three-day state visit to UK this week, President Erdoğan gave lengthy interviews to financial outlets and met major investors for dinner, presumably to stop his currency’s fall. What happened? The lira lost another 5 percent against the dollar, declining from 23 cents a lira to 22 cents. It seems that we don’t have a good story to tell the world any more, and the world votes with its cash.