Cyprus-Forum.com

[bill cobbett]

What ever happened to that "great idea" of having a "Turkish Lira Zone"?

Where's VP?

VP..??? Last seen queuing with a wheelbarrow outside a bank in the Occupied Part of Nicosia trying to withdraw TLs.

[Kikapu]

AMOTZ ASA-EL'S VIEW FROM JERUSALEM Archives
Jan. 30, 2014, 9:43 a.m. EST
By Amotz Asa-El

U.S. dollar will enjoy this Turkish bath

Opinion: Allure of exotic markets has spent itself.

JERUSALEM (MarketWatch) — It was too much, too late.

The Bank of Turkey’s drastic monetary action Tuesday night was enough to stem, but not offset, the lira’s tailspin. It will, however, stifle growth, and while at it expose Turkey’s political ailments, humble other emerging markets, and — along with other emerging economies — help rehabilitate the dollar.

The lira USDTRY -0.02% had lost one-fifth its value between last month and last Monday, plunging from 2.0 to 2.4 to the dollar, and one-third since this time last year, when it traded at 1.8 to the dollar.

The central bank, after months of inaction that were excused as a means for ensuring continued growth, finally moved Tuesday, when it more than doubled the benchmark seven-day repurchase rate from 4.5% to 10% while spiking the overnight lending rate from 7.75% to 12% and the corresponding borrowing rate from 3.5% to 8%.

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Arithmetically, this is the sharpest action any developed economy’s central bank has taken in recent years. Even so, the markets responded skeptically.

After initially soaring more than 4% to 2.15 to the dollar, the lira slid back 2% to 2.26 by the end of Wednesday, and to 2.27 as trading began Thursday. Why? Because investors suspect that the setting in which the Bank of Turkey must work will prove too wild for its task, no matter how professionally it works.

Tragic hero

The monetary saga in Turkey has a hero. Bank of Turkey Gov. Erdem Basci is universally respected as a brilliant economist and an impartial public servant. Yet he has been challenged with more than merely fostering price stability, which is what ordinary central bankers are mandated to do.

The 47-year-old Basci finds himself in the improbable role of anti-authoritarian torchbearer, after Prime Minister Recep Erdogan publicly pressured him to violate his professional commitment and avoid hiking rates. Though he has a business degree, and as such should be able to detect economic gibberish before speaking it, Erdogan said he is always against raising interest rates. That’s about as plausible as running naked into a snowstorm while declaring opposition to bad weather.

It would have been sad enough to voice this kind of view as an abstraction, but Erdogan’s statements came across not as abstractions, but as instructions, meant to keep the currency weak, and the economy overheated, ahead of local elections in March.

Such populism would be devastating for any economy, but even more so for Turkey’s, whose previous regime lost power 11 years ago amid a currency collapse.

Had he worked in another setting, Basci would have raised rates months ago, considering Turkey’s current-account deficit, which means that the country is spending too much foreign currency. Higher rates reduce imports because they make households’ borrowing more expensive and saving more lucrative.

But Basci worked in a setting where the prime minister was battling simultaneously the Supreme Court, the army, the media, police investigators, foreign diplomats, and street rioters. Volunteering to join this list would not come easily to anyone. Then again, that is what Basci did, especially with his action having been as sharp as it was.

Investors loathe this political volatility, and cannot assume that Basci, with all due respect to the guts he has just displayed, will be able to continue to work as politically undisturbed as other central bankers do. Moreover, the central bank can do little if Erdogan now orders the Treasury to accelerate borrowing, despite its rising costs, in order to increase spending.

http://www.marketwatch.com/story/us-dol ... eid=yhoof2

[-mikkie2-]

Interesting times.

Now that hard cash is flooding out of Turkey it will be interesting to see how Turkey prioritises its spending. Can they keep affording to pump $1billion per year into the northern part of Cyprus and maintain such vast military forces there?

[kurupetos]

Interesting times.

Now that hard cash is flooding out of Turkey it will be interesting to see how Turkey prioritises its spending. Can they keep affording to pump $1billion per year into the northern part of Cyprus and maintain such vast military forces there?

Of course they will. They would even sell their mothers to afford that.

[Lordo]

you boys just do not understand the terkish thinking. before they cut the money the government will be overthrown. nt nt nt bunch of wan..ngamatures.

[Maximus]

you boys just do not understand the terkish thinking. before they cut the money the government will be overthrown. nt nt nt bunch of wan..ngamatures.

yeah, there's going to be a big punch up in there and then they will cut the money.

[Jerry]

Oh dear more bad news for Turkey, trade gap has got bigger. "Turkey's 2013 foreign trade deficit increased 18.7 percent from the previous year to $99.8 billion due to a significant decrease in exports, the Turkish Statistics Institute (TurkStat) announced on Friday."
http://www.todayszaman.com/news-338192- ... -fall.html

[Kikapu]

Oh dear more bad news for Turkey, trade gap has got bigger. "Turkey's 2013 foreign trade deficit increased 18.7 percent from the previous year to $99.8 billion due to a significant decrease in exports, the Turkish Statistics Institute (TurkStat) announced on Friday."
http://www.todayszaman.com/news-338192- ... -fall.html

It just goes to show, that currency devaluation does not automatically mean increase in exports, right Lordo and VP.

On the contrary, since Turkey is very much depended on imports, the cost of imports goes up with a devalued currency, hence the widening of the foreign trade deficit.

Wait and see what the damage for 2014 foreign trade deficit will be.

[Jerry]

Oh dear more bad news for Turkey, trade gap has got bigger. "Turkey's 2013 foreign trade deficit increased 18.7 percent from the previous year to $99.8 billion due to a significant decrease in exports, the Turkish Statistics Institute (TurkStat) announced on Friday."
http://www.todayszaman.com/news-338192- ... -fall.html

It just goes to show, that currency devaluation does not automatically mean increase in exports, right Lordo and VP.

On the contrary, since Turkey is very much depended on imports, the cost of imports goes up with a devalued currency, hence the widening of the foreign trade deficit.

Wait and see what the damage for 2014 foreign trade deficit will be.

Devaluation will make their exports cheaper and easier to sell but they will have to increase volume of sales to get the same revenue, the buggers will have to work harder or the standard of living will fall.
"trnc" will need even more "loans" when Turkey can least afford it and yet last year they hinted at financial assistance for the ROC.

[Lordo]

i wonder if we have something similar to troika - oh dear, did not realise the terks are not as bankrupt as the greeks and south cyprus.

you talk as if this is only a terkish problem. all the developing countries are affected. the terks will pull through and you lot will still be bankrupt charluimmu