Cyprus-Forum.com

[B25]

Istanbul Stock Exchange National 100 Index (XU100:IND) drops another -5.010% - VALUE: 50,307.630 TRY on Wednesday after a slight "Dead Cat Bounce" gains on Tuesday!



http://www.bloomberg.com/apps/quote?ticker=XU100:IND

Kiks, will you please stop upsetting VP and his cronies with these reports.

After all Turkey is a middle east super power

perhaps you should be posting this info on the carpetbaggers site, that'll really shake them.

[Kikapu]

Kikapu just for the sake of discussion and because I want to learn:

What do you mean by "hot money"? Are the money that foreigners have put on investments?

Pyro,

That is the money short term investors are using in chasing after High Interest returns in any country that offers it. Turkey has relatively high interest rates on offer which attracts Hot Money to flow into the country, which then the banks use the extra cash to lend out to those looking to borrow at a higher rate. As a result, consumers borrowing money from the banks gets much easier since the banks want to lend them out to any Tom, Dick and Mary to generate enough money to pay off the short term investors with "Hot Money". This will of course result in the consumers buying more foreign products, increasing Imports, that then creates the imbalances between Imports/Exports causing the present Foreign Trade Deficits. In the mean time, the borrowers get into bigger debts than they can afford, since borrowing money from the banks has gotten easier with all that "Hot Money" sitting around. This is not same as the money as Investments money that are made into Turkish companies for the long term or Investment monies made into Foreign owned companies in Turkey.

Secondly, since it seems to be currently a surplus of money available to the consumers,that resulted in the frenzy of imports surpassing the exports by 100% with all those chain consequence,s won't there be a point where there befalling of the economy and the devaluation of the lira will by themselves provide an equilibrium/a balance between exports-imports?

In theory, that is true, but it is not a perfect science, hence there is the problem. Turkey needs to maintain relatively High Interest rates to combat Inflation, which are higher than most, so in effect they find themselves in a "no man's land" between Hot Money and Inflation which can be a very fine line between the two. If they want to cut off the Hot Money by reducing their high Interest rates, which they did by only 50 basis points, which is relatively small amount, but resulted in the Turkish Stock market getting spooked about growth threats in the future, which added more pressure on the TL because the threats of added inflation on the horizon. When inflation rises, it will automatically devalue the TL and it's purchasing power. With high inflation and devalued TL, it will make Imports far more expensive on raw material products the companies would need in order to run their companies, which will result in reducing growth, which will increase unemployment, which will result in less products produced, which will reduce Exports, and items that are being exported will have higher price tags since it cost more to Import the raw materials needed to make the product, and if the export prices rise, then the buyers will search for cheaper products from other countries, which will then reduce Exports, resulting more job loses and on and on and on until the country falls into recession.

Just by having devalued TL does not automatically result in more exports., even if the cost on products being exported remains the same as before the TL went down, it does not mean other countries will buy more from Turkey, since the TL has always been low against other major currencies. The question is, does Turkey produces what people want in other countries with their own labeled products.? Aside from products to eat and other small items, I don't see much else in other other countries that are in high demand with Turkish labeled products such as vehicles, electronics, durable house goods and so on, even though many foreign companies do have these high end products produced in Turkey with Turkish cheap labour, but they remain under the foreign company's trade names. Perhaps Turkey may ships some of these household durable products under a Turkish label to other countries in Middle East as well as at home in Turkey under licence, but I do not see them in Europe or the USA. Of course, foreign companies who have the work done in Turkey for their products with cheap Turkish labour do benefit from lower TL, since they still bring western prices for their products in developed countries, then turn around and pay cheap Turkish prices for labour cost in Turkey, taking full advantage on exchange rates alone, which will be in their favour. Also, the Turkish youth are use to buying quality foreign products, so despite the higher cost, they will pay for it, get further in debt, continue to increase the FTD, Interests rates will go up to fight inflation, which will invite more "Hot Money" into the country. It is a vicious catch-22.

Thirdly (only if by hot money you mean the investments money).Won't the situation be reversed as soon as those investments start deliverying?

"Hot Money" is a short term investments in countries that has high interest rates, which is different from investment money in companies for the long term.

[Pyrpolizer]

Kikapu just for the sake of discussion and because I want to learn:

What do you mean by "hot money"? Are the money that foreigners have put on investments?

Pyro,

That is the money short term investors are using in chasing after High Interest returns in any country that offers it. Turkey has relatively high interest rates on offer which attracts Hot Money to flow into the country, which then the banks use the extra cash to lend out to those looking to borrow at a higher rate. As a result, consumers borrowing money from the banks gets much easier since the banks want to lend them out to any Tom, Dick and Mary to generate enough money to pay off the short term investors with "Hot Money". This will of course result in the consumers buying more foreign products, increasing Imports, that then creates the imbalances between Imports/Exports causing the present Foreign Trade Deficits. In the mean time, the borrowers get into bigger debts than they can afford, since borrowing money from the banks has gotten easier with all that "Hot Money" sitting around. This is not same as the money as Investments money that are made into Turkish companies for the long term or Investment monies made into Foreign owned companies in Turkey.

Secondly, since it seems to be currently a surplus of money available to the consumers,that resulted in the frenzy of imports surpassing the exports by 100% with all those chain consequence,s won't there be a point where there befalling of the economy and the devaluation of the lira will by themselves provide an equilibrium/a balance between exports-imports?

In theory, that is true, but it is not a perfect science, hence there is the problem. Turkey needs to maintain relatively High Interest rates to combat Inflation, which are higher than most, so in effect they find themselves in a "no man's land" between Hot Money and Inflation which can be a very fine line between the two. If they want to cut off the Hot Money by reducing their high Interest rates, which they did by only 50 basis points, which is relatively small amount, but resulted in the Turkish Stock market getting spooked about growth threats in the future, which added more pressure on the TL because the threats of added inflation on the horizon. When inflation rises, it will automatically devalue the TL and it's purchasing power. With high inflation and devalued TL, it will make Imports far more expensive on raw material products the companies would need in order to run their companies, which will result in reducing growth, which will increase unemployment, which will result in less products produced, which will reduce Exports, and items that are being exported will have higher price tags since it cost more to Import the raw materials needed to make the product, and if the export prices rise, then the buyers will search for cheaper products from other countries, which will then reduce Exports, resulting more job loses and on and on and on until the country falls into recession.

Just by having devalued TL does not automatically result in more exports., even if the cost on products being exported remains the same as before the TL went down, it does not mean other countries will buy more from Turkey, since the TL has always been low against other major currencies. The question is, does Turkey produces what people want in other countries with their own labeled products.? Aside from products to eat and other small items, I don't see much else in other other countries that are in high demand with Turkish labeled products such as vehicles, electronics, durable house goods and so on, even though many foreign companies do have these high end products produced in Turkey with Turkish cheap labour, but they remain under the foreign company's trade names. Perhaps Turkey may ships some of these household durable products under a Turkish label to other countries in Middle East as well as at home in Turkey under licence, but I do not see them in Europe or the USA. Of course, foreign companies who have the work done in Turkey for their products with cheap Turkish labour do benefit from lower TL, since they still bring western prices for their products in developed countries, then turn around and pay cheap Turkish prices for labour cost in Turkey, taking full advantage on exchange rates alone, which will be in their favour. Also, the Turkish youth are use to buying quality foreign products, so despite the higher cost, they will pay for it, get further in debt, continue to increase the FTD, Interests rates will go up to fight inflation, which will invite more "Hot Money" into the country. It is a vicious catch-22.

Thirdly (only if by hot money you mean the investments money).Won't the situation be reversed as soon as those investments start deliverying?

"Hot Money" is a short term investments in countries that has high interest rates, which is different from investment money in companies for the long term.

Very well explained thank you.

[B25]

Kiks, did your dog dictate that too ?

Nice doggy.

[Viewpoint]

Do the dog a favor and put it out of its misery, i not talking about the economic evaluation but that it has to live with Kikapoooo.

[supporttheunderdog]

Here are two other charts which shown what Turkey's problems are

Chart.png

Chart1.png

About 12.5% in about 3 months on the dollar.

This probably represents what the world thinks of the Turkish Economy.

Only the carpet b*ggers might get some short term joy as the Lira falls in value so they got more for their pounds but inevitably there will be inflation so prices will rise and the benfits will go: this will particularly apply to imported goods, both in Turkey and the occupied area, and both raw materials and finished items.

[Viewpoint]

More sale of Turkish goods
Less purchase of foreign goods
Smaller trade deficit
Less hot money
Well done Turkey.

[CBBB]

More sale of Turkish goods
Less purchase of foreign goods
Smaller trade deficit
Less hot money
Well done Turkey.

Good news for everyone, the less they have to do with the civilised world the better.

[supporttheunderdog]

More sale of Turkish goods
Less purchase of foreign goods
Smaller trade deficit
Less hot money
Well done Turkey.

It failed for Harold Wilson in 1967 and it will fail for Turkey in 2011.

read the linkhttp://theageofstupidity.blogspot.com/2009/09/british-pound-devaluation-delusions.html

For Briish Pound read New Turkish Lira (and what happened to the old one!!!)

[kentish]

Ok lets test how much you claim you know why did he cut rates and allow the TL to fall which has now slowed down?

I'll give you the short version, since I don't have the time for the long version and also you will not understand it even if i did, so what's the point.

The intent was to reduce "Hot Money" coming in from outside, which has increased the debts held by the Turks with their ongoing buying frenzy of foreign goods, which has caused the Imports to rise twice as much as Exports, which has created a huge Foreign Trade Deficits. The idea was to discourage foreign "Hot Money", which Erdogan was recently asking the Turks not to spend too much money they did not have. Personally the Turks are hungry for foreign quality goods, therefore they will continue to buy and get further in debt and the Imports will continue to rise and so will the Foreign Trade Deficit, and the further the TL goes down against other major currencies, the greater the FTD will increase, regardless if Turkey's Exports also rise some as a result of the devalued TL. This will also cause higher inflation. While Turkey is importing quality products at higher price, their Exports at lower price will always create a huge differences in the Import-Export exchange, hence the continual FTD, which at some point will worsen the TL more than it already is. By cutting the rates, Erdogan thought he can solve the FTD problem without knowing he was going to make things worse by the TL going down, which the ISE reacted immediately, since it will also effect growth in Turkey.

I believe Turkey is now on a slippery slope heading "south" as far as her economy, currency and the stock market goes. You won't be hearing from Erdogan telling the world what great GDP results they have achieved for a long time to come from now on, or that the EU needs Turkey more than Turkey needs the EU !

PS. The above was dictated to me by my dog.

any chance of a translation into English, oh and is your dog as Greek as you are ?

Oh, look people, Kuntish is back!

How can I make it any simpler than the above explanation, when idiots like you still can't distinguish the differences between Greeks in Greece from the Greek Cypriots /Turkish Cypriots in Cyprus?

You can now crawl back into your den !

oh my, how clever greek boy,you changed one letter of my name and shunted a huge unexpected insult at me.