Streetwise Professor

August 12, 2018

As the old adage says, Erdo: Be careful what you ask for.  You might get it.  

Filed under: Economics,Turkey — cpirrong @ 6:40 pm

Turkish president Recep Tayyip Erdoğan is clearly insane, by the doing/saying-the-same-thing-repeatedly-and-expecting-different-results standard.

Apparently not content with the mere 22 percent drop in the TRY on Thursday and Friday which was attributable completely to his overheated, boneheaded economic rhetoric and his egging on a confrontation with the US, today he gave not one, not two, but three speeches that put his economic idiocy and bullheadedness on display.  And the markets reacted immediately, with the lira breaching 7 to the USD in early Asian trading.

Among the howlers:

Speaking in the northeastern city of Trabzon on Sunday, Erdogan warned business executives to not “rush to banks to withdraw foreign currency.”

He added that businesses should “know that keeping this nation alive and standing isn’t just our job, but also the job of industrialists, of merchants.”

“We are working day and night for alternative markets.”

Just what alternative markets is he talking about? Presumably steel and aluminum, which Trump imposed higher tariffs on on Friday.  But those aren’t the markets that matter now: it’s the currency and capital markets that matter, and every word out of Erdoğan’s mouth freaks out those markets even more.  Not least because talking about metals indicates a complete failure to grasp the true nature of the situation.

Importuning “industrialists and merchants” to take one for the team is futile.  They have already conceded, after taking brutal losses for heeding his earlier call.  The fact that Erdoğan seems oblivious to the fact that his previous nostrums have been disasters only convinces further those at home with money and those in the financial markets that he is utterly clueless–as do his continued imprecations against evil interest rates.

His chucklehead finance minister (whose main attributes appear to be that a) he is Erdoğan’s son-in-law, and b) he is less of a chucklehead than Erdoğan’s son) gave a don’t worry-be happy-everything will work out great talk to a group of assembled business leaders.  A Turkish friend said that Berat (not Borat!) Albayrak’s clownish performance was met by long faces from the assembled bankers and industrialists.

Erdoğan’s other stock response is that Turkey’s economic fundamentals are sound, but the country is being subjected to an economic attack from the US, and that he will fight back.  Arguendo, assume it is true that the US has targeted Turkey.  What is the best response, especially when someone like Trump is doing the targeting? Defiance is foolhardy, though perhaps emotionally gratifying in the short run, both to Erdoğan and his fervent followers.  A prudent leader would execute a tactical withdrawal in the face of overwhelming odds, and live again to fight another day.  You don’t fight battles you can’t win.  And again, Erdoğan’s apparent willingness to do so just stokes the panic.

Erdoğan says that he will find other allies.  Like who, exactly?  Speculation is that Russia, Qatar, and/or China might contribute financial support.

The first name makes me laugh.  Russia has its own issues right now, to put it mildly.  Its access to capital markets is extremely limited, and its currency is also under pressure.  Qatar is still battling an economic embargo with its Arab neighbors.  China’s own financial situation is somewhat tenuous now, and although it has shown a willingness to throw money down ratholes (cf. Venezuela) it is doubtful that it will stump up the tens of billions of dollars necessary to rescue Turkey from the brink, especially in the very limited time–maybe even hours–available.

And all of these candidates will no doubt think twice, and then think again, based on uncertainty of how Trump would react to their riding to the rescue of his current target.

Nope.  Erdo is on his own here.  And that’s the irony of all this.  Erdoğan asked for supreme power in Turkey.  He got it.  Now he owns all of it: the bad as well as the good.  As the old adage says, Erdo: Be careful what you ask for.  You might get it.

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